BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2011| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2011 Author: Cooper (D) Amended: 8/19/16 in Senate Vote: 27 - Urgency SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/14/16 AYES: Hall, Bates, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Vidak NO VOTE RECORDED: Berryhill SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 76-0, 4/28/16 (Consent) - See last page for vote SUBJECT: Thoroughbred racing: northern, central, and southern zones: auxiliary offsite stabling, training, and vanning SOURCE: Author 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, central, and southern 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, central, and southern zones 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. AB 2011 Page 2 Senate Floor Amendments of 8/19/16 add an urgency clause and incorporate nearly identical modifications to the S&V Fund for the central and southern racing zones as proposed in this bill for the northern zone. 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. 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, central, and southern zones from 1.25% to 2% and provides that this AB 2011 Page 3 amount in the northern zone, 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. 2)Establishes an auxiliary offsite stabling and training facility and vanning program for thoroughbred races in the northern, central, and southern zones. 3)Revises and recasts provisions governing the organization formed and operated to administer the S&V Fund to include, among other things, a 50-50% allocation of specified voting interests on the board of the organization, the use of funds to compensate the provider of a CHRB approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern, central, and southern zones, and the requirement that the organization submit its proposed financial and operational plans for the upcoming calendar year to the CHRB for review no later than November 1 of the preceding year. 4)Requires, at the request of the CHRB, the organization to 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, that those receipts and expenditures be audited by an independent third party selected by the CHRB at the organization's expense. 5)Requires that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern, central, or southern zone from a CHRB approved auxiliary offsite stabling and training facility. Also, authorizes the organization to enter into multiyear contracts for auxiliary facilities in the northern, central, or southern zone, subject to specified conditions. 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 AB 2011 Page 4 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 or vanning. 9)Contains an urgency clause to take effect immediately. 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. 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 AB 2011 Page 5 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 California. 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 provides for additional money from purses and commissions to help stabilize the S&V Fund. It should be noted that SB 1240 (Hall, 2016) was intended to be the vehicle to address vanning and stabling issues statewide and incorporates nearly identical changes to the S&V Fund as found in this bill. Both authors came to an agreement that only one bill is necessary to address the problem - thus, SB 1240 (Hall) will be held on the Assembly floor. Related/Prior Legislation 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 AB 2011 Page 6 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. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT: (Verified 8/22/16)California Authority of Racing Fairs California Thoroughbred Breeders Association Golden Gate Fields Santa Anita Racetrack Thoroughbred Owners of California OPPOSITION: (Verified 8/22/16) 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." ASSEMBLY FLOOR: 76-0, 4/28/16 AB 2011 Page 7 AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon NO VOTE RECORDED: Chávez, Daly, Mathis, Olsen Prepared by:Arthur Terzakis / G.O. / (916) 651-1530 8/22/16 22:59:21 **** END ****