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