BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                 UNFINISHED BUSINESS


          Bill No:  SB 472
          Author:   Hill (D)
          Amended:  8/26/13
          Vote:     21


           SENATE GOVERNMENTAL ORGANIZATION COMMITTEE  :  10-0, 4/9/13
          AYES:  Wright, Berryhill, Calderon, Cannella, Correa, De León,  
            Galgiani, Hernandez, Lieu, Padilla
          NO VOTE RECORDED:  Nielsen

           SENATE FLOOR  :  37-0, 4/11/13
          AYES:  Anderson, Beall, Berryhill, Block, Calderon, Cannella,  
            Corbett, Correa, De León, DeSaulnier, Emmerson, Fuller,  
            Gaines, Galgiani, Hancock, Hernandez, Hill, Hueso, Huff,  
            Jackson, Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen,  
            Padilla, Pavley, Price, Roth, Steinberg, Walters, Wolk,  
            Wright, Wyland, Yee
          NO VOTE RECORDED:  Evans, Vacancy, Vacancy

           SENATE GOV. ORG. COMM. :  6-0, 9/10/13 (pursuant to Senate Rule  
            29.10)
          AYES:  Wright, Berryhill, Cannella, De León, Galgiani, Lieu
          NO VOTE RECORDED:  Calderon, Correa, Hernandez, Padilla, Vacancy

           ASSEMBLY FLOOR  :  70-1, 9/4/13 - See last page for vote


           SUBJECT  :    Gaming:  licenses

           SOURCE  :     Author


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           DIGEST  :    This bill, among other things, creates a three-year  
          licensing exemption for the owners of the card room located at  
          Hollywood Park Racetrack by authorizing the California Gambling  
          Control Commission (CGCC) to exempt specified limited partners  
          in limited partnerships from specified licensing requirements. 

           Assembly Amendments  authorize the CGCC to exempt specified  
          limited partners in limited partnerships from specified  
          licensing requirements related to card clubs located on  
          racetrack grounds; provide for additional state gambling license  
          exemptions with divestment requirements; and add definitions.

           ANALYSIS  :    

          Existing law:

          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 specified 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  

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            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 1% interest in  
            that business. 

          This bill ensures the continued operations of the card club  
          located at the Hollywood Park Racetrack.  Specifically, this  
          bill:

          1.Authorizes the 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 (a)  
            is licensed or had an application to be licensed on file with  
            CGCC on or before February 1, 2013, (b) 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 (c) 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  

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            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.

          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.  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.

          5.Prohibits, during the three-year divestment period, any funds  
            used in connection with the capital improvement of the  
            gambling enterprise or gambling establishment from being  
            provided from the gaming revenues of either the business or  
            organization engaged in prohibited forms of gaming.

          6.Specifies that, if at the end of the three-year divestment  
            period, any person has not divested his/her interest in either  
            the gambling enterprise or gambling establishment or the  
            business or organization engaged in any form of prohibited  
            gaming, the current prohibition as it read on January 1, 2013,  
            will apply.

          7.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.

          8.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.

           Background


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           According to information provided by the author's office, 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.

          Existing law exempts the actual pension plans from being  
          licensed as card club owners, provided that the card club is  
          located at an "operating" racetrack.  However, existing 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  
          existing 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.

           Comments

           According to the author's office, 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 will 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 this 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, existing law requires the card club to be  

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          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.
           
          FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           Yes

          According to the Assembly Appropriations Committee, costs are  
          minor and absorbable within existing CGCC resources. 

           SUPPORT  :   (Verified  9/10/13)

          City of Inglewood Mayor, James T. Butts, Jr.
          Communities for California Cardrooms
          Hollywood Park Racetrack

           OPPOSITION  :    (Verified  9/10/13)

          Artichoke Joe's Casino
          Bicycle Casino
          Cities of Commerce and Hawaiian Gardens
          Commerce Casino
          Hawaiian Gardens Casino
          Hustler Casino
          San Manuel Band of Mission Indians
          Santa Ynez Band of Chumash Indians
          Tribal Alliance of Sovereign Indian Nations

           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 existing 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.   

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          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 a small minority of cardrooms.  For  
          similar reasons, Artichoke Joe's opposed SB 356 (Yee, 2013-14)  
          which allows cardroom owners to also have an ownership interest  
          in foreign based casinos.  They state, "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."

          Opponents contend that this bill will provide a special  
          exemption from licensing requirements only to Stockbridge and  
          Hollywood Park Casino Company (HPCC) and that these licensing  
          restrictions will continue to apply to the approximately 90  
          other card rooms that are operating in California.  They write,  
          "If this bill is passed then every other card room in California  
          will be disadvantaged by not having access to the capital  
          available to Stockbridge and HPCC."

           ASSEMBLY FLOOR  :  70-1, 9/4/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Beth  
            Gaines, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman,  
            Hall, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine,  
            Linder, Logue, Lowenthal, Maienschein, Medina, Mitchell,  
            Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,  
            Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,  
            Salas, Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,  
            Williams, John A. Pérez
          NOES:  Gatto
          NO VOTE RECORDED:  Donnelly, Garcia, Harkey, Mansoor, Melendez,  
            Skinner, Yamada, Vacancy, Vacancy


          MW:ej  9/10/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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