BILL ANALYSIS Ó
SB 741
Page 1
Date of Hearing: August 7, 2013
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Hall III, Isadore, Chair
SB 741 (Cannella) - As Amended: May 28, 2013
SENATE VOTE : 35-2
SUBJECT : California fairs: funding.
SUMMARY : 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, as
defined.
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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) Requires a DAA to comply with specified contracting
procedures, including, among others, soliciting bids in writing
if the estimated total cost of a project exceeds $25,000, as
specified.
16) Repeals the requirement that DAAs seek CDFA approval prior
to entering into a settlement agreement exceeding $10,000.
17) 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.
18) Authorizes a DAA to enter into contracts, with specified
requirements.
19) Provides that the title, control, and possession of all
personal property acquired, held, managed, or operated by a DAA
vests with the association.
20) Repeals the authority of DGS to lease any real property
under the jurisdiction of a DAA.
21) 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
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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
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 (CHRB) 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.
COMMENTS :
California's Network of Fairs : The "Network of California
fairs" includes 78 different fairs divided into four categories:
(1) 52 district agricultural associations (DAAs) which are state
government entities governed by a board of directors appointed
by the governor; (2) 23 county fairs which are county government
or not-for-profit organizations; (3) 2 citrus fruit fairs
(Cloverdale and San Bernardino Orange Show) which are
not-for-profit organizations; and, (4) the California Exposition
and State Fair (Cal Expo), a state entity.
Prior to the passage and enactment of SB 16 X2 (Ashburn) of
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2009, license fees assessed from the wagers made on horse racing
were deposited to the credit of the F&E Fund which, in addition
to providing general support for the annual budget of the CHRB,
supplemented the income of the State's network of fairs. At
that time, the law guaranteed the Fair and Exposition (F&E) Fund
would receive $40 million annually from license fees. SB 16 X2
eliminated the license fee on wagers as a means of helping the
struggling horse racing industry. In addition, it deleted the
$40 million "guarantee" from law. This amount is,
instead, distributed to the racing associations and horsemen and
horsewomen. The bill also provided that the state funding for
the network of California fairs shall be a continuous
appropriation of $32 million annually from the General Fund.
The $32 million General Fund support for the network of
California fairs was eliminated in the 2011-2012 Budget due to
the state's growing fiscal problems, thus requiring the fairs to
be self-sufficient as of January 1, 2012. The Governor directed
CDFA to form a working group to develop new fair governance and
funding opportunities for DAAs. A consortium of fair industry
representatives and stakeholders was formed to provide input for
CDFA'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.
Fairs serve the local community by providing the 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. In
addition, fairgrounds serve the state by assisting in emergency
preparedness and response. Furthermore, 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.
Currently, the Division of Fairs and Expositions budget
authority for 2012-13 is $2,832,728. The balance in the F&E
Fund, which includes any prior year carryover and reserves for
economic uncertainties, was $3,484,920 as of February 28, 2013.
Purpose of the bill : 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
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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.
Additional Background :
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.
The Commission recommended that "the Governor use the
reorganization process to consolidate and focus all property
management functions statewide under a new department." The
Commission also recommended that "state leaders develop policy
and a strategic plan for property management with the goal of
maximizing the value of the state's real property assets for
better program outcomes, greater transparency and enhanced
accountability."
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 district agricultural associations
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 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."
Senate Informational Hearing : The Senate Committee on
Agriculture held an informational hearing in 2012 titled "The
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Future of Fairs in California" to examine the financial status
of fairs and discuss alternative funding solutions to ensure the
vitality of California fairs. According to committee staff,
"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."
Double referral : This measure was double-referred to the
Assembly Agriculture Committee. The bill was heard and passed
(6-0) by that Committee on July 3, 2013.
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.
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
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delegating purchasing authority. The bill was held in the
Assembly Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Counties
Contra Costa County Fair
Nevada County Fairgrounds
Rural County Representatives of California (RCRC)
Western Fairs Association
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531