BILL ANALYSIS �
Bill No: AB
2765
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Lou Correa, Chair
2013-2014 Regular Session
Staff Analysis
AB 2765 Author: Committee on Governmental Organization
As Amended: June 5, 2014
Hearing Date: June 10, 2014
Consultant: Art Terzakis
SUBJECT
Horse Racing
DESCRIPTION
AB 2765 makes the following substantive, clarifying and
technical changes to California Horse Racing Law:
1)Extends the sunset date by 4 years (from January 1, 2015
to January 1, 2019) for the statewide marketing
organization that is responsible for marketing and
promoting thoroughbred and fair horse racing.
2)Clarifies that the marketing organization may utilize
outside consultants with horse racing or other related
experience, including experience in other gaming
enterprises for purposes of developing the annual
marketing plan.
3)Changes the date for submission of the marketing
organization's annual written report to the California
Horse Racing Board (CHRB) from November 1 to October 1.
4)Also, makes minor code maintenance changes.
EXISTING LAW
Article IV, Section 19(b) of the Constitution of the State
of California stipulates that the Legislature may provide
for the regulation of horse races and horse race meetings
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and wagering on the results. Existing Horse Racing Law
provides that the California Horse Racing Board (CHRB)
shall regulate the various forms of horse racing authorized
in this state.
Existing law (Business & Professions Code Section
19605.73), operative until January 1, 2015, authorizes
thoroughbred racing associations, fairs, and the
organization responsible for contracting with thoroughbred
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. If a marketing organization is formed,
existing law requires an amount not to exceed 0.25% of the
total amount handled by each satellite wagering facility to
be distributed to the marketing organization, and imposes
certain requirements on the marketing organization,
including that the marketing organization annually submit
certain information to the CHRB.
Existing law provides that the marketing organization shall
consist of the following six members: two members, one from
the northern zone and one from the combined central and
southern zones, appointed by the thoroughbred racetracks;
two members, one from the northern zone and one from the
combined central and southern zones, appointed by the
owners' organization responsible for contracting with
associations and fairs with respect to the conduct of
racing meetings; and two members, one from the northern
zone and one from the combined central and southern zones,
appointed by the organization representing racing and
satellite fairs.
BACKGROUND
Purpose of AB 2765 : The author's office references the
fact that SB 27 (Maddy), Chapter 335, Statutes of 1998,
among other things, created a private statewide marketing
organization for thoroughbred and fair racing to be funded
by 0.4 percent of the in-state off-track 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
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state. An underlying assumption of the CMC's Marketing
Plan over the years has been 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.
The author's office states that AB 2765 will allow the CMC
to utilize outside consultants with horse racing or other
related experience, including involvement with other gaming
enterprises while developing its annual marketing plan.
The author believes that the CMC should be allowed to
access the knowledge of consultants who have experience in
quantitative marketing research in other gaming related
businesses. The goal of this measure is to give the CMC
the tools to gain fresh perspectives and new ideas to
generate a comprehensive marketing plan which will expand
California's horse racing industry into new demographics
and markets. This measure will also extend the sunset date
on the statewide horse racing marketing program by 4 years
- until 2019.
In addition, this measure would change the date for
submission of CMC's annual expenditure report to the CHRB
from November 1 to October 1. This modification is
intended to provide the CHRB staff with more time to review
the annual expenditure plan prior to the CMC's oral
presentation to the CHRB before the start of the New Year.
Marketing Horse Racing in California : 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 $1.8 million in 2013. 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. The CMC's 2013 budget included expenditures
relating to: product enhancement; significant player
program; satellite marketing; Cal racing web-site; and
administration.
Deteriorating Status of the Horse Racing Industry in
California : The industry's long-term health is threatened
by a combination of factors, including competition from
racing in other states, other forms of gaming within
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California, racetrack bankruptcies and the potential for a
higher return from development of existing venues rather
than operating revenues. As resources shrink, the industry
is experiencing deficits in virtually every revenue source
category and traditional takeout, allocation and
distribution formulas are no longer able to sustain ongoing
operations. As the value of racing operations declines,
track ownership is struggling to maximize shareholders'
return on the investment and confront the temptation for
alternative uses of the property that may yield higher
returns. Consequently, the racing industry is suffering
unprecedented instability and capital flight. Tens of
thousands of industry jobs might be in jeopardy, along with
breeding farms and precious open space in urban centers
throughout California. Also at risk is a substantial
amount of local and state revenue generated both directly
and indirectly by the industry.
PRIOR/RELATED LEGISLATION
AB 1074 (Atkins), Chapter 428, Statutes of 2013. Extended
the sunset date by one year for the statewide marketing
organization that is responsible for marketing and
promoting thoroughbred and fair horse racing. Also, made
adjustments to existing law to pave the way for the CHRB to
adjust racing dates in the central and southern zones in
order to address the scheduling issues resulting from the
impending closure of Hollywood Park Racecourse.
SB 1072 (Calderon), Chapter 283, Statutes of 2010. Among
other things, required thoroughbred racing associations and
fairs to deduct an additional amount of the total handle on
exotic wagering for purse augmentation; authorized the CHRB
to license entities to operate "exchange wagering" systems;
required each exchange wagering licensee to annually
distribute a specified amount of exchange wagering revenue
to the existing jockey health and benefit welfare fund;
authorized the thoroughbred racing industry to use monies
from horse racing wagering pools to promote the Breeders'
Cup; and, extended the sunset date on the statewide
marketing program by 3-years.
SB 766 (Negrete McLeod), Chapter 766, Statutes of 2009.
Authorized the CHRB to shift money around from various
funds, including the marketing funds, which are in surplus,
to others that are in deficit, such as the Vanning and
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Stabling Account.
AB 1736 (Governmental Organization), Chapter 444, Statutes
of 2007. Among other things, extended the sunset on
provisions to enable racing associations and fairs to fund
taking part in the statewide horse racing marketing
program.
AB 2164 (Plescia), Chapter 80, Statutes of 2004. Extended
the sunset on provisions to enable racing associations and
fairs to fund taking part in the statewide horse racing
marketing program to 2006.
AB 2931 (Horton), Chapter 922, Statutes of 2002.
Authorized the racing associations to use funds earmarked
for the CMC for use in developing a program to off-set
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.
Also, created the CMC that is funded by 0.4 percent of the
in-state off-track handle.
SB 103 (Maddy), Chapter 10, Statutes of 1998. Provided
for California's involvement in the NTRA by permitting
thoroughbred owners to (pay to) take part in a national
marketing program to increase interest in horse racing.
SUPPORT: None on file as of June 6, 2014.
OPPOSE: None on file as of June 6, 2014.
FISCAL COMMITTEE: Senate Appropriations Committee
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