BILL ANALYSIS Date of Hearing: April 19, 1994 AB 3217 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Curtis R. Tucker, Jr., Chairman AB 3217 (Murray) - As Amended: April 18, 1994 SUBJECT Video Gaming Devices at Race Tracks. DIGEST Existing law, the California Horse Racing law, permits parimutuel šwagering on horse races, and empowers the California Horse Racing Board š(CHRB) to administer and enforce licensing provisions, allocation of racing šdays, track and satellite wagering, and the collection and distribution of špurses, commissions and license fees. Existing law also prohibits the possession, ownership, sale, štransportation, manufacture, or operation of any slot machine. This bill: 1) Permits licensed racing associations, as defined, to have video gaming devices for public use within the enclosure of the association's race track. 2) Defines a video gaming device as an electronic video game machine that, upon insertion of coins or cash, will play a video game such as video poker and blackjack, and from playing a game, a player, by chance, may receive credits which can be redeemed for cash. 3) Requires the CHRB to license manufacturers, distributors and operator of video gaming devices and to license each device and the premises the devices are located on. 4) Establishes license fees for manufacturers, distributors, operators, premises and devices, and imposes a license fee equal to 25 percent of the net income from wagers. 5) Establishes license qualifications to insure good character, honesty and integrity of licensees. 6) Requires the testing, approval and inspections of video gaming devices by the board. 7) Requires each device to meet specified operating requirements. 8) Requires every video gaming device to be linked to a CHRB central computer for the purpose of monitoring, auditing, and the transmission of license fee revenues. AB 3217 9) Requires that a device accept no more than $2 per game and that a per game prize not exceed $500. All devices are required to payout a minimum of 80 percent of amounts wagered. 10) Requires device credit vouchers to be redeemed for cash at the premise. 11) Requires licensed operators to provide records on the operation of every device in order to allow auditing of all device transactions. 12) Provides that all license revenues from net device income be deposited in the Natural Disaster Assistance Fund; all other license fee revenues be earmarked, upon appropriation by the Legislature, for enforcement of the provisions relating to video gaming devices. 13) Sunsets on January 1, 2000. FISCAL EFFECT Unknown, but depending on the number of video gaming devices placed at each race track inclosure, license fee revenues could be in the range of $100,000,000 to $200,000,000 based on the experience of other states with video wagering. COMMENTS 1) Purpose The purpose of this measure is to generate large amounts of revenues for earthquake relief and reconstruction in a relatively quick and painless manner. Newly permitted video poker machines in the state of Louisiana will produce over $100 million per year in revenues to the state and local government from approximately 10,000 machines. Potential tax revenues from video gaming in this state could conceivably help pay a major portion of the public costs of the Northridge quake, and drastically limit the need for bond financing or sales tax increases. 2) Limited Locations This measure would limit video gaming devices to long established privately owned race tracks (Santa Anita, Hollywood Park, Los Alamitos, Golden Gate Fields, and Bay Meadows) on the basis that gaming of this type should be contained to a limited number of sites to curtail impulse and compulsive wagering. 3) Indian Gaming - continued - AB 3217 Page 2 AB 3217 Casino style wagering on Indian reservations in California is an established fact of life. While a federal court decision is still pending over the scope of gambling to be permitted on Indian lands in the state, it seems certain that video wagering and other types of gambling at Indian casinos will be readily accessible by large numbers of Californians within the next two years. Federal law prohibits a state from taxing wagering on Indian lands. 4) Benefit to the Horse Racing Industry Overall revenues from parimutuel horse racing wagering are gradually declining because of competing recreational activities and the shift to off-track wagering. Permitting video wagering at race tracks should have the effect of increasing associated track attendance and handle, and reversing the decline of license fee revenues to the General Fund. 5) Should Horsemen Share the Benefits? This measure is silent on horsemen receiving any part of the revenues earned by racing associations from video wagering. Because video gaming could have an adverse impact on parimutuel wagering at a track and horsemen's purse winnings, consideration should be given to a provision requiring tracks to share a portion of their profits from video gaming with horsemen. Date of Hearing: April 19, 1994 SUPPORT None registered. OPPOSITION None registered. Britton McFetridge AB 3217 445-3451 Page 3 ago