BILL ANALYSIS Ó
SB 472
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Date of Hearing: August 14, 2013
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
SB 472 (Hill) - As Amended: August 5, 2013
SENATE VOTE : Vote not relevant
SUBJECT : Gaming: licenses.
SUMMARY : Ensures the continued operations of the card club
located at the Hollywood Park Racetrack. Specifically, this
bill :
1)Authorizes the California Gambling Control Commission (CGCC)
to exempt specified limited partners in limited partnerships
from specified licensing requirements solely for the purposes
of the licensure of a car club located on any portion of the
grounds upon which a racetrack is or had been previously
located and horse racing meetings were authorized to be
conducted by the California Horse Racing Board (CHRB) on or
before January 1, 2012, that is owned by a limited partnership
that also owns or owned a racetrack.
2)Exempts from specified licensing requirements a person who is
licensed or had an application to be licensed on file with
CGCC on or before February 1, 2013, has a financial interest
in a business or organization engaged in gambling prohibited
by state law that was closed and was not engaged in prohibited
gambling at a time the person was either licensed or had filed
an application to be licensed or had filed an application to
be licensed with the CGCC, and has a financial interest in a
gambling establishment that is located on any portion the
grounds on which a racetrack is or had been previously located
and horserace meetings were authorized to be conducted by CHRB
on or before January 1, 2012, that is directly or indirectly
owned by a racetrack limited partnership owner, as defined.
3)Requires an exempted person, within three years of the date
the closed business or organization reopens or becomes engaged
in any form of prohibited gambling, as specified, to either
divest that person's interest in the business or organization,
or divest that person's interest in the gambling enterprise or
gambling establishments for which the person is licensed or
has applied to be licensed by CGCC.
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4)Specifies that during the three year divestment period it is
unlawful for any cross-promotion or marketing to occur between
the business or organization that is engaged in any form of
gambling, as specified.
5)Defines "cross-promotion or marketing" as offering to any
customers of the gambling enterprise or gambling establishment
anything of value related to visiting or gambling at the
business or organization engaged in any form of gambling, as
specified.
6)Requires an exempted person to inform CGCC within 30 days of
the date on which a business or organization in which the
person has a financial interest begins to engage in any form
of prohibited gambling, as specified.
7)Extends from 30 to 45 days the time after receipt of an order
by CGCC within which a person must apply for a gambling
license or a finding of suitability
EXISTING LAW
1)The Gambling Control Act (Act) provides for the licensure of
certain individuals and establishments involved in various
gambling activities, and for the regulation of those
activities, by CGCC.
2)Provides that a person is deemed unsuitable to hold a state
gambling license to own a gambling establishment if the
person, or any partner, officer, director, or shareholder of
the persons, has any financial interest in any business or
organization that is engaged in a prohibited form of gambling,
whether within or without this state, except as specified.
3)Requires, under the Act, for every person who is required to
hold a state license to obtain the license prior to engaging
in the activity or occupying the position with respect to
which the license is required, except as specified.
4)Existing law requires every person who, by order of CGCC, is
required to apply for a gambling license or a finding of
suitability to file an application within 30 calendar days
after receipt of that order.
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5)Provides, under the Act, that if the owner of a gambling
enterprise is not a person, the owner is not eligible for a
gambling license unless specified persons involved in the
enterprise obtain a gambling license.
6)Authorizes CGCC to exempt specified limited partners in
limited partnerships from the licensing requirements described
above solely for the purpose of the licensure of a card club
located on the grounds of a racetrack that is owned by a
limited partnership that also owns the racetrack.
7)Provides that a person is deemed unsuitable to hold a state
gambling license to own a gambling establishment if the
person, or any partner, officer, director, or shareholder of
the person, has any financial interest in any business or
organization that is engaged in a prohibited form of gambling,
whether within or without this state, except as specified.
8)Allows a person or entity to hold a state gambling license if
they have a financial interest in another business that
conducts lawful gambling outside the state that, if conducted
within California, would be unlawful, provided that an
applicant or licensee may not own more than one percent
interest in that business.
FISCAL EFFECT : Unknown
COMMENTS :
Background : According to information provided by the author,
the Hollywood Park Racetrack and Card Club is owned by a group
of public pension plan investors. Some of those same public
pension plans also own a share of the currently closed Sahara
Hotel in Las Vegas, which is undergoing capital improvements and
remodeling.
Current law exempts the actual pension plans from being licensed
as card club owners, provided that the card clubs is located at
an "operating" racetrack. However, current law also prevents an
entity owning a card club in California from also owning an
interest in a gambling facility that operates gaming which is
prohibited in California.
The original purchase of the Sahara Hotel by the pension plans
was made under the assumption at that time, that leasing out the
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gaming casino at both the card club at Hollywood Park and the
Sahara Hotel would avoid the prohibition referenced above. This
assumption was found to be incorrect as it is not allowed under
current law.
Last year AB 1290 (Hill) was introduced to address which
individuals would need to be licensed at the card club and an
exemption for ownership of the Sahara Hotel by the same pension
plans. The legislation was not enacted. As a result, the
managers of the pension plan funds agreed to be licensed by the
CGCC.
Purpose of the bill : According to the author, SB 472 only
applies to a card club located at a racetrack. Once the Sahara
Hotel in Las Vegas, Nevada reopens for business, the owners of
the Hollywood Park Casino would have three years to divest
ownership of either the card club or the Sahara Hotel. The
permanent legislative exemption proposed last year is no longer
being sought, but simply a reasonable divestment period of three
years to divest of the card club or the hotel.
The author further contends that the bill will address a
technical issue to clarify that the pension plans themselves do
not have to be licensed at a card club at a racetrack, as long
as the managers of their funds are licensed, which is now
occurring. However, current law requires the card club to be
located at an operating racetrack. Since this is the
racetrack's last year of operating live horse racing, the owners
of the Hollywood Park Casino have been advised that there is a
need to make a technical change to this section to allow for the
same section to apply after horseracing ceases.
Arguments in Support : According to the Hollywood Park
Racetrack, many of the same public pension plans which own the
Hollywood Park card club, also purchased, in 2007, the Sahara
Hotel in Las Vegas. At the time of that purchase the card club
at Hollywood Park and the casino in Las Vegas were operated by
lessees, on a flat rent basis, with the pension plans having no
stake in the actual outcome of the gaming. Hollywood Park
Racetrack further states that it was believed at the time, that
such a structure would comply with current law. Unfortunately,
that is not the policy of the State, and as a result, it will be
necessary for the pension plans to divest ownership of either
the card club or the casino once the Sahara Hotel is reopened
for business.
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SB 472 simply allows for a reasonable 3-year divestment process,
once the Sahara Hotel reopens. It also prohibits any "cross
promotion" marketing between the card club and the Sahara Hotel
during the 3 year divestment period.
Arguments in Opposition : Artichoke Joe's Casino argues that it
is inappropriate to create exemptions in law for one particular
cardroom or even a small minority of cardrooms. For similar
reasons, Artichoke Joe's opposed SB 356 (Yee), which would allow
cardroom owners to also have an ownership interest in foreign
based casinos. It would be more appropriate for the Legislature
to debate cardroom ownership laws in their entirety, rather than
considering piece-mill legislation that creates exemptions in
law for a limited number of entities.
Related Legislation . SB 356 (Yee), 2013-2014 Legislative
Session. The bill would allow a person or entity with a
financial interest in a foreign gambling operation to retain a
California Gambling license. (Pending in Assembly
Appropriations Committee)
Previous Legislation : AB 1290 (Hill), 2011-2012 Legislative
Session. The bill would have repealed an existing body of law
in the Act relative to an exemption from licensing requirements
for a card club on the grounds of a racetrack and recast that
body of law. The bill was intended to ensure the continued
operations of the card club located at the Hollywood Park
Racetrack. (Held in the Inactive File on the Senate Floor)
AB 3068 (Horton), Chapter 868, Statutes of 2006. The bill
extended the provisions which apply to a publicly traded
corporation owning a card club located on the grounds of the
entity's racetrack to a limited liability company or a limited
partnership.
REGISTERED SUPPORT / OPPOSITION :
Support
Communities for California Cardrooms
Hollywood Park Racetrack
Opposition
SB 472
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Artichoke Joe's Casino
Bicycle Casino
Commerce Casino
Hawaiian Gardens
Hustler Casino
Analysis Prepared by : Felipe Lopez / G. O. / (916) 319-2531