BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2258|
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THIRD READING
Bill No: AB 2258
Author: Evans (D)
Amended: 7/2/08 in Senate
Vote: 27 - Urgency
SENATE GOVERNMENTAL ORG. COMMITTEE : 10-0, 6/10/08
AYES: Florez, Battin, Denham, Harman, Negrete McLeod,
Padilla, Vincent, Wiggins, Wyland, Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 5/15/08 - See last page for vote
SUBJECT : Horse racing: license fees: shortfalls: pro
rata assessment
SOURCE : California Authority of Racing Fairs
DIGEST : This bill clarifies language in current horse
racing law relating to the amount of licensee fees that
must be paid to the state by racing associations and fairs
in any calendar year.
Senate Floor Amendments of 7/2/08 add an urgency clause in
order to ensure that the California Horse Racing Board can
properly account for and collect all license fees paid to
the state by racing associations and fairs in the 2008
calendar year, and collect any shortfall due from the 2008
horse racing season by March 1, 2009, in compliance with
current law.
CONTINUED
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ANALYSIS : Existing law authorizes the California Horse
Racing Board (CHRB) to regulate the various forms of horse
racing authorized in this state.
Existing law provides, if the total amount paid to the
state by racing associations and fairs is les than $40
million in any calendar year, beginning January 1, 2001,
and thereafter, all associations and fairs conducted live
racing during the year of the shortfall shall remit to the
state, on a pro rata basis according to the amount handled
in-state by each association or fair, the amount necessary
to bring the total amount paid to the state to $40 million.
The amounts due, if any, shall be paid from the amount
available for commissions, purses, and breeder awards, and
shall be paid to CHRB prior to March 1 of the year
following the year of the shortfall.
Existing law provides that all revenues distributed to the
state as licensee fees from satellite wagering facilities
are deposited in the Satellite Wagering Account (SWA)
within the Fairs and Exposition Fund (F&E) and are
continuously appropriated and prioritized as follows:
1.Paying bond obligations at $2.6 million.
2.Paying for specified infrastructure projects.
3.Parimutuel projects for establishing, maintaining and
operating satellite wagering and live racing facilities.
4.Operations of a consolidated California signal at
satellite wagering facilities.
5.Spending for health and safety improvements.
6.Projects that result in a cost savings by more efficient
utilization of existing fair resources.
Existing law provides that the amount of funds to be spent
on an item in numbers 3-6, above, be decided by the Joint
Committee on Fairs Allocation and Classification.
Existing law provides that from the total revenue received
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by CHRB, including revenues transferred from the SWA, the
sum of $265,000 plus an amount equal to 63/100 of one
percent of the gross amount of money handled in the annual
parimutuel pool generated within this state, or the maximum
amount received by the state from the pari-mutuel pool of a
racing meeting held in this state, whichever is less, shall
be paid into the State Treasury to the credit of the F&E
Fund.
Existing law provides if the revenues paid into the F&E
Fund is in excess of $13 million in any fiscal year,
one-half of the amount in excess of the $13 million shall
be transferred to the state's General Fund.
Existing law provides the Legislature shall annually
appropriate and CHRB shall deposit to the credit of the F&E
Fund, such sums as it deems necessary for the following
purposes:
1.For the support of CHRB, including any costs and expenses
incurred by the Attorney General, as defined.
2.To the Department of Food and Agriculture (DFA) for the
oversight of the network of California fairs receiving
money from the fund.
3.To DFA for the contributions, or the cost of benefits in
lieu of contributions, payable to the Unemployment Fund
by the network of California fairs, as specified.
4.To DFA for the auditing of all district agricultural
association fairs, county fairs, and citrus fruit fairs.
This bill provides that if the total amount paid to the
state as license fees by racing associations and fairs is
less than $40 million in any calendar year, all
associations and fairs that conducted live racing during
the year of the shortfall shall remit to the state, on a
pro rata basis according to the amount paid as license fees
by each association or fair, the amount necessary to bring
the total amount paid to the state as license fees to $40
million.
Background
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In 1998, SB 27 (Maddy) was enacted which granted
substantial license fee relief ($40 million, annually) to
the California horse racing industry. This license fee
relief essentially cut horse racing license fees in half
and enabled the struggling industry to retain an additional
$40 million of its own money. As part of that license fee
relief package, the racing industry agreed that it would
provide a guaranteed minimum of $40 million, annually, to
the F&E Fund for the support of the California Fair
Network. SB 27 also provided that if the annual license
fees fall below $40 million, then all associations and
fairs that conducted live racing meetings during that year,
shall pay the state, on a pro rata basis according to the
amount handled, a sum necessary to bring fees up to $40
million.
Ambiguity arises in the language enacted by SB 27 which
bases the $40 million threshold - and any shortfall - on
the, "[T]otal amount paid to the state by racing
associations and fairs". Total payments to the state
include things other than license fees such as breakage
(the odd cents by which the amount payable on each dollar
wagered exceeds a multiple of ten cents), unclaimed
tickets, costs associated with the Kenneth L. Maddy Equine
Research Laboratory at U.C. Davis, an license application
fees. This bill intends to clarify that language by
specifying that the $40 million guarantee is based on the
total amount paid to the state as license fees.
State Horse Racing Revenue . State revenue from horse
racing comes primarily from license fees imposed on the
amount wagered by the public. The license fee revenue
schedule is based on such factors as the amount wagered,
track location, type of horse racing, type of wager, and
whether the wager is made ontrack or at a simulcast
facility. The state's share of horse-racing revenue is
either deposited in the state General Fund or a special
fund (e.g., F&E Fund or SWA).
Horse racing no longer generates enough license fees to
fund the fairs. For the second year in a row, license fee
revenue has fallen below the legally mandated $40 million
floor for supporting the fairs and the industry is required
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to make up the difference.
On January 26, 2007, the CHRB sent letters to each racing
association and fair regarding the shortfall for calendar
years 2005 and 2006. The CHRB stated, "that pursuant to
Section 19616.51 of the Business and Professions Code, cash
receipts for calendar years 2005 and 2006 to the State of
California fell short of the $40 million by a combined
total of $1,528,187. Each racing association and fair was
requested to submit to the CHRB their pro rata share of the
shortfall.
As of March 1, 2007, the CHRB received six remittances
totaling $101,367. Some associations questioned CHRB about
the dollar amount reported. They cited CHRB's Annual
Reports show amounts above the $40 million baseline. Those
reports include receipts other than amounts deposited in
the F&E Fund, SWA, and Equine Research Funds.
SB 1825 (Kelly), Chapter 342, Statutes of 2000 . In 2000,
the California Authority of Racing Fairs (CARF) sponsored
AB 8125 (Kelley), Chapter 342, Statutes of 2000. The
sponsor stated, "that a key part of the continuing success
and public benefit of the California fairs is the
relationship it shares with the state's horse racing
industry. The California Horse Racing Act of 1933 promised
that the state's revenue from license fees paid by racing
associations would be pledged to create a self-supporting
network of agricultural fairs. This bill places into law
the necessary guarantee to ensure the economic future of
these fairs." The author's office reported, "that as part
of the negotiations regarding SB 27 (Maddy), Chapter 335,
Statutes of 1998, the fairs consented to the removal of
language from SB 27 that would have guaranteed a specified
minimum annual funding level for the Network of California
Fairs, CHRB, and the U.C. Davis Center for Equine Health.
Prior/Related Legislation
SB 1825 (Kelley), Chapter 342, Statutes of 2000 . Provides
for a minimum of $40 million per year in license fees paid
to the state by racing associations and fairs for support
of the Network of California Fairs, CHRB, and the Kenneth
L. Maddy Equine Research Facility at U.C. Davis.
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SB 27 (Maddy), Chapter 335, Statutes of 1998 . Provided
extensive license fee relief ($40 million annually) to the
horse racing industry in California.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/19/08)
California Authority of Racing Fairs (source)
Golden Gate Fields
Santa Anita Park
Western Fairs Association
ARGUMENTS IN SUPPORT : According to the author's office,
there is confusion within California's Horse Racing
Industry regarding what payments to the state shall be used
to meet the requirements of current law for the financial
support of California's Network of Fairs. Some parties
within the racing industry believe that current statute
stipulates that all monies collected by the state shall be
used in the calculation while the sponsor of the bill, the
CARF, believes that only license fees paid to the state are
to be used in the calculation. This bill clarifies the
issue.
In addition, the author's office and sponsor contend that
this bill represents continued discussion from last session
involving the reauthorization of Advance Deposit Wagering
(ADW) which is the system whereby racing associations and
fairs may accept wagers on horse races via the telephone or
Internet. AB 765 (Evans), Chapter 613, Statutes of 2007,
extended and included a variety of changes to the ADW law
positively impacting the industry as a whole. Currently,
there are no license fees assessed on ADW wagers and ADW is
the one segment of the industry that is growing. With the
enactment of this bill, it is likely that there will be no
efforts to try and add license fee provisions to the ADW
authorization.
ASSEMBLY FLOOR :
AYES: Adams, Aghazarian, Anderson, Arambula, Beall,
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Benoit, Berg, Berryhill, Blakeslee, Brownley, Caballero,
Charles Calderon, Carter, Cook, Coto, Davis, De La Torre,
De Leon, DeSaulnier, DeVore, Duvall, Emmerson, Eng,
Evans, Feuer, Fuentes, Fuller, Furutani, Gaines,
Galgiani, Garcia, Hancock, Hayashi, Hernandez, Horton,
Houston, Huff, Huffman, Jeffries, Jones, Keene,
Krekorian, La Malfa, Laird, Leno, Levine, Lieber, Lieu,
Ma, Maze, Mendoza, Mullin, Nakanishi, Nava, Niello,
Nunez, Parra, Plescia, Portantino, Sharon Runner, Ruskin,
Salas, Saldana, Silva, Smyth, Solorio, Spitzer,
Strickland, Swanson, Torrico, Tran, Villines, Walters,
Wolk, Bass
NO VOTE RECORDED: Dymally, Garrick, Karnette, Price, Soto
TSM:cm 7/2/08 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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