BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1439 (Price)
Hearing Date: 05/24/2010 Amended: 04/28/2010
Consultant: Maureen Ortiz Policy Vote: GO 8-0
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BILL SUMMARY: SB 1439 reduces the protective zone for
satellite wagering facilities and racetracks from a 20 mile
radius to 15 miles. It also authorizes the Horse Racing Board
to approve a one-year test at a location that is between 10 and
15 miles from an existing satellite wagering facility, and
prohibits any satellite wagering facility from being located
within 20 miles from a tribal casino.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Admin expenses -----------------minor,
absorbable-------------- General
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STAFF COMMENTS:
The California Horse Racing Board (CHRB) indicates minor,
absorbable costs to review financial data after a one year test,
and to assess any impact on neighboring satellite wagering
facilities. The County of San Mateo has expressed concerns that
outstanding debt service may be jeopardized if a mini satellite
wagering facility is established within the San Mateo County
Fair's protective zone. The initial investment in the Jockey
Club (explained later) was approximately $5 million, with about
$3.4 million of the funds in the form of various loans from the
Fairs and Exposition Fund, the County of San Mateo, and the
California Association of Racing Fairs (CARF). Annual payments
to the Fairs and Exposition Fund are approximately $175,000,
payments to CARF are $75,000, and approximately $180,000 is paid
to the County of San Mateo in repayment of their loan to the
Jockey Club, in addition to interest that is between 0% and
4.96%. In 2009, its first year of operation, the Jockey Club
generated approximately $85 million in handle earning the club a
commission of about $1.7 million. In the event that a new mini
satellite wagering facility is opened within the protective zone
of the Jockey Club and revenue drops 10% from the previous year,
the Club's own commission will be reduced by approximately
$170,000 - leaving about $1.53 million to still repay debt
service owed on the original investment, as well as other
existing obligations. SB 1439 provides that after one year the
CHRB may impose an impact fee on the new mini satellite wagering
facility, therefore, revenue to the existing satellite wagering
facility is only at risk the first year. Additionally,
satellite wagering facilities generate other sources of revenue
from advanced deposit wagering fees, and concessions.
It should be noted that earlier this month, Pacific Racing
Association (PRA) which represents Golden Gate Fields and the
San Mateo County Event Center - Jockey Club (SMCEC-JC) have
entered into an agreement consenting to the implementation of
mini-satellite facilities within their respective 20 mile radius
protective zones. This MOU will authorize SMCEC-JC to open
mini-satellites in San Mateo County, and, PRA will have
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SB 1439 (Price)
full reciprocal authority to open mini-satellites within the
City and County of San Francisco. All new facilities are
contingent upon approval of the CHRB. In light of these
recent approvals, it will be nearly impossible to determine any
financial impact on an existing satellite wagering facility from
the opening of one facility if more than one mini satellite
facility is opened within the former's protective zone.
California has allowed off-track betting at satellite wagering
facilities located at fairs and racing facilities throughout the
state for about 25 years. There are currently 34 satellite
wagering facilities located at the live race tracks, fair
grounds, and Indian casinos.
AB 241 (Price), Chapter 613, Statutes of 2007, authorized the
establishment of up to 45 mini-satellite wagering facilities
throughout the state (15 within each zone), but prohibited any
of them from being constructed within a 20 mile radius from an
existing satellite wagering facility or a racetrack. The
protective zone was originally established to ensure that
existing facilities were not detrimentally impacted financially
due to the establishment of a nearby satellite wagering
facility. However, current law also authorizes existing
facilities to waive that 20 mile prohibition. In the southern
zone, both Hollywood Park and Santa Anita have consented to a
mini-satellite within their 20 mile radius. San Mateo County
Fair has authorized the establishment of one mini satellite
wagering facility, however, the fair has withheld consent for
another site.
After the closure of Bay Meadows Racecourse in 2008, the San
Mateo County Fair took over the satellite wagering operation,
made a $5 million investment, and opened a new facility called
The San Mateo County Events Center (SMCEC). Included with the
SMCEC is a satellite wagering facility called the "Jockey Club".
Any new mini satellite wagering facilities that were being
proposed within a 20 mile radius from the San Mateo County Fair
are prohibited from opening without the direct consent of the
San Mateo County Fair.
SB 1439 provides that if a satellite wagering facility does not
consent to a mini satellite wagering facility being situated
within 15 miles, the California Horse Racing Board may conduct a
one year test at the proposed site in order to determine the
impact of the proposed mini satellite wagering facility on total
parimutuel revenues, and on the attendance and wagering at
existing satellite wagering facilities. During the one year
study, the operator of the mini satellite wagering facility and
the satellite wagering facility may enter into an agreement
providing for the payment of an impact fee. If no such
agreement is made, the CHRB may impose an impact fee based on
the results of the one-year test study.