BILL ANALYSIS
AB 2215
Page 1
Date of Hearing: May 12, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2215 (Fuentes) - As Amended: April 28, 2010
Policy Committee: Governmental
Organization Vote: 21 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes the California Horse Racing Board (CHRB) to
adopt rules and regulations concerning the creation and
administration of advance deposit wagering (ADW) accounts at
satellite and mini-satellite wagering facilities.
FISCAL EFFECT
The CHRB is authorized to license 45 mini-satellite wagering
facilities throughout the state. So far, there is one facility.
If this bill makes it more attractive to operate a
mini-satellite facility, as intended, and therefore results in
44 additional facilities throughout the state it could result in
increased auditing and inspection workload costs of
approximately $900,000 for the CHRB. [Horse Racing Fund]
COMMENTS
1)Purpose . This bill is intended to establish another
distribution method for wagering on horseracing by allowing
existing facilities, including mini-satellites, to access the
current ADW infrastructure. The author argues that one of the
reasons mini-satellites have not been an attractive business
is that their betting volume tends to be low which makes it
less profitable for them to use the traditional simulcast
model which has fairly high fixed costs for handling wagers
and fairly low commissions. In contrast, the ADW structure is
a lower cost model.
2)Satellite Wagering . Satellite wagering via an off-track
facility has been legal in California since 1985. It was
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authorized at a time when California racetracks were beginning
to experience declining attendance and handle figures. The
industry believes that making the product easier to access not
only would expose and market horseracing to potential
customers, but also would make it more convenient for the
existing patrons to wager more often.
There are now 32 simulcast facilities throughout the state.
Six of the facilities are at privately owned racetracks, eight
at fairs that conduct live racing, 15 at county fairs and
district agricultural associations, and three on Indian lands.
Simulcast-only facilities do not have live racing; those
facilities accept wagers on races broadcast via simulcast from
in-state and out-of-state racetracks. In 2008-09, of the $4
billion wagered on horseracing in the state, over $1 billion
of that wagering was the result of off-track betting at
satellite facilities.
3)Mini-Satellite Facilities . AB 241 (Price; Chapter 594,
Statutes of 2007) authorized the establishment of up to 45
mini-satellite wagering sites to be operated by private
industry throughout California. A mini-satellite facility is
limited to locations that are only accessible to people 21 and
over. It is envisioned that these facilities will be set up
within establishments that serve a large population of adult
clientele such as sports bars, card clubs, and casinos.
California's first and only mini-satellite opened in November
2009 at the Commerce Casino, a Southern California Card Club.
The facility is currently handling more than $80,000 in horse
racing wagers per day.
To date, only three applications have been presented to the
CHRB for mini-satellite facilities. It is unclear why there
has not been a broader interest in these facilities. Some
speculate that the 2% commission that is retained by the
minisatellite is not enticing enough for business owners.
Alternatively, it could be that not enough time has elapsed
and there are not enough success stories for this type of
business proposition to reach the tipping point.
4)Advance Deposit Wagering (ADW) . The California horse racing
industry entered into a new era in 2002 with the advent of
ADW, which allows customers to deposit funds into an account
in order to wager online and over the telephone. These wagers
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are commingled into pools at the host track where the races
are run, and within the pari-mutuel wagering system regulated
by CHRB. In 2008-09, of the $4 billion wagered on horseracing
in the state, $2.3 billion of that wagering was the result of
advance deposit wagering.
5)Key Issues . If the intent of this legislation is to provide an
incentive for people to open mini-satellite facilities, the
author and sponsor may wish to consider including provisions
in the bill that would allow operators of mini-satellite
facilities to receive some payment associated with allowing
advanced deposit wagering in their establishments. Current ADW
law very clearly specifies how the takeout from the handle
shall be distributed and this legislation does not adjust that
distribution.
In addition, the CHRB does not receive any licensing fees from
the ADW handle. If this bill authorizes ADW betting kiosks or
machines to be placed in satellite and mini-satellite
facilities, those machines need to be regulated and monitored
by the CHRB. Therefore, the author and the Legislature may
wish to consider revising current ADW statutes to require a
portion of the ADW handle be paid into the Horse Racing Fund
to support the CHRB and to clarify that the CHRB has the
authority as a regulatory agency to carry out their mandate to
protect the betting public by monitoring and overseeing these
ADW machines.
6)Related Legislation . SB 1439 (Price) modifies provisions of
the Horse Racing Law relative to the authorization of
"minisatellite" wagering facilities by shrinking the
protective zone for existing satellite wagering facilities, as
specified, from a 20 mile radius to 15 miles. That bill is
currently pending in the Senate Appropriations Committee.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081