BILL ANALYSIS                                                                                                                                                                                                    Ó



                           SENATE COMMITTEE on AGRICULTURE
                          Senator Cathleen Galgiani, Chair

          BILL NO:    AB 2490                   HEARING:  06/17/14
          AUTHOR:   Eggman                      FISCAL:  Yes
          VERSION:  06/11/14                    CONSULTANT:  Anne Megaro
          

                         District agricultural associations.

           SUMMARY  :
          
          This bill would revise several provisions relating to the state  
          oversight of district agricultural associations.  This bill  
          would authorize these fairs to take specified actions without  
          the prior approval of state agencies, authorize the governor to  
          remove fair board members with cause, and reduce the frequency  
          of audits for smaller fairs, among other provisions and  
          technical changes.


           BACKGROUND AND EXISTING LAW  :

          California fairs have been in existence since 1854, and the  
          network has since grown to encompass 78 fairs statewide.  This  
          network of California fairs is composed of 52 district  
          agricultural associations (DAA), 23 county fairs, 2 citrus fruit  
          fairs, and The California Exposition and State Fair (Cal Expo).   
          DAAs are state government entities that are governed by  
          nine-member gubernatorial appointed boards of directors (fair  
          boards).  In contrast, county fairs are county government or  
          not-for-profit organizations; citrus fruit fairs are  
          not-for-profit organizations; and Cal Expo is a state agency.

          In 2009, California fairs generated a $2.85 billion economic  
          impact from consumer sales, $855 million in income for  
          California employees, $127 million in annual state and local tax  
          revenues, and provided 25,000 jobs.  Fairs serve the local  
          community by providing a venue for a variety of agricultural and  
          local community events such as livestock shows and competitions,  
          county fairs, trade shows, exhibits, and food, nutrition, and  
          agricultural education.  Fairgrounds also serve the state by  
          assisting in emergency preparedness and response.  In the event  
          of natural disasters, fairgrounds may be transformed into  
          command centers for CalFire, CalEMA, Homeland Security, law  
          enforcement, and FEMA and also provide shelter for displaced  
          persons and their pets and livestock.

          The Division of Fairs and Expositions within the California  




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          Department of Food and Agriculture (CDFA) provides fiscal and  
          policy oversight for the network of California fairs; and the  
          Department of General Services (DGS) provides oversight for use  
          of state property, procurement, and services contracts (Business  
          and Professions Code §19400 et seq.; Food and Agricultural Code  
          §3001 et seq.).

          The source of state funding for these fairs has historically  
          been dependent on horse racing license fees, which in recent  
          years have significantly declined.  In 2009, the legislature  
          recognized the need for a new source of funding for the  
          continuation of fairs and, thus, continuously appropriated $32  
          million from the state's General Fund to be paid into the Fairs  
          and Exposition Fund (F&E Fund) [SB 16 X2 (Ashburn)].  

          However, the 2011-12 state budget eliminated General Fund  
          contributions to the F&E Fund, requiring DAAs to be  
          self-sufficient as of January 1, 2012.  Since that time, several  
          bills have been introduced and proposals have been discussed  
          that aim to reduce DAA operating and administrative costs.   
          Given that DAAs are state entities, these proposals have  
          generally focused on reducing state oversight and specified  
          requirements while increasing local decision-making and  
          flexibility.  
           

          PROPOSED LAW:
          
          This bill:  

             1.   Authorizes DAAs to sue without the approval of CDFA.

             2.   Authorizes the governor to remove for cause any fair  
               board director.

             3.   Authorizes a fair board, without prior approval from  
               CDFA or DGS, to arrange, conduct or contract for any  
               activity on fairgrounds, except for the following:

                  a.        Uninsured hazardous activities as determined  
                    by CDFA in consultation with DGS.

                  b.        Enter into a settlement agreement over  
                    $100,000 without prior CDFA approval.

                  c.        Enter into personal services contracts.






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             4.   Specifies that nothing in the above provisions should be  
               construed and is not intended to extend or limit personal  
               services contracting.

             5.   Authorizes DAAs to do the following without the approval  
               of CDFA or DGS:

                  a.        Contract, in accordance with all of the  
                    following:
                        i.             The written policies and procedures  
                         developed and maintained by the fair board.
                        ii.            All applicable state laws governing  
                         contracts except for DGS requirements for the  
                         acquisition of goods and information technology  
                         services. 
                        iii.           Competitive bidding for any  
                         construction project that exceeds $25,000.
                        iv.            May elect to become subject to the  
                         Uniform Public Construction Cost Accounting Act  
                         and the Small Business Procurement and Contract  
                         Act, but exempt from reporting requirements.

                  b.        Accept funds or gifts.

                  c.        Conduct programs and contract for the lease of  
                    goods either independently or in cooperation with any  
                    individual, public or private organization, or  
                    government agency.

                  d.        Establish and maintain a banking account  
                    approved by the director of Finance.

                  e.        Approve an annual DAA budget and establish a  
                    program for paying contracting vendors.

                  f.        Contract with any county or county fair  
                    association for holding a joint fair.

                  g.        Make or adopt all necessary orders, rules, or  
                    regulations for governing activities of the DAA, which  
                    are exempt from state administrative regulations and  
                    rulemaking requirements.

                  h.        Operate a payroll system to pay employees.

                  i.        Delegate powers of the fair board to officers  
                    and employees for the orderly management and operation  





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                    of the DAA.

                  j.        Use or manage any DAA property jointly with  
                    any lessee or sublessee for any purpose approved by  
                    the fair board.

             6.   Authorizes DAAs to, with the approval of DGS but not  
               CDFA, to:

                  a.        Purchase, acquire, hold, sell, exchange, or  
                    convey an interest in real property.

                  b.        Make permanent improvements on nearby or  
                    adjacent public lands if the improvements materially  
                    benefit the DAA property.

                  c.        Lease DAA property to any person or public  
                    body for whatever purpose approved by the fair board.

                  d.        Take out a lien or security interest on a DAA  
                    property and pledge revenues, monies, accounts,  
                    accounts receivable, contract rights, and other rights  
                    to payment.

             7.   Authorizes DAAs, with the approval of CDFA, to enter  
               into a joint powers agreement.

             8.   Requires a fair board, other than that of the California  
               Science Center, to adopt and publish competitive bidding  
               procedures for a procurement, contract, or subcontract  
               greater than $100,000 and, with DGS approval, pledge any  
               revenues, monies, or rights of payment pursuant to terms  
               and conditions approved by the fair board.  The state shall  
               not be obligated to generate or appropriate funds for  
               payment of these contracts.

             9.   Requires DAAs to adopt a fiscal review policy and be  
               audited periodically by an independent certified public  
               accountant or firm selected by the fair board.  DAAs with  
               budgets exceeding $5 million shall be audited annually, and  
               DAAs with budgets less than $5 million shall be reviewed  
               annually and audited once every three years.  However, CDFA  
               may require an audit at other times if the state deems the  
               audit necessary.

             10.  Increases from $10,000 to $100,000 the threshold  
               requirement for DAAs to obtain CDFA approval prior to  





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               entering a settlement agreement.

             11.  Repeals the authority of the secretary of CDFA to make  
               any state property available to DAAs that has been obtained  
               without cost to the state.

             12.  Exempts the state from liability for any action,  
               obligation, or commitment made by any DAA.

             13.  Exempts DAAs from DGS vehicle purchasing requirements.

             14.  Repeals the requirement that CDFA annually prepare a  
               delegation program for DAAs.

             15.  Repeals the requirement that CDFA develop purchasing  
               criteria for DAAs and other fairs.

             16.  Exempts DAAs from recycling and waste management  
               reporting requirements.

             17.  Makes technical and conforming amendments.


           COMMENTS  :
           
          Need for this bill:   According to the author, "With the loss of  
          state funding, many have gone through their reserves and have  
          reduced staff, operations and even stopped their annual fair.   
          The cost of complying with state accounting and reporting  
          requirements add an additional burdens and costs to DAAs not  
          receiving state funds."
           
          Informational hearing:   The Senate Committee on Agriculture held  
          an informational hearing in 2012 titled "The Future of Fairs in  
          California" to examine the financial status of fairs and discuss  
          alternative funding solutions to ensure the vitality of  
          California fairs.  Testimony from fair industry representatives  
          acknowledged that many smaller fairs were at risk of closing if  
          alternative funding strategies and/or governance structures were  
          not utilized. 
           
          Oversight concerns:   Those in opposition state that this bill  
          "eliminates or diminishes many of the checks and balances in  
          current law that constrain what district fair boards can do  
          without higher level approval or review."   Considering a recent  
          effort to privatize the Orange County fairground, those in  
          opposition question why legislators would want to weaken  





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          transparency, oversight and accountability of DAAs.
           
          Subsequent amendments:   There may be further amendments to  
          address concerns regarding costs incurred for State Fire Marshal  
          inspections.  There is question as to whether local inspectors  
          could be identified as acceptable alternatives who could provide  
          the same high quality fire inspections but with lower travel  
          costs.


           RELATED LEGISLATION  :

          AB 1647 (Bigelow) of 2014.  Would repeal the requirement that  
          specified fairs report the number of credential and courtesy  
          passes issued and would repeal requirements that the California  
          Department of Food and Agriculture expend funds relating to  
          exhibits.  Currently in the Senate Committee on Agriculture.

          SB 741 (Cannella) of 2013.  Would revise the duties,  
          responsibilities, and powers of the California Department of  
          Food and Agriculture, the Department of General Services, and  
          district agricultural associations in regards to the operation,  
          oversight, administration, governance, and funding of the  
          network of California fairs.  In the Assembly Committee on  
          Appropriations.  

          AB 2345 (Ma) of 2012.  Would have established the California  
          Fair Network Commission as a nonprofit, mutual-benefit  
          corporation to assess fees for services, manage funds, and  
          provide administration and oversight of California's fairs.   
          Held in Assembly Committee on Appropriations.  

          AB 95 (Budget), Chapter 2, Statutes of 2011.  Repeals the $32  
          million annual General Fund appropriation for the support of the  
          network of California fairs.

          SBX2 16 (Ashburn), Chapter 12, Statutes of 2009-10 Second  
          Extraordinary Session.  Provides that horse racing license fees  
          shall no longer be paid into the Fairs & Expositions Fund, but  
          instead, beginning July 1, 2009, $32 million shall be  
          continuously appropriated from the state General Fund to the  
          Fairs and Exposition Fund for the support of the network of  
          California fairs.

          SB 1085 (Runner), Chapter 320, Statutes of 2010.  Allows the  
          50th DAA, with consent of the secretary of CDFA, to enter into a  
          joint powers agreement with a nonprofit organization to operate,  





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          maintain, and improve the 50th DAA.

          AB 2250 (Runner), Chapter 452, Statutes of 2008.  Authorizes  
          officers and employees of DAAs to receive compensation from  
          nonprofit corporations.

          SB 281 (Maldonado), Chapter 346, Statutes of 2007.  Requires  
          CDFA to develop criteria to be used for the disposal of property  
          by a DAA and Cal Expo.

          SB 1041 (Denham) of 2006.  Would have transferred responsibility  
          from DGS to CDFA for preparing a program for DAAs to delegate  
          purchasing authority.  Held in Assembly Committee on  
          Appropriations.  
           



          PRIOR ACTIONS  :

          Assembly Floor      75-0
          Assembly Appropriations  17-0
          Assembly Agriculture       7-0


           SUPPORT  :
          
          Western Fairs Association 
          Rural County Representatives of California 


           OPPOSITION  :
          
          Orange County Fairgrounds Preservation Society