BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1074
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          Date of Hearing:   April 10, 2013

                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
                              Hall III, Isadore, Chair
                 AB 1074 (Atkins) - As Introduced:  February 22, 2013
           
          SUBJECT  :   Horse racing: statewide marketing organization.

           SUMMARY  :    Removes the sunset of the statewide marketing  
          organization (California Marketing Committee) administered by  
          thoroughbred racing associations, fairs and organizations  
          responsible for contracting with the above mentioned entities.   
          Specifically,  this bill  :  

          1)  Deletes a January 1, 2014, sunset date which authorizes  
          thoroughbred racing associations, fairs, and the organization  
          responsible for contracting with thoroughbred racing  
          associations and fairs with respect to the conduct of racing  
          meetings, to form a private, statewide marketing organization to  
          market and promote thoroughbred and fair horse racing. This bill  
          would delete the repeal date, thereby extending the operation of  
          specific provision indefinitely.

           EXISTING LAW  :

          1)  Provides that the California Horse Racing Board (CHRB)  
          regulates the various forms of horse racing authorized in this  
          state.

          2)  Authorizes until January 1, 2014, thoroughbred racing  
          associations, fairs, and the organization responsible for  
          contracting with thoroughbred racing associations and fairs with  
          respect to the conduct of racing meetings, to form a private,  
          statewide marketing organization to market and promote  
          thoroughbred and fair horse racing. 

          3)  Requires an amount not to exceed 0.25% of the total amount  
          handled by each satellite wagering facility to be distributed to  
          the marketing organization, and imposes certain requirements on  
          the marketing organization, including that the marketing  
          organization annually submit certain information to the CHRB.

          4)  Provides that the organization shall consist of the  
          following members: two members, one from the northern zone and  
          one from the combined central and southern zones, appointed by  








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          the thoroughbred racetracks; two members, one from the northern  
          zone and one from the combined central and southern zones,  
          appointed by the owners' organization responsible for  
          contracting with associations and fairs with respect to the  
          conduct of racing meetings; and two members, one from the  
          northern zone and one from the combined central and southern  
          zones, appointed by the organization representing racing and  
          satellite fairs.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  : 

           Purpose of the bill  :  According to the author, SB 27 (Maddy),  
          Chapter 335, Statutes of 1998, among its provision, created a  
          private statewide marketing organization for Thoroughbred and  
          fair racing that is funded by a percentage of the intra-state  
          off-track handle.  The funds generated from this distribution  
          are used to market California horse racing on a statewide basis.  
           The California Marketing Committee (CMC) is generally  
          responsible for promoting horse racing in the state by  
          developing and implementing a marketing plan that will increase  
          on-track and off-track attendance in California.

          An underlying assumption of the CMC's Marketing Plan over the  
          years has been that it is far easier to capture a new fan  
          through an on-track experience than through an off-track  
          visitation to a satellite wagering facility.  

          The author states that this bill will allow the CMC to establish  
          a long-term marketing plan to promote horse racing in the state.  
           Past and current legislative sunsets have been somewhat of a  
          hindrance to the CMC because long-term financial commitments  
          could not be made to support programs which were proven to be  
          successful in attracting new fans to the sport.  In addition,  
          the CMC will still be required to annually present to the CHRB  
          at the board's November meeting a verbal report on the statewide  
          marketing and promotion plan for the upcoming calendar year.

          Supporters note that there is enough history and documentation  
          on the books to remove the legislative sunset.  The CMC through  
          attrition has shown that they're able to make fiscally  
          responsible business decisions to market and promote  
          California's racing industry.
           








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          Marketing horse racing in California  : In 2003, the CMC received  
          approximately $6.1 million to support its marketing efforts but  
          due to handle declines it has been reduced to approximately $1.8  
          million in 2013.  Current law provides that the CMC must  
          annually submit to the CHRB a statewide marketing and promotion  
          plan for thoroughbred and fair horse racing that encompasses all  
          geographical zones in the state, including the manner in which  
          funds were expended in the implementation of the plan for the  
          previous calendar year.  

          The 2013 CMC budget includes new categories and eliminated  
          others that were part of the 2012 budget.  The areas of focus  
          for the upcoming year are "handle generation" and "product  
          enhancement."  The new categories of expenditures in the 2013  
          budget are the "pick six promotions" and "racing information."   
          CMC plans to increase its "significant player program" by 29  
          percent and "product enhancement" by 9 percent.  CMC eliminated  
          from the 2013 budget the "branding and new media category." CMC  
          also plans to reduce "satellite marketing" by 33 percent and  
          "mini-satellite support" by 76 percent.  However, administration  
          cost of the CMC did not change.
           
          Deteriorating Status of the Horse Racing Industry in California  :  
           The California horse racing industry's long-term health is  
          threatened by a combination of factors, including competition  
          from racing in other states, other forms of gaming within  
          California, racetrack bankruptcies and the potential for higher  
          return from development than operating revenues.  As resources  
          shrink, the industry is experiencing deficits in virtually every  
          one of its revenue sources.  Traditional takeout, allocation and  
          distribution formulas are no longer able to sustain ongoing  
          operations.  As the value of racing operations declines, track  
          ownership is struggling to maximize shareholders' return on the  
          investment and tempted by alternative uses of the property that  
          yield higher returns.  Consequently, the racing industry is  
          suffering unprecedented instability and capital flight.  Tens of  
          thousands of industry jobs might be in jeopardy, along with  
          breeding farms and precious open space in urban centers  
          throughout California.  Also at risk is a substantial amount of  
          local and state revenue generated both directly and indirectly  
          by the industry.

           Related legislation  : AB 1347 (Gray) of 2013.  Extends the sunset  
          date from January 1, 2014 to January 1, 2019, in existing law  
          relating to a private statewide marketing organization to market  








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          and promote thoroughbred and fair horse racing in California, as  
          described. (Pending in Assembly G.O. Committee)

           Prior legislation  :  SB 1072 (Ron Calderon), Chapter 283,  
          Statutes of 2010.  Among its provisions, extended the sunset  
          date from January 1, 2011 to January 1, 2014, in existing law  
          relating to a private statewide marketing organization to market  
          and promote thoroughbred and fair horse racing in California, as  
          defined.

          SB 766 (Negrete McLeod), Chapter 616, Statutes of 2009.  Allows  
          uncommitted surplus funds in the CMC Fund or the horse racing  
          Workers' Compensation Fund, to be reallocated to any other fund  
          or account created pursuant to the Horse Racing Law.  

          AB 1736 (Governmental Organization Committee), Chapter 444,  
          Statutes of 2007.  Extends "sunset" provisions in current law  
          relating to the marketing of the California Horse Racing  
          Industry.

          SB 103 (Maddy), Chapter 10, Statutes of 1998.  Requires any  
          association, including fairs that conducts thoroughbred racing  
          to pay to the owners' organization contracting with the  
          association an additional percentage for a national marketing  
          program, as specified, to promote thoroughbred racing unless the  
          owners' organization chooses not to contribute to the program.   
          The bill sunsets January 1, 2004.

          SB 27 (Maddy), Chapter 335, Statutes of 1998,  Among its  
          provision, created a private statewide marketing organization  
          for thoroughbred and fair racing that is funded by .4% of the  
          instate off-track handle.  The funds generated from this  
          distribution are used to market California horse racing on a  
          statewide basis.  CMC is generally responsible for promoting  
          horse racing in the state by developing and implementing a  
          marketing plan that will increase on-track and off-track  
          attendance throughout the state.

          AB 1418 (Tucker), Chapter 311, Statutes of 1994.  Among various  
          provisions, stated that cash vouchers that are not redeemed  
          within 365 days of the close of the racing meeting at which the  
          voucher was purchased shall be distributed to a nonprofit  
          organization designated by the board for purposes of maintaining  
          a data base of horseracing information, as defined.









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           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Del Mar Thoroughbred Club

           Opposition 
           
          None on file
           
          Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531