Washington Horse Racing Commission
Meeting Minutes
June 8, 2006

Present were: Hartly Kruger, Chairman; Paul George, Commissioner; A. L. Bud Hallowell, Commissioner; Judi Roland, Commissioner; Carol Smith-Merkulov, Commissioner; Senator Marilyn Rasmussen, Legislative Ex-Officio Member; Susan Carlson, Assistant Attorney General; Robert M. Leichner, Executive Secretary; Patty Sorby, Secretary.

Item #1. Approval of the meeting minutes of May 11, 2006.

Commissioner Roland moved to accept the minutes as submitted. Commissioner George seconded the motion. Unanimously approved.

Item #2. Chairman’ report.

Chairman Kruger reported on his visit to the National Racing Compact (NRC) office in Lexington, Kentucky. The staff is proposing business process changes for efficiency.

Chairman Kruger requested for him and Robert Leichner to attend a meeting of the RCI board scheduled in Wilmington, Delaware on July 21 and 22. It is a four-hour board meeting. Commissioner Smith-Merkulov recommended attending by phone. Commissioner George felt that attendance should be in person. Robert Leichner estimated that expenses would be approximately $1000 to $1200 per person to attend. Commissioner Roland asked to postpone the decision for the next meeting. Mr. Leichner said that he would prepare a sheet showing expenses.

Senator Rasmussen arrived and was welcomed.

Commissioner Hallowell asked the Chairman to prepare a report on activities of the NRC board meetings.

Item #3. Emerald Downs’ report.

Mr. Ron Crockett said due to recent bad weather, they had experienced a decline from a week ago. Total handle was $1.521 million versus $1.477 million in comparison to 2005. Mr. Crockett said generally Emerald Downs handle is up. The purses are high and the worry is to cover them without having a negative account at the end of the year. The higher purse races are filling but last year the smaller purse races were filling better.

Mr. Crockett urged Senator Rasmussen to assist with removing the sunset clause from the advance deposit wagering bill. He said that without this legislation, the industry cannot survive.

Chairman Kruger asked about the handicapping contest that had been approved at the previous meeting. Ms. Sourwine said the contest had sold out.

Item #4. Ownership change – Club Broadway-Big Apple Casino in Everett, WA.

Mr. Leichner said Bob Fraser, Emerald Downs, notified him that the ownership had changed at the Club Broadway-Big Apple Casino in Everett. The current owners had dissolved their partnership and the previous owner had taken the site back. He had been previously approved by the WHRC to operate the off-track betting (OTB) facility. Mr. Fraser requested to continue to operate the site during the transition of the license. All currently licensed employees will continue working at the OTB.

Commissioner Smith-Merkulov moved to approve the Club Broadway-Big Apple Casino to continue to operate during the ownership change. Commissioner Roland seconded the motion. Unanimously approved.

Item #5. License renewal for Youbet.com

Mr. Leichner presented the license renewal application for Youbet.com. Mr. Leichner said that representatives of Youbet.com were unable to attend the meeting and had submitted the required documents to staff. Mr. Leichner had been communicating with Michael Robertson who submitted the draft irrevocable letter of credit. If the language is acceptable to the members, Mr. Robertson indicated he would have the bank finalize the document. Mr. Leichner said that he and staff counsel had reviewed all documents submitted and were comfortable with the draft language for the irrevocable letter of credit and recommended approval.

Commissioner Roland moved to approve the advance deposit wagering license renewal of Youbet.com subject to receipt of the executed irrevocable letter of credit. Commissioner Hallowell seconded the motion. Unanimously approved.

Mr. Leichner said he would inform Mr. Robertson of the approval.

Item #6. License renewal for TVG.

Mr. Leichner presented the advance deposit wagering license renewal for TVG. Mr. Leichner and staff counsel had reviewed all documents and recommended approval of the license renewal application.

Commissioner George moved to approve the advance deposit wagering license renewal application for TVG as submitted. Commissioner Roland seconded the motion. Unanimously approved.

Item #7. 2005 Equine Health and Safety Report.

Sally Calkins, DVM, WHRC Veterinarian, presented the 2005 Equine Health & Safety Report.

Mr. Jack Hodge, vice-president of Emerald Downs said this report was the most thorough report since the start of the program.

Commissioner Hallowell noted that advance deposit wagering had contributed greatly to the enhancements to the necropsy program and was another reason to have the sunset clause removed from the advance deposit wagering legislation.

Mr. Crockett said one of the reasons Emerald Downs did not request a longer meet this year was animal safety and health.

Dr. Calkins thanked Mr. Leichner for assisting in the preparation of the report.

Item #8. Discussion of possible Breeder’s Awards rules.

Mr. Leichner said a letter had been received regarding Breeder Awards with questions about the current distribution process. There is very little reference in statute or rule about Breeder Awards. Staff recommended beginning rulemaking to establish regulations.

Ralph Vacca addressed the members on the issue of Breeder Award rules on behalf of the Washington Thoroughbred Breeders Association (WTBA). He read a letter prepared by David Thorner, President, WTBA who stated there is no need to establish regulations regarding the distribution process. Mr. Vacca gave the background regarding the Breeder Awards distribution. He stated he had also contacted California, New York and Florida and found that similar handling fees were charged to distribute the awards in those states.

Mr. Crockett said that the real issue is the five percent charge for processing the awards. He explained how the moneys were obtained for the awards.

Chairman Kruger asked if the WHRC wanted to start the rulemaking process for Breeder Awards. Commissioner George stated he did not. Commissioner Roland stated she did not.

Chairman Kruger for a motion to begin the rulemaking process. Commissioner George moved to not begin rulemaking for Breeder Awards. Commissioner Hallowell seconded the motion.

Commissioner Smith-Merkulov asked if the WTBA had a contract authorizing the five percent handling fee. Mr. Vacca responded no. Commissioner Smith-Merkulov said that rulemaking was an opportunity for anyone to voice an opinion or view regarding the issue. The WHRC could then decide whether or not to go forward. It seemed premature to not consider starting the rulemaking process.

Commissioner George stated he agreed with the remarks of David Thorner as stated in the letter from the WTBA and said the Commission should not get involved.

Chairman Kruger stated it was moved and seconded to not begin rulemaking regarding the Breeder Awards and called for a vote.

Commissioner George, Commissioner Hallowell and Commissioner Roland voted “yes.”
Commissioner Smith-Merkulov voted “no.” Chairman Kruger “abstained.” Motion carried.

Commissioner Hallowell stated that the five percent charge was a non-issue. Breeder awards are an important part of the industry and reminded the members that the effect of rulemaking may not have turned out to be what was intended and could have had an adverse effect.

Mary Ann O’Connell, Horsemen’s Benevolent & Protective Association (HBPA) urged the WHRC to at least adopt some language to authorize an administrative fee to be retained by the WTBA for the cost of overseeing the account.

Chairman Kruger asked Mr. Vacca to discuss this issue with the WTBA board and return to the WHRC with their response.

BREAK 11:25 A.M. RECONVENED 11:30 A.M.

Item #9. Preliminary rates for L&I coverage for jockeys.

Mr. Leichner stated stakeholders were not ready to discuss this item and indicated it would be put on the agenda for a future meeting.

Item #10. L&I Premium Workgroup.

Mr. Leichner said the workgroup had been established and a list of the members was provided. The first meeting is scheduled for June 14, 2006 at Emerald Downs.

Chairman Kruger selected Commissioner Smith-Merkulov to Chair the meeting. Commissioner George would also attend.

Item #11. Hearings:

a) Helen Konkright.

Mr. Leichner received a request from Ms. Konkright to continue her hearing. It was granted.

b) Jim Tracy.

Mr. Tracy requested a continuance and it was granted.

Mr. Leichner asked the members if it was their preference to have the Executive Secretary address requests for continuances. Commissioner Smith-Merkulov moved to authorize the Executive Secretary to reschedule a hearing prior to convening before the WHRC and that a sentence be added to the hearing notice indicating the Executive Secretary has the authority to reschedule hearings. Commissioner George seconded the motion. Unanimously approved.

Mary Ann O’Connell, HBPA said she was comfortable with the Executive Secretary having the authority to reschedule a hearing.

Mr. Leichner asked the members whether they would be available to meet for a special meeting of the Commission to handle hearings. It was agreed that a special meeting would be scheduled to conduct hearings.

Item #12. Review incentive fund proposals:

a) Jockey incentive.

Mr. Leichner described the distribution calculations for each option. Several issues need clarification, including the intent of the program, whether awards should be rounded to the nearest dollar and whether there should be a cut-off, such as no awards less than $10.

Commissioner Smith-Merkulov asked whether there was any incentive for the jockeys to go to a meet when they are only collecting $178 or $153.

Commissioner Roland asked if the options had been voted on by the members. Mr. Leichner said no, the information was the result of the input from stakeholders from the April 7, 2006 meeting and Class C jockeys. The incentive fund was assumed to be $35,000.

Mr. Crockett asked if there was an option utilizing a per race earning. Mr. Leichner said no, that option was rejected at the April 7 meeting.

Chairman Kruger said the number one goal was to attract jockeys.

Doug Moore, WHRC steward, said that in his experience, the jockeys that are showing up at the meet and are picking up the rides are going to show up anyway. The performance incentive is the purse.

Mr. Crockett said that the distribution must be made simple.

Chairman Kruger directed Mr. Leichner to prepare an option showing a “per mount” distribution, submit it to the Class C meets for comment, and report back at the next meeting.

b) Grant process.

Mr. Leichner reported that no comments have been received in response to the grant process.

Item #13. Class C’s importing the Kentucky Derby and Preakness.

Mr. Leichner received a call asking to conduct advance wagering for the Kentucky Derby by Emerald Downs. Mr. Schellinger called and asked that advance wagering not be conducted at the sites near Sun Downs race track during his race meet.

Mr. Schellinger requested to simulcast the Kentucky Oaks along with the Kentucky Derby. Mr. Leichner researched the Sun Downs application and it was not listed, therefore Mr. Schellinger’s request was denied. Mr. Schellinger asked if it was possible for the WHRC to approve more than one simulcast.

In researching the question raised by Mr. Schellinger, Mr. Leichner discovered that when the advance deposit wagering legislation was enacted, the provision allowing for the Class C meets to import a race of national or local interest was omitted. At this time, with the importance of the legislation to remove the sunset clause attached to the advance deposit wagering law, he recommended the WRHC not sponsor additional legislation on simulcast authority for the Class C meets.

Break 12:10 PM. Reconvened 1:10 PM.

Item #14. Discussion of possible rules for Class C purse money.

Mr. Leichner said that due to a day being cancelled during the Waitsburg meet this year it was discovered that the money the WHRC sends to the Class C meets to support purses was not fully disbursed.

Mr. Leichner researched the statutes and rules and could find no guidance on handling the purse money in the event a meet could not be conducted. Mr. Leichner spoke with the association and recommended they disburse the money to the purses for the twelve races that were conducted.

Mr. Leichner suggested that rules be adopted to cover this type of situation. He was directed to develop language and bring it back before the members to consider.

Item #15. Discussion regarding honorary license approval process.

At the last meeting Mr. Vacca asked about the time frame involved with the approval process for the honorary license. The current process requires approval by the Commission. Since the Commission only meets once a month, the honorary license applicant may be required to wait as long as a month before the license could be approved and issued. Mr. Vacca suggested this was an unnecessary delay and the honorary license should be handled no differently from any other license application.

Mr. Leichner said that it was within the authority of the executive secretary to establish the process to approve licenses. The members can allow the stewards to approve the honorary license. When the honorary license was established the commission wanted to approve them, after discussion by the members, the consensus was to allow the stewards to approve the honorary license and if the person wished to appear before the members they could appear at the next commission meeting.

Item #16. Executive Secretary’s report.

a) May 24th legislative work session.

Mr. Leichner reported on the legislative joint work session held May 24 by the Senate, Labor, Commerce, Research and Development Committee and the House, Commerce and Labor Committee. Commissioners George and Roland attended. The discussions were on gambling policy and its direction in Washington State. Mr. Leichner said that another meeting had been scheduled near the end of June and he would keep the members informed of the exact time, date and the agenda when it becomes available.

b) Audit reports for 2006 Class C meets.

Mr. Leichner said the auditor’s reports for the Sun Downs, Walla Walla, Waitsburg and Dayton meets all show handle revenues down from the previous meets conducted in 2005.

c) Accountant’s May 2005/2006 recap.

Mr. Leichner reviewed the accountant’s recap.

d) 05-07 budget.

Mr. Leichner discussed the revenue and expenditures.

d) Preliminary 2007-2009 agency budget.

Mr. Leichner provided copies of the draft agency budget for the 2007-2009 biennium. The intent is to file the budget documents with the Office of Financial Management the latter part of July. If anyone has changes, he should have them prior to the July 13th commission meeting. Any changes would be reviewed for approval.

e) WHRC exempt positions:

i) Deputy Secretary

Mr. Leichner said an exempt management position of Deputy Secretary has been created. Mr. Lopez had been working in an acting Washington Management Services, Administrative Services Manager position and it was converted to Exempt Management Service. There was no change in salary.

ii) Equine Medical Director

Mr. Leichner said this position was already allocated to the WHRC in Washington Management Service and is vacant. This position would supervise the veterinary staff.

Item #17. Executive Secretary salary.
Item #18. Executive session.

At 2:20, the Commission announced an executive session for the purpose of reviewing the performance of the Executive Secretary.

Reconvened in public session at 2:40 PM.

Commissioner George said he was impressed with Mr. Leichner’s abilities.

Commissioner Hallowell stated he appreciated Mr. Leichner’s open minded approach to any issue.

Chairman Kruger expressed thanks from all the members for all Mr. Leichner’s hard work on behalf of the WHRC and asked for a motion to increase Mr. Leichner’s monthly salary beginning July 1 and approve the 1.6 percent increase that takes effect September 1, 2006.

Commissioner Roland moved to increase the Executive Secretary’s salary effective July 1, 2006 to $7,310.00/month ($87,720.00/year), and that the 1.6 percent general salary increase provided by the Legislature for state employees on September 1, 2006 be applied to the Executive Secretary as well. Commissioner Smith-Merkulov seconded the motion. Unanimously approved.

Item #19. Any other business that may be properly brought before the Commission.

Hearing none, Chairman Kruger adjourned the meeting at 2:45 PM.

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Robert M. Leichner, Executive Secretary