BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 741|
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THIRD READING
Bill No: SB 741
Author: Cannella (R)
Amended: 5/28/13
Vote: 27 - Urgency
SENATE AGRICULTURE COMMITTEE : 5-0, 4/16/13
AYES: Galgiani, Cannella, Berryhill, Lieu, Wolk
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 9-1, 4/23/13
AYES: Wright, Nielsen, Berryhill, Calderon, Cannella, De León,
Galgiani, Lieu, Padilla
NOES: Correa
NO VOTE RECORDED: Hernandez
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SUBJECT : California fairs: funding
SOURCE : California Fairs Alliance
Western Fairs Association
DIGEST : This bill, an urgency measure, makes several
substantive and clarifying changes to existing law related to
the operation, oversight, and funding of the network of
California fairs.
ANALYSIS : Existing law governs fairs and expositions in this
state, including the California Exposition and State Fair,
county and district fairs, and citrus fruit fairs.
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Existing law divides the state into agricultural districts and
authorizes 50 or more persons who are residents of a district to
form district agricultural associations (DAAs) for the purpose
of holding fairs, expositions, and exhibitions, as specified.
Existing law provides that DAAs are state institutions governed
by a board of directors whose members are appointed by the
Governor.
Existing law provides that the Department of Food and
Agriculture (DFA) is responsible for providing oversight of
activities carried out by each California fair, including, but
not limited to, conducting fiscal and performance audits of
county fairs and citrus fruit fairs that are either requested by
the fair or that DFA deems necessary, and conducting, or causing
to be conducted, annual fiscal audits and periodic compliance
audits.
Existing law authorizes an association to carry out specified
duties with the approval of the DFA and the Department of
General Services (DGS), including contracting and leasing its
real property.
California Constitution, Article IV, Section 19(b) provides that
the Legislature may provide for the regulation of horse races
and horse race meetings and wagering on the results.
Existing law grants the California Horse Racing Board the
authority to regulate the various forms of horse racing
authorized in this state.
Existing law establishes the Fair and Exposition Fund (F&E Fund)
to, among other things, allocate moneys for the support of the
network of California fairs. Existing law requires certain
license fees from satellite wagering to be deposited into a
separate account in the F&E Fund, and continuously appropriates
those moneys for specified purposes, including, among others,
the payment of expenses incurred in establishing and operating
satellite wagering facilities at fairs.
Existing law authorizes the DFA to make and administer loans
from the F&E Fund to any fair in the network of California
fairs, as specified.
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This bill:
1. Consolidates specific revenues generated by racing
associations and fairs to be deposited into the F&E Fund, to
be continuously appropriated and allocated to fairs for
various purposes.
2. Provides that monies within the F&E Fund be used for specific
purposes, as defined.
3. Permits, as determined by the Secretary of DFA (Secretary), a
reasonable amount of the remaining unallocated balance in the
F&E Fund be used by the Division of Fairs and Expositions
(DFE) to provide oversight and administration of the network
of California fairs.
4. Requires the Secretary to annually project the available
monies in the F&E Fund, and to advise the Joint Committee on
Fairs, Allocation and Classification (Joint Committee) of the
administrative budget of the DFE and the additional resources
necessary to oversee the network of California fairs.
Requires the Secretary shall also prepare an annual
expenditure plan for the F&E Fund for review and concurrence
by the Joint Committee.
5. Repeals the requirement that fair projects follow DFA project
schedules.
6. Repeals the requirement that DFA perform annual fiscal audits
of the network of California fairs and instead requires
annual reviews.
7. Requires all fairs to be audited once every three years, or
every year if the DAA's operating budget exceeds $10 million,
by a certified public accountant/firm selected by the fair.
Requires this audit to be included in the fair's annual
statement of operations, along with any recommendations for
improvement by the auditing entity, for the approval of the
Secretary. Permits two or more fairs to contract for a joint
review or audit.
8. Repeals annual legislative appropriations to the DFA for
oversight and auditing of the network of California fairs.
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9. States declarations and findings of the Legislature that
funding for the network of California fairs is a cooperative
venture and is anticipated to be generated from multiple
sources, public and private. Requires fairs to work
collectively to identify and designate new funding sources to
benefit all fairs in the network.
10.Provides that all fairs only pay a share of costs directly
related to personnel administration and no other state agency
administrative costs, except for services rendered pursuant
to specific contracts entered into with other state agencies.
11.Repeals the requirement that a DAA attain DFA approval to
sue.
12.Repeals the requirement that DFA and DGS approve any activity
conducted on fairground property and instead only requires
fair board approval. If the activity is deemed hazardous,
the board must consult with DFA and DGS to ensure adequate
insurance coverage is obtained.
13.Authorizes the Governor to remove for cause a fair board
director within one year of the director's appointment.
14.Repeals the requirement that DAAs provide DFA written
notification prior to entering into any agreement that (1)
exceeds $100,000; (2) exists for a period greater than two
years; or (3) builds permanent structures on the property.
15.Repeals the requirement that DAAs seek DFA approval prior to
entering into a settlement agreement exceeding $10,000.
16.Repeals the provision that the state is not liable for any
premium which is offered or award that is made, or on account
of any contract which is made, by any association.
17.Authorizes a DAA to enter into contracts, with specified
requirements.
18.Provides that the title, control, and possession of all
personal property acquired, held, managed, or operated by a
DAA vests with the association.
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19.Repeals the authority of DGS to lease any real property under
the jurisdiction of a DAA.
20.Makes technical changes.
Comments
The $32 million General Fund (GF) support for the network of
California fairs was eliminated in the 2011-12 Budget due to the
state's growing fiscal problems, thus requiring the fairs to be
self-sufficient as of January 1, 2012. A consortium of fair
industry representatives and stakeholders was formed to provide
input for DFA's policy recommendation to the Governor. The
consortium delivered an informal draft comprehensive plan;
however, no official policy recommendations have been presented
by the Administration to the Legislature.
Value of California fairs . According to the information
provided by the Senate Agriculture Committee, 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. In addition, fairgrounds serve the state
by assisting in emergency preparedness and response.
Milton Marks "Little Hoover" Commission . The Milton Marks
"Little Hoover" Commission on California State Government
Organization and Economy issued a report in September 2012
titled "Building Value: Modernizing Property Management" which
urged the Governor and Legislature to put the job of state
property management into the hands of a new state department.
With respect to fairs, the report noted, "State-owned
fairgrounds pose a unique property management challenge now that
the state - as of January 2011 - has stopped funding District
Agricultural Associations. Without funding or state staff, local
associations are on their own to manage and use the 41-state
owned fairground properties."
The Commission suggested that legislation should be enacted that
provides more flexibility to DAAs to pursue strategies that
support and sustain the mission of local fairs. Specifically,
the Commission stated, "the legislation should enable the state
to transfer state-owned fairground property to a joint powers
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authority, whose membership includes the district agricultural
association and local governments, established to keep the
property in public hands and expand options for communities that
support the association's missions and local economies."
Prior Legislation
AB 2345 (Ma, 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. The bill
was held in the Assembly Appropriations Committee.
AB 95 (Budget, Chapter 2, Statutes of 2011) repealed the $32
million annual GF appropriation for the support of the network
of California fairs.
SBX2 16 (Ashburn, Chapter 12, Statutes of 2009-10, 2nd
Extraordinary Session) provided that horse racing license fees
no longer be paid into the F&E Fund, and instead provided that
beginning July 1, 2009, $32 million shall be continuously
appropriated from the state GF to the F&E 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 DFA, to enter into a joint
powers agreement with a nonprofit organization to operate,
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 DFA
to develop criteria to be used for the disposal of property by a
DAA and Cal Expo.
SB 1041 (Denham, 2006) would have transferred the responsibility
from DGS to DFA to prepare a program for DAAs for delegating
purchasing authority. The bill was held in the Assembly
Appropriations Committee.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
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According to the Senate Appropriations Committee, this bill will
result in a reduction to DFA's budget of roughly $1 million
(special funds). This bill also reduces DFA's responsibilities
with respect to fairs, by a lesser, unknown amount, resulting in
a potential cost pressure in the hundreds of thousands of
dollars.
Furthermore, this bill requires DFA to submit an annual
expenditure plan for the review and approval of the Joint
Committee. DFA estimates this additional workload would require
$60,000 (special funds) for one-half of one position (including
salaries, benefits and equipment).
SUPPORT : (per Senate Agriculture Committee analysis of 4/16/13
- unable to reverify at time of writing)
California Fairs Alliance (co-source)
Western Fairs Association (co-source)
Cloverdale Citrus Fair
El Dorado County Fair
Imperial Valley Expo/California Mid-Winter Fair and Fiesta (45th
DAA)
Marin County Fair
Nevada County Fairgrounds (17th DAA)
Patricia M. Kress, member of Western Fairs Association
San Joaquin County Fair (2nd DAA)
Ventura County Fairgrounds (31st DAA)
OPPOSITION : (per Senate Agriculture Committee analysis of
4/16/13 - unable to reverify at time of writing)
Orange County Employees Association
Orange County Fairgrounds Preservation Society
SEIU
ARGUMENTS IN SUPPORT : According to the author's office, this
bill is intended to help DAAs deal with the new reality facing
the network of California fairs as they exist today without
state funding. The author's office notes that this bill is an
attempt to start the process of moving fairs away from state
oversight and providing them with some ability to operate more
as private businesses or non-profit agencies. It is the
author's belief that this bill will give fairs the necessary
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flexibility to operate more efficiently, save money and preserve
jobs.
ARGUMENTS IN OPPOSITION : Opponents argue that the negative
impacts on California fairgrounds outweigh the positive impacts
in this bill. Opponents reference the fact that money
laundering at the 32nd DAA (Orange County Fair) shows that
problems exist already and oversight should be increased, not
reduced. Opponents are also concerned with new language that
allows for the removal of board directors for cause. Opponents
argue that the view of who is a "problematic director" should
lie with the majority of the board. Furthermore, opponents have
expressed concern that this bill allows the "contracting out" of
services.
JL:k 5/28/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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