BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Isadore Hall, III Chair 2015 - 2016 Regular Bill No: AB 2011 Hearing Date: 6/14/2016 ----------------------------------------------------------------- |Author: |Cooper | |-----------+-----------------------------------------------------| |Version: |2/16/2016 Introduced | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Arthur Terzakis | | | | ----------------------------------------------------------------- SUBJECT: Horse racing: thoroughbred racing: northern zone: auxiliary offsite stabling, training, and vanning DIGEST: This bill makes modifications to existing provisions in Horse Racing Law pertaining to the Stabling and Vanning Fund (S&V Fund) to help horsemen and horsewomen in the northern zone defray the costs of having to transport and stable their race horses at auxiliary training facilities. Specifically, this bill 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% of handle on wagers made on thoroughbred races at satellite wagering facilities to an amount not to exceed 2% of the handle. This bill also makes changes to provisions governing the organization formed to administer the S&V Fund. ANALYSIS: Existing law: 1)Stipulates, pursuant to Article IV, Section 19(b) of the Constitution of the State of California, the Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results. 2)Provides that the California Horse Racing Board (CHRB) shall regulate the various forms of horse racing authorized in this state. AB 2011 (Cooper) Page 2 of ? 3)Divides the state into three geographical zones for purposes of regulating horse racing - northern zone, central zone and southern zone. 4)Provides that, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern, central, or southern zone, an amount equal to 1.25% of the total amount handled by all of those satellite wagering facilities must be deducted from the take-out for the benefit of the S&V Fund. Proceeds therein are distributed to the organization representing the racing associations and horsemen and horsewomen for the purpose of providing reimbursement for off-site stabling and vanning at CHRB-approved auxiliary training facilities of licensed racing associations. This is to compensate for the additional stalls beyond the number of usable stalls the association is required to provide under existing law. 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% of the total amount handled by satellite wagering facilities to an amount not to exceed 2% of the handle. 2)Provides that this amount, if adjusted by the CHRB, may be a different percentage of the handle for different associations and fairs but only if all the associations and fairs agree to the differing percentages. 3)Revises and recasts the provisions governing the organization formed and operated to administer the S&V Fund to include, among other things, a 50-50% allocation of voting interests on the organization's governing board and the use of funds to pay the organization's expenses and compensate the provider of a CHRB approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern zone. 4)Requires that the governing organization submit its proposed financial and operational plans for the upcoming calendar year to the CHRB for review no later than November 1st of the preceding year. AB 2011 (Cooper) Page 3 of ? 5)Requires that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern zone from a CHRB approved auxiliary offsite stabling and training facility and authorizes the organization to enter into multiyear contracts for auxiliary facilities in the northern zone. 6)Authorizes the governing organization to use the funds to pay back commissions, purses, and owners' premiums to the extent the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization. 7)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. 8)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. 9)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 the request of any party within the organization, that those receipts and expenditures be audited by the CHRB. Background Horse racing law provides for the S&V Fund to help horsemen and horsewomen defray the costs of having to transport and stable their race horses at auxiliary training facilities. The S&V Fund is divided into northern and southern California accounts, both of which are administered by similar organizations and governing boards. These statutes date back to the late 1980s and early 1990s when wagering at satellite facilities located on fairgrounds and race tracks was the only form of off-track parimutuel wagering available. The S&V Fund was financed exclusively from revenue generated at satellite wagering facilities in this state. With the advent of advance deposit wagering (ADW), the parimutuel handle began to migrate from satellite wagering facilities to online ADW sources. The subsequent decline in handle at satellite facilities has resulted in a significant depletion of revenue to the S&V Fund. AB 2011 (Cooper) Page 4 of ? In 2013, Hollywood Park race track announced the discontinuance of racing which created a severe stabling and training problem for the horse racing industry. The CHRB and the racing industry were able to negotiate an agreement for Hollywood Park to remain open for stabling and training through the first quarter of 2014, but had to find other stabling and training facilities to replace Hollywood Park immediately thereafter. Industry stakeholders and the CHRB came together to reach agreements and the necessary commitments were made to preserve thoroughbred racing in southern California. Specifically, Los Alamitos race track built 500 new stalls to accommodate thoroughbred training on a year-round basis; the San Luis Rey Training Center, located in Bonsall (San Diego County) was upgraded with an improved track and renovated barns to play a major stabling role; Fairplex Park, located in Pomona, agreed to provide stabling and training for a limited time; and, Santa Anita race track and Del Mar race track continued to operate race meets and stabling programs. More recently, due to the decision by Fairplex to discontinue training and racing, the CHRB granted Galway Downs training center in Temecula a conditional license to begin providing stalls and training. The CHRB and the industry are hopeful that a new training center will eventually be built somewhere in southern California to accommodate the horse racing industry which plays a vital role in the state's economy. In northern California, the two licensed auxiliary offsite stabling facilities, Alameda County Fair and Golden Gate Fields, have been operating with deficient balances. In 2014, the Alameda County Fair lost approximately $300,000 in off-track stabling operations. Purpose of AB 2011. According to the author's office, this bill is intended to address vanning and stabling issues for the racing industry in northern California. The author's office emphasizes that northern California's S&V Fund will continue to operate in the red if it is not restructured. The author's office notes that current statutory language limits available funding and decision-making flexibility. This bill gives the CHRB and the organization governing the S&V Fund more flexibility in governance and decision-making. Furthermore, it AB 2011 (Cooper) Page 5 of ? provides for additional money from purses and commissions to help stabilize the S&V Fund. The author's office claims that without these changes the S&V Fund will continue to operate in the red and the two licensed auxiliary offsite stabling facilities in northern California will continue to lose money. Prior/Related Legislation SB 1240 (Hall, 2016) makes extensive modifications to existing provisions in Horse Racing Law pertaining to the S&V Fund to help horsemen and horsewomen in the northern, central, and southern zones defray the costs of having to transport and stable their race horses at auxiliary training facilities. Specifically, this bill increases the amount that is required to be deducted by a racing association or racing fair in the northern, central, and southern zones from an amount not to exceed 1.25% of handle on wagers made on thoroughbred races at satellite wagering facilities to an amount not to exceed 2% of the handle and also makes changes to provisions governing the organization formed to administer the S&V Fund. (Pending in Assembly policy committee) AB 650 (Perea, 2015) would have increased the portion of the take-out used to fund the S&V Fund from 1.25% of handle on wagers made on thoroughbred races at northern California satellite facilities to 2% of handle. Also, would have restructured the organization that governs the S&V Fund. (Gutted and amended in the Senate on April 14, 2016 to become a bill relating to regulation of taxicabs.) SB 766 (Negrete McLeod, Chapter 616, Statutes of 2009), among other things, 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) provided that any funds that are not used to defray the cost of workers' compensation insurance from the supplemental "take-out" may be used for reimbursing racing organizations for safety improvements to racing and training surfaces. AB 2931 (J. Horton, Chapter 922, Statutes of 2002), among other things, authorized the racing associations to use existing AB 2011 (Cooper) Page 6 of ? industry funds (stabling and vanning and promotion funds) to develop a program to off-set workers' compensation rates for horse trainers in the state. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT: California Authority of Racing Fairs OPPOSITION: None received ARGUMENTS IN SUPPORT: Writing in support, the California Authority of Racing Fairs states, "AB 2011 will give affected parties more flexibility in governance and decision-making and allow money from purses and commissions to stabilize the S&V Fund. Without these changes, the fund will continue to operate in the red. As a consequence, the two licensed auxiliary offsite stabling facilities in Northern California, Alameda County Fair and Golden Gate Fields, will continue to lose money."