Call to Order and Roll Call
The 5th meeting of the Interim Joint Committee on Licensing and Occupations was held on Tuesday, November 23, 2010, at 10:00 AM, in Room 129 of the Capitol Annex. Senator Gary Tapp, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Gary Tapp, Co-Chair; Representative Dennis Keene, Co-Chair; Senators Julian M. Carroll, Perry B. Clark, Julie Denton, Carroll Gibson, Denise Harper Angel, John Schickel, Dan "Malano" Seum, Kathy W. Stein, Damon Thayer, and Robin L. Webb; Representatives Tom Burch, Larry Clark, Ron Crimm, Tim Firkins, David Floyd, Dennis Horlander, Joni L. Jenkins, Adam Koenig, Charles Miller, Darryl T. Owens, Carl Rollins II, and Arnold Simpson.
Guests: Lisa Underwood, Executive Director, Jamie Eads, Director of Incentives and Development, Kentucky Horse Racing Commission.
LRC Staff: Tom Hewlett, Bryce Amburgey, Carrie Klaber, Michel Sanderson, and Susan Cunningham.
Approval of minutes from October 8, 2010, meeting.
There was a motion from Representative Keene followed by a second from Representative Owens and the minutes were adopted.
A presentation by the Kentucky Horse Racing Commission.
Lisa Underwood, Executive Director said Kentucky is the horse capital of the world and with that responsibility the Kentucky Horse Racing Commission plays a leadership role not just in the state, but in the entire industry. The bi-annual report has been posted on the commission's website; however, if any member wanted a copy her staff would print and deliver one to them. The commission was charged with protecting the integrity of the sport as well as the safety and welfare of the human and equine athletes. There was also a statutory obligation to encourage the horse breeding industry within the Commonwealth. In addition, Ms. Underwood said the Governor's Task Force on the Future of Horse racing had made several recommendations to the commission.
Regarding the integrity of the sport, Ms. Underwood said the task force has recommended drug and medication testing for the commission should be performed at a laboratory located in Kentucky. On February 1, 2011, the equine drug and medication testing will be handled through a laboratory located in Lexington that is owned and operated by HFL Sports Science, which was formerly only located in the United Kingdom. The commission has researched the HFL laboratory and was impressed with the company both as a business and a laboratory. HFL will not only perform drug tests on horses but will test horse feed and human sports supplements for banned substances and is developing screening tests for human growth hormone. HFL will employ as many at 25 technicians by the end of 2011.
In response to a question from Senator Tapp, Ms. Underwood said that HFL was collaborating with the University of Kentucky on several projects and presumed that the testing of feed was included.
Ms. Underwood said the HFL lab director will be Rick Sams, who is currently working at the University of Florida. To further the commitment to medication integrity, the Equine Drug Research Council recommended and the commission approved a regulation for out of competition testing. The testing is necessary to detect certain prohibited substances that may be administered to a horse weeks, sometimes months, in advance of a race. These drugs are not detectable in post race sampling. As an example of these substances she said the regulation prohibits the presence and or the administration to a horse, at any time, of a blood doping agent, natural and synthetic venoms or their derivatives, and growth hormones. Ms. Underwood said that the commission conducted extensive meetings prior to the adoption of the regulation to give everyone an opportunity for input. The regulation was filed as an emergency regulation as well as an ordinary regulation. The commission has conducted out-of-competition testing at the Red Mile and at the Breeder's Cup this year. All testing was reported as negative. The tracks are cooperating by adding notice with the stall applications and nomination forms.
Ms. Underwood said the commission has approved five research projects this year and will be sending out proposals for next year in the near future. She said working with the drug research council the commission has developed a good working relationship with the University of Kentucky Equine Center and the Gluck Center.
Ms. Underwood said the commission has hired Greg Lamb as Supervisor of Pari-Mutuel wagering, which was one of the recommendations from the Governor's task force. Mr. Lamb brought over 20 years of experience in the pari-mutuel industry to the commission and has established a process for the commission to audit the pricing calculations performed by the tote system on a regular basis. Wagering data previously came from the track. Now the commission has a contract with a company to receive information from the tote companies. For the first time, all tracks will perform a pre-meet test to ensure the tote is properly functioning before the meet starts. Mr. Lamb is also working on a regulation to license Advance Deposit Wagering (ADW) providers. The commission is meeting with the wagering integrity committee and with ADWs who will be licensed to get their input on the regulation. Mr. Lamb is also working on a pricing regulation to calculate consistent payouts from the development funds to all breeds. The General Assembly had also authorized the commission to license tote companies and a regulation is currently being written. Another recommendation from the Governor's task force was to put an integrity hot line in place. People are now able to call anonymously with a tip or any information they feel the commission should investigate.
Jamie Eads, Director for the Kentucky Breeders Incentive Fund, told members that the fund was implemented in 2005 to ensure the strength and growth of the horse industry in Kentucky. The money for the fund comes from the six percent sales tax received from stud fees in Kentucky. Funds are allocated to Thoroughbreds, Standardbreds, and 11 non-race breeds. The thoroughbred fund receives eighty-percent of the monies collected from stud fees. Money from the fund is awarded back to qualified winners of eligible races. In 2010, $13.9 million was paid out to eligible races in 2009 with the average award being $3,525. Because the last five Kentucky Derbies and Oaks were won by Kentucky-bred thoroughbreds, the winners will receive $100,000 each in 2011.
Ms. Eads said in 2010 there were 17,303 mares bred in Kentucky according to the Jockey Club, of which 8,868 registered with the Breeder Incentive Program. In order to be eligible to receive funds the mare must reside in Kentucky the entire gestation period, from cover until foaling. One thousand ten mares have been verified in Kentucky, representing 901 breeders at 241 boarding farms in Kentucky. Ms. Eads said that the anticipated allocation for the first quarter of 2011 is approximately $10 million for races that were won.
Ms. Eads said that the Standardbreds are financed through 13 percent of receipts collected from stallion stud fees. Incentives are awarded as purse money on the Kentucky Sire Stakes. Kentucky has one of the richest finals in North America with $2.4 million allotted in purse money, which includes eight finals paying $300,000 each. Finals are hosted at the Red Mile. These races are promoted by the commission through in-house resources to reduce administrative costs.
Ms. Eads said that the non-race breeds are awarded seven percent of the money collected from stallion stud fees. There are 11 non-race breeds participating in the program 2010, including the Kentucky Arabian and half-Arabian as well as Kentucky Miniatures which were added to the program this year. The commission distributed brochures highlighting the non-race program during the World Equestrian Games.
In response to a question from Senator Tapp, Ms. Eads said the quarter horse breed has seen the largest growth since the inception of the fund. Ms. Underwood added for clarification that the development fund is a different program than the Breeders Incentive Fund. The development fund for quarter horses in not actually Breeders Incentive Fund money. There is a quarter horse, appaloosa, and Arabian development fund established under KRS 230.445 consisting of money allocated from pari-mutuel tax receipts generated when money is bet on a quarter horse race. The commission is working with the Kentucky Quarter Horse Association on a regulation to deal with that fund.
Concerning the status of instant racing, Ms. Underwood said an administrative regulation was filed in July, 2010, and a law suit is pending in Franklin Circuit Court concerning the legality of the regulation. The Family Foundation has intervened. Briefs have been submitted and the court has not set a date for oral arguments. In response to a question from Senator Stein Ms. Underwood deferred to Tim West, Assistant General Counsel for the KHRC. Mr. West said that the Family Foundation moved to intervene in the lawsuit as an interested party. The standing of Family Foundation in the lawsuit has not been challenged by any other parties to the suit. Mr. West added that there was a permissive intervention under Civil Rule 24. Mr. West told Senator Stein he would forward the briefs of the suit to her.
Ms. Underwood said Breeders Cup attendance on Friday, November 5 was 41,614 and on Saturday, November 6, attendance was 72,739. The handle for Friday was $53,010,624 and for Saturday was almost $110 million. An incident related to the Ladies Classic is currently under investigation. The commission will submit a report with recommendations. In response to Senator Tapp's question, Ms. Underwood said that there is no timeframe set for the investigation to end due to the thoroughness of the investigation. Senator Thayer commented that he was interested in the final report and, in particular, why the jockey did not inform the veterinarian's that his horse was not warming up well.
Ms. Underwood said, regarding search and seizure, the Attorney General has issued an opinion responding to a request from Commissioner Burr Travis to clarify the scope of the commission's power to search areas and seize materials when a commission agent determines that it is relevant to a commission investigation. The Attorney General confirmed that the commission may make a warrantless search of any property in its jurisdiction, including the vehicle of licensees, with the exception of living quarters or sleeping quarters. The commission also may search for any item reasonably believed to constitute evidence of a violation of one of the commission’s regulations. She said that language in the current license application gives valid voluntary consent to a warrantless administrative search and seizure, as long as the search does not go into living quarters or dormitories.
In response to a question from Representative Keene Ms. Underwood said the search does not include a search of the license holder’s other business entities.
Ms. Underwood told committee members that one of the main initiatives for the 2011 legislative session will be working on the National Racing Compact. The Public Protection Cabinet's strategic plan for 2010-2014 was filed with the LRC in 2009, and one of the items listed was an interest in either joining or starting a national racing compact. She is serving on a national steering committee to gather consensus with various interested parties to form the multi-state racing compact.
In response to a question from Representative Floyd, Jamie Eads said the Kentucky Sire Stakes money was a combination of horseman fees and entry fees, the pari-mutuel tax (Standardbred Development Fund), and the 13 percent collected for the Standardbred Breeders Incentive Fund.
In response to a question from Representative Keene, Ms. Underwood said that it is hard to project the economic impact of a full casino opening in Cincinnati on Turfway Race Course. She commented that race dates, purses, and handle have been declining.
Recognition of Departing Members
Senator Tapp read a resolution honoring the Representative Tim Firkins' service to the committee. With a motion from Senator Carroll, seconded by Senator Tapp, the resolution was adopted by voice vote and presented to Representative Firkins.
Representative Keene told Senator Tapp that he wanted to publicly thank him for the help, fairness, and consideration he had shown in teaching him to be an effective committee chairman. He said, "It was never a Republican thing, never a Democratic thing, it was always the right thing." As a token of the committee's appreciation, Senator Tapp was presented with a statue of an American eagle. Representative Keene read the plaque on the statue, "For outstanding leadership, 2003 – 2010, Licensing and Occupations Co-Chair, Senator Gary Tapp."
Senator Tapp thanked the committee members saying that it had been an honor to serve on the committee. He said he appreciated the cooperation of all the committee members and thanked the staff for their work. Senator Tapp also thanked his wife for her support.
The committee adjourned.