Washington Horse Racing Commission
Meeting Minutes
July 13, 2006

Present were: Hartly Kruger, Chairman; Paul George, Commissioner; Dr. A.L. “Bud” Hallowell, DVM, Commissioner; Judi Roland, Commissioner; Carol Smith-Merkulov, Commissioner; Susan Carlson, Assistant Attorney General; Robert J. Lopez, Deputy Secretary; Patty Sorby, Confidential Secretary.

Item #1. Approval of the meeting minutes of June 8, 2006.

Chairman Kruger requested a change to page 1 of the minutes be corrected to reflect that Dr. Hallowell had asked him to report on the activities of the National Racing Compact (NRC) not the Association of Racing Commissioners International (ARCI).

Commissioner George moved to accept the minutes with the change requested by Chairman Kruger. Commissioner Smith-Merkulov seconded the motion. Unanimously approved.

Item #2. Chairman’s report.

Chairman Kruger announced that this meeting would be the last meeting for Commissioner Roland. A letter of appreciation was provided to Commissioner Roland and Chairman Kruger read it into the record.

Commissioner Roland thanked everyone and spoke about her tenure on the Commission.

Item #3. Emerald Downs’ report.

Mr. Jack Hodge gave the report for Mr. Ron Crockett who was unable to attend. Mr. Hodge updated the members on the advance deposit wagering, satellite sites, instate handle and out-of-state handle. Mr. Hodge reported that overall the figures were in line with projections.

Item #4. Everett satellite ownership change.

Robert Lopez reported the Club Broadway/Big Apple Casino in Everett was changing ownership. The establishment has reverted back to the original owner Allen Hemmat. Mr. Hemmat was previously approved by the WHRC. Mr. Lopez asked Investigator Richard Smith, WHRC to give the report on the site. Mr. Smith said he had conducted the background check, found nothing derogatory, and recommended approval of the ownership change.

Commissioner Roland moved to approve the ownership change at the Club Broadway/Big Apple Casino. Commissioner Hallowell seconded the motion. Unanimously approved.

Item #5. Request for new satellite site at Hawk’s Prairie Casino, Olympia.

Mr. Lopez said Emerald Downs’ had been searching in the Thurston County area for a new satellite site, and had requested approval of the Hawk’s Prairie Casino. Mr. Lopez said Investigator Smith had investigated the site and would report to the members.

Mr. Smith reported that he had visited the Hawks’ Prairie Casino and found it to have ample space to accommodate satellite wagering. He had conducted background checks and visited with Lacey Police Department. One officer with the Lacey P.D. commented they had some concerns about violations related to underage drinking at the site. The Mayor’s office had been notified in writing of the application for satellite wagering at Hawk’s Prairie and no response was received. Staff recommended approval.

Commissioner Roland moved to approve the Hawk’s Prairie Casino as a satellite site for off track betting. Commissioner Hallowell seconded the motion. Unanimously approved.

Item #6. Labor & Industries Industrial Insurance Workgroup update.

a. Public comment.

Commissioner Smith-Merkulov, chairperson of the workgroup, said that a meeting had been held on July 11th and some excellent comments were received. Commissioner George also attended the meeting and felt that the meeting had been a success. One of the comments was to have the exercise riders and pony riders pay into the pool.

Commissioner George stated there needed to be better tracking of licensees to ensure those that should be licensed are licensed. He also commented that workplace safety is very important.

Commissioner Hallowell asked if it was possible to give the Emerald Downs’ Security the ability to access the WHRC licensing data to check if someone has a valid license.

Mr. Lopez stated that the WHRC has changed the ID credential to print the groom’s employer on the ID card and will be discussing giving the Security at Emerald Downs’ access to view licensing information.

Mr. Jack Hodge said that requiring exercise riders and pony riders to pay a premium may cause some concern among the licensees due to increased costs for licensing.

Commissioner Smith-Merkulov said it was announced at the July 11 meeting that the public would have another opportunity to speak at the meeting of the Commission on July 13 and also said the next meeting of the workgroup would be on July 25th.

Chairman Kruger adjusted the agenda items to allow those present for Item #8. b. Assistant grants the opportunity to speak.

Item 8. b. Assistance grants.

Commissioner Hallowell introduced two persons from Washington State University, College of Veterinary Medicine, Dr. Tim Baszler and Dr. Robert Schneider.

Mr. Lopez said the draft guidelines for the grant process was sent to stakeholders approximately two months ago. The only response was from Dr. Warwick Bayly and those comments have been incorporated. Mr. Lopez said the issue before the members was to approve the guidelines and the time frame for submitting the requests.

A request had been received from Cliff Schellinger from the Class C meets to have the grants processed at the September meeting of the Commission. Commissioner Smith-Merkulov asked whether that would give the others enough time to submit their proposals and whether staff would have enough time to present them to the members.

Dr. Baszler said that he’d had quite a bit of experience in grant writing and had some suggestions. He felt it was important to define what was expected for the funds to be given.

Dr. Schneider also commented that he felt a September deadline would be too tight a timeframe to be able to submit grant proposals.

Mr. Hodge said that Emerald Downs is very interested in injury causes. He would like to have more research done in that area.

Dr. Baszler asked whether the Commission intended to follow-up on the results of any research in order to determine whether the funds were used appropriately and whether it was worthy to continue.

Commissioner Smith-Merkulov said this was an evolutionary process and the expectation is the Commission will learn a lot through this first year and if the process needs “tweaking”, that can be done in the future. She suggested that the Commission should stick to the original schedule for this year. Commissioner Smith-Merkulov also suggested that the Commission review all of the proposals at one time.

Chairman Kruger suggested that a couple of Commissioners could look over the proposals before the Commission meeting at which the grant proposals would be considered to sort out the priorities of the proposals.

Commissioner Hallowell suggested a workgroup to review the proposals.

Commissioner Hallowell moved to approve the grant guidelines as proposed by staff. Commissioner Roland seconded the motion. Unanimously approved.

8.a. Jockey incentive.

Mr. Lopez said there had been a variety of responses to the options that were mailed to stakeholders. Of the Class C meets, Dayton, Waitsburg and Sun Downs favored Option 3 while Walla Walla favored Option 7 or 8.The Class C jockeys favored Option 3. The WHRC staff recommended Option 3 which would distribute the entire fund to those jockeys that at any time rode a starter without penalty for not riding in all meets.

Commissioner Hallowell said that the intent of the incentive program was to reward jockeys for riding and to distribute the funds to all jockeys not just the top riders.

Commissioner George moved to adopt Option 4 for the distribution of the funds for the Jockey Incentive Program. Commissioner Smith-Merkulov seconded the motion. Unanimously approved.

Adjourned for five minute break. (10:55 a.m.) Reconvened at 11:00 a.m.

Item #7 Public Hearings: Rules of Racing:

a. WAC 260-08-597 Funding to assist the equine industry. NEW SECTION

Mr. Lopez said in March 2006 the Washington State Legislature passed SSB 6382 which allows the WHRC to expend up to $300,000 of its operating funds for development of the equine industry, improvement of racing facilities and equine health research. The purpose of the proposed new rule is to provide a mechanism for the WHRC to allocate the funds.

The notice of proposed rulemaking was filed on March 24, 2005, and draft language was sent to stakeholders on April 26, 2006. No comments were received. Staff recommended adoption of WAC 260-08-597.

Chairman Kruger asked for public comment. None received.

Commissioner Roland moved to adopt WAC 260-08-597. Commissioner Smith-Merkulov seconded the motion. Unanimously approved.

b. WAC 260-48-935 Group (n) pools. NEW SECTION

Mr. Lopez said this rule would allow a new form of wagering called choose (n). Bettors will attempt to select the winning horses in a specific number of races (n) designated by the racing association. The races may not be consecutive and the pool for this is held separately from other pools. If no one chooses correctly the first place winners, the twenty-five percent of the pool is disbursed to the wagers with the most correct first place picks, and the remaining seventy-five percent will carryover to the next choose (n) offering.

Mr. Lopez said the new section was filed on January 4, 2006, language was sent to the stakeholders on May 4, 2006 and no comments were received. Staff recommended adoption of WAC 260-48-935.

Chairman Kruger asked for public comments and none were received.

Commissioner Smith-Merkulov moved to adopt new section WAC 260-48-935. Commissioner George seconded the motion. Unanimously approved.

c. WAC 260-80-140 Disturbing the peace.

Mr. Lopez said that on March 9, 2006 the members adopted changes to chapter 260-80 WAC. One of the sections amended at that adoption hearing was WAC 260-80-140 Disturbing the peace, however, when staff filed the rule making order it was discovered the section could not be included because the notice of proposed rule making did not include this section and the agency had to begin over with regard to this rule change. The WHRC refiled this amendment on April 14, 2006, and proposed language was sent to stakeholders on May 4, 2006 with no comments received. Staff recommended adoption of the changes to this section.

Chairman Kruger asked for public comments and none were received.

Commissioner Roland moved to adopt the change to WAC 260-80-140. Commissioner George seconded the motion. Unanimously approved.

Item #9. End of the meet reports for:

a. Sun Downs
b. Walla Walla Fair & Frontier Days
c. Waitsburg Days of Real Sport
d. Dayton Days

Mr. Lopez said the end of meet reports for each of the concluded spring meets were provided to the members.

Commissioner George asked if the requests contained in the end of meet reports would be the subject of the facilities grant requests and would each request be funded. He also asked whether the facilities requests would be submitted by the Blue Mountain Circuit or individually by association.

Mr. Lopez said that they would be submitting individually.

Commissioner Smith-Merkulov suggested the members guarantee the amount to be spent for grants.

Commissioner Smith-Merkulov moved to spend $300,000 including the amount designated for the jockey incentive fund, for 2006 grant awards. Commissioner Roland seconded the motion. Unanimously approved.

Item #10. L&I waiver for:

a. Longacres Mile
b. Emerald Downs’ Breeders’ Cup Derby
c. Washington Cup Day
d. Gottstein Futurity

Mr. Lopez said that a letter had been forwarded to the Labor & Industries requesting extra-territorial coverage for horse trainers shipping into Emerald Downs to participate in any of the following races: Longacres Mile, Emerald Downs’ Breeders’ Cup Derby, Washington Cup Day and the Gottstein Futurity. The letter proposed Labor & Industries fees would be waived if the trainer has proof of coverage for workers from their home state. The trainer could not employ persons other than jockeys upon arriving in Washington, except that a trainer could employ a local pony person for the race in which the trainer’s horse is entered. A response has not yet been received from Labor & Industries, but they have approved similar proposals in previous years, so it is expected that it will be approved again this year.

Item #11. Executive Secretary’s report.

a. 2007-2009 Budget.

Mr. Lopez said the 2007-2009 budget was in final form and before the members for approval to submit it to the Office of Financial Management. There were no changes from the draft report that was presented at the last meeting.

Commissioner Smith-Merkulov moved to approve the 2007-2009 WHRC budget and submit it to the Office of Financial Management. Commissioner Roland seconded the motion. Unanimously approved.

b. Employee survey.

The Commissioners were provided the results of the April 2006 Department of Personnel survey of WHRC employees. Mr. Lopez said approximately 31 WHRC employees participated in the survey during the 2006 Spring training session. .

c. Accountant’s recap June 2005/2006.

The Commissioners were provided the accountant’s Comparative Statement of Total Revenues and Distribution of Commissions from Pari-Mutuel Wagering at Emerald Downs and satellite sites. Mr. Lopez explained the first page compares June 2005 and June 2006 and the second page compares fiscal year 2005 with fiscal year 2006.

d. Accountant’s FY06 recaps.

The Commissioners were provided the accountant’s Statement of Total Revenues and Distribution of Commissions from Pari-Mutuel Wagering. Mr. Lopez explained the reports show the fiscal year 2006 figures by race meet revenues, distribution of commissions, source market fees and advance deposit wagering.

e. 05/07 budget.

Mr. Lopez explained the estimates to actual revenues and expenditures for the WHRC.

Chairman Kruger thanked the staff for their tremendous work in turning the agency around.

Item #12. Any other business that may be properly brought before the Commission.

Commissioner Smith-Merkulov asked to have the hearing notices regarding upcoming hearings sent to them prior to holding hearings. Chairman Kruger agreed and Commissioners George and Roland also requested to have them. Susan Carlson stated it was appropriate for Commissioners to receive these in advance of the hearing.

Chairman Kruger asked about the agency request legislation regarding the sunset clause on the advance deposit wagering. Mr. Lopez reported that the he wasn’t sure if the draft language had been submitted to the Code Reviser’s Office, but it is simply a repealer of the sunset language. The first step is to get the decision package approved by the Governor’s office. Until we receive that approval, we cannot voice an opinion regarding the legislation.

Commissioner George asked if the ex-officios members would be involved. Mr. Lopez said that Mr. Leichner would be contacting them and determine who would be the prime sponsor and the ex-officio members are the first to be contacted.

Commissioner Hallowell asked if the members would be provided topics to discuss. Mr. Lopez said that Mr. Leichner would provide them with a one page document highlighting key discussion points for the legislation.

Commissioner Hallowell wanted to know if Ralph Vacca had talked to his board, the Washington Thoroughbred Breeders Association (WTBA) regarding breeder’s awards. Specifically, he asked what the consensus of the board was regarding breeder’s awards and whether or not the WHRC should consider rule making.

Commissioner George reminded the commission the vote taken at the last meeting was to not conduct rule making.

Chairman Kruger said that he had asked Mr. Vacca to talk to his board and find out if there needed to be some formal statement from the commission regarding handling of the breeder awards and if rule making was needed. Chairman Kruger said that he had reconsidered his vote and thinks that rule making should be opened regarding breeder awards.

Commissioner Smith-Merkulov said policy decisions are made by an agency, by either issuing a policy statement or by the rule-making process. There is no in-between – the commission must either conduct a public process or do nothing.

Commissioner Hallowell said the five percent administrative fee retained by the WTBA is not the issue, but the breeders awards themselves needs to be defined. The owner’s bonus is spelled out.

Commissioner Smith-Merkulov said maybe the rules that are already in place need to be “tweaked” or there may be a need to make new rules. She stated that the Commission did not have the authority to write a letter to Emerald Downs and tell them how to handle breeder awards.

Chairman Kruger will follow up and stated that it was his request to have Mr. Vacca go back to his board to discuss these issues.

Commissioner Hallowell said that it is a big issue which he believes it was not fully addressed at the last meeting. He expressed concern that it may come back to haunt the commission.

Commissioner Smith-Merkulov said that it won’t haunt the commission but it may come back to haunt the industry. While there is a lot of disharmony on this issue, the mechanism for resolving these issues is to conduct rule making and obtain public input. An interpretive statement or policy cannot be issued without the authority to do so. The WHRC must pay attention to what our authority is. If someone has an issue they can petition the WHRC to take a look at it.

Chairman Kruger asked Susan Carlson if the WHRC could reconsider the issue. Susan responded that the Commission could reconsider the issue at any time.

Commissioner George questioned whether only the person who was on the prevailing side of the vote could ask the WHRC to reconsider the issue as required in Roberts’ Rules of Order.

Commissioner Smith-Merkulov said she would have to read the Roberts’ Rules of Order, as she wasn’t aware of the proper procedure.

Susan Carlson stated that the members could adopt the Roberts’ Rules of Order but to her knowledge, the Commission has not adopted them, and therefore the WHRC isn’t bound to operate by those procedures.

Chairman Kruger adjourned the meeting. (11:50 a.m.)

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Robert J. Lopez, Deputy Executive Secretary