A. To encourage the improvement of racing facilities for the benefit of the public, breeders and horse owners, and to increase the revenue to the state from the increase in pari-mutuel wagering resulting from such improvements, the percentage paid by a permittee to the state as provided in section 5-111, subsection C shall be reduced by one percent of the total amount wagered in connection with all racing meetings conducted in counties having a population of five hundred thousand persons or more and by two percent of the total amount wagered in connection with all racing meetings conducted in all other counties for those permittees who make capital improvements to racetracks and such amount shall be retained by the permittees making such capital improvements. When a permittee other than the permittee making the capital improvements, such as a lessee, is authorized to conduct racing at the facility being improved, the percentage paid by such permittee to the state as provided in section 5-111, subsection C shall be reduced by one percent of the total amount wagered and such amount shall be paid by such permittee to the permittee making the capital improvements.

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B. In order to qualify for the reduction in percentage, a permittee shall first apply to the commission in such form as the commission may require. The application shall contain, but is not limited to, full details of the proposed capital improvement and the cost and expenses to be incurred, economic justification for approval of the application by an estimate of the additional pari-mutuel revenues accruing to this state as the result of the proposed capital improvement, a description of any public safety concerns to be resolved by the proposed capital improvement and a management and construction plan for the indicated capital improvement, including:

1. The approach and structure of construction management.

2. Construction schedules and detailed cost estimates.

3. Construction progress and cost revision reporting systems.

C. More than one capital improvement at a horse track may be consolidated in one application. Following receipt of the application the commission shall either approve or disapprove the application within forty-five days thereafter and shall, within ten days after taking action on the application, transmit a copy of the application and notification of the action taken by the commission on the application to the president of the senate and speaker of the house of representatives. If the application submitted by the permittee is approved by the commission, the permittee qualifies for the decrease in percentage prescribed by subsection A of this section. The commission shall not approve an application submitted pursuant to this subsection unless the commission determines that the capital improvement will promote the safety of racing horses or increase the safety, convenience or comfort of the people and is in the best interest of horse racing and this state generally. If the commission approves an application submitted pursuant to this section, the director shall conduct periodic inspections of the capital improvement at least monthly during the construction period of the capital improvement in order to ascertain compliance with the permittee’s application. In the event that such approved project has not commenced within one year following approval by the commission, unless such period is extended by the commission, the funds not expended pursuant to the approval of the commission shall revert to the general fund of the state and a decrease in the percentage paid to this state by reason of the approval of the commission shall terminate. The commission may suspend or revoke the authority of the permittee to expend capital improvement monies for failure to comply with the capital improvement application approved pursuant to subsection B of this section. The permittee shall notify the commission of the completion of construction on each capital improvement authorized pursuant to subsection B of this section.

D. Except as provided in subsection H of this section, the decrease in percentage paid to this state by the permittee pursuant to this section starts from the date horse racing is first conducted following the date of approval by the commission of the permittee’s application for the funding of a capital improvement at the horse track and continues until sufficient funds have been obtained for completion of the capital improvement approved by the commission.

E. Following commission approval of an application for funding of a capital improvement at a horse track pursuant to this section, the permittee shall set aside in a separate capital improvement escrow or trust account all monies retained from the decrease in the state’s share. The monies in the account and any interest on the monies may be used only for the capital improvement previously approved by the commission. The permittee shall provide to the commission quarterly reports on a form prescribed by the director that show for the previous calendar quarter:

1. Payments to and expenditures from each capital improvement or trust account established pursuant to this section.

2. The progress of construction on the capital improvement approved by the commission.

F. The cost of a capital improvement shall be determined by generally accepted accounting principles and verified on completion of the project by an audit of the permittee’s records conducted by the auditor general acting at the instructions of the commission or an independent certified public accountant selected by the permittee and approved by the commission.

G. In this section, unless the context otherwise requires, "capital improvement" means an addition, replacement or remodeling of a racetrack facility involving an expenditure of at least fifty thousand dollars. Capital improvement also includes architectural and design expenses directly related to such addition, replacement or remodeling, whether incurred before or after project approval by the commission. Capital improvement does not include the cost of ordinary repairs and maintenance required to keep a racetrack facility in ordinary operating condition and does not include operational expenses, but may include the direct acquisition of water trucks and tractors.

H. In counties with a population of less than five hundred thousand persons, a decrease in the percentage paid to this state by the permittee pursuant to this section shall not begin until from and after June 30, 1995.

I. This section expires on June 30, 1992 for counties with a population of five hundred thousand persons or more. This section expires on June 30, 1999 for counties with a population of less than five hundred thousand persons. Projects approved prior to either of these dates may continue until their completion under the terms of this section and the decrease in percentage paid to the state by the permittee shall continue until sufficient funds have been obtained for completion of the approved capital improvement.