BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 472
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          SENATE THIRD READING
          SB 472 (Hill)
          As Amended  August 26, 2013
          Majority vote

           SENATE VOTE  :   Vote not relevant
            
           GOVERNMENTAL ORGANIZATION   15-0APPROPRIATIONS      15-0        
           
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          |Ayes:|Hall, Nestande, Campos,   |Ayes:|Gatto, Bigelow,           |
          |     |Chesbro, Cooley, Gray,    |     |Bocanegra, Bradford, Ian  |
          |     |Hagman, Jones,            |     |Calderon, Campos, Eggman, |
          |     |Jones-Sawyer, Levine,     |     |Gomez, Hall, Holden,      |
          |     |Medina, Perea, V. Manuel  |     |Linder, Pan, Quirk,       |
          |     |Pérez, Salas, Waldron     |     |Wagner, Weber             |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           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  








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            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.

          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)Specifies that during the three-year divestment period, any  
            funds used in connection with the capital improvement of the  
            card club located at the Hollywood Park Racetrack shall not be  
            provided from the gaming revenues of either the business or  
            organization engaged in gaming that is prohibited in the State  
            of California.

          6)Specifies that if at the end of the three-year divestment  
            period, any person has not divested his or her interest in  
            either the card club located at the Hollywood Park Racetrack  
            or the business or organization engaged in any form of gaming  
            that is prohibited in the State of California, the current  
            prohibition as it read on January 1, 2013 shall apply.

          7)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.

          8)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. 

          9)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  :








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          1)Provides, under the Gambling Control Act (Act), 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)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.

          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  








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            applicant or licensee may not own more than 1% interest in  
            that business.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, costs associated with this legislation should be  
          minor and absorbable within existing CGCC resources.

           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  
          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, this bill 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.








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          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 the 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.

          This bill simply allows for a reasonable three-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 three-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." 
           
          Analysis Prepared by  :    Felipe Lopez / G.O. / (916) 319-2531 


                                                                FN: 0001917








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