BILL ANALYSIS Ó
AB 2011
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Date of Hearing: April 6, 2016
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
AB 2011
(Cooper) - As Introduced February 16, 2016
SUBJECT: Horse racing: thoroughbred racing: northern zone:
auxiliary offsite stabling, training, and vanning
SUMMARY: Recasts and restructures the Stabling and Vanning Fund
(S&V Fund), which exists in Horse Racing Law to help horsemen
and horsewomen in northern California defray the costs of having
to transport and stable their races horses at auxiliary training
facilities. Specifically, this bill:
1) Increases the amount that is required to be deducted by a
racing association or racing fair in the northern zone for the
S&V Fund from an amount not to exceed 1.25 to 2% of the total
amount handled by satellite wagering facilities, as defined.
2) A vote of the organization representing thoroughbred
horsemen and horsewomen shall constitute 50 percent of all
voting interests on the board of the organization formed and
operated to administer the fund. The other 50 percent of all
voting interests shall be allocated among thoroughbred racing
associations and fairs conducting thoroughbred racing in a
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manner that provides meaningful representation on the governing
board of the organization for thoroughbred racing associations
and fairs conducting thoroughbred racing, as specified.
3) The funds distributed to the organization shall be used to
pay the organization's expenses and compensate the provider of a
board-approved auxiliary offsite facility for stabling,
training, and vanning of thoroughbred horses in the northern
zone.
4) The organization administering the auxiliary offsite
stabling and training facility and vanning program shall submit
its proposed financial and operational plans for the upcoming
calendar year to the board for review no later than November 1
of the preceding year.
5) Provides the funds shall also be used to cover all or part
of the cost of vanning thoroughbred horses from a board-approved
auxiliary offsite stabling and training facility to the track to
start in a thoroughbred race at a thoroughbred or fair racing
meeting in the northern zone. The organization shall determine
the extent of and manner in which compensation will be paid for
thoroughbred horses that are vanned from the auxiliary facility
to the track or the fair conducting the thoroughbred or fair
racing meeting.
6) Provides the auxiliary offsite stabling and training
facilities and the amenities provided for offsite stabling and
training purposes shall be substantially equivalent in character
to those provided by the thoroughbred racing association or fair
conducting the racing meeting.
7) Requires that the funds be used to cover all or part of the
cost of vanning thoroughbred horses in the northern zone from a
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board-approved auxiliary offsite stabling and training facility
and would authorize the organization to enter into multiyear
contracts for auxiliary facilities in the northern zone subject
to specified conditions.
8) Provides that at the request of the CHRB, the organization
shall submit a report detailing all of its receipts and
expenditures over the prior two fiscal years and, upon request
of any party within the organization, those receipts and
expenditures shall be audited by CHRB.
9) States in addition to the uses of the funds, as described,
the organization may use the funds for both of the following:
a) Maintain a reserve fund of up to 10 percent of the total
estimated annual vanning and
auxiliary offsite stabling and training facility costs. In
addition to the reserve fund, if the
funds generated for the auxiliary offsite stabling and training
facilities and vanning are
insufficient to fully cover the expenses incurred, the
organization may, in the future,
accumulate sufficient funds to fully cover those expenses.
b) Pay back commissions, purses, and owners' premiums to the
extent the deductions made, as
defined, exceed in any year the amount of funds necessary to
achieve the objectives of the
organization.
10) Authorizes the organization to use the funds to pay back
commissions, purses, and owners' premiums to the extent that the
deductions made exceed in any year the amount of the funds
necessary to achieve the objectives of the organization. The
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bill would also authorize a thoroughbred racing association or
fair in the northern zone to opt out of the auxiliary offsite
stabling and training facility and vanning program, as
specified.
11) Provides the amount initially deducted and distributed to
the organization may be adjusted by CHRB, in its discretion.
However, the adjusted amount may not exceed 2 percent of the
total amount handled by satellite wagering facilities. The
amount deducted and distributed to the organization as adjusted
by the board may be a different percentage of the handle for
different associations and fairs conducting thoroughbred racing
meetings in the northern zone, but only if all the associations
and fairs agree to the differing percentages.
12) Authorizes a thoroughbred racing association or fair in the
northern zone to opt out of the auxiliary offsite stabling and
training facility and vanning program, as specified. Provides
that any thoroughbred racing association or fair in the northern
zone that opts out of the auxiliary offsite stabling and
training facility and vanning program shall not have any voting
interest therein until the association or fair opts back into
the program, as defined.
13) Provides that the CHRB shall reserve the right to
adjudicate any disputes that arise regarding costs, or other
matters, relating to the furnishing of offsite stabling,
training, or vanning, as specified.
EXISTING LAW:
1)Provides, under existing law, Article IV, Section 19(b) of the
Constitution of the State of California, which the Legislature
may provide for the regulation of horse races and horse race
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meetings and wagering on the results.
2)Authorizes the CHRB to regulate the various forms of horse
racing authorized in this state.
3) Defines "pari-mutuel wagering" as a form of wagering in
which bettors purchase tickets of various denominations on the
outcome of one or more horse races.
4) Requires racing associations to deduct a specified
percentage of the total amount wagered on each race and type of
wager, for the purpose of distributing the amount collected for
purses, commissions, and other mandated distributions as
specified.
5) Requires, when satellite wagering is conducted on
thoroughbred races at associations or fairs in the northern
zone, that an amount not to exceed 1.25% of the total amount
handled by all of those satellite wagering facilities be
deducted from the funds otherwise allocated for distribution as
commissions, purses, and owners' premiums.
6) Requires an organization representing thoroughbred horsemen,
to administer a fund to provide reimbursement for off-site
stabling at CHRB approved auxiliary training facilities for
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additional stalls beyond the number of usable stalls the
association or fair is required to make available and maintain,
and for the vanning of starters from these additional stalls on
racing days for thoroughbred horses.
7) Divides the state into three geographical zones for
regulating horse racing (northern zone, central zone and
southern zone) and with respect to racing meetings conducted in
the northern zone, requires the association or fair conducting
the meeting to provide all stabling required by the CHRB without
cost to participating horsemen.
FISCAL EFFECT: Unknown
COMMENTS:
Purpose of the bill : According to the author's office, northern
California's Stabling and Vanning Fund (S&V Fund) will continue
to operate in the red if it is not restructured. Consequently,
two licensed auxiliary off-site stabling facilities in northern
California, the Alameda County Fair and Golden Gate Fields are
operating with deficient balances. In 2014, the Alameda County
Fair lost approximately $300,000 from off-track stabling
operations.
The S&V Fund exists to help horsemen and horsewomen defray the
costs of having to transport and stable their races horses at
auxiliary training facilities. According to the author, the
racing industry wants to ensure solvency of the S&V Fund by
diverting monies from generated purses, commissions and owners'
premiums.
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Existing statute dates back to late 1980s and early 1990s when
wagering at satellite facilities located on fairgrounds and
racetracks was the only form of off-track pari-mutuel wagering
available. The S&V Fund was funded exclusively from revenue
generated at California such satellite wagering facilities.
With the advent of advance deposit wagering (ADW) in 1999,
pari-mutuel handle began to migrate from satellite wagering
facilities to on-line ADW sources. The subsequent decline in
handle at satellite facilities has resulted in a significant
depletion of revenue to the S&V Fund. Current statutory
language limits available funding and decision-making
flexibility.
According to the author, this bill is intended to allow for
greater flexibility in the use of the S&V Fund to help
streamline operations in light of current financial constraints.
Without these changes, the S&V Fund will continue to operate in
the red. Therefore, the two licensed auxiliary offsite stabling
facilities in Northern California, Alameda County Fair and
Golden Gate Fields, will continue to lose money.
Background : The Horse Racing Law establishes the amount that
may be deducted (the takeout) from the pari-mutuel wagering
pools of horse races in California. The takeout is the amount
deducted from wagers before winnings are paid out to bettors.
Currently, California's takeout rate on Thoroughbred races is
15.43 percent for win, place, and show wagers, and 20.18% for
other types of wagers (i.e., Exacta, Trifecta, and Pick-6). The
takeout may be used for specific purposes, as defined by law,
such as license fees, enforcement fees, owners purses, racing
association commissions, marketing, workers' compensation, and
vanning and stabling, among others.
For more than a decade, horse racing has been a declining
industry. Some argue that the decline stems from increased
competition from expanded gaming in California to the inability
of the industry to attract new fans. Further exasperating the
problem is the downturn in the economy, which has significantly
impacted the amount, wagered (the handle).
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Prior legislation : SB 766 (Negrete McLeod), Chapter 616,
Statutes of 2009. Authorized the CHRB to shift money around
from various funds dedicated for specific purposes within horse
racing that are in surplus, such as the promotions fund and
workers' compensation fund, to others that are in deficit, such
as the S&V Fund.
SB 1805 (Florez), Chapter 883, Statutes of 2006. Provides that
any funds that are not used to defray the cost of workers'
compensation insurance from the supplemental "takeout" may be
used for reimbursing racing organizations for safety
improvements to racing and training surfaces.
AB 701 (Horton), Chapter 40, Statutes of 2004. Provided a
framework for the deduction from pari-mutuel pools in order to
address increased costs in workers compensation insurance in the
horse racing industry. Required Thoroughbred racing
associations to deduct an additional one-half percent of the
total amount handled in exotic pari-mutuel pools to be used to
defray workers' compensation costs in the horse racing industry.
AB 2931 (Horton), Chapter 922, Statutes of 2002. Authorized
racing associations to use existing industry funds (stabling and
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vanning and promotion funds) for use in developing a program to
offset workers' compensation rates for horse trainers in the
state.
REGISTERED SUPPORT / OPPOSITION:
Support
California Authority of Racing Fairs
Opposition
None on file
Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531
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