HISTORY OF CALIFORNIA FAIRS/ NAPA COUNTY FAIR

Transcription

1 ATTACHMENT 1 The California State Fair HISTORY OF CALIFORNIA FAIRS/ NAPA COUNTY FAIR Shortly after California achieved statehood in 1850, the state s first daily newspaper, the San Francisco-based Alta California, encouraged the formation of an agricultural society to enhance the State s reputation as an ideal place for farming and industry. Eager to meet that challenge, the California Legislature created the State Agricultural Society (SAS) in 1852 to hold an exhibition of livestock and manufactured agricultural and other products. Eighty enthusiastic individuals signed up for the initial effort to plan an agricultural exposition. Its success led to the creation of the first California State Fair in 1854 held in San Francisco. Travel was a hardship for many in those days, so organizers held the Fair in different locations in the state each year. By 1859, the city of Sacramento became the State Fair s permanent home. In 1863, the Legislature added a Board of Agriculture to administer the affairs of the SAS. In 1880, the SAS was declared to be a State agency, but it retained its independent status as a State board. County Fairs The State Fair s success inspired California counties to organize their own fairs to showcase their regional industries and accomplishments, mostly agriculture and livestock. County fairs allowed more people to enjoy a fair every year, since many could not travel the long distance to Sacramento. County fairs quickly became profitable ventures that helped boost local economies. In 1876, the Dixon May Fair, considered to be the oldest county fair and fairgrounds in California, made its debut. Over the next 50 years, counties across the state founded their own fairs. Horses were an integral part of everyday life in the 1800s, so many of the fairs included horse shows and horse racing, drawing many fans. In 1919, the Legislature created the California Department of Food & Agriculture (CDFA) to ensure food safety, protect crops from invasive species, and promote agricultural industry. One of the Department s seven divisions was the Division of Fairs & Expositions that provided fiscal and policy oversight of the California s network of 80 fairs until 2015 when it became a branch of CDFA s Marketing Services Division. 1

2 California fairs today are divided into seven classes. The smallest fairs are rated Class I fairs, increasing to the largest fairs that rated Class VII. Napa s two fairs are rated Class III+. Many fairs had been partially subsidized with State or city funds until 2011 when the State eliminated its annual funding for fairs. Even though State funding has resumed this year, the vastly smaller stipends have forced many fairs to transition to more self-sufficient and sustainable entities. Fairs are generally considered self-sustaining enterprises, operating without State or county subsidies, although State money is granted to some smaller fairs in classes I to IV. Network of County Fairs 80 Members California law defines a state-supported fair organization as any fair that conducts an annual fair and submits an annual statement of operations to the CDFA. There are 80 fair organizations in the CDFA s California Network of Fairs. They include: 54 District Agricultural Associations (DAAs): state government entities that operate fairs (Napa Town & Country Fair is the 25 th DAA) 23 County fairs: fairgrounds owned by a county and managed by either the County or a nonprofit group (Napa County Fair in Calistoga is a county-owned fair, managed by a nonprofit) 2 Citrus fairs: fairgrounds owned by a nonprofit group and chartered by the State to hold annual expositions celebrating California s orange and lemon industries 1 State Fair: California s official statewide fair, held in Sacramento Governance of Fairs There are a number of ways fair governance structures may be designed. Over the years, however, most structures settled into two basic models: DAAs and county fairs. But as economics and cultural tastes have changed, more fairs are looking at new governing arrangements to allow greater flexibility to raise more revenue and keep their fair enterprises self-sustaining. DAA fairs are state entities. They are governed by a board of directors. There are nine members on each board. Each director is nominated by their respective communities and confirmed by the governor of California. The Napa Town & County Fair, the 25 th DAA, has nine board members. 2

3 The State owns about 90 percent of the lands these 54 DAAs operate on. There has been little change in DAA governance structures since they were founded, according to CDFA staff. Being owned by the State, these fairs must adhere to State rules governing DAAs. The DAA are managed by State employees and are bound by State laws government the managing of fairs. DAA s often form a separate nonprofit corporation a Friends of the Fair for fundraising purposes. This practice has gained popularity since the State cut fair funds in County fairs operate on County-owned land. Of the State s 23 county fairs, 13 are managed by nonprofit corporations and 10 are managed by counties. County fair boards vary in size from five to 36 members. They are either governed by their own bylaws or county ordinance. Property Ownership NAPA COUNTY FAIR Ownership, Governance Today, The Napa County Fairgrounds comprises about 70 acres and is located entirely within the City of Calistoga s boundaries. According to a 1996 Dickenson, Peatman & Fogarty title search and an August 2016 First American title search, the County of Napa owns all the property within the Fairgrounds boundary. The following is a brief chronological history of these acquisitions: October 15, 1935: Phillip E. Kelley and his wife, Lilius, sell a 32-acre parcel to the Calistoga Fair Association for $10 to help establish a permanent physical home for the Napa County Fair. May 17, 1938: The Association sells the former Kelley property to the County of Napa for $40,000. January 29, 1951: The County of Napa takes small triangular piece of property of about an acre by condemnation order from several property owners. Price not disclosed on condemnation order document. 3

4 July 2, 1957: Louis Rubbattino and his wife, Tillie, sold about 22 acres, contiguous to the Fairgrounds, to the County of Napa for about $40,000 to expand the Fairgrounds. May 18, 1966: The County of Napa takes 1.77 acres by condemnation order from John Logvy, his wife Valentina, and several others for $13,500. January 29, 1976: The County of Napa takes acres by condemnation from John Logvy for $94,800. Management Napa County contracts with the Napa County Fair Association, a nonprofit corporation, to manage the land, buildings, and events at the Fairgrounds, including the Annual County Fair. The contract must be renewed every five years for the Association to continue managing the Fairgrounds. The current contract was signed entered into on October 1, 2013 (Napa County Agreement No. 8025), and will expire on December 31, On January 27, 2004, the Board of Supervisors approved a land tenure agreement with the California Department of Food and Agriculture s Division of Fairs and Expositions. The County sought this agreement (Napa County Agreement No. 6243) to ensure the State would continue providing annual funding toward the Fairgrounds operation and maintenance. In exchange, the County committed to use the Fairgrounds for Fair purposes for the next 20 years. The agreement will expire on January 27, In 2010, the Fair received its annual State stipend and capital improvement funds of $220,000. But in 2011, the State eliminated all fair funding as it struggled with a large deficit, exacerbated by the economic recession. In 2014, the Napa County Fair Association changed its corporate structure from a 501(c)5 agricultural membership association to a 501(c)(3) nonprofit, charitable corporation. This change was made to try and fill the revenue hole created by the loss of annual State funds. This change allowed the Association to raise charitable and other donations to support the Fair s expenses. Other fairs, mostly DAAs, that do not have a nonprofit, charitable corporate structure create a Friends of nonprofit, charitable group to raise money outside the entity s operation. The Association hires a CEO and staff, who are Association employees, but are in the County pension system. In 2016, the State granted a $38,000 allocation to the Association, the first since

5 Governance The Association is comprised of two types of members: 1) Voting members - a person or business entity residing in Napa County or in an area serviced by a Napa County postal code 2) Non-voting members a person or business entity residing outside Napa County According to the Association s bylaws, its Board of Directors must consist of at least nine members and as many as 15 members. Non-voting members are prohibited from serving on the Board. The Association s Board currently consists of nine members. The Association s members elect six Board members at its annual meeting. The bylaws were amended in 2012, granting the Napa County Board of Supervisors authority to appoint three members. Board of Directors : Elected members: Bob Beck, Chairperson Don Meyer, Vice-Chairperson Woran Deckard, Treasurer Dana Cole Kerri Hammond-Abreu Karan Schlegel Appointed members: Bob Fiddaman Anne Steinhauer Bonnie Chisholm The Board of Directors provides the general oversight and sets the policies for Association operations. Meetings are held on a monthly basis and are open to the public. The Napa County Fair is a member of Western Fairs Association (WFA), a trade association representing California's fairs through legislative advocacy that also provides staff development and training programs. 5

6 NAPA COUNTY FAIR State of Fairgrounds/Revenue/Assets Annual Fair The Fair is currently trifurcated into: a one-day fair on July 4; a Fiesta Mexicana and Jaripeo in summer; and a professional arts show in April, as part of the County-wide Arts in April event. The Fair operates on approximately 20 acres, and generally takes approximately two weeks for setup and a week for breakdown during which, limited non-fair use, golf, RV camping, and a race take place. Throughout the rest of the year, other uses can take place on the footprint of the Fair. In the past, the Annual Fair has run for as many as six days, depending on what day of the week July 4 fell on. If July 4 fell on a Wednesday, for example, the Fair would be held for six days. If July 4 fell on a Thursday, the Fair would last four days, etc. When the State pulled the Fair s funding in 2011, the Association looked for ways to trim expenses and boost revenues. An analysis showed that more than 50 percent of the Fair s attendance occurred on July 4, regardless of which day of the week if fell on. The other days attracted far fewer fairgoers, yet the expenses remained fixed: entertainment, staff, insurance, utilities, and other expenses. The analysis showed the Fair lost money on those days. The Board then decided to cut back the Fair days to one day, every July 4. Annual Fair operating revenues have increased significantly since 2010 reaching a high of approximately $392,000 in 2012; however Annual Fair operating expenditures have also increased significantly during the same six-year period reaching a high of approximately $457,000 in Also in 2015, the Annual Fair generated a net operating loss of approximately $20,000. The Annual Fair historically has operated at a loss, but is seen as having a very high social and community benefit. Events Center The Events Center includes several buildings, facilities, and open space areas on a total area of approximately 14.3 acres. The Events Center includes: the Tucker Room, Tubbs Building, Butler Pavilion, Cropp Building, Great Lawn, BBQ area, the Pavilion, and the Fiesta Center. The interiors and exteriors are dated and unattractive. 6

7 While all of the outdoor facilities are flexible in terms of use, the indoor spaces do not provide effective flexible space to meet competitive market demands. In 2015, the Events Center generated a net of $4,241, or $297/acre. The Events Center supplements the use of the Fairgrounds for the Annual Fair, is a traditional use by the Fairgrounds, and is a historical use for the NCFA. The Events Center is seen as having a high social and community benefit. The current Events Center complex, as designed and used, will not likely meet the needs for high-end users looking for event space rentals in the North County/Calistoga area. Reasons for this include the inflexibility to accommodate various events (e.g. weddings and event space rentals), the unattractive and in-flexible interior layouts, poor restroom facilities, and the lack of close-in and improved parking. RV Park The Calistoga RV Park is the Fairgrounds most stable revenue generator. The park occupies the smallest footprint on the Fairgrounds at 3.5 acres, but generates the highest revenue. In 2015, the RV Park generated a net operating income of approximately $308,076, or $88,022/acre. Additionally, Transient Occupancy Tax (TOT) tax is not collected from the RV Park. Guests are limited to 14 days within a six-month period. The Association is looking to expand and upgrade the park to make it more aesthetically pleasing and more reflective of the culture and standards of Napa Valley. RV parks are a valuable component in the sustainability of most California fairs. Golf Course The Fairgrounds features the Mount St. Helena Golf Course, a nine-hole course on 36.5 acres that includes a small clubhouse that sells snacks and some golf paraphernalia. There is also a meeting space, the Tucker Room, that is rented out to area groups. The golf course is open seven days a week, 8 a.m. to dusk. When available, the infield area of the Speedway is used as a driving range by the golf course. 7

8 In 2015 the golf course generated a net operating income of approximately ($18,822), or ($516)/acre. The Mount St. Helena Golf Course is the only golf course in Calistoga, and is much lower in price than surrounding courses. The golf course is seen as having a high social and community benefit. The golf course and clubhouse are in need of a capital upgrade to attract more golfers and increase revenue. High temperatures in June and July of this year have contributed to a number of large, unsightly brown spots on the golf course. Part of the problem was caused by the irrigation system, which is antiquated and needs to be either upgraded or replaced. The aging irrigation system causes more employee hours to operate it and properly water all the fairways and greens. There are rough areas of the course that need grading work, and there are areas that do not drain well. These problems may be solved with a newer irrigation system with current technology and new grasses and turfs that would require less water and better the course drain better. The city of Calistoga currently sends recycled water to the golf course, its largest dispersion point. There is a paved track for golf carts, but it covers less than half the course. The unpaved portions are often highly bumpy and not enjoyable for golfers, not to mention the wear and tear to the golf carts. The Association and management believe a restaurant/food service provider in the clubhouse would attract more golfers and more revenue. But the County apparently cannot grant a health permit for the building, because the rest rooms are antiquated and do not meet current regulations. Race Track When the fair opened in 1935, a horse racing track was built. Several years later, Fair officials took the advice of an auto racing promoter and decided to convert the facility to an auto racing track. The first auto races at the Fairgrounds were held in 1937 at what is now called the Calistoga Speedway. The Calistoga High School football team plays its home games in the center of the track. Although the actual footprint of the Speedway uses approximately 15.7 acres on the Fairgrounds, much of the Fairgrounds is used during race events. Existing facilities at the Speedway include covered grandstands and uncovered grandstands (roughly 3,000 total seats), the half mile dirt track, permanent concrete safety walls/chain link fencing, event lighting, an infield scoreboard, ticket office, restrooms and a food/beverage booth. 8

9 Currently, the existing Speedway promoter (HMC Promotions) has a contract for four (4) race weekends per year, with a total of six (6) races per year, which generally happen in April, June, and September. According to the RCH study, the Speedway generated a net operating income of approximately $45,751 in 2015, or $2,914/acre. The Speedway is seen by most as having a low social and community benefit, however there is an avid racing community in support of the facility. The race weekends attract RV camping to the Fairgrounds that is quite profitable. There are 69 RV sites at the RV Park. During a recent race weekend, about 200 RVs parked at the Fairgrounds, with the overflowing located in other areas in the Fairgrounds. The extra revenue is used for the continued maintenance and expenses of the Speedway. Although the Speedway is marginally profitable, the facility can quickly run a deficit if rain or poor weather necessitates a cancellation of an event. The rain can make the dirt track unsafe for racing and the grandstands unsafe for patrons. The Speedway would likely be more profitable if it held more events. But some neighbors are resistant to more noise, traffic, and dust that more events would engender. Budget/Revenue NAPA COUNTY FAIR Challenges/Future Since 2011, when then-gov. Schwarzenegger pulled state funding and threatened to sell some fairgrounds to private investors, many fairs across the state have instituted a master planning/repurposing process to increase revenues and make their respective fairs sustainable in case state funding is again pulled when the economy contracts. The Napa County Fairgrounds, over the six-year period from 2010 to 2016, has generated annual net operating losses in three of the six years reviewed, according to a 2016 report by the RCH group. The largest annual operating losses occurred in 2010 ($194,951) and 2011 ($182,287). These annual net losses reflect the financial performance of the Fairgrounds before depreciation expenses and offsetting revenue to the Fairgrounds from State of California Department of Food & Agriculture, Napa County, and other revenue sources from grants, interest income, or other donations. Given the necessary expenditures and overhead of the 9

10 Fairgrounds, the existing programs of the Fairgrounds do not generate enough revenue to make necessary capital improvements and operate in the long term. Capital Asset Improvements/Financing The lack of capital to upgrade and repurpose the Fairgrounds aging assets has hampered the Association s ability to attract revenue and set itself on a path of financial sustainability. Its assets and revenue generators include: the Annual Fair, the Events Center buildings, RV Park, nine-hole golf course, and a dirt racing track. There are two main State law sections governing the relationship between a board of supervisors and nonprofits or associations hired by the board to manage fair operations. Napa County adheres to California Government Code Section that limits contracts between a board of supervisors to five years, thus the County contracts with the Fair Association in five-year increments: The board of supervisors may contract with a nonprofit corporation or association for the conducting of an agricultural fair, as agent of the county, for a period not exceeding five years. The contract may provide for the use, possession, and management of any public park or fairgrounds by the nonprofit corporation, as agent of the county, during the period of the contract. Section s five-year contract restriction makes it virtually impossible for the Association to obtain the long-term financing needed to renovate and upgrade the Fairgrounds, making it more financially self-sustaining. Lending institutions are aware of State law and also that many California fairs do not have stable revenue streams. So, they are not confidant the Association will exist in the future long enough to pay off the longterm debt. The other section of the California Government Code that can be applied to fairgrounds is Section This section contains no such time limitation: The board of supervisors of a county may contract with a nonprofit corporation or association for the conducting of an agricultural fair in the county for the period and under those conditions as the board may determine. The contracts may provide for the use, possession, and management of any public park or fairgrounds by the nonprofit corporation during the period of the contract. The following is a comparison of the two Sections: 1. The Attorney General (AG) pointed out that Section requires that the nonprofit corporation or association conduct the agricultural fair only as agent of 10

11 the county, whereas Section would seem to permit the corporation or association to act as an independent contractor. 2. The AG explained that Section places a limit of five years on the term of such contracts whereas section imposes no such limit. 3. Section requires that all net proceeds received by the nonprofit organization be deposited within 60 days after the conclusion of any fair in a special county fair fund in the county treasury, whereas there is no such requirement in section Under section 25905, each year the nonprofit organization must submit an annual budget to the State Department of Finance, whereas under section no such budget need to be submitted unless the county desires allocation of state funds. 5. Section requires approval by the Department of Finance if the contract involves the use of property derived from the State or contemplates the use of money allocated or appropriated by the State for the fair. Governance Structure Possibilities It is clear that the current structure, with the County contracting with a nonprofit association under the provisions of Government Code section does not provide the long-term contractual agreement that will allow the fair to attract sufficient private sector investment. Below is a discussion of the different governance structures that could be substituted for the current structure, along with a discussion on the pros and cons of each alternative. (The Fair will be eligible for the same State funding regardless of the governance structure chosen. The only requirement for such State funding is that an annual fair be held at the Fairgrounds.) Joint Powers Authority-Napa County and City of Calistoga The County of Napa and the city of Calistoga could enter into a Joint Powers Authority (JPA) to oversee management of the fairgrounds. Under California law, two or more public entities can enter into an agreement to form a JPA to exercise any common power. (Gov. Code 6502). Once formed, the JPA becomes a separate public entity. This new public entity typically has officials from the member agencies on its governing board. The JPA is authorized, in its own name, to enter into contracts, acquire, hold or dispose of property, incur debts, liabilities and obligations, and to sue and be sued. (Gov. Code 6507, 6508). 11

12 The joint powers agreement would set forth the purpose of the JPA, the scope of authority, each member s responsibilities, powers to be shared, and other mutually acceptable conditions that define the intergovernmental arrangement. The agreement must provide strict accountability of all funds, receipts and disbursements. Additionally, by law, the JPA must appoint a treasurer and an auditor. The treasurer may be from a member agency such as the county treasurer or a certified public accountant. It should be noted that as a matter of law, members to the JPA would likely be jointly and severally liable for the tort liabilities arising from the JPA s actions. However, JPA members may have the power to allocate the JPA s contractual liabilities amongst themselves. (See Tucker Land Co. v. California, (2001) 94 Cal. App.4th 1191, ; Gov. Code 6508, ) Under a Napa County-Calistoga JPA, the JPA would not only oversee the management and operations of the fairgrounds, but could take ownership of the site, if the County is so inclined. PRO: Assuming that the County maintains ownership of the fairgrounds a JPA would give Calistoga a role in the management and operations of the Fairgrounds. A JPA would not have to operate under the constraints of Government Code Section 25905, therefore the JPA could enter into a longer term agreement with a private third party that could invest in the facility. A Calistoga-Napa County JPA would allow each entity respective resources in the most efficient way to provide support to the fairgrounds. CON: A JPA operates as a public entity. Although it is anticipated that the Fairgrounds will operate within the revenues that it generates it will be up to both the City of Calistoga and County of Napa to cover any deficits in expenses that may result from the operation of the fair. Employees of the fairgrounds may become public employees with all of the benefits of public employees accruing to them. Reconstitute Nonprofit Under Government Code Section Under this option, the County could reconstitute the nonprofit that manages the fairgrounds so that it would operate under Government Code Section instead of Government Code Section PRO: If the County amends its agreement with the Association to use Section 25906, the new association could enter into a longer term agreement with the county. A longer term agreement may allow the fairgrounds attract investment in the facilities in exchange for an operating contract. 12

13 CON: The current structure provides no role for the City of Calistoga, which has a vested interest in the long-term health of the Fairgrounds, since the property is located within its boundaries. The current structure also leaves a reduced role for the County. Obtaining long-term financing for the fairgrounds on its own may be difficult, even if Section is instituted and would likely require the county to be a guarantor prior to obtaining investment. Napa County Management of Fairgrounds Under this structure, the Fairgrounds could become an operating division of the County. PRO: The County would have direct oversight over the Fairgrounds and all its operations. The County is an organization designed for this kind of oversight, and will make decisions with a broader perspective for the entire County. The County could opt to create a County Department or contract out operations. CON: The County will need to devote new funds to staffing the Fairgrounds and events. The County, like most other counties, does not want to be in the fair business and see the county fair model as a self-sustaining separate entity. Also, Calistoga would have no role in the Fairgrounds development and operation. 13