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 9/11/13)
City of Inglewood Mayor, James T. Butts, Jr.
Communities for California Cardrooms
Hollywood Park Racetrack
UNITE HERE!
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
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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 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 9/11/13 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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