Fiscal Summary

Increase State Expenditures - $41,900/One-Time/Division of Regulatory Boards $174,500/Recurring/Division of Regulatory Boards Other Fiscal Impact - Due to various unknown factors, the extent and timing of receipt for any additional state tax revenue cannot be reasonably determined. Any such amounts received are not anticipated to cover expenses in the short term; but is assumed to cover expenses incurred in the long term. As of June 30, 2018, the Division of Regulatory Boards had a cumulative reserve balance of $27,499,691. To the extent that wagered horse racing becomes established in this state, the Department of Revenue and Department of Commerce and Insurance could eventually require additional positions and system integrations; however, due to unknown factors, any determination with regards to such additional positions cannot be made at this time with any reasonable certainty.

Bill Summary

This bill establishes the Tennessee horse racing commission to regulate horse racing and parimutuel wagering, establishes the transportation improvement fund, imposes taxes, and establishes a criminal offense, as discussed below.

COMMISSION

This bill creates the state horse racing commission, to be attached to the division of regulatory boards within the department of commerce and insurance. The commission is composed of the following members:

(1) One public member, to be appointed by the governor, who resides in the middle grand division of the state;
(2) One public member, to be appointed by the speaker of the senate, who resides in the eastern grand division of the state and who has a reasonable knowledge of the practices and procedures of horse racing;
(3) One public member, to be appointed by the speaker of the house, who resides in the western grand division of the state and who has a reasonable knowledge of the practices and procedures of horse racing;
(4) One public member, to be appointed by the speaker of the senate, with a reasonable knowledge of the practices and procedures of horse racing;
(5) One public member, to be appointed by the speaker of the house, with a reasonable knowledge of the practices and procedures of horse racing;
(6) One member with a background in law enforcement, who is appointed by the governor from a list of three persons submitted by the director of the TBI; and
(7) One member with a background in accounting, who is appointed by the governor from a list of three persons submitted by the state board of accountancy.

This bill requires the appointing authorities to, when making appointments to the commission, strive to ensure that the commission is composed of members who are diverse in professional or educational background, ethnicity, age, race, gender, geographic residency, heritage, perspective, and experience.

Following a period during which initial appointees will be appointed to staggered terms of two to four years, all subsequent terms will be four-year terms. Vacancies are filled in the same manner as the original appointment but for the unexpired term only. Members are prohibited from serving more than two consecutive four-year terms.

This bill establishes eligibility requirements for membership on the commission, such as a member must: have been a legal resident of this state for five years immediately preceding the appointment; be more than 30 years of age; not directly or indirectly own or have an interest in a horse racetrack; not be a public official or public employee; not have been convicted of a gambling offense under federal or any state's law; not accept a reward or gift from an association licensed by the commission to engage in horse racing; not wager on a horse race; and not have a financial interest in a business that is licensed to conduct race meetings under this bill.

Commission members will not receive compensation for their services, but a member will receive an expense allowance equal to the allowance granted to members of the general assembly for each day or portion of a day the member is engaged in official business. A member will also receive reimbursement for travel expenses.

The full text of this bill specifies various procedural requirements for the commission's meetings and specifies the manner by which the governor may remove a commission member.

The commission is required to appoint an executive secretary. This position is full time and the secretary is prohibited from holding another office or employment. The secretary will receive an annual salary set by the commission. The secretary is required to keep a complete record of the proceedings at each meeting and preserve all books, documents, and papers entrusted to the care of the commission. The commission may employ additional personnel and appoint horse racing officials, as necessary.

Each member of the commission and the executive secretary is required to furnish a $50,000 corporate surety bond payable to the state.

All meetings of the commission are open and public and all records are open to inspection by the public, with exceptions for certain medical records, investigative records, and criminal history information.

All funds handled by the commission are subject to audit by the comptroller of the treasury. Subject to certain exceptions described in this bill summary, funds received by the commission will be paid into the state general fund.

The powers of the commission include the power to:

(1) Grant, refuse, suspend, or revoke licenses issued pursuant to this bill;
(2) Promulgate rules to regulate the running of live horse races or the presentation of simulcast races;
(3) Issue subpoenas and summon witnesses before its meetings and hearings, administer oaths to such witnesses, and require testimony on issues before it;
(4) Compel the production of all books, records, or documents showing the receipts and disbursements of any person licensed to conduct the race meetings under this bill, as well as other records that the commission believes to be pertinent to its function of maintaining the integrity of horse racing;
(5) Compel, at any time, the removal of any employee or official employed by an association in a case in which it has reason to believe the employee or official has been guilty of any dishonest practice in connection with horse racing, has failed to comply with a condition of the association's license, or has violated any rule promulgated by the commission;
(6) Establish recordkeeping requirements for licensees;
(7) Visit, investigate, and place auditors, inspectors, and security personnel in the offices, racetracks, or places of business of an association;
(8) Impose, by rule, a civil penalty for each violation of a statute or rule of not more than $10,000. Any such civil penalty must be deposited in the transportation improvement fund; and
(9) Eject certain persons from licensed premises.

This bill establishes an appellate process for a party who is the subject of an order or ruling of officers appointed to oversee horse races.

The commission must determine the time and place in which horse races may be conducted and where licensed satellite theaters may simulcast and accept wagers on horse races. Horse races will be conducted during licensed race meetings. The commission must take certain factors into consideration in making these determinations, such as the public interest and community support for the racetrack or satellite theaters. The commission must hold at least one public hearing in the area of a proposed racetrack or satellite theater to receive comments and testimony. The commission is prohibited from granting more than one license to conduct horse races in each grand division, with an exception for fairs.

The commission must perform background investigations on an applicant for a license to conduct horse races and must request the assistance of the TBI in performing the background investigations. The full text of this bill specifies various requirements for applications for licenses to hold race meetings.

This bill establishes the following license fees for associations to hold race meetings:

(1) For an association that did not hold a race meeting license for the year preceding the race meeting dates applied for:
(A) $10,000, to accompany the application;
(B) $25,000, which shall also accompany the application, to defray the costs of background investigations required by this bill, of which any amount remaining after the investigation has concluded will be refunded to the applicant; and
(C) Up to $1,000 for each racing day; and
(2) For an association that did hold a race meeting license for the year preceding the race meeting dates applied for:
(A) $1,000 to accompany the application; and
(B) Up to $1,000 for each racing day.

This bill authorizes the commission to establish a fee amount based on simulcast racing days and a separate fee amount based on live racing days. This bill also authorizes the commission to establish horse racing-related occupational license fees not to exceed $1,000 a year, per fee. The commission may adjust fees as necessary to ensure the commission is fiscally self-sufficient and revenues from fees do not exceed necessary and required expenditures.

This bill authorizes the commission to visit and investigate the offices, racetracks, or places of business of an association, and place therein accountants and other personnel it deems necessary to determine whether the association is in compliance with the rules of the commission.

This bill authorizes the commission to establish separate provisions regarding the conduct of live racing and simulcasts by fairs.

The full text of this bill sets out in detail other powers and requirements of the commission.

PARIMUTUEL WAGERING

This bill authorizes the parimutuel style of wagering at the running of licensed live horse races or licensed satellite theaters. Only persons licensed by the commission to conduct horse races may conduct parimutuel wagering, and such wagering must only be conducted on the association's premises. An association, other than a fair, that requests approval for at least 34 live racing days may also request approval to conduct simulcast wagering on days on which the association does not conduct a live horse race on its racetrack.

Interstate combined pool wagering may be permitted on simulcast races and the commission is authorized to enter into agreements with other horse racing commissions and jurisdictions to effect such combined pool wagering. Subject to the commission's approval, an association participating in an interstate combined wagering pool may adopt the take-out of the host jurisdiction or facility.

Parimutuel wagering at a live horse race or a simulcast theater is prohibited in a county or municipality unless a majority of voters of the county or municipality approve a referendum permitting parimutuel wagering. This bill details the procedures and rules concerning such a referendum.

This bill sets out in detail other requirements for pari-mutuel wagering.

TRANSPORTATION IMPROVEMENT FUND

This bill establishes a separate account within the general fund known as the transportation improvement fund. The department of transportation will administer this fund. The general assembly must use this account to fund special projects related to transportation. Any balance remaining at the end of the fiscal year carries forward and does not revert to the general fund.

TAXES

Every association must pay to the commission an admissions tax of 15 cents for each person entering the grounds of the association. These funds must be deposited in the transportation improvement fund.

Associations that conduct race meetings must pay to the department of revenue the following:

(1) 1.5 percent of the first $600,000 of the daily parimutuel handle; and
(2) 2.5 percent of the daily parimutuel handle over $600,000.

If an association conducts more than one program of horse races in any day, each program is considered a separate racing day for the purpose of calculating the tax due. The tax must be applied separately to the parimutuel handles at each track or satellite theater. This state's parimutuel taxes or retainage may only be imposed on amounts wagered in this state.

Thirty percent of funds collected from each racetrack and satellite theater in accordance with (1) and (2) above must be allocated to the municipality where the racetrack or satellite theater is located, or if the racetrack or satellite theater is not located within a municipality, to the county where the racetrack or satellite theater is located. These funds must be earmarked for law enforcement, rehabilitation referral services or programs for problem and compulsive gamblers, and education programs. If the commission determines that a proposed racetrack or satellite theater will increase expenditures in a municipality or county other than the municipality or county in which the racetrack or satellite theater is located, the commission may require that a portion of these tax proceeds be paid by the department to the affected municipality or county. The remaining 70 percent of the funds collected in accordance with (1) and (2) above must be allocated to the transportation improvement fund.

Breakage must be computed on a basis not to exceed 10 cents on the dollar. An association may retain one-third of the total amount of breakage each day. The remaining breakage must be remitted to the department of revenue to be deposited into the transportation fund.

Funds for the payment of outstanding parimutuel tickets must be held by the association in an interest-bearing special escrow account. Funds remaining in the escrow account for more than one year must be distributed as follows: one-third to the association; and two-thirds to the department of revenue to be deposited into the transportation fund.

This bill sets out in detail other administrative requirements related to taxation.

CRIMINAL OFFENSE AND PROHIBITIONS

This bill establishes the criminal offense of entering a licensed racetrack by an ejected person. A person who is excluded or ejected from the premises of an association commits a misdemeanor if that person thereafter enters the premises of any licensed racetrack in this state without first having obtained permission from the commission.

This bill prohibits various people from wagering at any horse race, such as minors and employees of an association.

This bill will take effect upon becoming a law for rulemaking purposes and January 1, 2021, for all other purposes.