BILL ANALYSIS Ó
AB 2218
Page 1
GOVERNOR'S VETO
AB
2218 (Burke)
As Enrolled September 9, 2016
2/3 vote
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|ASSEMBLY: |75-0 |(April 14, |SENATE: |37-0 |(August 25, |
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|COMMITTEE VOTE: |16-0 |(August 30, |RECOMMENDATION: |concur |
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|ASSEMBLY: |71-7 |(August 31, | | | |
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AB 2218
Page 2
Original Committee Reference: G.O.
SUMMARY: Extends a licensing exemption for the owners of the
card room located at the old Hollywood Park Racetrack.
Additionally, extends the time after receipt of an order by the
Gambling Control Commission (CGCC) within which a person must
apply for a gambling license or a finding of suitability.
Specifically, this bill:
1)Extends from three to six years a limited exemption in current
law that 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)Requires the City of Inglewood, by July 1, 2018, to prepare
and submit a report to the Legislature and appropriate policy
committees on the progress of the construction of the City of
Champions Revitalization Project and the project's impact on
the divestment requirement contained in this bill.
3)Makes legislative findings and declarations as to the
necessity of a special statute for the City of Inglewood.
4)Extends from 45 to 60 days the time after receipt of an order
by the Gambling Control Commission (CGCC) within which a
person must apply for a gambling license or a finding of
suitability.
The Senate amendments:
AB 2218
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1)Extend from three to six years a limited exemption in current
law that 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)Require the City of Inglewood, by July 1, 2018, to prepare and
submit a report to the Legislature and appropriate policy
committees on the progress of the construction of the City of
Champions Revitalization Project and the project's impact on
the divestment requirement contained in this bill.
3)Makes legislative findings and declarations as to the
necessity of a special statute for the City of Inglewood.
EXISTING LAW:
1)The Gambling Control Act (Act) provides for the licensure of
certain individuals and establishments involved in various
gambling activities, and for the regulation of those
activities, by the CGCC.
2)Requires 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.
3)Requires every person who, by order of the CGCC, is required
to apply for a gambling license or a finding of suitability to
file an application within 45 calendar days after receipt of
the order.
4)Provides that a person is deemed unsuitable to hold a state
AB 2218
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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.
5)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.
6)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
directly or indirectly owned by a racetrack limited
partnership owner, as defined.
7)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
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has applied to be licensed by CGCC.
8)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.
9)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.
10)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.
11)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.
FISCAL EFFECT: Unknown
COMMENTS:
Background: The Hollywood Park Casino is owned by a group of
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public pension plan investors known as the Stockbridge Capital
Partners, LLC, which also owns a share of the recently reopened
SLS Hotel and Casino in Las Vegas.
The original purchase of the SLS Hotel and Casino, then known as
Sahara Hotel, by Stockbridge was made under the assumption that
leasing out the gaming casino at both the card club at Hollywood
Park and the Sahara Hotel would avoid the prohibition that
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. This assumption was found to
be incorrect.
In 2012, 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. The legislation
was not enacted. As a result, the managers of Stockbridge
agreed to be licensed by the CGCC.
However, because of the prohibition against owning out of state
interest in a gambling establishment that operates gaming which
is prohibited in California, the Legislature passed and the
Governor signed SB 472 (Hill), Chapter 760, Statutes of 2013
which granted a three-year licensing exemption that gave
Stockbridge a three year period after the SLS Casino and Hotel
reopened to either divest their interest in the Hollywood Park
Casino or the SLS Casino and Hotel.
In addition, the bill prohibited co-promotion activities between
the Hollywood Park Casino and the SLS Hotel and Casino. The SLS
Hotel and Casino reopened in late August of 2014 after going
through massive remodeling. Thus, the current three year
exemption would expire in late August of 2017.
AB 2218
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Since the passage of SB 472, the St. Louis Rams reached a deal
to return back to Los Angeles. The site that was selected to be
the home of the Los Angeles Rams was the former Hollywood Park
Racetrack where an 80,000 seat stadium, entertainment center,
and retail and office complex is being built. As a result, the
Hollywood card club is in the process of being moved about 100
yards from its current location. Hollywood Park has stated that
the move and the construction in the area have resulted in a
downturn in their business, which has prevented them from
selling the property in the 3 years the owners were given to
divest from either business.
This bill would extend the licensing exemption that gives
Stockbridge a three year period to divest from Hollywood Park
Casino or the SLS Casino and Hotel another 3 years, until August
2020.
Purpose of the bill: According to the author: "This bill
simply extends the current three year divestment period in
current law by an additional three years. This change would
allow the public pension plans to retain their interest in the
card club during the massive construction period required for
the new project and avoid the public pension plans from having
to divest of the card club during the major stadium/venue
construction period. AB 2218 would retain all of the existing
conditions of the current law exemption, while simply extending
it for an additional three years while the massive construction
activities occur at the site"
In addition the author argues that, "depending on an
individual's various financial holdings, as well as other
background, the documents required to be provided for a gaming
license can be very significant and require much time and effort
to provide. The purpose of this bill is to expand the timeframe
that individuals have to file the application, to facilitate the
most comprehensive supply of documents to the CGCC."
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CalPERS Investment Report: The CalPERS 2014-2015 Annual
Investment Report, which shows, among other things, performance
on all investments, operations, and initiatives for the one-year
period ending on June 30, 2015. The report lists the book value
(value upon purchase) and market value (current value) of
Stockbridge's real estate assets this bill seeks an exemption
for - Hollywood Park Casino and the SLS Hotel and Casino. The
Hollywood Park asset shows an increase in the investment of just
over $29 million (Book Value: $52,773,489; Market Value:
$81,775,383). The SLS Casino asset shows an increase of just
under $1 million (Book Value: $33,915,001; Market Value:
$34,759,908). It is important to note that the CalPERS report
is a snapshot of the fiscal year and does not take into account
the entire life of the investments in question.
Gambling Control Commission (CGCC): The Act provides the CGCC
with jurisdiction over the operation of gambling establishments
in California. The Act assigns the CGCC the responsibility of
assuring that gambling licenses are not issued to, or held by,
unqualified or disqualified persons, or by persons whose
operations are conducted in a manner that is harmful to the
public health, safety, or welfare. The Act directs the CGCC to
issue licenses only to those persons of good character, honesty
and integrity, whose prior activities, criminal record, if any;
reputation, habits and associations do not pose a threat to the
public interest of this state. The Department of Justice Bureau
of Gambling Control (DOJ or Bureau) conducts background and
field investigations and enforces the provisions of the Act in
this regard.
Arguments in Support: According to the State Building and
Construction Trades Council of California, "the Hollywood Park
site in Inglewood has been chosen for construction of a new,
state of the art, NFL stadium. This addition, along with a
7,000 seat music venue will make this project a world class
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location in Southern California. Just as important, it will
provide an estimated 30,000 new jobs, many of which will be good
paying jobs in the construction industry, which our members are
very excited about. We also understand that a construction
project of this magnitude, while a tremendous economic driver
for the region, will have a temporary impact on the business of
the card club located directly adjacent to the overall project.
This bill simply extends the current divestment period for an
additional three years while the massive construction efforts
are underway."
Arguments in Opposition: According to the United Auburn Indian
Community, "we did not oppose the first exemption in the spirit
of allowing the pension fund investors time to sort out the
conflicting ownerships. But they have had ample time to divest
themselves from one or the other operation. To allow an
additional exemption would undermine the purpose and intent of
the underlying California law."
Opponents of the bill also argue that, "the special interest
exception represented by AB 2218 is unnecessary as there is
still adequate time under the existing exception for Stockbridge
and Hollywood Park Casino Company (HPCC) to determine whether
to divest themselves of either Hollywood Park Casino or the SLS
Las Vegas. Hollywood Park Casino has announced that it will
momentarily be opening its new casino facility. The fact that
there is construction occurring elsewhere on the larger site has
no impact on the divestiture decision. This requested special
exemption serves no purpose other than granting Stockbridge and
HPCC much more time to determine which property is more
valuable. We submit that maximizing Stockbridge's and HPCC's
profits is not the job of the Legislature and most certainly
does not provide a sound basis upon which to continue to alter a
fundamental public policy."
Prior/Related Legislation: SB 472 (Hill), Chapter 760, Statutes
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of 2013. Created a three-year licensing exemption for the
owners of the card room located at Hollywood Park Racetrack by
authorizing the CGCC to exempt specified limited partners in
limited partnerships from specified licensing requirements.
SB 356 (Yee) of 2013-2014. The bill would allow a person or
entity with a financial interest in a foreign gambling operation
to retain a California Gambling license. (Held in Assembly
Appropriations Committee)
AB 1290 (Hill) of 2011-2012. The bill would have repealed an
existing body of law in the Act relative to an exemption from
licensing requirements for a card club on the grounds of a
racetrack and recast that body of law. The bill was intended to
ensure the continued operations of the card club located at the
Hollywood Park Racetrack. (Held on the Inactive File on the
Senate Floor)
AB 2526 (Hall) of 2012 would have revised several definitions
within the Act. Specifically the bill revised the definition of
a "key employee," added surveillance managers and supervisors to
the definition of "key employee" for licensing purposes and
deleted the term "pit boss" and replaced the term "shift boss"
to "shift manager." (Held on the inactive file on the Senate
Floor)
AB 777 (Hall) of 2011 would have required every person who is
required to hold a state license to obtain the license before
engaging in the activity or occupying the position with respect
to which the license is requires, except as specified. (Never
Heard in Assembly Governmental Organization Committee)
AB 3068 (Horton), Chapter 868, Statutes of 2006. The bill
extended the provisions which apply to a publicly traded
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corporation owning a card club located on the grounds of the
entity's racetrack to a limited liability company or a limited
partnership.
GOVERNOR'S VETO MESSAGE:
I am returning Assembly Bill 2218 without my signature.
This bill provides the owners of the Hollywood Park Casino three
additional years to divest of its interest in the card club or
the SLS Casino in Nevada.
The City of Champions Revitalization Project will continue to
bring enormous economic benefits to Inglewood regardless of
whether the cardroom is sold next year or in 2020. If our
gambling laws are based on outdated policies or assumptions, we
should thoughtfully examine those laws and amend them so that
all participants in the industry receive the same benefits and
opportunities.
Analysis Prepared by:
Kenton Stanhope / G.O. / (916) 319-2531 FN:
0005134
AB 2218
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