(a)

1. (1) Pursuant to Arkansas Code § 23-110-407(a)(3)(A), the franchise holder shall retain four and one-half percent (4.5%) of all moneys wagered on races where the wagerer is required to select one (1) horse, and three and one-half percent (3.5%) of all moneys wagered on races where the wagerer is required to select more than one (1) horse, i.e., the "purse, construction, and patronage and tourism promotion moneys", which retained amounts shall be reflected in a separate account on the franchise holder's books designated "purse, construction, patronage and tourism fund".
2. (2) In addition, the franchise holder shall retain and deposit into the purse, construction, and patronage and tourism fund account the amount required to be withheld by the franchise holder for such purposes pursuant to Arkansas Code § 23-110-405(b)(3)(B), and such amounts shall likewise be considered purse, construction, and patronage and tourism promotion money.

(b)

1. (1) The purse, construction, and patronage and tourism promotion fund account shall be established and maintained in federally insured financial institutions selected by the franchise holder.
2. (2) Such financial institutions shall be located in the State of Arkansas, provided, however, if the franchise holder obtains a loan for construction purposes from a financial institution located outside the State of Arkansas, the purse, construction, and patronage and tourism promotion fund account may be maintained there as long as the loan is outstanding.
3. (3) All such funds shall be maintained in interest-bearing accounts whenever reasonably possible.
4. (4) Purse, construction, and patronage and tourism promotion moneys shall be used only for purses and construction, for debt service on money borrowed by the franchise holder for construction, or for promotions to encourage patronage and tourism consistent with the provisions of Arkansas Code § 23-110-407(a)(3).

(c)

1. (1) "Construction", as used in this section, shall include all items and expenditures incurred in keeping the overall racing facility in the best possible condition for the patrons, horsemen, and franchise holder, including, without limitation, land acquisition (provided that the franchise holder submits plans for utilizing the acquired land for an approved purpose within five (5) years of the acquisition), new construction with related equipment, and reconstruction, renovation, reconditioning, and repairing of facilities with related equipment.
2. (2) "Construction", as used in this section, shall not include ordinary or routine maintenance of the overall racing facility and shall not include the construction or improvement of areas of the racing facility not generally accessible by or used for the benefit of the horsemen or patrons, or both.
3. (3) "Construction", as used in this section, shall not apply to office furniture, office telephones, or other office equipment primarily devoted to the use of the franchise holder and providing little or no benefit to either horsemen or patrons, or both.

(e)

1. (1) The Arkansas Racing Commission shall have jurisdiction and shall seek the assistance of the Department of Finance and Administration to check and verify compliance by the franchise holder with the provisions of this section.
2. (2) The commission shall make periodic determinations as to compliance under this section and under such other rules as the commission shall adopt.

(f)

1. (1) The franchise holder must deliver to the commission any documents reasonably requested by the commission, and the franchise holder must deliver to the department any documents reasonably requested by the department, to check and verify compliance with this section, within thirty (30) days of receiving a written request for the documents.
2. (2) If the commission does not receive the documents requested by the commission within the time period provided, or if the department does not receive the documents requested by the department within the time period provided (and the Secretary of the Department of Finance and Administration so notifies the commission), no reimbursement shall be approved from the purse, construction, and patronage and tourism promotion fund until the documents are delivered.

(g)

1. (1) The franchise holder may seek prior approval from the commission for expenditures.
2. (2) The application for the approval must contain the information required by subsection (d) of this section, provided if the exact amount of the expenditure is not then known, the franchise holder shall use its best estimate, and if the precise contractor or payee is not then known, the franchise holder may provide that information prior to final approval of the expenditure by the commission as set forth below.
3. (3) The initial approval will be subject to a final approval by the commission that the expenditures were made for the approved purposes in compliance with the requirements of this part and Arkansas Code § 23-110-407(a)(3), and the commission shall seek assistance from the department to verify that the expenditures were made for the approved purposes.

(h)

1. (1) The franchise holder shall be solely responsible for planning and accomplishing all construction and for accountings.
2. (2) Before undertaking any construction project estimated to cost one hundred thousand dollars ($100,000) or more, the franchise holder shall give the committee (identified in subsection (l) of this section) at least fifteen (15) days’ notice of the proposed project and its estimated cost, which notice shall contain sufficient information to adequately apprise the committee of what is being undertaken.
3. (3) If the committee wants a meeting concerning the proposed project, it shall advise the franchise holder within the fifteen (15) days.
4. (4) If there is no request for a meeting, the franchise holder may proceed with the project.
5. (5) If there is a request for a meeting, the franchise holder may proceed after the meeting in accordance with the action taken by the committee at the meeting.
6. (6) If the estimated cost of a project is less than one hundred thousand dollars ($100,000), the franchise holder may proceed immediately, but must notify the committee within sixty (60) days of the project and its estimated cost, which notice shall contain sufficient information to adequately apprise the committee of what is being undertaken.
7. (7) If the committee wants a meeting concerning the proposed project, it shall advise the franchise holder within fifteen (15) days after receipt of the notice.
8. (8) If there is no request for a meeting, the franchise holder may proceed with the project.
9. (9) If there is a request for a meeting, the franchise holder may proceed after the meeting in accordance with the action taken by the committee at the meeting.

(i)

1. (1) On or before June 1 of each year the franchise holder shall file a report with the committee reflecting the purpose and amounts of expenditures for construction and promotions to encourage patronage and tourism during the preceding calendar year.
2. (2) The report shall be accompanied by a statement from the franchise holder's independent certified public accounting firm that the report accurately reflects the purposes and amounts of construction and patronage and tourism promotion expenditures.
3. (3) Also, on or before June 1 of each year, the franchise holder shall file a report with the committee specifying the amount of purse, construction, and patronage and tourism promotion moneys used for purses during the preceding calendar year.

(j)

1. (1) The purse, construction, and patronage and tourism promotion moneys shall not be subject to the provisions of any contract or agreement between the franchise holder and the organization representing horsemen, to the end that any contractual obligations for the use of moneys for purses shall not apply to any expenditures for construction or patronage and tourism promotion out of the purse, construction, and patronage and tourism promotion moneys, and any expenditures for purses out of the purse, construction, and patronage and tourism promotion moneys shall be in addition to contractual purse obligations affecting moneys other than the purse, construction, and patronage and tourism promotion moneys.
2. (2) The franchise holder shall determine the amount of the purse, construction, and patronage and tourism promotion moneys to be used for the authorized purposes, except that at least one-half (1/2) of the purse, construction, and patronage and tourism promotion moneys must be used for purses.

(l)

1. (1) The commission shall appoint a three-member committee, to include the secretary (the "committee"), to examine and to approve or disapprove, in whole or in part, the reports filed by the franchise holder pursuant to subsection (i) of this section.
2. (2) Committee action shall be reported to the full commission for approval or ratification, but the franchise holder may proceed on the basis of any committee action until it shall be notified that the full commission has taken contrary action.
3. (3) The committee may, in its discretion, have an auditor from the department conduct an audit of all deposits and expenditures of purse, construction, and patronage and tourism promotion fund moneys for any calendar year.
4. (4) In that event, the franchise holder shall make available to the auditor all records necessary for the audit.

(m)

1. (1) As authorized by Arkansas Code § 23-110-407(a)(3), accountings for expenditures for construction and patronage and tourism promotion out of the purse, construction, and patronage and tourism promotion fund moneys may utilize a multi-year approach based on a multi-year program being undertaken by the franchise holder so that accountability for expenditures may be based on expenditures made during the entire multi-year period out of the purse, construction, and patronage and tourism promotion fund moneys derived during the multi-year period, provided that the multi-year period shall not exceed five (5) years, unless the commission makes a specific determination that a longer period is necessary to finance long-term construction projects for the joint benefit of patrons, horsemen, and the franchise holder.
2. (2) Authorized expenditures will be determined on the basis of what is expended during the entire multi-year period and not on what is expended in any one (1) year.
3. (3) For example, if in the first year less is expended for construction than the eligible amount, the unused amount will carry over to the next year and if in that year more is expended than the eligible amount plus any carry over, the excess shall be carried forward to the next year and credited against the franchise holder's expenditures, and so forth.

(n)

1. (1) If money is borrowed for an authorized purpose, then purse, construction, and patronage and tourism promotion moneys may be used for debt service (principal, interest, and service charges) on the loan.
2. (2) The franchise holder shall account to the commission for expenditures from the proceeds of any loan, to ensure that eligible items are involved.

(p)

1. (1) If the franchise holder makes any expenditure of purse, construction, and patronage and tourism promotion moneys in good faith and it is subsequently determined that all or part of that expenditure does not qualify as an authorized purpose under this part or Arkansas Code § 23-110-407(a)(3), the franchise holder may use the unqualified amount for another purpose that is qualified.
2. (2) If, after the franchise holder is afforded that opportunity, there is a final determination that there remains at the end of the applicable multi-year period an amount that represents an unauthorized expenditure, that amount shall be paid to the commission for the use and benefit of the State of Arkansas.