BILL ANALYSIS
Bill No: SB
1439
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 1439 Author: Price
As Amended: April 6, 2010
Hearing Date: April 13, 2010
Consultant: Chris Lindstrom
SUBJECT
Horse racing: minisatellite wagering facilities.
DESCRIPTION
SB 1439 modifies provisions of the Horse Racing Law
relative to the authorization of "minisatellite" wagering
facilities by shrinking the protective zone for existing
satellite wagering facilities, as specified, from a 20 mile
radius to 15 miles, as defined. The bill shortens the
length of time, by 1.5 years, from January 1, 2013 to July
1, 2011, in which specified fairs in the northern zone must
consent to the location of a minisatellite within its fair
district. The bill also authorizes the California Horse
Racing Board (CHRB) to locate a minisatellite within 10
miles of an existing satellite wagering facility on a
one-year test basis without the consent of the existing
satellite facility, as specified. Provides for mitigation
fees to be paid by a minisatellite to an existing satellite
wagering facilities, as specified. Specifies that mileages
shall be measured property line to property line by the
shortest publicly accessible driving route, and not be
based on radii.
Specifically, the bill makes the following changes to the
pertinent provisions of the Horse Racing Law:
1)Provides that the California Horse Racing Board (CHRB)
SB 1439 (Price) continued
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may approve an additional 15 minisatellite wagering sites
if all of the conditions are met:
a) No site is within 15 miles of a racetrack, a
satellite wagering facility, or a tribal casino that
has a satellite wagering facility. If the proposed
minisatellite wagering facility is within 15 miles of
one of the above-referenced facilities, then the
consent of each such facility within 15 miles (reduced
from a 20 mile radius) must be given before the
proposed minisatellite wagering facility may be
approved by CHRB.
b) Until July 1, 2011 (reduced from January 1, 2013),
if the proposed minisatellite wagering site is in the
northern zone in a fair district where the fair has
operated a satellite wagering facility for the
previous five years, the approval of the fair must be
obtained even if the proposed location is more than 15
miles from the existing satellite wagering facility
operated by the fair.
c) The written consent of the San Mateo County Fair
shall be obtained prior to the approval of any
minisatellite wagering site located within 15 miles
(reduced from a 20 mile radius) of its fairground.
d) (New paragraph) Notwithstanding subdivisions (a)
and (c) above (no minisatellite within 15 miles of an
existing facility without the consent of the existing
facility, as specified, and, written consent must be
obtained by San Mateo County Fair to locate within 15
miles of its fairground) , the requirement that the
approval of a racetrack, satellite wagering facility,
tribal casino that has a satellite wagering facility,
or fair be obtained if the proposed minisatellite
wagering facility is within 15 miles shall only apply
to those facilities that are operated by tribal
casinos, racetracks, or fairs that actually conduct
two weeks or more of live racing in the preceding
year.
SB 1439 (Price) continued
Page 3
If a satellite wagering facility, or tribal casino that
has a satellite wagering facility, does not consent to
a minisatellite wagering facility being situated
within 15 miles, CHRB may conduct a one-year test at
the proposed site in order to determine the impact of
the proposed minisatellite wagering facility on total
parimutuel revenues, and on the attendance and
wagering at existing satellite wagering facilities.
With respect to the one-year test, CHRB may approve only
one minisatellite wagering facility per existing
satellite wagering facility and the minisatellite
wagering facility must be located within 10 miles of
the existing satellite wagering facility.
During the one-year study, the operator of the
minisatellite wagering facility and the satellite
wagering facility operated by a fair or a tribal
casino may enter into an agreement providing for the
payment of an impact fee. If there is no agreement
within that year, CHRB may hear testimony from both
parties and impose an impact fee based on the results
of the one-year test study. A decision of CHRB
regarding a proposed site may cover the period of time
during which the test is to be conducted, as well as
apply to the operation of the minisatellite wagering
facility if it continues to operate beyond one year.
e) (New Paragraph) For purposes of this section,
mileages shall be measured property line to property
line by the shortest publicly accessible driving
route.
2)Makes other technical and conforming changes.
EXISTING LAW
Article IV, Section 19(b) of the Constitution of the State
of California provides that the Legislature may provide for
the regulation of horse races and horse race meetings and
wagering on the results.
Existing law provides for the California Horse Racing Board
to regulate the various forms of horse racing authorized in
SB 1439 (Price) continued
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this state.
Existing law authorizes CHRB to permit licensed racing
associations, fairs and mini-satellites licensees to
operate satellite wagering facilities.
Existing law authorizes and defines "advance deposit
wagering (ADW)" as a form of parimutuel wagering in which a
person "establishes an account with a board-approved
betting system or wagering hub where the account owner
provides "wagering instructions" authorizing the entity
holding the account to place wagers on the owner's behalf."
Existing law permits the San Joaquin, Humboldt, Shasta, and
Fresno Fairs, with the approval of CHRB and CDFA, to
operate a satellite wagering facility on leased premises
within the boundaries of the fair.
Existing law permits the California Exposition and State
Fair, with the approval of CDFA and CHRB, to operate a
satellite wagering facility within the boundaries of the
fair in addition to any facility otherwise authorized under
current law.
Existing law authorizes CDFA to approve no more than three
satellite wagering facilities either on the San Francisco
fairgrounds (Cow Palace) or within the boundaries of San
Francisco. The fair may contract for the operation and
management of such a facility with other racing
associations.
Existing law provides that the San Mateo County Fair may
operate a satellite wagering facility on its fairgrounds or
on leased premises in San Mateo County contingent upon the
closure of a racing association licensed in the year 2002
to conduct a thoroughbred race meeting in that county.
Existing law authorizes CHRB to approve the Solano County
Fair to operate a satellite wagering facility on the
fairgrounds or on leased premises in Solano County, if the
fair ceases to conduct live horse racing at the site of its
2002 racing meeting, as specified.
Existing law prohibits a satellite wagering facility,
except when that facility conducts live race meetings, from
being located within 20 miles of any existing satellite
SB 1439 (Price) continued
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wagering facility or track, which conducts live race
meetings. In the northern zone, existing racing
associations and satellite wagering facilities may waive
this prohibition.
Existing law defines "inclosure" for purposes of wagering
as all areas of the racing association's or fair's grounds
and locations, as designated by the racing association or
fair licensed to conduct a live racing meeting and approved
by CHRB, excluding the public parking lot.
BACKGROUND
Purpose of the bill . According to the author's office,
"this bill seeks to allow for the easier citing of
minisatellite wagering facilities. The current law that
provides for a protective zone for existing satellite
wagering facilities up to a twenty mile radius has been
determined to be too restrictive.
"SB 1439 will empower the California Horse Racing Board to
approve mini-satellite wagering facilities that are less
than twenty-miles from existing satellite wagering
facilities. It will further allow the board to conduct a
one-year feasibility study at the proposed site to
determine its impact on pari-mutuel revenues, attendance
and wagering at existing facilities."
Background . California has allowed off-track betting in
satellite wagering facilities located at fairs and racing
associations throughout the state for 25 years. In 2007,
AB 241 (Price) was enacted to authorize the creation of 15
additional "minisatellites" in each racing zone for a total
of 45. The stated intent of this legislation was to make
the sport of horse racing more accessible to potential
California bettors and to increase the handle - the amount
wagered on horse races - by giving preference to
minisatellites that will generate the largest handle if
more than 15 applications for minisatellites are submitted
to CHRB for a given zone.
Currently, there are 34 satellite wagering facilities in
California located at the live race tracks, fair grounds
and Indian casinos. Furthermore, 64 additional wagering
facilities are authorized pursuant to SB 241 of 2007 - 44
minisatellite facilities (one has been established already)
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and all fairs that currently are not operating satellite
wagering facilities may do so either on or off the
fairground (within the boundaries of the fair district).
Currently, no minisatellite wagering facility can be
established within a 20 mile radius of an existing
satellite wagering facility or racetrack without the
consent of the existing wagering facility. Additionally,
no satellite facility may be established within a 20 mile
radius of a racetrack without the consent of the existing
facility. These statutory protections were established to
ensure that existing facilities, many of which have made
significant monetary investments in their facilities, were
not detrimentally impacted financially due to the
establishment of a nearby facility. However, in
recognizing the need for a process to enable new satellites
to be approved, current law allows existing facilities to
waive this protection and consent to the placement of
another facility within the 20 miles radius. Each decision
is made on a case-by-case basis by the existing facilities
and applicants, based on the terms of negotiated agreements
by the signatory parties.
The impetus of this bill is the result of attempts by
various parties to establish minisatellites in San Mateo
County within the exclusionary zone controlled by the San
Mateo County Fair (the San Mateo County Event Center).
After the closure of Bay Meadows Racecourse in 2008, the
San Mateo County Fair took over the satellite waging
operation formerly operated by Bay Meadows. The fair made
a significant investment in a new facility it calls the
"Jockey Club", purportedly, in light of the 20 mile
exclusion zone radius and the protection it afforded from
being put into direct competition with new facilities that
might be opened nearby. In San Mateo's case, the revenue
from the Jockey Club is used to debt service loans made to
the fair by the county and state to build this facility.
San Mateo Fair has stated that it is not opposed to the
establishment of new satellite facilities nor is it
unwilling to discuss and negotiate for new facilities
within its zone. In fact, it recently entered into an
agreement to allow a card club which is located within the
20 mile protection zone to operate a minisatellite.
Another card club located within the 20 radius also wants
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to operate a minisatellite, as well. However, it has been
unable to come to an arrangement with the San Mateo Fair at
this time. San Mateo states that it is being prudent in
its due diligence to determine the impact that proposed
sites might have on the existing wagering facilities,
considering its obligations to repay the loans from state
and county to build the Jockey Club.
In addition to shrinking the protective zone by 5 miles, as
specified, the bill:
1)Authorizes CHRB to approve, not subject to any specified
conditions, one minisatellite wagering facility within 10
miles of an existing satellite wagering facility, for
potentially an indefinite amount of time, without the
consent of the existing satellite wagering facilities.
2)Authorizes the minisatellite wagering facility and the
existing satellite wagering facility to enter into an
agreement providing for the payment of an impact fee to
mitigate the economic impact of the location of a
minisatellite within 10 miles of an existing satellite
wagering facility.
3)If the minisatellite and existing satellite wagering
facility do not reach agreement on an impact fee,
authorizes CHRB to impose, not subject to any specified
conditions, an impact fee to mitigate the economic impact
of the location of a minisatellite within 10 miles of an
existing satellite wagering facility.
4)Shortens the length of time that a fair in the northern
district may control the location of a minisatellite
within its fair district - which is essentially the
county in which the fair is located - by a year and a
half.
5)Removes the requirement that the written consent of San
Mateo County Fair must be obtained prior to locating a
minisatellite within 10 miles (currently 20 miles in
existing law) of its existing wagering facility on a
one-year test basis.
6)Authorizes CHRB to allow for the operation of the
minisatellite wagering facility within 10 miles of the
existing facility beyond one year, not subject to any
specified conditions.
7)Changes the means of measuring the mileage from a radius
to street miles.
Arguably, each of these provisions alters the existing
facilities' spheres of protection, as well as, their
negotiating positions.
SB 1439 (Price) continued
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At the end of the day, it is unclear what the net effect of
this bill will be statewide and for the industry, as a
whole. The law has been in effect for 2 years, and to
date, only 3 applications have been brought to CHRB for
approval. One application was granted, with an initial 6
month exclusive right to operate a minisatellite in the
southern zone. The other two were denied because they did
not receive the consent of an existing facility and were
within the 20 mile radius of the existing facility.
It is unclear why only 3 applications have been brought
before CHRB for consideration, thus far. Perhaps, the 2%
commission that is retained by the minisatellite is not
enticing enough for business owners. Perhaps, not enough
time has elapsed and there aren't enough "minisatellite"
success stories for this type of business proposition to
reach the tipping point. Whatever the reason, the
Legislature needs to be deliberate in balancing the needs
of existing satellite operators with the needs of the horse
racing industry, as a whole.
Intuitively, it seems to reason that the more distribution
points for horse racing, the more wagering that will occur.
Advanced Deposit Wagering (ADW), which allows people to
wager virtually from anywhere within the state, either
online or over the phone, is the one segment of the horse
racing industry that has realized consistent growth in
wagering over the last few years. Even with the growth in
wagering in ADW, horse racing has not been able to reach
its watershed year in 1999 in the amount wagered on horse
racing in California. Something needs to be done to
sustain the industry in California or else it may continue
to struggle. A broader plan, which is being pursued
through the leadership of CHRB, among others, needs to be
developed.
Arguments in support . CHRB supports the basic concept of
the bill and feels that minisatellites are an integral part
of a broader plan to promote horse racing in California.
The Thoroughbred Owners of California (TOC) states "The
2007 minisatellite legislation cited the fact that there
are over 18,000 lottery outlets, more than 90 card clubs
and 60 tribal casinos where people can make a bet in
California. However, there are only 33 places to wager on
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a horse race in the entire state. Limited distribution has
placed California's horse racing industry at a competitive
disadvantage with other forms of wagering and
gaming-supporting horse racing venues in other states.
"Unlike the bigger satellite wagering facilities, which are
located in settings that cater to existing fans, it was
envisioned that the minisatellites would be set-up within
establishments that serve a larger population of adult
clientele. It was also hoped that locating minisatellites
in existing bars, card clubs, casinos, etc. would help
attract a new more casual bettor to the sport.
"Preliminary experience with the minisatellite model is
quite encouraging. California's first minisatellite, which
opened in November 2009 at the Commerce Club, is handling
more than $80,000 in horse racing wagers per day. Other
card club based minisatellites are in the works and it is
reasonable to expect that they will perform at a
proportionate level.
"Requirements that must be met to establish a minisatellite
include approval from the CHRB, buy-in from the horsemen's
organization, and consent from any preexisting satellite
facility within a 20-mile radius of the new site. The
latter requirement has not been an obstacle in the southern
zone, where both Hollywood Park and Santa Anita have
consented to minisatellites within their 20-mile radius.
However, it has raised significant issues in underserved
urban areas in the northern zone. Specifically, required
consent has been withheld for a couple of sites in San
Francisco, which is slightly less than 20 miles to the
north of an existing facility.
"SB 1439 would ensure that placement of additional
minisatellites in prime locations is not unreasonably
restricted by existing satellite operators. In its present
state, this bill would reduce the 20-mile consent radius to
15 miles for existing facilities, allow minisatellites to
be located within the radius restriction on a 1-year trail
basis, provide a process for determining if a new
minisatellite has any negative impact on existing facility
revenue and allow for payment of mitigation fees where
appropriate.
"Minisatellites may not fix everything for California horse
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racing, but they do have the capacity to create a
substantial new source of much-needed revenue and attract a
new variety of horse racing fan. Given horse racing's
current financial condition, passage of SB 1439 is
essential to maintain the industry's statewide presence,
support jobs in this sector and continue our positive
contribution to the state's sagging economy."
Arguments in opposition . The County of San Mateo states
that it, in partnership with the San Mateo County Event
Center (SMCEC), constructed and opened the five million
dollar, 16,000-square-foot Jockey Club in 2008.
Considering the 20-mile protection this significant
investment was reasonable. Revenue from the Jockey Club is
used to repay construction loans to both the County and the
State. Locating new satellites within a 20-mile proximity
would jeopardize these funds and the ability of the Jockey
Club to make the required debt service payments to both the
State and County.
The County of San Mateo and SMCEC are not opposed to new
satellite facilities nor are we unwilling to discuss and
negotiate approvals for new facilities. We are however
being prudent in doing our due diligence to determine the
impact that proposed sites would have on revenue generation
to the existing satellite wagering facility.
The County of San Mateo does not see the benefit in
changing existing statute, which was enacted to provide a
balance between protecting the fiscal base of existing
facilities while allowing for a process of approval for new
facilities. The provisions included in this bill appear to
circumvent the very intent of current law and diminish
confidence in constructing facilities that benefit horse
racing across the state.
The County supports the advancement of the horse racing
industry and expanding participation in satellite wagering,
but want to be sure that any new facilities do not harm the
fiscal viability of existing facilities, which have
invested significant time, money and resources in their
development and maintenance.
The San Mateo County Event Center's (SMCEC) arguments
mirror those of the County of San Mateo's.
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The California Authority of Racing Fairs writes that it was
instrumental in creating a very successful network of
satellite facilities. CARF supported AB 241 of 2007
authorizing the creation of up to 15 mini-satellites per
zone with the consent of an existing facility if the
mini-satellite is located within a 20 mile radius. CARF is
excited about improving upon its model with the addition of
mini-satellites but must oppose SB 1439 because it
eliminates the consent authority of existing satellites and
passes that decision to CHRB after conducting a one year
pilot program. CARF points out that there are a growing
number of examples where the current will soon prove to be
adequate. At this time, CARF has no fewer than 3 members
actively working with potential partners to open a
mini-satellite. If the current law is give more time, CARF
is confident it will prove to be a success.
Artichoke Joe's Casino is a family owned and operated card
room located in San Mateo County within 20 miles of the San
Mateo County Events Center (SMCEC). Artichoke Joe's and
the SMCEC have finalized a deal allowing Artichoke Joe's to
open and operate a mini-satellite wager facility. Our
agreement demonstrates that current law works well to
balance the financial needs of existing wagering
facilities, while still providing the opportunity to expand
horse racing betting opportunities. Therefore, we believe
SB 1439 is unnecessary.
The Barona Band of Mission Indians (Barona), the California
Nations Indian Gaming Association, and the California
Tribal Business Alliance (CalTBA) expressed concerns with
the bill, as well.
Barona questions why SB 1439 is being advanced when in just
over two years, only one of the 45 authorized minisatellite
wagering facilities has been sited. Regardless of the
number, Barona is opposed to the weakening of the
existing-facility protections in existing law. Barona also
notes that the bill would weaken protections for most
existing satellite wagering facilities, yet is selectively
protective of satellite wagering facilities where live
racing occurs. Barona believes this is a highly
questionable and self-serving provision for the racing
industry. Finally, Barona notes that they have significant
overarching concerns about the proliferation of gaming in a
manner that contradicts the promise of Propositions 5 and
SB 1439 (Price) continued
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1A. Specifically, these voter approved measures authorized
a very limited expansion of gaming in the state -
restricted to reservations that are overwhelmingly located
in remote rural areas. Barona is highly concerned that
expansion of gaming, especially in urban areas, violates
the spirit of the voters' will.
CalTBA expresses concerns that no gaming tribes were
consulted with when this bill was written. Even more
concerning to CalTBA is the fact that not even those tribes
that operate off-track wagering facilities, such as the
Viejas Band, a CalTBA member, were given a chance to
provide input on the concept. CalTBA also is troubled that
not even three years after legislation authorizing the
creation of 45 minisatellite wagering facilities in
California, legislation is already being sought to expand
the number of authorized sites. This despite the fact that
only a single minisatellite wagering facility has actually
gone into operation.
CalTBA expresses concerns that the bill appears to weaken
the protections for existing minisatellite wagering
facilities while selectively protecting those near live
racing. CalTBA argues that this is just bad policy.
Further, if anything is to be done in this area, more time
should be give to analyze how the barely two year-old
legislation is operating and then reaching out to all
minisatellite wagering facilities, including tribes that
operate facilities, and other stakeholders in order to seek
a thoughtful global solution.
Finally, CalTBA expresses a similar argument as Barona
regarding the expansion of urban gaming never contemplated
by the public when it passed Propositions 5 and 1A.
NOTE : The author's office indicated that it is working on
amendments that would remove the tribes' opposition by
making the changes in the bill inapplicable to the tribal
governments. If it is the intent of the author to exempt
the tribes from the bill via a "notwithstanding provision",
careful consideration needs to be given as to how the
language is drafted, particularly, when the bill changes
such things as the definition of miles, for example.
PRIOR/RELATED LEGISLATION
SB 1439 (Price) continued
Page 13
AB 246 (Price), Chapter 226, Statutes of 2009 . Authorizes
a quarter horse association and a harness racing
association to deduct up to 2 percent more from the total
amount wagered in the parimutuel pool for any type of
wager, and, specifies how the funds shall be distributed to
eligible satellite wagering facilities, owners purses and
racetrack commissions. Intended to provide financial
assistance to a number of satellite wagering facilities
that find it difficult to stay open and accept the night
signal because they do not make a profit.
AB 765 (Evans), Chapter 613, Statutes of 2007 . Extended,
expanded and revised state authorization for ADW.
AB 241 (Price), Chapter 594, Statutes of 2007 . Authorizes
all fairs to operate a satellite wagering facility off of
the fair grounds. Authorizes the establishment of up to 45
mini-satellite wagering sites to be operated by private
industry throughout California.
AB 1286 (Richardson), Chapter 202, Statutes of 2007 .
Authorizes the Alameda County Fair and the Los Angeles
County Fair to operate 2 additional satellite-wagering
facilities off the fairgrounds, with certain approval and
conditions, as specified.
AB 401 (J. Horton), Chapter 556, Statutes of 2003 . Permits
the California Exposition and State Fair, with the approval
of CDFA and CHRB, to operate a satellite wagering facility
within the boundaries of the fair in addition to any
facility otherwise authorized under current law.
AB 509 (Horton), Chapter 235, Statutes of 2004 . Permits a
thoroughbred racing association or fair to import the
audiovisual signal, and accept wagers on, the results of
out-of-country thoroughbred races.
SB 690 (Ashburn), Chapter 372, Statutes of 2003 . Allows
the Kern County Fair to re-establish its one existing
satellite wagering facility off the fairgrounds property to
another location within the boundaries of the fair, as
specified.
AB 1316 (Dickerson), Chapter 872, Statutes of 2002 .
Authorizes a fair in Shasta County to operate one satellite
wagering facility within the boundaries of the fair,
SB 1439 (Price) continued
Page 14
contingent upon the approval of CDFA and CHRB.
AB 2554 (Thomson), Chapter 874, Statutes of 2002 .
Authorizes CHRB to approve the Solano County Fair to
operate a satellite wagering facility on the fairgrounds or
on leased premises in Solano County, if the fair ceases to
conduct live racing in 2002 or any subsequent year, as
specified.
AB 2338 (Papan), Chapter 1063, Statutes of 2002 . Provides
that the San Mateo County Fair may operate a satellite
wagering facility on its fairgrounds or on leased premises
in San Mateo County contingent upon the closure of a racing
association licensed in 2002 to conduct live racing in that
county.
AB 471 (Hertzberg), Chapter 198, Statutes of 2001 .
Authorized ADW.
SB 27 (Maddy), Chapter 335, Statutes of 1998 . Granted
limited authorization for out-of-state full-card
simulcasting.
SB 14 (Maddy), Chapter 1273, Statues of 1987 . Expanded
satellite wagering statewide. Satellite wagering was the
first major expansion of racing in this state since 1933.
Since then, full-card wagering on out-of-state races has
been authorized. Satellite wagering, in general, has been
successful and provided the fairs with additional revenue.
License fees from satellite wagering are deposited into the
Satellite Wagering Account for the benefit of the fairs.
SB 1499 (Maddy), Chapter 1698, Statutes of 1984 .
Implemented satellite wagering in the central and southern
part of the state, and made conforming and technical
changes in the northern part of the state.
Proposition 3 of 1933, legalized parimutuel wagering on
horse racing in California.
SUPPORT: As of April 9, 2010:
California Horse Racing Board
Del Mar Thoroughbred Club
Golden Gate Fields
Hollywood Park Race Track
SB 1439 (Price) continued
Page 15
Los Alamitos Race Course
Oak Tree Racing Association
Santa Anita Race Track
Scientific Games
Thoroughbred Owners of California
OPPOSE: As of April 9, 2010:
Artichoke Joe's Casino
Barona Band of Mission Indians
California Authority of Racing Fairs
California Nations Indian Gaming Association
California Tribal Business Alliance
County of San Mateo
San Mateo County Event Center
FISCAL COMMITTEE: Senate Appropriations Committee
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