BILL ANALYSIS Ó 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