BILL ANALYSIS �
Bill No: SB
732
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
SB 732 Author: Wyland
As Amended: April 11, 2011
Hearing Date: May 10, 2011
Consultant: Art Terzakis
SUBJECT
Horse Racing: northern zone; vanning of starters
DESCRIPTION
SB 732 makes the following substantive changes to existing
horse racing law provisions pertaining to offsite stabling
and vanning of horses:
1. Deletes the requirement that racing associations in
the northern zone provide, at the option of the horse
owner, vanning of participating racehorses from any
California Horse Racing Board (CHRB)-approved offsite
stabling facility.
2. Authorizes, with respect to the northern zone and
subject to the availability of specified funds, at the
option of the horse owner, vanning of participating
racehorses from any CHRB-approved offsite stabling
facility.
EXISTING LAW
Article IV, Section 19(b) of the Constitution of the State
of California provides that the Legislature may provide for
the regulation of horse races and horse race meetings and
wagering on the results.
Existing law authorizes that the California Horse Racing
Board (CHRB) to regulate the various forms of horse racing
SB 732 (Wyland) continued
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authorized in this state.
Existing law sets the amount deducted from the parimutuel
pools of thoroughbred races in California. According to
the CHRB 2009-10 annual report, the "takeout rate" (the
amount deducted from wagers before winnings are paid out to
bettors) for conventional wagering (e.g., win, place, and
show wagers) on Thoroughbred races is 15.9%, and 21.34% for
exotic wagers (e.g., Exacta, Trifecta, Pick-6). These
funds are used for a variety of purposes including funding
commissions, purses, welfare funds, and enforcement fees.
Existing law provides that, when satellite wagering is
conducted on thoroughbred races at associations or fairs in
the central or southern zone, an amount equal to 1.25
percent of the total amount handled by all of those
satellite wagering facilities must be deducted from the
take-out for the benefit of the "Vanning and Stabling"
Fund. Proceeds therein are distributed to the organization
representing the racing associations and horsemen and women
for the purpose of providing reimbursement for off-site
stabling and vanning at board-approved auxiliary training
facilities of licensed racing associations. This is to
compensate for the additional stalls beyond the number of
usable stalls the association is required to provide under
current law.
Existing law requires the CHRB to determine the number of
usable stalls that each racing association or fair must
make available and maintain for a racing meeting. The
minimum number of stalls may be at the site of the racing
meeting or at CHRB-approved offsite locations.
Additionally, existing law 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.
Furthermore, existing law requires with respect to northern
zone thoroughbred meetings only, the association conducting
the meeting to provide, at the option of the horse owner,
vanning of participating racehorses from any CHRB-approved
offsite stabling facility in the northern zone. Racing
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fairs may, but are not required to, provide vanning of
participating racehorses from any board-approved offsite
stabling facility subject to the availability of funds.
BACKGROUND
Over the years, racing has been raiding the Vanning and
Stabling Fund to cover the costs of workers' compensation,
amongst other things. Since 2002, upwards of $4 million
annually has been deducted from the fund to help defray the
cost of workers' compensation coverage for stable employees
and jockeys of thoroughbred trainers. Furthermore, an
additional $1 million from the Vanning and Stabling Fund
has been diverted to the backstretch employees' welfare
fund to provide various services and benefits to
backstretch employees.
Purpose of SB 732: The author's office states that
thoroughbred horse racing has struggled for several years
with the economic recession and the industry has been
modifying its infrastructure to deal with the realities of
a more competitive and financially constrained environment.
The author's office notes that the Vanning and Stabling
Fund exists to help horsemen and women defray the costs of
having to transport and stable their races horses at
auxiliary training facilities. This bill is intended to
allow for greater flexibility in the use of the Vanning and
Stabling Fund to help streamline operations in light of
current financial constraints. The author's states that
this bill would provide racing associations the same
flexibility currently available to racing fairs by deleting
the requirement that they help pay for the vanning or
transportation of a race horse from an offsite stabling
facility to the racing venue. The author's office contends
that this modification would allow racing associations to
use the Fund's support where it will be most efficient.
Arguments in Support: Writing in support, The Thoroughbred
Owners of California (TOC), the sponsor of this measure,
points out that "when a racing association conducts live
racing, current law mandates that the Vanning and Stabling
Fund provide for the subsidization of shipping a race
horse(s) from an approved offsite stabling facility to the
live racing venue; however, the law makes no such mandate
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when racing fairs are conducting live racing (e.g., it is
left to the discretion of the Fund's management along with
other business decisions)."
The TOC states that "this bill would treat racing
associations in the same manner as racing fairs by allowing
the Vanning and Stabling Fund the same operational
flexibility to allocate its funds to where they may be most
efficient depending on horse inventory, vanning and
stabling demands, and other operating requirements."
Arguments in Opposition: Writing in opposition, Hollywood
Park Race Track states that "this bill is apparently
intended to allow southern California owners to send their
horses to race in northern California at the expense of
southern California race tracks. Historically, this
expense has been shouldered by the race horse owner. It is
ironic that after more than twenty-five years of
experience, and at a time when the Southern California
Off-Track Wagering, Inc. (SCOTWINC) fund is insolvent,
that this change is being sought."
Hollywood Park Race Track is requesting that the author at
least make it mutual, so that northern California owners
could have their horses vanned to southern California at
the expense of the Northern California Off-Track Wagering
system (NCOTWINC).
Staff Comments: It is perhaps overly-stated that horse
racing has been at a "crossroads" in California for a
number of years as attendance for what was once America's
most popular spectator sport has declined steadily and
dramatically for more than two decades. Some argue that
the decline stems from increased competition from expanded
gaming in California to the inability of the industry to
attract new fans. Other individuals reference unhappiness
with the CHRB's mandate of the use of synthetic surfaces or
the high costs of operating a stable in this state and the
lower costs and additional benefits of doing business in
other states. Regardless of the reasons, the closure and
threatened closure of racetracks are indicators that the
"sport of kings" is in a precarious position. Further
exasperating the problem is the downturn in the economy
which has significantly impacted the amount wagered (the
handle).
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Figures from the CHRB's annual report for the fiscal year
ending June 30, 2010 show that wagering in California
declined by $500 million during fiscal year 2009-10, and
betting through Advance Deposit Wagering (ADW), the only
growth area in the state's handle over the past several
years also declined slightly. Total handle, the amount
wagered in California and bet in other racing jurisdictions
and merged into state pools, was down 12.7% from the
preceding 12 months, dropping from more than $3.942 billion
to $3.441 billion.
ADW wagering (by computer or telephone) through 4
authorized state providers also dropped slightly (from
$669.58 million two years ago to $666.38 million in
2009-10. This was the first drop witnessed in ADW handle
since it was adopted in 2002. In spite of the dip, ADW
handle accounted for 19.36% of all wagering in 2009-10, up
from 16.98% two year ago.
On-track handle was off by $97 million, or 16.4% (from $590
million to $493 million), and accounted for approximately
14% of the total bet. Off-track betting at state simulcast
facilities was down $92 million (from about $1 billion to
$908 million), a drop of about 9%. Out-of-state wagers,
representing approximately 40% of the overall common pool,
fell from $2.31 billion to just below $2.04 billion, a drop
of approximately 12%.
PRIOR/RELATED LEGISLATION
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 Vanning and Stabling account.
AB 813 (Portantino), Chapter 19, Statutes of 2008 .
Provided that, with respect to harness meetings, if there
are funds unexpended in the horse racing promotion account,
those funds may be expended for other purposes with the
consent of the horsemen and the racing association to
benefit the horsemen, or the racing association, or both,
pursuant to their agreement.
AB 2103 (Plescia), Chapter 443, Statutes of 2008 . Extended
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the sunset date, from January 1, 2009 to January 1, 2014,
on a deduction from parimutuel wagering on thoroughbred
horse racing in order to defray the costs of pay or
workers' compensation insurance.
SB 1805 (Florez), Chapter 883, Statutes of 2006 . Provided
that any funds not used to defray the costs of workers'
compensation insurance as described, may also be used to
reimburse a racing association for actual costs of safety
improvements to racing and training surfaces, health and
safety programs, and research or safety equipment.
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.
SB 27 (Maddy), Chapter 335, Statutes of 1998. Among other
things, granted major license fee relief ($40 million
annually) and limited out-of-state full-card simulcasting.
SB 28 (Maddy), Chapter 516, Statutes of 1998 . Provided
that when satellite wagering is conducted on thoroughbred
races at associations or fairs in the 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 and distributed to the
organization representing the racing associations and
horsemen and women for the purpose of providing
reimbursement for off-site stabling and vanning at
board-approved auxiliary training facilities of licensed
racing associations. This was intended to compensate for
additional stalls beyond the number of usable stalls an
association is required to provide under existing law.
SB 1515 (Maddy), Chapter 53, Statutes of 1996 . Permitted
any vanning and stabling reimbursement funds that are not
expended during an association or fair horse racing meeting
in which they are collected to be allocated to the
organization representing racing fairs to offset its costs
of maintaining the stalls contracted for by fairs.
SB 1196 (Thompson), Chapter 80, Statutes of 1995 . Allowed
fairs in the northern zone, subject to the availability of
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funds, to provide for the vanning of racehorses from any
offsite stabling facility.
SB 14 (Maddy), Chapter 1273, Statutes of 1987 . Expanded
satellite wagering statewide, as specified.
SB 1499 (Maddy), Chapter 1698, Statutes of 1984 .
Implemented satellite wagering in the central and southern
part of the state, and made conforming and technical
changes in the northern part of the state.
SUPPORT: As of May 6, 2011:
Thoroughbred Owners of California (sponsor)
OPPOSE: As of May 6, 2011:
Hollywood Park Race Track
FISCAL COMMITTEE: No
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