(1)The Horse Racing Law requires, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern, central, or southern zone, that an amount not to exceed 1.25% of the total amount handled by all of those satellite wagering facilities be deducted from the funds otherwise allocated for distribution as commissions, purses, and owners premiums and instead be distributed to an organization formed and operated by thoroughbred racing associations, fairs conducting thoroughbred racing, and the organization representing thoroughbred horsemen and horsewomen, to administer a fund to provide reimbursement for offsite stabling at California Horse Racing Board-approved auxiliary training facilities for additional stalls beyond the number of usable stalls the association or fair is required to make available and maintain, and for the vanning of starters from these additional stalls on racing days for thoroughbred horses.

This bill would increase the amount that is required to be deducted to an amount not to exceed 2% in the northern, central, and southern zones, and would provide that this amount in the northern zone, if adjusted by the board, may be a different percentage of the handle for different associations and fairs, but only if all the associations and fairs agree to the differing percentages. The bill would establish an auxiliary offsite stabling and training facility and vanning program for thoroughbred races in the northern, central, and southern zones. The bill would revise and recast the provisions governing the organization formed and operated to administer the fund to include, among other things, a 50-50 percentage allocation of specified voting interests on the board of the organization, the use of funds to pay the organizations expenses and compensate the provider of a board-approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern, central, and southern zones, and the requirement that the organization submit its proposed financial and operational plans for the upcoming calendar year to the board for review no later than November 1 of the preceding year. The bill would require, at the request of the board, the organization to submit a report detailing all of its receipts and expenditures over the prior 2 fiscal years and, upon request of any party within the organization, that those receipts and expenditures be audited by an independent 3rd party selected by the board at the organizations expense.

The bill would also require that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern, central, or southern zone from a board-approved auxiliary offsite stabling and training facility and would authorize the organization to enter into multiyear contracts for auxiliary facilities in the northern, central, or southern zone subject to specified conditions. The bill would authorize the organization to use the funds to pay back commissions, purses, and owners premiums to the extent that the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization. The bill would also authorize a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified. The bill would provide that the board shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling or vanning, as specified.

(2)By expanding the provisions of the Horse Racing Law, a violation of which is a crime, the bill would create new crimes and would thereby impose a state-mandated local program.

(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(4)This bill would declare that it is to take effect immediately as an urgency statute.

(1)The Horse Racing Law requires, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern, central, or southern zone, that an amount not to exceed 1.25% of the total amount handled by all of those satellite wagering facilities be deducted from the funds otherwise allocated for distribution as commissions, purses, and owners premiums and instead be distributed to an organization formed and operated by thoroughbred racing associations, fairs conducting thoroughbred racing, and the organization representing thoroughbred horsemen and horsewomen, to administer a fund to provide reimbursement for offsite stabling at California Horse Racing Board-approved auxiliary training facilities for additional stalls beyond the number of usable stalls the association or fair is required to make available and maintain, and for the vanning of starters from these additional stalls on racing days for thoroughbred horses.

This bill would increase the amount that is required to be deducted to an amount not to exceed 2% in the northern, central, and southern zones, and would provide that this amount in the northern zone, if adjusted by the board, may be a different percentage of the handle for different associations and fairs, but only if all the associations and fairs agree to the differing percentages. The bill would establish an auxiliary offsite stabling and training facility and vanning program for thoroughbred races in the northern, central, and southern zones. The bill would revise and recast the provisions governing the organization formed and operated to administer the fund to include, among other things, a 50-50 percentage allocation of specified voting interests on the board of the organization, the use of funds to pay the organizations expenses and compensate the provider of a board-approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern, central, and southern zones, and the requirement that the organization submit its proposed financial and operational plans for the upcoming calendar year to the board for review no later than November 1 of the preceding year. The bill would require, at the request of the board, the organization to submit a report detailing all of its receipts and expenditures over the prior 2 fiscal years and, upon request of any party within the organization, that those receipts and expenditures be audited by an independent 3rd party selected by the board at the organizations expense.

The bill would also require that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern, central, or southern zone from a board-approved auxiliary offsite stabling and training facility and would authorize the organization to enter into multiyear contracts for auxiliary facilities in the northern, central, or southern zone subject to specified conditions. The bill would authorize the organization to use the funds to pay back commissions, purses, and owners premiums to the extent that the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization. The bill would also authorize a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified. The bill would provide that the board shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling or vanning, as specified.

(2)By expanding the provisions of the Horse Racing Law, a violation of which is a crime, the bill would create new crimes and would thereby impose a state-mandated local program.

(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(4)This bill would declare that it is to take effect immediately as an urgency statute.

(1)The Horse Racing Law requires, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern zone, northern, central, or southern zone, that an amount not to exceed 1.25% of the total amount handled by all of those satellite wagering facilities be deducted from the funds otherwise allocated for distribution as commissions, purses, and owners premiums and instead be distributed to an organization formed and operated by thoroughbred racing associations, fairs conducting thoroughbred racing, and the organization representing thoroughbred horsemen, horsemen and horsewomen, to administer a fund to provide reimbursement for offsite stabling at California Horse Racing Board-approved auxiliary training facilities for additional stalls beyond the number of usable stalls the association or fair is required to make available and maintain, and for the vanning of starters from these additional stalls on racing days for thoroughbred horses.

This bill would increase the amount that is required to be deducted to an amount not to exceed 2% in the northern, central, and southern zones, and would provide that this amount, amount in the northern zone, if adjusted by the board, may be a different percentage of the handle for different associations and fairs, but only if all the associations and fairs agree to the differing percentages. The bill would establish an auxiliary offsite stabling and training facility and vanning program for thoroughbred races in the northern zone. northern, central, and southern zones. The bill would revise and recast the provisions governing the organization formed and operated to administer the fund to include, among other things, a 50-50 percentage allocation of specified voting interests on the board of the organization, the use of funds to pay the organizations expenses and compensate the provider of a board-approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern zone, northern, central, and southern zones, and the requirement that the organization submit its proposed financial and operational plans for the upcoming calendar year to the board for review no later than November 1 of the preceding year. The bill would require, at the request of the board, the organization to submit a report detailing all of its receipts and expenditures over the prior 2 fiscal years and, upon request of any party within the organization, that those receipts and expenditures be audited by an independent 3rd party selected by the board at the organizations expense.

The bill would also require that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern northern, central, or southern zone from a board-approved auxiliary offsite stabling and training facility and would authorize the organization to enter into multiyear contracts for auxiliary facilities in the northern northern, central, or southern zone subject to specified conditions. The bill would authorize the organization to use the funds to pay back commissions, purses, and owners premiums to the extent that the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization. The bill would also authorize a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified. The bill would provide that the board shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling, training, stabling or vanning, as specified.

(2)By expanding the provisions of the Horse Racing Law, a violation of which is a crime, the bill would create new crimes and would thereby impose a state-mandated local program.

(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(1)The Horse Racing Law requires, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern zone, that an amount not to exceed 1.25% of the total amount handled by all of those satellite wagering facilities be deducted from the funds otherwise allocated for distribution as commissions, purses, and owners premiums and instead be distributed to an organization formed and operated by thoroughbred racing associations, fairs conducting thoroughbred racing, and the organization representing thoroughbred horsemen, to administer a fund to provide reimbursement for offsite stabling at California Horse Racing Board-approved auxiliary training facilities for additional stalls beyond the number of usable stalls the association or fair is required to make available and maintain, and for the vanning of starters from these additional stalls on racing days for thoroughbred horses.

This bill would increase the amount that is required to be deducted to an amount not to exceed 2% and would provide that this amount, if adjusted by the board, may be a different percentage of the handle for different associations and fairs, but only if all the associations and fairs agree to the differing percentages. The bill would establish an auxiliary offsite stabling and training facility and vanning program for thoroughbred races in the northern zone. The bill would revise and recast the provisions governing the organization formed and operated to administer the fund to include, among other things, a 50-50 percentage allocation of specified voting interests on the board of the organization, the use of funds to pay the organizations expenses and compensate the provider of a board-approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern zone, and the requirement that the organization submit its proposed financial and operational plans for the upcoming calendar year to the board for review no later than November 1 of the preceding year.

The bill would also require that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern zone from a board-approved auxiliary offsite stabling and training facility and would authorize the organization to enter into multiyear contracts for auxiliary facilities in the northern zone subject to specified conditions. The bill would authorize the organization to use the funds to pay back commissions, purses, and owners premiums to the extent that the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization. The bill would also authorize a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified. The bill would provide that the board shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling, training, or vanning, as specified.

(2)By expanding the provisions of the Horse Racing Law, a violation of which is a crime, the bill would create new crimes and would thereby impose a state-mandated local program.

(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2011

Author:(Cooper)

As Amended Ver:August 19, 2016

2/3 vote. Urgency

Original Committee Reference: G.O.

SUMMARY: Makes detailed modifications to existing provisions in Horse Racing Law pertaining to the Stabling and Vanning Fund (S&V Fund) to help horsemen and horsewomen in the northern, central, and southern zones defray the costs of having to transport and stable their race horses at auxiliary training facilities in California.

1. Increases the amount that is required to be deducted by a racing association or racing fair in the northern, central, and southern zones from 1.25% to 2% and provides that this amount in the northern zone, if adjusted by the California Horse Racing Board (CHRB), may be a different percentage of the handle for different associations and fairs, but only if all the associations and fairs agree to the differing percentages.
2. Establishes an auxiliary offsite stabling and training facility and vanning program for thoroughbred races in the northern, central, and southern zones.
3. Revises and recasts provisions governing the organization formed and operated to administer the S&V Fund to include, among other things, a 50-50% allocation of specified voting interests on the board of the organization, the use of funds to compensate the provider of a CHRB approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern, central, and southern zones, and the requirement that the organization submit its proposed financial and operational plans for the upcoming calendar year to the CHRB for review no later than November 1 of the preceding year.
4. Requires, at the request of the CHRB, the organization to submit a report detailing all of its receipts and expenditures over the prior two fiscal years and, upon request of any party within the organization, that those receipts and expenditures be audited by an independent third party selected by the CHRB at the organization's expense.
5. Requires that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern, central, or southern zone from a CHRB approved auxiliary offsite stabling and training facility. Also, authorizes the organization to enter into multiyear contracts for auxiliary facilities in the northern, central, or southern zone, subject to specified conditions.
6. Authorizes the governing organization to use the funds to pay back commissions, purses, and owners' premiums to the extent the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization.
7. Authorizes a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified.
8. Provides that the CHRB shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling or vanning.
9. Contains an urgency clause to take effect immediately.

The Senate amendments:

1. Incorporate nearly identical modifications to the S&V Fund for the central and southern racing zones as proposed in this bill for the northern zone.
2. Add an urgency clause.

EXISTING LAW:

1. Provides, under existing law, California Constitution Article IV, Section 19(b), which the Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results.
2. Authorizes the CHRB to regulate the various forms of horse racing authorized in this state.
3. Defines "pari-mutuel wagering" as a form of wagering in which bettors purchase tickets of various denominations on the outcome of one or more horse races.
4. Requires, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern zone, that an amount not to exceed 1.25% of the total amount handled by all of those satellite wagering facilities be deducted from the funds otherwise allocated for distribution as commissions, purses, and owners' premiums.
5. Provides that, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern, 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 for the benefit of the S&V Fund. This deduction is to compensate for the additional stalls beyond the number of usable stalls the association is required to provide under existing law and for the vanning of starters from these additional stalls on racing days for thoroughbred horses.
6. Provides an organization formed and operated by thoroughbred racing associations, fairs conducting thoroughbred racing, and the organization representing thoroughbred horsemen and horsewomen, to administer the fund to provide reimbursement for offsite stabling at sanctioned auxiliary training facilities and for the vanning of starters from these additional stalls on racing days for thoroughbred horses.
7. 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.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

AS PASSED BY THE ASSEMBLY, this bill would increase the amount that may be deducted by a racing association or racing fair in the northern zone for the S & V Fund from 1.25% to 2.0% of the total amount handled by satellite wagering facilities.

COMMENTS: This bill, as amended in the Senate is consistent with Assembly actions.

Horse racing law provides for the Stabling and Vanning Fund (S&V Fund) to help horsemen and horsewomen defray the costs of having to transport and stable their races horses at auxiliary training facilities. These statutes date back to the late 1980s and early 1990s when wagering at satellite facilities located on fairgrounds and racetracks was the only form of off-track pari-mutuel wagering available. The S&V Fund was financed exclusively from revenue generated at satellite wagering facilities in this state. With the advent of advance deposit wagering (ADW), the pari-mutuel handle began to migrate from satellite wagering facilities to online ADW sources. The subsequent decline in handle at satellite facilities has resulted in a significant depletion of revenue to the S&V Fund.

In 2013, Hollywood Park racetrack announced the discontinuance of racing which created a severe stabling and training problem for the horse racing industry. The CHRB and the racing industry were able to negotiate an agreement for Hollywood Park to remain open for stabling and training through the first quarter of 2014, but had to find other stabling and training facilities to replace Hollywood Park immediately thereafter.

Industry stakeholders and the CHRB came together to reach agreements and the necessary commitments were made to preserve thoroughbred racing in southern California. Specifically, Los Alamitos race track built 500 new stalls to accommodate thoroughbred training on a year-round basis; the San Luis Rey Training Center, located in Bonsall (San Diego County) was upgraded with an improved track and renovated barns to play a major stabling role; Fairplex Park, located in Pomona, agreed to provide stabling and training for a limited time; and, Santa Anita race track and Del Mar race track continued to operate race meets and stabling programs.

More recently, due to the decision by Fairplex to discontinue training and racing, the CHRB granted Galway Downs training center in Temecula a conditional license to begin providing stalls and training. The CHRB and the industry are hopeful that a new training center will eventually be built somewhere in southern California to accommodate the horse racing industry which plays a vital role in the state's economy.

In northern California, the two licensed auxiliary offsite stabling facilities, Alameda County Fair and Golden Gate Fields, have been operating with deficient balances. In 2014, the Alameda County Fair lost approximately $300,000 in off-track stabling operations.

In addition, for more than a decade, horse racing has been a declining industry in California. Some argue that the decline stems from increased competition from expanded gaming in California to the inability of the industry to attract new fans. Further exasperating the problem is the downturn in the economy, which has significantly affected the amount, wagered (the handle).

Purpose of the bill: According to the author's office, this bill is intended to address vanning and stabling issues for the racing industry in California.

The author's office notes that current statutory language limits available funding and decision-making flexibility. This bill gives the CHRB and the organization governing the S&V Fund more flexibility in governance and decision-making. Furthermore, it provides for additional money from purses and commissions to help stabilize the S&V Fund.

It should be noted that SB 1240 (Hall) of the current legislative session was intended to be the vehicle to address vanning and stabling issues statewide and incorporates nearly identical changes to the S&V Fund as found in this bill. Both authors came to an agreement that only one bill is necessary to address the problem – thus, SB 1240 (Hall) will be held on the Assembly floor.

In support: Writing in support, the California Authority of Racing Fairs states, "AB 2011 will give affected parties more flexibility in governance and decision-making and allow money from purses and commissions to stabilize the S&V Fund. Without these changes, the fund will continue to operate in the red. As a consequence, the two licensed auxiliary offsite stabling facilities in Northern California, Alameda County Fair and Golden Gate Fields, will continue to lose money."

Related legislation: SB 2011 (Hall) of the current legislative session. Would make detailed and extensive modifications to existing provisions in Horse Racing Law pertaining to the Stabling and Vanning Fund (S&V Fund) to help horsemen and horsewomen in the northern, central, and southern zones defray the costs of having to transport and stable their race horses at auxiliary training facilities in California. (Pending on Assembly Floor)

Prior legislation: AB 650 (Low) of the current legislative session. Originally would have increased the portion of the take-out used to fund the S&V Fund from 1.25% of handle on wagers made on thoroughbred races at northern California satellite facilities to 2% of handle. Also, restructures the organization that governs the S&V Fund. (Amended and changed subject matter).

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 S&V Fund.

SB 1805 (Florez), Chapter 883, Statutes of 2006. Provides that any funds that are not used to defray the cost of workers' compensation insurance from the supplemental "takeout" may be used for reimbursing racing organizations for safety improvements to racing and training surfaces.

AB 701 (Horton), Chapter 40, Statutes of 2004. Provided a framework for the deduction from pari-mutuel pools in order to address increased costs in workers compensation insurance in the horse racing industry. Required Thoroughbred racing associations to deduct an additional one-half percent of the total amount handled in exotic pari-mutuel pools to be used to defray workers' compensation costs in the horse racing industry.

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.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0004849

 THIRD READING  

Bill No: AB 2011

Author:

Amended: in Senate

Vote: 7- Urgency

SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/14/16

AYES: Hall, Bates, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Vidak

NO VOTE RECORDED: Berryhill

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 76-0, 4/28/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill makes modifications to existing provisions in Horse Racing Law pertaining to the Stabling and Vanning Fund (S&V Fund) to help horsemen and horsewomen in the northern, central, and southern zone defray the costs of having to transport and stable their race horses at auxiliary training facilities. Specifically, this bill increases the amount that is required to be deducted by a racing association or racing fair in the northern, central, and southern zones for the S&V Fund from an amount not to exceed 1.25% of handle on wagers made on thoroughbred races at satellite wagering facilities to an amount not to exceed 2% of the handle. This bill also makes changes to provisions governing the organization formed to administer the S&V Fund.

Senate Floor Amendments of 8/19/16 add an urgency clause and incorporate nearly identical modifications to the S&V Fund for the central and southern racing zones as proposed in this bill for the northern zone.

ANALYSIS:

Existing law:

1. Stipulates, pursuant to Article IV, Section 19(b) of the Constitution of the State of California, the Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results.
2. Provides that the California Horse Racing Board (CHRB) shall regulate the various forms of horse racing authorized in this state.
3. Divides the state into three geographical zones for purposes of regulating horse racing – northern zone, central zone and southern zone.
4. Provides that, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern, 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 for the benefit of the S&V Fund. Proceeds therein are distributed to the organization representing the racing associations and horsemen and horsewomen for the purpose of providing reimbursement for off-site stabling and vanning at CHRB-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 existing law.

This bill:

1. Increases the amount that is required to be deducted by a racing association or racing fair in the northern, central, and southern zones from 1.25% to 2% and provides that this amount in the northern zone, if adjusted by the CHRB, may be a different percentage of the handle for different associations and fairs, but only if all the associations and fairs agree to the differing percentages.
2. Establishes an auxiliary offsite stabling and training facility and vanning program for thoroughbred races in the northern, central, and southern zones.
3. Revises and recasts provisions governing the organization formed and operated to administer the S&V Fund to include, among other things, a 50-50% allocation of specified voting interests on the board of the organization, the use of funds to compensate the provider of a CHRB approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern, central, and southern zones, and the requirement that the organization submit its proposed financial and operational plans for the upcoming calendar year to the CHRB for review no later than November 1 of the preceding year.
4. Requires, at the request of the CHRB, the organization to submit a report detailing all of its receipts and expenditures over the prior two fiscal years and, upon request of any party within the organization, that those receipts and expenditures be audited by an independent third party selected by the CHRB at the organization’s expense.
5. Requires that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern, central, or southern zone from a CHRB approved auxiliary offsite stabling and training facility. Also, authorizes the organization to enter into multiyear contracts for auxiliary facilities in the northern, central, or southern zone, subject to specified conditions.
6. Authorizes the governing organization to use the funds to pay back commissions, purses, and owners’ premiums to the extent the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization.
7. Authorizes a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified.
8. Provides that the CHRB shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling or vanning.
9. Contains an urgency clause to take effect immediately.

Background

Horse racing law provides for the S&V Fund to help horsemen and horsewomen defray the costs of having to transport and stable their race horses at auxiliary training facilities. The S&V Fund is divided into northern and southern California accounts, both of which are administered by similar organizations and governing boards. These statutes date back to the late 1980s and early 1990s when wagering at satellite facilities located on fairgrounds and race tracks was the only form of off-track parimutuel wagering available. The S&V Fund was financed exclusively from revenue generated at satellite wagering facilities in this state. With the advent of advance deposit wagering (ADW), the parimutuel handle began to migrate from satellite wagering facilities to online ADW sources. The subsequent decline in handle at satellite facilities has resulted in a significant depletion of revenue to the S&V Fund.

In 2013, Hollywood Park race track announced the discontinuance of racing which created a severe stabling and training problem for the horse racing industry. The CHRB and the racing industry were able to negotiate an agreement for Hollywood Park to remain open for stabling and training through the first quarter of 2014, but had to find other stabling and training facilities to replace Hollywood Park immediately thereafter.

Industry stakeholders and the CHRB came together to reach agreements and the necessary commitments were made to preserve thoroughbred racing in southern California. Specifically, Los Alamitos race track built 500 new stalls to accommodate thoroughbred training on a year-round basis; the San Luis Rey Training Center, located in Bonsall (San Diego County) was upgraded with an improved track and renovated barns to play a major stabling role; Fairplex Park, located in Pomona, agreed to provide stabling and training for a limited time; and, Santa Anita race track and Del Mar race track continued to operate race meets and stabling programs.

More recently, due to the decision by Fairplex to discontinue training and racing, the CHRB granted Galway Downs training center in Temecula a conditional license to begin providing stalls and training. The CHRB and the industry are hopeful that a new training center will eventually be built somewhere in southern California to accommodate the horse racing industry which plays a vital role in the state’s economy.

In northern California, the two licensed auxiliary offsite stabling facilities, Alameda County Fair and Golden Gate Fields, have been operating with deficient balances. In 2014, the Alameda County Fair lost approximately $300,000 in off-track stabling operations.

Purpose of AB 2011. According to the author’s office, this bill is intended to address vanning and stabling issues for the racing industry in California.

The author’s office notes that current statutory language limits available funding and decision-making flexibility. This bill gives the CHRB and the organization governing the S&V Fund more flexibility in governance and decision-making. Furthermore, it provides for additional money from purses and commissions to help stabilize the S&V Fund.

It should be noted that SB 1240 (Hall, 2016) was intended to be the vehicle to address vanning and stabling issues statewide and incorporates nearly identical changes to the S&V Fund as found in this bill. Both authors came to an agreement that only one bill is necessary to address the problem – thus, SB 1240 (Hall) will be held on the Assembly floor.

Related/Prior Legislation

AB 650 (Perea, 2015) would have increased the portion of the take-out used to fund the S&V Fund from 1.25% of handle on wagers made on thoroughbred races at northern California satellite facilities to 2% of handle. Also, would have restructured the organization that governs the S&V Fund. (Gutted and amended in the Senate on April 14, 2016 to become a bill relating to regulation of taxicabs.)

SB 766 (Negrete McLeod, Chapter 616, Statutes of 2009), among other things, 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 S&V Fund.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 8/22/16)

California Authority of Racing Fairs

California Thoroughbred Breeders Association

Golden Gate Fields

Santa Anita Racetrack

Thoroughbred Owners of California

OPPOSITION: (Verified 8/22/16)

None received

ARGUMENTS IN SUPPORT: Writing in support, the California Authority of Racing Fairs states, “AB 2011 will give affected parties more flexibility in governance and decision-making and allow money from purses and commissions to stabilize the S&V Fund. Without these changes, the fund will continue to operate in the red. As a consequence, the two licensed auxiliary offsite stabling facilities in Northern California, Alameda County Fair and Golden Gate Fields, will continue to lose money.”

ASSEMBLY FLOOR: 76-0, 4/28/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Chávez, Daly, Mathis, Olsen

Prepared by:

8/22/16 22:59:21

**** END ****

 THIRD READING  

Bill No: AB 2011

Author:

:

Vote:

SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/14/16

AYES: Hall, Bates, Block, Gaines, Galgiani, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Vidak

NO VOTE RECORDED: Berryhill

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 76-0, 4/28/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill makes modifications to existing provisions in Horse Racing Law pertaining to the Stabling and Vanning Fund (S&V Fund) to help horsemen and horsewomen in the northern zone defray the costs of having to transport and stable their race horses at auxiliary training facilities. Specifically, this bill increases the amount that is required to be deducted by a racing association or racing fair in the northern zone for the S&V Fund from an amount not to exceed 1.25% of handle on wagers made on thoroughbred races at satellite wagering facilities to an amount not to exceed 2% of the handle. This bill also makes changes to provisions governing the organization formed to administer the S&V Fund.

ANALYSIS:

Existing law:

1. Stipulates, pursuant to Article IV, Section 19(b) of the Constitution of the State of California, the Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results.
2. Provides that the California Horse Racing Board (CHRB) shall regulate the various forms of horse racing authorized in this state.
3. Divides the state into three geographical zones for purposes of regulating horse racing – northern zone, central zone and southern zone.
4. Provides that, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern, 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 for the benefit of the S&V Fund. Proceeds therein are distributed to the organization representing the racing associations and horsemen and horsewomen for the purpose of providing reimbursement for off-site stabling and vanning at CHRB-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 existing law.

This bill:

1. Increases the amount that is required to be deducted by a racing association or racing fair in the northern zone for the S&V Fund from an amount not to exceed 1.25% of the total amount handled by satellite wagering facilities to an amount not to exceed 2% of the handle.
2. Provides that this amount, if adjusted by the CHRB, may be a different percentage of the handle for different associations and fairs but only if all the associations and fairs agree to the differing percentages.
3. Revises and recasts the provisions governing the organization formed and operated to administer the S&V Fund to include, among other things, a 50-50% allocation of voting interests on the organization’s governing board and the use of funds to pay the organization’s expenses and compensate the provider of a CHRB approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern zone.
4. Requires that the governing organization submit its proposed financial and operational plans for the upcoming calendar year to the CHRB for review no later than November 1 of the preceding year.
5. Requires that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern zone from a CHRB approved auxiliary offsite stabling and training facility and authorizes the organization to enter into multiyear contracts for auxiliary facilities in the northern zone.
6. Authorizes the governing organization to use the funds to pay back commissions, purses, and owners’ premiums to the extent the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization.
7. Authorizes a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified.
8. Provides that the CHRB shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling, training, or vanning.
9. Provides that at the request of the CHRB, the organization shall submit a report detailing all of its receipts and expenditures over the prior two fiscal years and, upon the request of any party within the organization, that those receipts and expenditures be audited by the CHRB.

Background

Horse racing law provides for the S&V Fund to help horsemen and horsewomen defray the costs of having to transport and stable their race horses at auxiliary training facilities. The S&V Fund is divided into northern and southern California accounts, both of which are administered by similar organizations and governing boards. These statutes date back to the late 1980s and early 1990s when wagering at satellite facilities located on fairgrounds and race tracks was the only form of off-track parimutuel wagering available. The S&V Fund was financed exclusively from revenue generated at satellite wagering facilities in this state. With the advent of advance deposit wagering (ADW), the parimutuel handle began to migrate from satellite wagering facilities to online ADW sources. The subsequent decline in handle at satellite facilities has resulted in a significant depletion of revenue to the S&V Fund.

In 2013, Hollywood Park race track announced the discontinuance of racing which created a severe stabling and training problem for the horse racing industry. The CHRB and the racing industry were able to negotiate an agreement for Hollywood Park to remain open for stabling and training through the first quarter of 2014, but had to find other stabling and training facilities to replace Hollywood Park immediately thereafter.

Industry stakeholders and the CHRB came together to reach agreements and the necessary commitments were made to preserve thoroughbred racing in southern California. Specifically, Los Alamitos race track built 500 new stalls to accommodate thoroughbred training on a year-round basis; the San Luis Rey Training Center, located in Bonsall (San Diego County) was upgraded with an improved track and renovated barns to play a major stabling role; Fairplex Park, located in Pomona, agreed to provide stabling and training for a limited time; and, Santa Anita race track and Del Mar race track continued to operate race meets and stabling programs.

More recently, due to the decision by Fairplex to discontinue training and racing, the CHRB granted Galway Downs training center in Temecula a conditional license to begin providing stalls and training. The CHRB and the industry are hopeful that a new training center will eventually be built somewhere in southern California to accommodate the horse racing industry which plays a vital role in the state’s economy.

In northern California, the two licensed auxiliary offsite stabling facilities, Alameda County Fair and Golden Gate Fields, have been operating with deficient balances. In 2014, the Alameda County Fair lost approximately $300,000 in off-track stabling operations.

Purpose of AB 2011. According to the author’s office, this bill is intended to address vanning and stabling issues for the racing industry in northern California. The author’s office emphasizes that northern California’s S&V Fund will continue to operate in the red if it is not restructured.

The author’s office notes that current statutory language limits available funding and decision-making flexibility. This bill gives the CHRB and the organization governing the S&V Fund more flexibility in governance and decision-making. Furthermore, it provides for additional money from purses and commissions to help stabilize the S&V Fund. The author’s office claims that without these changes the S&V Fund will continue to operate in the red and the two licensed auxiliary offsite stabling facilities in northern California will continue to lose money.

Prior/Related Legislation

SB 1240 (Hall, 2016) makes the same changes pertaining to the S&V Fund incorporated in this bill but applies them statewide (northern zone, central zone, and southern zone) instead of only the northern zone. (Pending in the Assembly Governmental Organization Committee)

AB 650 (Perea, 2015) would have increased the portion of the take-out used to fund the S&V Fund from 1.25% of handle on wagers made on thoroughbred races at northern California satellite facilities to 2% of handle. Also, would have restructured the organization that governs the S&V Fund. (Gutted and amended in the Senate on April 14, 2016 to become a bill relating to regulation of taxicabs.)

SB 766 (Negrete McLeod, Chapter 616, Statutes of 2009), among other things, 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 S&V Fund.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 6/28/16)

California Authority of Racing Fairs

Golden Gate Fields

Santa Anita Racetrack

OPPOSITION: (Verified 6/28/16)

None received

ARGUMENTS IN SUPPORT: Writing in support, the California Authority of Racing Fairs states, “AB 2011 will give affected parties more flexibility in governance and decision-making and allow money from purses and commissions to stabilize the S&V Fund. Without these changes, the fund will continue to operate in the red. As a consequence, the two licensed auxiliary offsite stabling facilities in Northern California, Alameda County Fair and Golden Gate Fields, will continue to lose money.”

ASSEMBLY FLOOR: 76-0, 4/28/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Chávez, Daly, Mathis, Olsen

Prepared by:

6/29/16 15:46:00

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: AB Hearing Date: 6/14/2016

SUBJECT:

DIGEST: This bill makes modifications to existing provisions in Horse Racing Law pertaining to the Stabling and Vanning Fund (S&V Fund) to help horsemen and horsewomen in the northern zone defray the costs of having to transport and stable their race horses at auxiliary training facilities. Specifically, this bill increases the amount that is required to be deducted by a racing association or racing fair in the northern zone for the S&V Fund from an amount not to exceed 1.25% of handle on wagers made on thoroughbred races at satellite wagering facilities to an amount not to exceed 2% of the handle. This bill also makes changes to provisions governing the organization formed to administer the S&V Fund.

ANALYSIS:

Existing law:

1. Stipulates, pursuant to Article IV, Section 19(b) of the Constitution of the State of California, the Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results.
   
2. Provides that the California Horse Racing Board (CHRB) shall regulate the various forms of horse racing authorized in this state.
   
3. Divides the state into three geographical zones for purposes of regulating horse racing – northern zone, central zone and southern zone.
   
4. Provides that, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern, 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 for the benefit of the S&V Fund. Proceeds therein are distributed to the organization representing the racing associations and horsemen and horsewomen for the purpose of providing reimbursement for off-site stabling and vanning at CHRB-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 existing law.
   

This bill:

1. Increases the amount that is required to be deducted by a racing association or racing fair in the northern zone for the S&V Fund from an amount not to exceed 1.25% of the total amount handled by satellite wagering facilities to an amount not to exceed 2% of the handle.
   
2. Provides that this amount, if adjusted by the CHRB, may be a different percentage of the handle for different associations and fairs but only if all the associations and fairs agree to the differing percentages.
   
3. Revises and recasts the provisions governing the organization formed and operated to administer the S&V Fund to include, among other things, a 50-50% allocation of voting interests on the organization’s governing board and the use of funds to pay the organization’s expenses and compensate the provider of a CHRB approved auxiliary facility for offsite stabling and training of thoroughbred horses in the northern zone.
   
4. Requires that the governing organization submit its proposed financial and operational plans for the upcoming calendar year to the CHRB for review no later than November 1st of the preceding year.
   
5. Requires that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern zone from a CHRB approved auxiliary offsite stabling and training facility and authorizes the organization to enter into multiyear contracts for auxiliary facilities in the northern zone.
   
6. Authorizes the governing organization to use the funds to pay back commissions, purses, and owners’ premiums to the extent the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization.
   
   
7. Authorizes a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified.
   
8. Provides that the CHRB shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling, training, or vanning.
9. Provides that at the request of the CHRB, the organization shall submit a report detailing all of its receipts and expenditures over the prior two fiscal years and, upon the request of any party within the organization, that those receipts and expenditures be audited by the CHRB.
   

Background

Horse racing law provides for the S&V Fund to help horsemen and horsewomen defray the costs of having to transport and stable their race horses at auxiliary training facilities. The S&V Fund is divided into northern and southern California accounts, both of which are administered by similar organizations and governing boards. These statutes date back to the late 1980s and early 1990s when wagering at satellite facilities located on fairgrounds and race tracks was the only form of off-track parimutuel wagering available. The S&V Fund was financed exclusively from revenue generated at satellite wagering facilities in this state. With the advent of advance deposit wagering (ADW), the parimutuel handle began to migrate from satellite wagering facilities to online ADW sources. The subsequent decline in handle at satellite facilities has resulted in a significant depletion of revenue to the S&V Fund.

In 2013, Hollywood Park race track announced the discontinuance of racing which created a severe stabling and training problem for the horse racing industry. The CHRB and the racing industry were able to negotiate an agreement for Hollywood Park to remain open for stabling and training through the first quarter of 2014, but had to find other stabling and training facilities to replace Hollywood Park immediately thereafter.

Industry stakeholders and the CHRB came together to reach agreements and the necessary commitments were made to preserve thoroughbred racing in southern California. Specifically, Los Alamitos race track built 500 new stalls to accommodate thoroughbred training on a year-round basis; the San Luis Rey Training Center, located in Bonsall (San Diego County) was upgraded with an improved track and renovated barns to play a major stabling role; Fairplex Park, located in Pomona, agreed to provide stabling and training for a limited time; and, Santa Anita race track and Del Mar race track continued to operate race meets and stabling programs.

More recently, due to the decision by Fairplex to discontinue training and racing, the CHRB granted Galway Downs training center in Temecula a conditional license to begin providing stalls and training. The CHRB and the industry are hopeful that a new training center will eventually be built somewhere in southern California to accommodate the horse racing industry which plays a vital role in the state’s economy.

In northern California, the two licensed auxiliary offsite stabling facilities, Alameda County Fair and Golden Gate Fields, have been operating with deficient balances. In 2014, the Alameda County Fair lost approximately $300,000 in off-track stabling operations.

Purpose of AB 2011. According to the author’s office, this bill is intended to address vanning and stabling issues for the racing industry in northern California. The author’s office emphasizes that northern California’s S&V Fund will continue to operate in the red if it is not restructured.

The author’s office notes that current statutory language limits available funding and decision-making flexibility. This bill gives the CHRB and the organization governing the S&V Fund more flexibility in governance and decision-making. Furthermore, it provides for additional money from purses and commissions to help stabilize the S&V Fund. The author’s office claims that without these changes the S&V Fund will continue to operate in the red and the two licensed auxiliary offsite stabling facilities in northern California will continue to lose money.

Prior/Related Legislation

SB 1240 (Hall, 2016) makes extensive modifications to existing provisions in Horse Racing Law pertaining to the S&V Fund to help horsemen and horsewomen in the northern, central, and southern zones defray the costs of having to transport and stable their race horses at auxiliary training facilities. Specifically, this bill increases the amount that is required to be deducted by a racing association or racing fair in the northern, central, and southern zones from an amount not to exceed 1.25% of handle on wagers made on thoroughbred races at satellite wagering facilities to an amount not to exceed 2% of the handle and also makes changes to provisions governing the organization formed to administer the S&V Fund. (Pending in Assembly policy committee)

AB 650 (Perea, 2015) would have increased the portion of the take-out used to fund the S&V Fund from 1.25% of handle on wagers made on thoroughbred races at northern California satellite facilities to 2% of handle. Also, would have restructured the organization that governs the S&V Fund. (Gutted and amended in the Senate on April 14, 2016 to become a bill relating to regulation of taxicabs.)

SB 766 (Negrete McLeod, Chapter 616, Statutes of 2009), among other things, 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 S&V Fund.

SB 1805 (Florez, Chapter 883, Statutes of 2006) provided that any funds that are not used to defray the cost of workers’ compensation insurance from the supplemental “take-out” may be used for reimbursing racing organizations for safety improvements to racing and training surfaces.

AB 2931 (J. Horton, Chapter 922, Statutes of 2002), among other things, authorized the racing associations to use existing industry funds (stabling and vanning and promotion funds) to develop a program to off-set workers' compensation rates for horse trainers in the state.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

California Authority of Racing Fairs

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: Writing in support, the California Authority of Racing Fairs states, “AB 2011 will give affected parties more flexibility in governance and decision-making and allow money from purses and commissions to stabilize the S&V Fund. Without these changes, the fund will continue to operate in the red. As a consequence, the two licensed auxiliary offsite stabling facilities in Northern California, Alameda County Fair and Golden Gate Fields, will continue to lose money.”

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2011

Author:(Cooper) – As Introduced Ver:February 16, 2016

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill restructures the funding and administration of the Stabling and Vanning Fund (S & V Fund). In summary, this bill:

1. Increases the amount that may be deducted by a racing association or racing fair in the northern zone for the S & V Fund from 1.25% to 2.0% of the total amount handled by satellite wagering facilities.
2. Specifies that 50% of the voting interests of the organization that administers the funds must be a vote of the organization representing thoroughbred horsemen and horsewomen and the other 50% shall be allocated among thoroughbred racing associations and fairs.
3. Specifies that funds distributed to the organization shall pay the organization’s expenses and compensate a board-approved auxiliary offsite facility for stabling, training, and vanning of thoroughbred horses in the northern zone.
4. Authorizes the organization to enter into multiyear contracts for auxiliary facilities in the northern zone, pending approval from the board.
5. Allows a thoroughbred racing association or fair in the northern zone that is able to provide the minimum number of stalls required by its racing and meeting license without the use of auxiliary offsite stabling and training facility and vanning program may opt out of this program.
6. Specifies that the board reserves the right to adjudicate any disputes that arise regarding costs or other matters related to stabling, training or vanning. The board may also request that the organization submit a report detailing receipts and expenditures over the prior two fiscal years.

FISCAL EFFECT:

Negligible fiscal impact.

COMMENTS:

1. Background. Existing law establishes the amount that may be deducted from the pari-mutuel wagering pools of California horseraces. This amount, called the takeout, is the amount deducted from wagers before winnings are paid out to bettors. Currently, California’s takeout rate on thoroughbred races is 15.43% for the win, place, and show wagers, and 20.18% for other types of wagers. This takeout is used for specific purposes, defined by law, such as license fees, enforcement fees, owners purses, racing association commissions, marketing, workers’ compensation, and vanning and stabling of the horses.
2. Stabling and vanning. The Stabling and Vanning Fund (S & V Fund) exists to help horsemen and horsewomen defray the costs of having to transport and stable their horses at auxiliary training facilities. Currently, up to 1.25% of the total amount handled at satellite wagering facilities at thoroughbred races at northern zone fairs or associations are deposited into the S&V Fund. However, revenue from wagering facilities has been in decline, and as a result there has been a significant reduction in money flowing into the S & V Fund. According to the author’s office, two licensed auxiliary off-site stabling facilities in northern California (Alameda County Fair and Golden Gate Fields) are operating with deficient balances.
3. Purpose. According to the author, this bill is intended to allow for greater flexibility in the use of the Stabling and Vanning Fund (S&V Fund) to help streamline operations in light of current financial constraints. Without these changes, the S&V fund will continue to be in the red.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 6, 2016

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 2011 (

Author:Cooper) – As Introduced Ver:February 16, 2016

SUBJECT: Horse racing: thoroughbred racing: northern zone: auxiliary offsite stabling, training, and vanning

SUMMARY: Recasts and restructures the Stabling and Vanning Fund (S&V Fund), which exists in Horse Racing Law to help horsemen and horsewomen in northern California defray the costs of having to transport and stable their races horses at auxiliary training facilities. Specifically, this bill:

1) Increases the amount that is required to be deducted by a racing association or racing fair in the northern zone for the S&V Fund from an amount not to exceed 1.25 to 2% of the total amount handled by satellite wagering facilities, as defined.

2) A vote of the organization representing thoroughbred horsemen and horsewomen shall constitute 50 percent of all voting interests on the board of the organization formed and operated to administer the fund. The other 50 percent of all voting interests shall be allocated among thoroughbred racing associations and fairs conducting thoroughbred racing in a manner that provides meaningful representation on the governing board of the organization for thoroughbred racing associations and fairs conducting thoroughbred racing, as specified.

3) The funds distributed to the organization shall be used to pay the organization’s expenses and compensate the provider of a board-approved auxiliary offsite facility for stabling, training, and vanning of thoroughbred horses in the northern zone.

4) The organization administering the auxiliary offsite stabling and training facility and vanning program shall submit its proposed financial and operational plans for the upcoming calendar year to the board for review no later than November 1 of the preceding year.

5) Provides the funds shall also be used to cover all or part of the cost of vanning thoroughbred horses from a board-approved auxiliary offsite stabling and training facility to the track to start in a thoroughbred race at a thoroughbred or fair racing meeting in the northern zone. The organization shall determine the extent of and manner in which compensation will be paid for thoroughbred horses that are vanned from the auxiliary facility to the track or the fair conducting the thoroughbred or fair racing meeting.

6) Provides the auxiliary offsite stabling and training facilities and the amenities provided for offsite stabling and training purposes shall be substantially equivalent in character to those provided by the thoroughbred racing association or fair conducting the racing meeting.

7) Requires that the funds be used to cover all or part of the cost of vanning thoroughbred horses in the northern zone from a board-approved auxiliary offsite stabling and training facility and would authorize the organization to enter into multiyear contracts for auxiliary facilities in the northern zone subject to specified conditions.

8) Provides that at the request of the CHRB, the organization shall submit a report detailing all of its receipts and expenditures over the prior two fiscal years and, upon request of any party within the organization, those receipts and expenditures shall be audited by CHRB.

9) States in addition to the uses of the funds, as described, the organization may use the funds for both of the following:

a) Maintain a reserve fund of up to 10 percent of the total estimated annual vanning and auxiliary offsite stabling and training facility costs. In addition to the reserve fund, if the funds generated for the auxiliary offsite stabling and training facilities and vanning are insufficient to fully cover the expenses incurred, the organization may, in the future, accumulate sufficient funds to fully cover those expenses.

b) Pay back commissions, purses, and owners’ premiums to the extent the deductions made, as defined, exceed in any year the amount of funds necessary to achieve the objectives of the organization.

10) Authorizes the organization to use the funds to pay back commissions, purses, and owners’ premiums to the extent that the deductions made exceed in any year the amount of the funds necessary to achieve the objectives of the organization. The bill would also authorize a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified.

11) Provides the amount initially deducted and distributed to the organization may be adjusted by CHRB, in its discretion. However, the adjusted amount may not exceed 2 percent of the total amount handled by satellite wagering facilities. The amount deducted and distributed to the organization as adjusted by the board may be a different percentage of the handle for different associations and fairs conducting thoroughbred racing meetings in the northern zone, but only if all the associations and fairs agree to the differing percentages.

12) Authorizes a thoroughbred racing association or fair in the northern zone to opt out of the auxiliary offsite stabling and training facility and vanning program, as specified. Provides that any thoroughbred racing association or fair in the northern zone that opts out of the auxiliary offsite stabling and training facility and vanning program shall not have any voting interest therein until the association or fair opts back into the program, as defined.

13) Provides that the CHRB shall reserve the right to adjudicate any disputes that arise regarding costs, or other matters, relating to the furnishing of offsite stabling, training, or vanning, as specified.

EXISTING LAW:

1) Provides, under existing law, Article IV, Section 19(b) of the Constitution of the State of California, which the Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results.

2) Authorizes the CHRB to regulate the various forms of horse racing authorized in this state.

3) Defines "pari-mutuel wagering" as a form of wagering in which bettors purchase tickets of various denominations on the outcome of one or more horse races.

4) Requires racing associations to deduct a specified percentage of the total amount wagered on each race and type of wager, for the purpose of distributing the amount collected for purses, commissions, and other mandated distributions as specified.

5) Requires, when satellite wagering is conducted on thoroughbred races at associations or fairs in the northern zone, that an amount not to exceed 1.25% of the total amount handled by all of those satellite wagering facilities be deducted from the funds otherwise allocated for distribution as commissions, purses, and owners’ premiums.

6) Requires an organization representing thoroughbred horsemen, to administer a fund to provide reimbursement for off-site stabling at CHRB approved auxiliary training facilities for additional stalls beyond the number of usable stalls the association or fair is required to make available and maintain, and for the vanning of starters from these additional stalls on racing days for thoroughbred horses.

7) 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.

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the bill: According to the author's office, northern California's Stabling and Vanning Fund (S&V Fund) will continue to operate in the red if it is not restructured. Consequently, two licensed auxiliary off-site stabling facilities in northern California, the Alameda County Fair and Golden Gate Fields are operating with deficient balances. In 2014, the Alameda County Fair lost approximately $300,000 from off-track stabling operations.

The S&V Fund exists to help horsemen and horsewomen defray the costs of having to transport and stable their races horses at auxiliary training facilities. According to the author, the racing industry wants to ensure solvency of the S&V Fund by diverting monies from generated purses, commissions and owners’ premiums.

Existing statute dates back to late 1980s and early 1990s when wagering at satellite facilities located on fairgrounds and racetracks was the only form of off-track pari-mutuel wagering available. The S&V Fund was funded exclusively from revenue generated at California such satellite wagering facilities. With the advent of advance deposit wagering (ADW) in 1999, pari-mutuel handle began to migrate from satellite wagering facilities to on-line ADW sources. The subsequent decline in handle at satellite facilities has resulted in a significant depletion of revenue to the S&V Fund. Current statutory language limits available funding and decision-making flexibility.

According to the author, this bill is intended to allow for greater flexibility in the use of the S&V Fund to help streamline operations in light of current financial constraints. Without these changes, the S&V Fund will continue to operate in the red. Therefore, the two licensed auxiliary offsite stabling facilities in Northern California, Alameda County Fair and Golden Gate Fields, will continue to lose money.

Background: The Horse Racing Law establishes the amount that may be deducted (the takeout) from the pari-mutuel wagering pools of horse races in California. The takeout is the amount deducted from wagers before winnings are paid out to bettors. Currently, California's takeout rate on Thoroughbred races is 15.43 percent for win, place, and show wagers, and 20.18% for other types of wagers (i.e., Exacta, Trifecta, and Pick-6). The takeout may be used for specific purposes, as defined by law, such as license fees, enforcement fees, owners purses, racing association commissions, marketing, workers' compensation, and vanning and stabling, among others.

For more than a decade, horse racing has been a declining industry. Some argue that the decline stems from increased competition from expanded gaming in California to the inability of the industry to attract new fans. Further exasperating the problem is the downturn in the economy, which has significantly impacted the amount, wagered (the handle).

Prior 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 S&V Fund.

SB 1805 (Florez), Chapter 883, Statutes of 2006. Provides that any funds that are not used to defray the cost of workers’ compensation insurance from the supplemental “takeout” may be used for reimbursing racing organizations for safety improvements to racing and training surfaces.

AB 701 (Horton), Chapter 40, Statutes of 2004. Provided a framework for the deduction from pari-mutuel pools in order to address increased costs in workers compensation insurance in the horse racing industry. Required Thoroughbred racing associations to deduct an additional one-half percent of the total amount handled in exotic pari-mutuel pools to be used to defray workers' compensation costs in the horse racing industry.

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.

REGISTERED SUPPORT / OPPOSITION:

Support

California Authority of Racing Fairs

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531