BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1074
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 1074 (Atkins)
          As Amended  August 26, 2013
          Majority vote
           
           ----------------------------------------------------------------- 
          |ASSEMBLY:  |77-0 |(May 29, 2013)  |SENATE: |37-0 |(September 3,  |
          |           |     |                |        |     |2013)          |
           ----------------------------------------------------------------- 
            
           Original Committee Reference:    G.O.  

           SUMMARY  :  Extends the sunset date by one year for the statewide  
          marketing organization that is responsible for marketing and  
          promoting thoroughbred and fair horse racing and also makes  
          adjustments to existing Horse Racing Law to allow the California  
          Horse Racing Board (CHRB) to adjust racing dates in the central  
          and southern zones in order to address the scheduling issues  
          resulting from the impending closure of Hollywood Park  
          racetrack.  

           The Senate amendments  :

          1)Make conforming changes to specified provisions in order to  
            update cross references.

          2)Delete obsolete provisions of existing Horse Racing Law.

          3)Prohibit the allocation of racing dates to a thoroughbred  
            association in the central zone for the purpose of conducting  
            racing if a thoroughbred racing association is conducting  
            racing in the southern zone on the same date during daytime  
            hours. 

          4)Provide from the weeks available in the combined central and  
            southern zones, the CHRB may allocate a maximum of five weeks  
            per year to a thoroughbred racing association to conduct  
            thoroughbred racing at a racetrack in the southern zone that  
            was not used to conduct a thoroughbred race meeting in the  
            southern zone prior to 2012.

           EXISTING LAW  :

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








                                                                  AB 1074
                                                                  Page  2

            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 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.

           AS PASSED BY THE ASSEMBLY  , this bill extended 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.

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.

           COMMENTS  :  This bill, as amended in the Senate is consistent  
          with Assembly actions.

           Purpose of the bill  :  According to the author, SB 27 (Maddy),  
          Chapter 335, Statutes of 1998, among its provision, created a  








                                                                  AB 1074
                                                                  Page  3

          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 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 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%  








                                                                  AB 1074
                                                                  Page  4

          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  
          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.
           

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


                                                                FN: 0001961