BILL ANALYSIS Ó
SB 741
Page 1
Date of Hearing: July 3, 2013
ASSEMBLY COMMITTEE ON AGRICULTURE
Susan Talamantes Eggman, Chair
SB 741 (Cannella) - As Amended: May 28, 2013
SENATE VOTE : 35-2
SUBJECT : California fairs: funding.
SUMMARY : This bill makes several substantive and clarifying
changes to current law related to the operation, oversight, and
funding of the network of California fairs. This bill has an
urgency clause. Specifically, this bill :
1)Consolidates specific revenues generated by racing
associations and fairs to be deposited into the Fair and
Exposition (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 (Secretary) of The
Department of Food and Agriculture (CDFA), 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 DFE, and the additional resources
necessary to oversee the network of California fairs.
Requires the Secretary to 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 CDFA project
schedules.
6)Repeals the requirement that CDFA perform annual fiscal audits
of the network of California fairs and instead requires annual
reviews.
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7)Requires all fairs to be audited once every three years, or
every year if the District Agriculture Association's (DAA)
operating budget exceeds $10 million, by a certified public
accountant/firm selected by the fair.
a) 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; and,
b) Permits two or more fairs to contract for a joint review
or audit.
8)Repeals annual legislative appropriations to CDFA for
oversight and auditing of the network of California fairs.
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 CDFA approval to
sue.
12)Repeals the requirement that CDFA and California Department
of General Services (DGS) approve any activity conducted on
fairground property and instead only requires fair board
approval.
a) If the activity is deemed hazardous, the board must
consult with CDFA 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 CDFA written
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notification prior to entering into any agreement that:
a) exceeds $100,000;
b) exists for a period greater than two years; or,
c) builds permanent structures on the property.
15)Repeals the requirement that DAAs seek CDFA 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.
19)Repeals the authority of DGS to lease any real property under
the jurisdiction of a DAA.
20)Makes technical changes.
EXISTING LAW :
1)Provides governing rules for fairs and expositions in this
state, including the California Exposition and State Fair,
county and district fairs, and citrus fruit fairs.
2)Divides the state into agricultural districts and authorizes
50 or more persons who are residents of a district to form
DAAs for the purpose of holding fairs, expositions, and
exhibitions, as specified.
3)Provides that DAAs are state institutions governed by a board
of directors whose members are appointed by the Governor.
4)Provides that CDFA 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 CDFA deems necessary, and conducting, or
causing to be conducted, annual fiscal audits and periodic
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compliance audits.
5)Authorizes an association to carry out specified duties with
the approval of CDFA and DGS, including contracting and
leasing its real property.
6)Provides that the Legislature may provide for the regulation
of horse races and horse race meetings and wagering on the
results.
7)Authorizes the California Horse Racing Board the authority to
regulate the various forms of horse racing authorized in this
state.
8)Establishes the 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.
9)Authorizes CDFA to make and administer loans from the F&E Fund
to any fair in the network of California fairs, as specified.
FISCAL EFFECT : Unknown. This bill has been keyed fiscal by
Legislative Counsel.
COMMENTS : California is home to 78 fairs that are
interconnected and operate as a network. A majority of these
fairs operate under the oversight of CDFA and DGS, on state
owned land. 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 CDFA's policy recommendation to the Governor;
however, no official policy recommendations have been presented
by the Administration to the Legislature.
A CDFA Fairs economic impact report from 2010 stated that
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
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provided 25,000 jobs. In addition, fairgrounds serve the state
by assisting in emergency preparedness and response.
A 2012 Little Hoover Commission (LHC) 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." LHC suggested that
legislation should be enacted that provides more flexibility to
DAAs to pursue strategies that support and sustain the mission
of local fairs.
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 flexibility to operate more
efficiently, save money and preserve jobs.
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.
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 Committee), Chapter 2, Statutes of 2011, repealed
the $32 million annual GF appropriation for the support of the
network of California fairs.
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SBX2 16 (Ashburn), Chapter 12, Statutes of 2009-10, 2nd
Extraordinary Session, provides that horse racing license fees
no longer be paid into the F&E Fund, and instead provides 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.
REGISTERED SUPPORT / OPPOSITION :
Support
Imperial Valley Expo (45th DAA)
Marin County Fair
Nevada County Fairgrounds (17th DAA)
Patricia M. Kress, PK Consulting
Rural County Representatives of California (RCRC)
Solano County
Western Fairs Association
Opposition
Orange County Employees Association
Orange County Fairground Preservation Society
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Analysis Prepared by : Victor Francovich / AGRI. / (916)
319-2084