BILL ANALYSIS Ó
SB 1240
Page 1
Date of Hearing: June 30, 2016
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
SB
1240 (Hall) - As Amended April 5, 2016
SENATE VOTE: 36-0
SUBJECT: Horse racing: thoroughbred racing: northern,
central, and southern zones: auxiliary offsite stabling,
training, and vanning
SUMMARY: This bill makes detailed and extensive 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 zones defray
the costs of having to transport and stable their race horses at
auxiliary training facilities in California. Specifically, 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 amount in
the northern zone, if adjusted by the California Horse Racing
Board (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.
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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 that the 2% of funds of the total amount handled, as
specified, be used to pay the organization's expenses in the
northern zone.
5)Requires, in the northern, central, and southern zones and 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
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an independent third party selected by the CHRB at the
organization's expense.
6)Provides 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.
7)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.
8)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.
9)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
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vanning.
10)Contains an urgency clause to take effect immediately.
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
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, 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.
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5) 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. This deduction is to compensate for the additional stalls
beyond the number of usable stalls the association is required
to provide under existing law and for the vanning of starters
from these additional stalls on racing days for thoroughbred
horses.
6) Provides an organization formed and operated by thoroughbred
racing associations, fairs conducting thoroughbred racing, and
the organization representing thoroughbred horsemen and
horsewomen, to administer the fund to provide reimbursement for
offsite stabling at sanctioned auxiliary training facilities 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
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COMMENTS:
Horse racing law provides for the Stabling and Vanning Fund (S&V
Fund) to help horsemen and horsewomen defray the costs of having
to transport and stable their races horses at auxiliary training
facilities. These statutes date back to the 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 financed
exclusively from revenue generated at satellite wagering
facilities in this state. With the advent of advance deposit
wagering (ADW), the pari-mutuel 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 racetrack 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
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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.
In addition, for more than a decade, horse racing has been a
declining industry in California. 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 affected the amount, wagered
(the handle).
Purpose of the bill : According to the author, this bill is
intended to address vanning and stabling issues for the racing
industry in California. The author states 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.
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The author's office claims that without the 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.
Related Legislation : AB 2011 (Cooper) of 2016. Among other
things, 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.
(Pending in Senate Appropriations Committee)
Prior legislation : AB 650 (Perea) of 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,
restructures the organization that governs the S&V Fund.
(Pending in Senate Rules Committee).
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'
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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
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
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Del Mar Thoroughbred Club
Oak Tree Racing Association
Opposition
None on file
Analysis Prepared by:Eric Johnson / G.O. / (916)
319-2531