Interim Joint Committee on Licensing and Occupations


Minutes of the<MeetNo1> 5th Meeting

of the 2007 Interim


<MeetMDY1> November 9, 2007


The<MeetNo2> 5th meeting of the Interim Joint Committee on Licensing and Occupations was held on<Day> Friday,<MeetMDY2> November 9, 2007, at<MeetTime> 10:00 AM, in<Room> Room 171 of the Capitol Annex and Room 101 Crounse Building, Paducah Community College, Paducah, KY via videoconference. Senator Gary Tapp, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Room 171 Capitol Annex - Senator Gary Tapp, Co-Chair; Representative Joni L. Jenkins, Co-Chair; Senators Julian M. Carroll, Perry B. Clark, Julie Denton, Carroll Gibson, Denise Harper Angel, Daniel Mongiardo, Ernesto Scorsone, Dan Seum, Robert Stivers II, and Damon Thayer; and Representatives Tom Burch, Larry Clark, Ron Crimm, Jon Draud, Tim Firkins, Dennis Horlander, Reginald Meeks, Charles Miller, Tim Moore, David Osborne, Sal Santoro, Ron Weston, and Susan Westrom; and Room 101 Crounse Building, Paducah Community College, Paducah, KY, - Senator Bob Leeper.


Guests:  Alex Waldrop, National Thoroughbred Racing Association, Nick Nicholson, CEO, Keeneland, Walt Robertson, CEO, Fasig-Tipton, Reynolds Bell, Thoroughbred Owners and Breeders Association (TOBA); Mac Stone, Director, Division of Value-Added Plant Production in the Department of Agriculture; and Rex Cecil, Executive Director, Kentucky Board of Architects.


LRC Staff:  Tom Hewlett, Bryce Amburgey, and Susan Cunningham.


First on the agenda, Senator Tapp asked for a motion and a second, and the minutes from the October 19, 2007, meeting were adopted by voice vote.


Next, Senator Tapp recognized Senator Gibson who introduced Terry Martin, County Judge Executive from Hart County and Billy Goodman, former head of the Industrial Foundation in Horse Cave and asked the committee to make them feel welcome.


Next on the agenda, Alex Waldrop, CEO, National Thoroughbred Racing Association (NTRA) and moderator for the Sales Integrity Task Force, presented the final recommendations of the task force.  Mr. Waldrop said that earlier in the year Representative Larry Clark had introduced legislation that would significantly change the conduct of public horse sales.  Mr. Waldrop said that in response to the legislation, the industry, TOBA, Keeneland, Fasig-Tipton, the Kentucky Thoroughbred Association, and the Consignors and Commercial Breeders Association (CCBA) agreed to establish a task force to address: 1) licensing of bloodstock agents and consignors, 2) disclosure of ownership in the horse sales arena and, 3) disclosure of medication in the horse sales arena. Thirty-six members were selected to join the task force.  The members represented buyers and sellers from the thoroughbred industry and other breeds' sales companies and associations.  He said that more than 50 percent of the task force members represented buyers or representatives of buyers at public equine auctions.  Mr. Waldrop said that three committees were formed and all members of the task force were asked to join the committees.  He reported that an advisory committee made up of people with legal, veterinary, and blood-stock experience was established.  Each committee was assigned an industry executive so that all members would be notified of task force meetings.  Mr. Waldrop said that many points of view were offered, with all points of view considered.  He said a hearing was held at Keeneland to notify the public of the task force's preliminary recommendations.  Mr. Waldrop said that key recommendations were: 1) the creation of a code of conduct for all sale participants, including blood stock agents, with violators facing exclusion from the sales grounds, 2) the establishment of a voluntary, confidential ownership registry for disclosure of ownership and, 3) the imposition of a ban on sports steroid use within 45 days of the sale and a procedure know as "injection behind the knee."  He said that the task force also recommended that a committee made up of representatives of TOBA, the CCBA, and the American Association of Equine Practitioners make an annual review and recommend any additional prohibited practices.  The recommendations were handed out at the public forum and have been posted on the TOBA website,  He said questions and comments were encouraged at the public forum and have been received on the website.  Mr. Waldrop said that a consensus has been reached on all three issues and the recommendation to disclose known and material medical information was approved unanimously. 


Mr. Waldrop said the word recommendation was used to accommodate other breeds; because, other breeds may choose not to implement one or more of the recommendations.  He said that many in the horse industry do not understand that "one size does not fit all."  Mr.Waldrop said the task force did not want to mandate activities that were unnecessary or impractical where other breeds are concerned.  He added that regarding the thoroughbred industry, each of the recommendations will be fully implemented, either through conditions of sale at auctions in Kentucky or through TOBA.  Keeneland and Fasig-Tipton are also fully committed to making the contracts of all public sales fully binding.  Mr. Waldrop said that each task force recommendation will have the full force of law as applied to sales of horses at public auctions in Kentucky.  He said that the sales conducted at Keeneland and Fasig-Tipton were examples of self-regulation at its finest and that both companies conduct world-class sales involving buyers and sellers from around the globe setting new records daily.  Mr. Waldrop cited as proof of the public's faith in the integrity of auction sales in Kentucky, the November 5, 2007 sale at Keeneland where a broodmare was sold at the record breaking price of $10.5 million.


Mr. Waldrop said the task force specifically debated the pros and cons of  licensing bloodstock agents and concluded that state regulation was not only unnecessary but could inadvertently exclude international buyers and their agents.  Buyers now come from over 42 countries and account for a significant number of bloodstock sales.  Licensure could pose a barrier to international buyers, potentially excluding them from public auctions.  The task force recommended that a strict code of conduct be applied to all participants at Keeneland and Fasig-Tipton, including bloodstock agents and consignors.  Therefore, a "bloodstock agent code of conduct" will be added to the conditions of sale at Fasig-Tipton and Keeneland.  Other Kentucky sales companies can choose to adopt the code.  The code states that an agent owes a duty of good faith and loyalty to his principal, and requires the agent to act at all times in an equine auction sale in the principal's best interest.  This duty mandates that an agent not place himself in a position where his or her personal interests conflicts with the duties of his or her principal's interest unless full disclosure is made.  If this code is breeched it must be disclosed to the sales company.  If the parties cannot resolve the matter among themselves, the injured party may initiate arbitration.  If the arbitrator finds that a violation of the code has occurred, the arbitrator may impose sanctions against the person or persons violating the code.  The sanctions include exclusion from the sales or the sales grounds.  Three-time offenders could be barred from participation for life.  The name of the party sanctioned and the sanction imposed will be posted in a public place during the period of the exclusion.  Mr. Waldrop said enforcement of the code through contractually imposed binding arbitration is the most effective way to regulate agents.  Additionally, the dual agent statute allows injured parties to seek treble damages.  Regarding disclosure of ownership, the task force researched other auction markets, inside and outside of the horse industry, and found only one of 11 markets analyzed required disclosure of ownership and that market related to food for human consumption.  The right to privacy is important to owners who legitimately need to avoid publicity.  The task force heard from buyers who wanted to know the identity of owners; however, no one could specify a valid reason to identify owners.  The task force decided not to mandate disclosure of ownership because it believed to do so might drive owners to other markets where privacy is protected.  The task force found that in the past, a voluntary repository has worked well concerning a horse's medical condition because buyer-demand necessitated that consignors make the medical condition of the horse known prior to the sale.  Mr. Waldrop said that a condition of sale addressing ownership transparency would be added to the Fasig-Tipton's and Keeneland's conditions of sale that will incorporate a voluntary ownership registry where once ownership is disclosed, a change in owners while on sales grounds will be announced by the auctioneer prior to the sale of the horse.  If a purchaser discovers after the sale that the material listed in the catalog was inaccurate, purchasers may collect damages.  Failure to use the repository will be a strong indicator of buyer interest.  Mr. Waldrop said the task force feels it is important to respond to market conditions rather than jump to conclusions regarding owner disclosure. 


Finally, the task force supports the ban on anabolic steroids announced by Keeneland and Fasig-Tipton, effective January 1, 2008.  He said that both companies will prohibit the use of anabolic steroids within 45 days of the horse's sale and will employ technology to perform drug tests for the presence of exogenous anabolic steroids at the request of the purchaser.  Mr. Waldrop said research is being done to establish a threshold for naturally occurring anabolic steroids in different ages and sexes of horses.   Levels in excess of the naturally occurring steroids in horses purchased may result in the rescission of the sale.  He said the task force went further than required by the compromise by addressing disclosure of medical procedures as well.  Mr. Waldrop said that currently the conditions of sale at Fasig-Tipton and Keeneland list prohibited practices such as blistering and acupuncture and will add injection behind the knee to that list.  He said this act is performed to hide the true condition and conformation of the horse and has no therapeutic value.  Mr. Waldrop said that the task force also recommends that sales companies disclose conformation altering procedures and all other medical procedures.  He said that the task force is asking TOBA to form a committee to work with relevant industry organizations to address all issues necessary to implement the recommendations of the Sales Integrity Task Force.  Mr. Waldrop said that it was important that the final recommendations were self regulatory, market-driven, and solution-oriented.  He said that imposing those recommendations on other breeds would put them at a competitive disadvantage. Now they are free to adopt any or all they choose.  Mr. Waldrop said that there was overwhelming consensus among task force members to self regulate the industry by adopting the recommendations.


Nick Nicholson, President and CEO, Keeneland, told members that Keeneland is totally committed to the Sales Integrity Task Force recommendations.  He said that earlier in the week a broodmare was sold for a record-breaking price, adding that this sale demonstrates how well the Kentucky thoroughbred sales industry works.  Mr. Nicholson said he believes the market is not broken and that buyers and sellers trust Keeneland to treat them fairly.  He said that Keeneland is already implementing steroid drug testing and that in January 2008, threshold levels and withdrawal times will be established.  Also, in 2008, Keeneland's code of ethics, will require that every buyer and seller have a contract with Keeneland verifying that they are aware of the task force recommendations.  Mr. Nicholson said that the process has united the horse industry across the board and that the thoroughbred industry has learned not to be insular.  Walt Robertson, President of Fasig-Tipton, said Kentucky is the epicenter for thoroughbred activity.  He indicated that Fasig-Tipton intends to fully implement all the task force recommendations.  He said a high level of integrity must be maintained and that the industry will continue to work to make itself better.  Reynolds Bell, a TOBA trustee, commended the committee for bringing the task force back together.  He agreed with Mr. Nicholson and Mr. Robertson that the thoroughbred industry was significant in Kentucky and added that TOBA will continue to set standards for owners and breeders in the thoroughbred industry.


Senator Tapp said he appreciated the work that had been done over the summer, adding that the thoroughbred industry was important to Kentucky.  Representative Burch said that by the industry coming together, the right thing had been done.  Representative Clark said he was the sponsor of the bill that had brought about the compromise agreement and commended the task force for honoring the agreement.  Representative Westrom asked if the task force intended to continue to meet formally and make recommendations to the Licensing and Occupations Committee, and if other states would adopt Kentucky's recommendations.  Mr. Waldrop said that TOBA was forming a committee that would meet at least twice a year to monitor the effectiveness of the recommendations.  Mr. Robertson said that Fasig-Tipton operates sales around the country and that he believed other sales companies would follow suit.  Senator Thayer congratulated the task force for their work in coming to a unanimous agreement. 


Next on the agenda Mac Stone, Director of the Division of Value-Added Plant Production, Department of Agriculture, was present to give the committee an update on the Kentucky Grape and Wine Council activities.  Mr. Stone said that 2007 was a unique year for growing grapes due to the Easter freeze.  He said that not only was this year's crop lost but some vines were damaged.  Mr. Stone said that bird netting was a critical need for the vineyards and that funding through the Agriculture Development Board was one possible resource.  Mr. Stone said that three tons of grapes per acre would be an average yield; however, this year's yield was not that high.  Fifty-five acres of grapes will supply the grapes needed to produce the 50,000 gallon of wine that a small winery may legitimately produce.  Mr. Stone said that the council has developed a map to help wineries know what grape will grow well in their locations.  He said that the trend in the tasting rooms is that customers request the sweeter wines which do not duplicate the retail market place.  He said that twenty percent of the wineries product eighty percent of the wine produced in the state.  Mr. Stone said that grapes are being grown state-wide making the services of the enology and viticulture specialists at the University of Kentucky Agriculture Department invaluable.  He said that grape growing does rival tobacco crops but that county extension agents do not always have the expertise in grape growing.  Mr. Stone said that the Alcohol Beverage Control Department has been helpful in ensuring that shipping is not done in a dry territory. 


Mr. Stone said that the Small Farm Marketing Cost Share Program is funded at $100,000 per year.  Under this fund a winery can apply for a 50/50 cost share.  To date, twelve wineries have applied for the funds.  The Wholesale Distribution Reimbursement Program is funded at $75,000 per year.  Mr. Stone said the council is very diverse and has done a good job of coming together to reach consensus in all aspects of the business.  He said that one problem is that wholesalers cannot afford to inventory the wine because the wine may have different prices depending on where it is being shipped and some cases the contents of the case.  He said an effort is being made to streamline the communication between the retailer and the small farm winery.  Mr. Stone said there is now a statewide marketing program with and .com and the council has developed a logo.  He said advertisements should soon be seen in national magazines.  There is a plan to make a video to use for short promotions at trade shows.  Mr. Stone said the council is planning a calendar for 2008 summer wine festivals.  Also, in 2008, the council is looking at wine competitions with out-of-state judges, culminating with a final wine competition at the state fair that will allow for credentialed, award winning wines.  He said that marketing techniques are important to help small wineries break into the market.  Mr. Stone said that the department will notify the wineries that if they own less than ten acres in horticultural production, for which grapes qualify, their property's value may be assessed at the agricultural rate rather than the fair market value.  Also, there is an informational news letter that is sent out after each council meeting.


Representative Westrom asked how many acres of grapes are being raised in Kentucky.  Mr. Stone said the official number is 706 acres by 206 growers.  Senator Carroll asked if there is sufficient production in Kentucky to provide wineries with grapes.  Mr. Stone said Kentucky is still importing grapes; however, there is potential for more production.  Senator Carroll also asked if birds were causing problems.  Andre Brousseau, Chateau du Vieux Corbeau in Danville, said his grape crop, as well as that of others, was wiped out by robins even though the grapes had been netted.   He said other farmers he talked to said their crops had been affected by sparrows.  Mr. Brousseau said the drought caused the birds to look for moisture in any form.  He said the council was looking for ways to provide large nets to wineries.  Senator Tapp said the local grape growers could work with local agricultural development committees to receive tobacco money to purchase netting.  Mac Stone said that some growers were having difficulty accessing those funds.  Senator Clark asked if wine could be purchased on the internet in Kentucky.  Mac Stone said that the Granholm case allows Kentucky to ship two cases, both in-state and out-of-state.  Representative Clark said he appreciated the hard work Mr. Stone had done with the small farm winery legislation.  Senator Tapp said he appreciated all parties working together on Senate Bill 82.


Next on the agenda, Rex Cecil, Executive Director, Kentucky Board of Architects, and Jim Grawe, Assistant Attorney General representing the board, said the board had recently discussed the need to change the current statutes for architecture.  He said there was some concern among counties and cities regarding building remodeling regarding the building code that states public buildings require professional involvement.  Mr. Cecil said that the board would like to raise fines, from $5,000 to $10,000 per incident.  In addition, the board wants to add the title "emeritus architect" to statute to employ permanent staff and maintain an office site.  Mr. Cecil said that "certified interior designer" board was incorrectly identified in statute and that the board wants to eliminate the grandfathering  provision since it expired in July, 2006.  He said that board was also requesting changes in sanctions for certified interior designer licensees to allow the board to recover of attorney fees.


Senator Tapp asked how many violations were being investigated and what the average fine was.  Mr. Grawe said that currently, there are 16 pending and the average fine is $2,000.  He stated that typically the larger fines were assessed architects from other states that initiate projects without obtaining a Kentucky license.


There being no further business to come before the committee, with a motion and second the meeting was adjourned at 11:30 a.m.