BILL ANALYSIS Ó Bill No: AB 270 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2011-2012 Regular Session Staff Analysis AB 270 Author: Perea As Amended: May 12, 2011 Hearing Date: June 14, 2011 Consultant: Art Terzakis SUBJECT Horse Racing: Satellite Wagering DESCRIPTION AB 270 creates an exception to Horse Racing Law by authorizing a fair satellite wagering facility to elect not to be subject to the requirements related to a "satellite facility supervisor" if the board of directors of the fair, after a public hearing, deems those requirements to be not economically feasible. Specifically, this measure: 1. Permits a fair satellite wagering facility, that generate less than $10 million annually in total handle, to determine that the position of satellite facility supervisor is not economically feasible, following a public hearing by the board of directors. 2. Stipulates that a fair satellite wagering facility which elects to eliminate the satellite wagering supervisor position must do both of the following: (a) continue to abide by all laws and regulations pertaining to its operation and (b) provide notice of the fair board's action to the California Horse Racing Board (CHRB) within 10 days of approval of the fair board. EXISTING LAW Article IV, Section 19(b) of the Constitution of the State AB 270 (Perea) continued Page 2 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 grants the California Horse Racing Board (CHRB) the authority to regulate the various forms of horse racing authorized in this state. Existing law requires the CHRB to set forth requirements for the position of "satellite facility supervisor" for all satellite wagering facilities operated by the state or on public land. The law provides that the supervisor shall, among other things, monitor the performance of licensees at the facilities. Existing law authorizes the CHRB to permit licensed racing associations, fairs and mini-satellite licensees to operate satellite wagering facilities. Existing law authorizes the CHRB to approve the establishment of 15 mini-satellite wagering sites in each zone (for a total of 45) and defines "minisatellite wagering site" to mean a location where satellite wagering may be conducted, with the approval of the CHRB, provided that the wagering occurs in an area that is restricted to those who are 21 years of age or older. Existing law specifies that no mini-satellite site may be located within 20 miles of a race track, a satellite wagering facility, or a tribal casino that has a satellite wagering facility without the consent of each facility within that 20-mile radius. BACKGROUND History: California has allowed off-track betting in satellite wagering facilities located at fairs and racing associations throughout the state for well over 25 years. Satellite wagering was authorized at a time when California racetracks were beginning to experience declining attendance and handle figures. The industry believed that making the product easier to access would expose and market horse racing to potential customers and also make it far more convenient for existing patrons to wager more often. Currently, there are 34 satellite-wagering facilities in California located at live race tracks, fair grounds and AB 270 (Perea) continued Page 3 Indian casinos. In addition, seven state-designated or county fairs have received statutory authority to locate additional satellite-wagering facilities off the respective fairgrounds but within the boundaries of the fair district. To date, only the Fresno County Fair has exercised this authority by leasing space in a card-club in downtown Fresno (Fresno Club One). In 2007, AB 241 (Price) was enacted to authorize the creation of 15 "minisatellites" in each racing zone for a total of 45. The stated intent of this legislation was to make the sport of horse racing even more accessible to potential California bettors and to increase the handle - the amount wagered on horse races. To date, only two mini-satellites have been opened and licensed statewide (one is located at the California Commerce Club in the City of Commerce, the other is located at the OC Tavern Grill and Sports Bar in San Clemente). Purpose of AB 270 : According to the author's office, this measure is intended to provide greater financial flexibility to smaller fair satellite wagering facilities that find themselves in difficult financial situations due to the mandatory staffing language in current law pertaining to satellite facility supervisors. The author's office points out that over the years, expenses have increased considerably while the mechanism to generate revenue to cover overhead is limited by Horse Racing Law (2% commission on each dollar wagered). Due to declining attendance, increased costs and other factors, some smaller fair satellite wagering facilities have been faced with the decision to close their wagering operations. The author's office states that this measure would provide flexibility in managing overhead costs which in turn would enable these facilities to remain in operation generating revenue for the fair and California's horse racing industry. The author's office notes that county fairs and agricultural associations receive a great deal of their revenue from wagering on horse racing, so it's in their best interest to ensure that satellite wagering remains a viable facet of their business operation. Additionally, this bill is intended to ensure that the California horse racing industry remains viable as an agribusiness within AB 270 (Perea) continued Page 4 the state. Duties of a Simulcast or Satellite Facility Supervisor : The simulcast facility supervisor is responsible for the oversight of the facility and to ensure compliance with the state's laws, rules and regulations. The duties, in addition to any duties and responsibilities required by his or her employer, include, but are not limited to, immediately reporting to the CHRB or its stewards, in writing or by telephone, any violation of the CHRB's rules or regulations which come to their attention or of which they have knowledge. This includes referrals of matters involving misconduct of licensees to the host track stewards and ordering the exclusion or ejection of persons who are prohibited from participating in pari-mutuel wagering and from being present within any racing enclosure during a recognized race meeting. Additional duties include maintaining minutes of the conduct of each day's events at the simulcast location where assigned, supervising all phases of the facility which are directly related to the requirements of the CHRB's laws and regulations at the simulcast location. Staff Comments: By eliminating the requirement for the position, some individuals may raise concerns about opportunities for abuse within this state licensed system. However, the bill does not alleviate the facility from the responsibility of complying with wagering laws. It simply allows the fair management to decide how best to assign the duties. In this era of very little state support for the fairs, they need to be given the flexibility to adapt their business models in order to function more economically. PRIOR/RELATED LEGISLATION SB 305 (Calderon) 2011-12 Session. Would modify a provision of Horse Racing Law that currently requires the CHRB to license minisatellite facilities for two years and instead directs the CHRB to license such facilities for up to five years. (Pending in Assembly G.O. Committee) SB 1439 (Price) of 2010. Would have decreased the exclusion zone in which a "minisatellite" horse racing wagering facility can be situated in proximity to an existing horse racing satellite wagering facility or live horse racing race track from a 20 to 15 mile radius. (Failed passage on AB 270 (Perea) continued Page 5 Senate floor) AB 2215 (Fuentes), Chapter 255, Statutes of 2010. Among other things, authorized a minisatellite wagering facility to enter into an agreement with an advance deposit wagering (ADW) provider to accept and facilitate the placement of any wager at its facility that a California resident could make through that ADW provider. SB 16xx (Ashburn) Chapter 12, Statutes of 2009-10 Second Extraordinary Session . Among other things, provided that beginning on July 1, 2009, and annually thereafter, thirty-two million ($32,000,000) shall be appropriated from the state's General Fund and paid into the Fair and Exposition Fund for the financial support of the network of California fairs. AB 246 (Price), Chapter 226, Statutes of 2009. Authorized a quarter horse association and a harness racing association to deduct up to 2 percent more from the total amount wagered in the pari-mutuel pool for any type of wager, and, specified how the funds shall be distributed to eligible satellite wagering facilities, owners purses and racetrack commissions AB 241 (Price), Chapter 594, Statutes of 2007. Authorized all fairs to operate a satellite wagering facility off of the fair grounds. Also, authorized 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 . Allowed the Alameda County Fair and the Los Angeles County Fair (Fairplex) to obtain authorization to operate new satellite wagering facilities off of their fair grounds under certain conditions. SB 677 (Murray) 2005-06 Session. Would have authorized the establishment of seven additional satellite wagering facilities around the state. (Died Assembly Inactive File) SB 1096 (Dutton) Chapter 1096, Statutes of 2005. Authorized the National Orange Show (San Bernardino County) to operate a second satellite-wagering operation within its fair district boundaries. AB 270 (Perea) continued Page 6 AB 401 (J. Horton) Chapter 556, Statutes of 2003. Permitted CalExpo, with the approval of the Department of Food and Agriculture and CHRB, to operate a satellite wagering facility within the boundaries of CalExpo in addition to any facility otherwise authorized under current law. SB 14 (Maddy), Chapter 1273, Statues of 1987. Expanded satellite wagering statewide. SUPPORT: As of June 10, 2011: California Authority of Racing Fairs California Exposition and State Fair Del Mar Thoroughbred Club Kern County Fair National Date Festival Riverside County Fair San Joaquin County Fair Santa Maria Fairpark Shasta District Fair The Big Fresno Fair OPPOSE: None on file as of June 10, 2011. FISCAL COMMITTEE: No