BILL ANALYSIS
AB 2414
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ASSEMBLY THIRD READING
AB 2414 (John A. Perez)
As Amended April 15, 2010
Majority vote
GOVERNMENTAL ORGANIZATION 21-0APPROPRIATIONS 17-0
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|Ayes:|Coto, Anderson, |Ayes:|Fuentes, Conway, Ammiano, |
| |Blakeslee, Chesbro, Cook, | |Bradford, Charles |
| |Bradford, Evans, | |Calderon, Coto, Davis, |
| |Galgiani, Hall, | |Monning, Ruskin, Harkey, |
| |Hernandez, Hill, | |Miller, Nielsen, Norby, |
| |Charles Calderon, Ma, | |Skinner, Solorio, |
| |Mendoza, Nestande, V. | |Torlakson, Torrico |
| |Manuel Perez, Potantino, | | |
| |Silva, Torres, Torrico, | | |
| |Tran | | |
| | | | |
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SUMMARY : Encourages the Breeders' Cup to designate California
as the permanent host state for the Breeders' Cup World
Championship horse racing event. Specifically, this bill :
1)Authorizes a Thoroughbred association hosting Breeders' Cup
races, upon filing a written notice with the California Horse
Racing Board (CHRB), to deduct from the total amount handled
in the pari-mutuel pool for any type of wager made during the
days on which Breeders' Cup races are held, an amount of not
less than 10% nor more than 25%. Requires the written notice
to include the written agreement of the Thoroughbred
association and the horsemen's organization.
2)Requires for every year that the organization operating the
Breeders' Cup Championship series chooses to conduct the
series of races in California, the statewide marketing
organization shall enter into an agreement, in consultation
and cooperation with the California Tourism Commission and
with the organization that operates the Breeders' Cup to
sponsor and promote the event. AB 2414 requires the agreement
to provide for assistance with a minimum value of $2 million
annually to promote the Breeders' Cup World Championship
series.
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3)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
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.
EXISTING LAW :
1)Provides that CHRB regulate the various forms of horse racing
authorized in this state.
2)Authorizes a Thoroughbred association or fair, subject to
approval by CHRB, to deduct from the pari-mutuel pool for any
type of wager, a specified percentage for the meeting of the
Thoroughbred association or fair that accepts the wager.
3)Permits racing associations, fairs, and the organization
responsible for contracting with racing associations and fairs
with respect to the conduct of racing meetings, to form a
private, statewide marketing organization to market and
promote Thoroughbred and fair horse racing, and to obtain,
provide, or defray the cost of workers' compensation coverage
for stable employees and jockeys of Thoroughbred trainers.
4)Authorizes California Thoroughbred owners to deduct a portion
of their purse pools to participate in the "national
marketing" association, the National Thoroughbred Racing
Association (NTRA). Extends the sunset date from January 1,
2008, to January 1, 2011, in existing law, which allows any
racing association or fair that conducts thoroughbred racing
to pay to the owners' organization a certain portion of the
purses for a national marketing program, as specified.
5)Authorizes racing associations, fairs, and the organization
representing Thoroughbred owners' to form a private statewide
marketing organization to market and promote Thoroughbred and
fair horse racing. Provides that the private statewide
marketing organization shall remain in effect only until
January 1, 2011.
6)Authorizes a Thoroughbred association or fair to file a
written notice with CHRB to alter the amount deducted (the
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takeout) from the total amount wagered (the handle) on horse
races. The takeout shall be not less than 10% or more than
25% of the handle.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
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 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.
3)This bill requires a minimum $2 million investment [California
Marketing Committee (CMC) funding] in the marketing and
promotion of the Breeders' Cup Championship. Currently the
marketing association has a budget of approximately $4 million
a year.
COMMENTS : According to the author, the Breeders' Cup
Championship series of races is the preeminent series of horse
races recognized throughout the world. From the inaugural
running in Hollywood Park 26 years ago, the Breeders' Cup World
Championship has a rich and vibrant tradition in California,
having been run here eight times. The Breeders' Cup World
Championship races were conducted in California in 2008 and 2009
by Oak Tree Racing Association at Santa Anita Park located in
Los Angeles County. In 2009, more than 96,000 fans attended the
event while being broadcast to over 130 countries.
The author maintains the intent of this bill is to encourage the
organization operating the Breeders' Cup Championship series to
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make California the permanent home of the Breeders' Cup
Championship series and it is the intent of the Legislature,
through the enactment of this bill, to provide substantial
support towards that end.
The Los Angeles Economic Development Commission, having studied
the impact of the Breeders' Cup Championship series being held
in California the last two years, has concluded that the events
have brought an additional $60 million in economic impact to the
State of California and Los Angeles region each year, through
added tourism and other economic impact, and created over 500
direct and indirect jobs.
The author states, the Legislature and the Governor of
California recognize the importance of the horse racing industry
to this state, including the 50,000 jobs associated with the
industry, and have taken significant steps to support the
industry, evidenced most recently by the $40 million in license
fee relief provided in SB 16xx (Ashburn), Chapter 12, Statutes
of 2009-10 Second Extraordinary Session.
The author states that having the Breeders' Cup Championship
races held annually in California will benefit California's
horse racing industry and the State of California by stimulating
the economy and tourism. back on-track allowing it to be enjoyed
for generations to come.
Background: Breeders' Cup: The Breeders' Cup World
Championship is an annual series of Grade I 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's Cup
ranks fifth in North America and usually surpasses the
attendance of all other stakes races. The daily attendance of
the Breeders' Cup typically only trails the Kentucky Derby, the
Preakness Stakes and the Kentucky Oaks.
It was reported in March 2010, that the Breeders' Cup board is
looking at a permanent host location for the World Championships
as a potential option as part of the organization's ongoing
strategic planning initiative. Although Breeders' Cup officials
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have said that the organization has considered designating Santa
Anita Park in Arcadia as a permanent host site for the next five
years beginning in 2011, the organization is also considering a
three-track rotation that includes Oak Tree Racing Association
at Santa Anita Park, Churchill Downs in Kentucky, and Belmont
Park in New York.
California's racetracks meet the criteria for being a permanent
host location by providing a major media market, ability to
accommodate big crowds, good weather, and generating increased
revenue through attendance and pari-mutuel handle. Another
potential benefit to the World Championships being held in
California would be that Oak Tree Racing Association is a
non-profit organization which provides many business and
financial advantages over competing racetracks.
In a related matter, Kentucky Governor Beshear recently signed
legislation that would rescind a tax break in 2010 for Churchill
Downs and the Breeders' Cup if that racetrack is not designated
as a host site for the 2011 or 2012 Breeders' Cup. It would
require, however, the tax to be paid if Breeders' Cup has not
selected Churchill Downs as a host site in the next two years by
November 4, 2010. In the past, various state legislatures have
forgiven pari-mutuel taxes for the Breeders' Cup events. The
Kentucky legislation is the first that would make the tax
contingent on another development.
Marketing horseracing: The popularity of horse racing as both a
sport and industry has suffered of late in California, primarily
due to the industry's inability to expand its market share and
attract new customers. Moreover, the industry has experienced
difficulty competing with other more popular forms of gambling,
such as those games offered by the state lottery, card clubs and
casino gambling in Nevada or on Indian reservations.
To help address general declines in the overall industry,
Thoroughbred racing interests from across the country formed the
National Thoroughbred Racing Association (NTRA) in order to
create a centralized structure which would promote Thoroughbred
horse racing on a national level. The primary objective of NTRA
is to develop and implement a comprehensive marketing strategy
featuring increased network and cable media exposure. Funding
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for this program comes from racing interests outside of
California, as well as California's Thoroughbred racing
associations and horse owners from purses. Last year,
California Thoroughbred owners, through the Thoroughbred Owners
of California (TOC), paid approximately $400,000 to NTRA for the
purpose of marketing horse racing.
SB 27 (Maddy), Chapter 335, Statutes of 1998, creates a private
statewide marketing organization for Thoroughbred and fair
racing that is funded by 0.4% of the in-state off-track handle.
The funds generated from this distribution are used to market
California horse racing on a statewide basis. 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. An
underlying assumption of the CMC's Marketing Plan is that it is
far easier to capture a new fan through an on-track experience
than through an off-track visitation to a satellite wagering
facility.
In 2003, the CMC received approximately $6.1 million to support
its marketing efforts but due to handle declines it has been
reduced to approximately $4 million in 2010. Current law
provides that the CMC must annually submit to the CHRB a
statewide marketing and promotion plan for thoroughbred and fair
horse racing that encompasses all geographical zones in the
state, including the manner in which funds were expended in the
implementation of the plan for the previous calendar year.
Additionally, the 2010 CMC Budget redirects a portion of its
marketing and advertising funds to enhance purses on major
racing days, such as the Santa Anita Handicap, Hollywood Gold
Cup, and Pacific Classic. The CMC program will expire after
this year due to a sunset clause in the law unless there is
legislation to extend it.
California Travel and Tourism Commission: The California Travel
and Tourism Commission (CTTC) is a not-for-profit, 501(C)(6)
corporation formed in 1998 to work jointly with the State of
California's Division of Tourism to implement an annual
marketing plan, which promotes California as a travel
destination. While these two partners (CTTC and Division of
Tourism) are separate legal entities, they are commonly referred
to jointly as California Tourism.
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In 2006, Governor Schwarzenegger signed AB 2592 (Leno), an
assessment program for the passenger car rental industry which
was in addition to other levy assessments on other specified
businesses which benefit from travel and tourism spending. AB
2592 also reduced the state's General Fund appropriation from
$7.3 million to $1 million. In 2010, the major source of CTTC's
budget ($50 million) is directly derived from assessed
businesses in the travel and tourism industry in California.
The 37-member CTTC is composed of individuals from all 12
regions of California. Twenty-four of the commissioners are
elected by the approximately 5,000 assessed California
businesses; 12 are appointed by the governor; and the 37th is
the California Business, Transportation and Housing Agency
Secretary. A 34-member statewide Marketing Advisory Committee
also provides input in developing the marketing plan. Tourism is
California's fourth largest employer and fifth largest
contributor to the gross state product.
The Takeout: The horse racing takeout amount is a percentage
deducted from all of the wagers before the winnings are paid 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). 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 CMC. Current law allows for flexibility in the takeout
(not less than 10% nor more than 25% from the pari-mutuel pool
for any type of wager), subject to the approval of the CHRB.
Prior/related legislation: SB 517 (Florez), Chapter 636,
Statutes of 2009, allows a Thoroughbred association or fair,
subject to CHRB, to alter the amount deducted from horse racing
wagering. Allows the distribution of funds from the amount
deducted to be modified or redirected, subject to the approval
of CHRB.
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AB 1308 (Torrico), Chapter 410, Statutes of 2007, authorizes a
Thoroughbred association or fair and the horsemen's
organization, subject to approval by CHRB, to deduct an amount
of not less than 10% nor more than 25% from the pari-mutuel pool
for any type of wager.
AB 1736 (Governmental Organization Committee), Chapter 444,
Statutes of 2007, extends "sunset" provisions in current law
relating to the marketing of the California Horse Racing
Industry.
SB 103 (Maddy), Chapter 10, Statutes of 1998, requires any
association, including fairs, that conducts thoroughbred racing
to pay to the owners' organization contracting with the
association an additional percentage for a national marketing
program, as specified, to promote thoroughbred racing unless the
owners' organization chooses not to contribute to the program.
The bill sunsets January 1, 2004.
SB 27 (Maddy), Chapter 335, Statutes of 1998, among its
provision, creates a private statewide marketing organization
for thoroughbred and fair racing that is funded by .4 percent of
the instate off-track handle. The funds generated from this
distribution are used to market California horse racing on a
statewide basis. 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.
AB 2592 (Leno), Chapter 790, Statutes of 2006, modifies the
conditions and terms of appointees and elected members of the
CTTC, broadens industry segments which may voluntary participate
in CTTC programs, and clarifies certain assessment and
referendum procedures. Additionally, the bill makes changes to
the way the passenger car rental industry is assessed by the
CTTC which will permit rental car companies to separately state
specified fees in advertising, quotes and charges for rental
cars which become operational only if the rental car industry
agrees to increase its Tourism Marketing Assessment (assessment)
to specified level.
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
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