BILL ANALYSIS
AB 2414
Page 1
Date of Hearing: May 19, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2414 (John A. Perez) - As Amended: April 15, 2010
Policy Committee: Governmental
Organization Vote: 21 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes an increase in the takeout from the total
amount wagered on the Breeders' Cup World Championship horse
races and establishes marketing requirements for the Breeders'
Cup. Specifically, this bill:
1)Exempts the association hosting the Breeder's Cup from the
requirement that they receive California Horse Racing Board
(CHRB) authorization prior to adjusting the takeout and the
requirement that they report all receipts and expenditures to
the board after the meet. Instead, upon filing a written
notice with the CHRB, the association can either reduce or
increase the percentage deducted from the total amount handled
in the pari-mutuel pool for any type of wager made during the
days on which the races are held.
2)Provides that the takeout percentage must be more than 10% and
less than 25% of the total amount wagered.
3)Requires the statewide marketing organization to enter into an
agreement, in consultation and cooperation with the California
Tourism Commission, to sponsor and promote the Breeders' Cup
in any year the races are conducted in California.
4)Requires the marketing association to provide at least $2
million annually to promote the Breeders' Cup World
Championship series.
5)Declares the Legislature's intent to later amend this bill to
provide that a percentage of the takeout that is attributable
to the Breeders' Cup races that otherwise would not have been
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generated absent the Breeders' Cup races occurring in this
state, be eligible to be made available to support the
statewide marketing organization and the state horse racing
industry.
FISCAL EFFECT
1)In 2009, $128 million was wagered on Breeder's Cup
Championship races. The current takeout from those races would
be approximately $26 million. This bill would allow
flexibility in that amount, thus the takeout could be anywhere
from $13 million to $32 million, depending on what the racing
association decides.
2)This legislation requires a minimum $2 million investment
(California Marketing Committee funding) in the marketing and
promotion of the Breeders' Cup Championship. Currently the
marketing association has a budget of approximately $4 million
a year.
3)This bill will be amended to require that a percentage of the
takeout from the Breeders' Cup be devoted to the marketing of
horseracing and the industry. The average (handle) for two
days of racing at Santa Anita in 2009 was $15 million. The
two days of Breeders' Cup races generated over $128 million in
handle. Using the standard takeout rate of 19.9%, the
increased handle for the Breeders' Cup was approximately $20
million. Requiring that 20% of the increased takeout, for
example, be dedicated to marketing and the industry could
result in an additional $4 million for those purposes.
COMMENTS
1)Purpose . The intent of this legislation is to provide
incentives to encourage the Breeders' Cup to designate
California and the Santa Anita Racetrack as the permanent host
for the annual Breeders' Cup World Championship. Santa Anita
Park in Arcadia is currently competing with Churchill Downs in
Kentucky and Belmont Park in New York to become a permanent
host for the Breeders' Cup. For the last two years, the
Breeders' Cup has been held at Santa Anita Park. The series
will be held at Churchill Downs in Kentucky in 2010.
2)The Takeout . The horse racing takeout amount is a percentage
deducted from all of the wagers before the winnings are paid
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out to bettors. These takeout rates vary among states.
California's current rate is 15.43% for conventional wagers
(win, place, and show wagers) and 20.68% for exotic wagers
(Exacta, Trifecta, and Pick-6), resulting in a total takeout
of 19.9%. The money from the takeouts is used for such things
as owner purses, racing association commissions, and breeding
incentive programs. In addition, various funds receive money
from the takeout to meet specific needs of the industry. For
example, funds have been set up for offsite stabling and
transporting horses on race day, to offset the costs of
workers compensation, to establish pension plans and provide a
welfare fund for backstretch personnel, and to fund the
California Marketing Committee.
Among the horseracing industry, there has been a movement over
the last several years to allow flexibility to increase or
reduce takeout rates. For example, Balmoral Park in Illinois
recently announced that on each Wednesday of the meet the
takeout on Pick 3 and Pick 5 wagers would be reduced from the
current 25% to 15%, thus increasing the payout to the winning
bettors by 10%. They are using this type of takeout adjustment
as a marketing tool to increase attendance at the races and
boost wagering.
Current law allows for flexibility in the takeout, subject to
the approval of the CHRB. Under this legislation, adjusting
the takeout for the Breeders' Cup would not require CHRB
approval.
3)Breeders' Cup . The Breeders' Cup World Championship is an
annual series of Grade 1 thoroughbred horse races. The event
is a year-end championship for North American thoroughbred
racing, which attracts top horses from other parts of the
world, especially Europe. The Breeders' Cup is considered to
be the richest two days in the United States for total purses
paid to horse owners. The attendance at the Breeders' Cup
ranks fifth in North America and usually surpasses the
attendance of all other stakes races. The daily attendance of
the Breeders' Cup typically trails only the Kentucky Derby,
the Preakness Stakes and the Kentucky Oaks.
Despite a steady decline in the amount wagered at horse races,
the Breeders' Cup overall wagering in 2009 increased by almost
3%. International wagering showed an increase of 32% over
2008. The total handle for the 19 races exceeded $128 million.
This increase is especially impressive when measured against a
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national decline in wagering of over 11%. Oak Tree, the
racing association hosting the Breeders' Cup saw a 16% handle
drop during their fall meet in 2009.
4)California Marketing Committee . SB 27 (Maddy; Chapter 335,
Statutes of 1998), created a statewide marketing organization
for thoroughbred and fair racing that is funded by 0.4% of the
in-state satellite wagering facility handle. The funds
generated from this distribution are used to market California
horse racing on a statewide basis. The California Marketing
Committee (CMC) is generally responsible for promoting horse
racing in the state by developing and implementing a marketing
plan that will increase on-track and off-track attendance
throughout the state. The CMC will receive approximately $4
million in 2010 to support its marketing efforts.
5)Decreasing Fiscal Oversight. Despite an ongoing mandate for
the CHRB to protect the betting public, over the last 20 years
efforts have been made to significantly reduce regulations and
state oversight within the horseracing industry in California.
As a result of this degregulation, it has become difficult
for CHRB to provide significant fiscal oversight over an
industry that generates $4 billion per year in wagering
activity. Given that reduced level of oversight, the committee
may wish to consider whether or not it is prudent to give
racing associations the authority to adjust the takeout
without CHRB approval.
6)Related Legislation . Similar to this bill, SB 517 (Florez;
Chapter 636, Statutes of 2009) as originally written would
have allowed thoroughbred associations or fairs the authority
to adjust the takeout, without CHRB approval. That bill was
amended in this committee to require a racing association to
submit a written request and receive CHRB approval prior to
adjusting the takeout.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081