Washington Horse Racing Commission
Meeting Minutes
September 8, 2005

Present were: Hartly Kruger, Chairman; Dr. Bud Hallowell, Commissioner; Carol Smith-Merkulov, Commissioner; Susan Carlson, Assistant Attorney General; Robert M. Leichner, Executive Secretary; Patty Sorby, Secretary; Judi Roland, Commissioner excused.

Chairman Kruger announced the resignation of Commission member Deanna W. Oppenheimer.

Item #1. Approval of the meeting minutes of August 11, 2005.

Commissioner Smith-Merkulov moved to accept the minutes as submitted. Commissioner Hallowell seconded the motion. Unanimously approved.

Item #2. Emerald Downs’ report.

Susie Sourwine, Marketing Director for Emerald Downs reported the live on live handle is up 2.4 percent and total handle is up 15.3 percent. Emerald Downs has added the Monday nights to the racing schedule in place of the Thursday nights. The Washington Cup series is on October 2nd and on closing day Emerald Downs is offering a closing claiming challenge.

Item #3. TVG license renewal.

Mr. Leichner explained the process for the renewal of the advance deposit wagering license for TVG and indicated TVG had submitted all requested information. Mr. Leichner said John Hindman was present to speak on behalf of TVG. He recommended renewal of the license.

Mr. Hindman thanked Mr. Leichner and staff for their diligent work in implementing the advance deposit wagering program. He stated this first year had exceeded their expectations in that $16.1 million in wagers have been processed and $1.8 million in revenue has been distributed to Emerald Downs, horsemen and the Commission. Emerald Downs is up 155 percent to $5.3 million through the end of August. Mr. Hindman stated he was very pleased with the progress and the relationship with Emerald Downs, the horsemen and the Commission and respectfully asked for favorable consideration for the renewal of the advance deposit wagering license.

Commissioner Hallowell asked if the advance deposit wagering was affecting the live wagering. Susie Sourwine responded that this was not having a negative impact.

Commissioner Smith-Merkulov asked if the attendance was affected on site at Emerald Downs. Ms. Sourwine stated that although the attendance is not counted, it was apparent people were still coming out to the track. She thought the exposure from television has been a positive draw.

Commissioner Smith-Merkulov moved to renew the license application for Advance Deposit Wagering by TVG. Commissioner Hallowell seconded the motion. Unanimously approved.

Mr. Leichner was directed to send Mr. Hindman a letter confirming renewal of the advance deposit wagering license for TVG.

Item #4. Rules of Racing: Adoption Hearings:

a) WAC 260-48-960 Handicapping contests

Robert Lopez stated that the Legislature passed Substitute Senate Bill 5953 in 2005 authorizing Class 1 racing associations to conduct handicapping contests and directed the Commission to establish rules for the conduct of these events.

Rules were drafted and the proposed language was shared with stakeholders. Ms. Sourwine of Emerald Downs supported approval of the proposed language.

Staff was recommending adoption of the proposed new section WAC 260-48-960.

Mr. Lopez stated that some additional changes had been received and those were indicated on the handout that was provided to the members. The changes were in section (4) changing the word “provided” to “awarded”; and changing “competitor” to “participant” in sections (6) and (8).

Commissioner Smith-Merkulov moved to adopt the rule with the changes as indicated in sections 4, 6 and 8. Commissioner Hallowell seconded the motion. Unanimously approved.

b) WAC 260-49-070 Distribution of source market fee.

Mr. Lopez defined source market fee as a wager made on any race by a person whose principle residence address is in Washington. The current rule requires the source market fee to be paid monthly.

Source market fees are derived from advance deposit wagering. The Commission recently approved a license for advance deposit wagering in which the licensee would pay the fee on a quarterly basis, and the Association would pay the fee to the Commission on a monthly basis. The experience with that license application process suggested that WAC 260-49-070 should be amended to allow the Commission more flexibility in determining payment periods for the source market fee.

Proposed language was sent to stakeholders which would amend the rule to allow the advance deposit wagering service provider to pay the source market fee quarterly to the association, and the commission’s portion of the fee would be distributed monthly. One comment was received from Commission Auditor Patrick Crowley who strongly urged the Commission to not adopt this change, but instead keep the payment periods consistent. Separate payment periods would result in unnecessary and time-consuming accounting problems. A second version amending WAC 260-49-070 was prepared providing that the fee would be paid monthly unless otherwise directed by the Commission.

Ms. Carlson, counsel for the Commission, suggested moving the phrase in section (1) of version 2: “unless otherwise directed by the commission” to follow after the language”…monthly…” in the preceding sentence of WAC 260-49-070 version 2.

Commissioner Smith-Merkulov asked if the changes were too great for adoption at this meeting.

Susan Carlson stated that these amendments were not a significant change and the new section could be adopted.

Commissioner Smith-Merkulov moved to adopt WAC 260-49-070 version 2 with the change suggested by Ms. Carlson. Commissioner Hallowell seconded the motion. Unanimously approved.

Item #5. Proposed agency request legislation for 2006 – Public comment.

Mr. Leichner updated the members on the stakeholder response to the proposed 2006 agency request legislation. Mr. Leichner indicated that stakeholders supported the proposed legislation to authorize the Commission to spend up to $300,000 per fiscal year from its operating account for development of the equine industry, maintenance and upgrades of racing facilities, and equine health research giving first consideration to uses that would assist the non-profit race meets and equine health research. Mr. Leichner explained that expenditure of these funds would only occur if it would not result in insufficient funds being available for the continued operations of the Commission.

Commissioner Hallowell noted that Dayton had indicated support with concerns and asked Mr. Leichner to discover what those concerns were.

Mr. Leichner was authorized to file the proposed legislation with the Governor’s office.

Item #6. Update on Horse Racing Industry Industrial Insurance Premium Study.

Mr. Leichner indicated that comments were still being received and that the final report would be ready for the October meeting.

Item #7. Hearings. Moved to later in the agenda.

Item #8. Executive Secretary’s report.

a) Update:

Mr. Leichner reported that the super testing results had been received for the Longacres Mile race and all samples had cleared. Mr. Leichner sent a letter to the Graded Stakes Committee informing them of the results.

Mr. Leichner also updated the members on the live-scan fingerprint program. The Commission received word from the Association of Racing Commissioners International (ARCI) that they had ordered the equipment and it should be in place in about 60 to 90 days.

Mr. Leichner informed the members of a potential advance deposit wagering firm license application that may be brought before them. “A Day at the Races” had notified Mr. Leichner that an application would be received shortly. Ms. Sourwine asked Mr. Leichner about the application and stated the firm had no contract in place with Emerald Downs to become an advance deposit wagering site.

i) XpressBet license renewal.

Mr. Leichner has notified XpressBet that their renewal would be discussed at the October 2005 meeting.

ii) Youbet.com licensing order requirements.

Mr. Leichner stated Youbet.com had complied with the requirements of the order and have provided an irrevocable letter of credit. Refinement of the reporting process is still being worked on due to the agreement between TVG and Youbet.com.

Mr. Leichner recommended that the order to Youbet.com be amended to direct them to pay quarterly based on the new rule. The Office of Financial Management calculated the loss at $140 per year by paying quarterly. Mr. Leichner would be requesting weekly reporting by Youbet.com of the wagering amounts.

Commissioner Smith-Merkulov asked about the letter of credit, and expressed concern that it was too limiting as it only applied if the company filed bankruptcy. She stated that it was preferable that it be accessible when needed. Susan Carlson stated that either she or Mike Tribble will review the letter of credit to determine if it is consistent with the rules.

The Commission also indicated that the Youbet.com order should be amended to state that the licensee must pay the source market fee to the Commission quarterly based on the rule change adopted today.

b) Necropsy program.

Mr. Leichner updated the members on the progress on the recommendations in the yearly veterinary report by Dr. Calkins and Ms. Dawn Christensen. Funding is included in the proposed legislation for additional exams at the veterinary school. The WHRC database has been updated to reflect changes recommended by Ms. Christensen. The ability to allow access from outside the WHRC to look at information contained in the database by WSU faculty was on hold as Mr. William Dewey was working on the database changes requested from the Oregon Racing Commission.

Mr. Leichner said that some of the changes had been on hold to be able to complete the work for the Oregon Racing Commission. Mr. Dewey has been working to comply with the Oregon requirements.

Mr. Leichner also updated the members on the Steward’s Seminar scheduled for October 4th and 5th in Spokane.

c) Accountant’s August 2004/2005 recap.

Mr. Leichner reported the percentages comparing August 2004/2005. The recap shows that instate wagering is up 5.1 percent and that average daily handle is up 2.6 percent.

Mr. Leichner discussed payment of the owner’s bonus. Normally, the bonus is paid at the end of the Emerald Downs meet. However, due to advance deposit wagering being reported on a monthly basis and not being fully reconciled when Emerald Downs’ meet concludes, the bonus would either need to be delayed until the end of October, or paid at the end of the meet but not including the advance deposit wagering deposits for October. Those advance deposit wagering deposits would be added to next year’s distribution. Mary Ann O’Connell, Horsemen’s Benevolent & Protective Association concurred with the suggestion to pay the bonus at the end of the Emerald Downs meet, as owners are always anxious to receive the bonus as soon as possible.

Commissioner Smith-Merkulov moved to payout the owner’s bonus through the end of Emerald Downs meet concluding on October 16, 2005. Funds from advance deposit wagering that are not included as of that date would be distributed the following year. Commissioner Hallowell seconded the motion. Unanimously approved.

d) 03-05 Budget.

Mr. Leichner stated the reports for the 05-07 budget were unavailable as the allotments have not yet been approved. The attached pages in the member’s notebooks were the 03-05 budget and are similar to last month’s submission showing the increase in the fund balance at $688,000. No reports are yet available to show July, August and September 2005 activity.

Commissioner Hallowell voiced concerns regarding the funding of the proposed legislation for the $300,000 to further equine research. Mr. Leichner stated that funding was on a yearly basis and determined by the Commission. If the operating budget was unable to fund the program it would not continue.

Chairman Kruger thanked staff for all the hard work.

Item #9. Executive session.

Chairman Kruger adjourned the meeting to executive session at 10:50 A.M. for twenty minutes to discuss potential litigation and a complaint against a Commission employee.

Chairman Kruger reconvened the meeting at 11:10 and immediately adjourned the meeting until 11:30 A.M. when the hearings were scheduled.

Item #7 Hearings:

a) Navin Mangalee.

Mr. Mangalee appeared on his own behalf. Commission staff was represented by Michael S. Tribble, Assistant Attorney General. Mr. Tribble offered exhibits 1-5 and these were admitted by Chairman Kruger. Mr. Mangalee asked to admit a videotape of a different race and this was denied. Mr. Tribble called Mr. Doug Moore, Presiding Steward, WHRC to testify. The Commission received testimony from Mr. Mangalee.

The members of the Commission upheld the board of stewards ruling, and stated an order would be prepared and mailed to Mr. Mangalee. Hearing closed.

b) Lucretia Camacho.

Ms. Camacho appeared on her own behalf. Commission staff was represented by Michael S. Tribble, Assistant Attorney General. Mr. Tribble offered exhibits 1-5 and these were admitted by Chairman Kruger. Mr. Tribble stated that the staff would be relying entirely upon the exhibits admitted. The Commission received testimony from Ms. Camacho, Sandra Smith, her supervisor, Emerald Downs Housekeeping and Bob Fraser, Vice President Operations, on her behalf.

The members of the Commission granted a conditional license to Ms. Camacho. An order would be prepared and mailed to Ms. Camacho. Hearing closed.

c) Ronald C. Triplett.

Mr. Triplett did not appear. Commission staff was represented by Michael S. Tribble, Assistant Attorney General. Mr. Tribble offered exhibits 1-7 and these were admitted by Chairman Kruger. Testimony was heard from Richard K. Smith, Investigator, WHRC. The Commission affirmed the suspension of Mr. Triplett’s license and ordered him banned from race courses under the jurisdiction of the WHRC. Hearing closed.

d) William P. Christian.

Mr. Christian appeared on his own behalf. Commission staff was represented by Michael S. Tribble, Assistant Attorney General. Mr. Tribble offered exhibits 1-6 and these were admitted by Chairman Kruger. Testimony was heard from Linda Hancock, Investigator, WHRC. The Commission also received testimony from Mr. Christian.

The members of the Commission denied the license application of Mr. Christian.

An order would be prepared and mailed to Mr. Christian.

Hearings closed at 3:05 P.M.

Item #10. Any other business that may be properly brought before the Commission.

Commissioner Hallowell cautioned the members regarding inaccuracies of information distributed regarding medication. Specifically, he mentioned that the Association of Racing Commissioners International bulletin recently forwarded to them reporting on Lasix issues contained several inaccuracies. He stated that there was a lot of misinformation and you shouldn’t believe everything you read.

Meeting adjourned at 3:15 P.M.

____________________________________
Robert M. Leichner, Executive Secretary