BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1074
                                                                  Page  1


          ASSEMBLY THIRD READING
          AB 1074 (Atkins)
          As Amended  May 24, 2013
          Majority vote 

           GOVERNMENTAL ORGANIZATION   16-0APPROPRIATIONS      17-0        
           
           ----------------------------------------------------------------- 
          |Ayes:|Hall, Nestande, Bigelow,  |Ayes:|Gatto, Harkey, Bigelow,   |
          |     |Chesbro, Cooley, Gray,    |     |Bocanegra, Bradford, Ian  |
          |     |Hagman,                   |     |Calderon, Campos,         |
          |     |Roger Hernández, Jones,   |     |Donnelly, Eggman, Gomez,  |
          |     |Jones-Sawyer, Levine,     |     |Hall, Ammiano, Linder,    |
          |     |Medina, Perea, V. Manuel  |     |Pan, Quirk, Wagner, Weber |
          |     |Pérez, Salas, Waldron     |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Extends the operation of the California Marketing  
          Committee (CMC) and its related funding from July 1, 2014, to  
          January 1, 2019.  Current law 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 (CMC) to market and promote  
          thoroughbred and fair horse racing. 

           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  








                                                                  AB 1074
                                                                  Page  2


            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 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  :  According to the Assembly Appropriations  
          Committee, funding for the CMC comes from the in-state off-track  
          wagering handle.  Of the amount wagered, .4% is provided to the  
          CMC for marketing horse racing in the state.  In 2013, the CMC  
          will receive approximately $1.8 million for marketing.   
          Eliminating the sunset would result in continuing the annual  
          redirection of the handle.

           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  








                                                                  AB 1074
                                                                  Page  3


          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 extend the legislative sunset from 2014 to 2019.  
           The CMC through attrition has shown that they are able to make  
          fiscally responsible business decisions to market and promote  
          California's racing industry.
           
          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%  
          and "product enhancement" by 9%.  CMC eliminated from the 2013  
          budget the "branding and new media category." CMC also plans to  
          reduce "satellite marketing" by 33% and "mini-satellite support"  
          by 76%.  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  








                                                                  AB 1074
                                                                  Page  4


          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.

           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 1074
                                                                  Page  5



          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.

           
          Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531 


                                                                FN: 0000947