BILL ANALYSIS �
AB 1204
Page 1
Date of Hearing: January 19, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1204 (Dickinson) - As Amended: January 4, 2012
Policy Committee: AgricultureVote:8
- 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill expands the authority of the State Fair Leasing
Authority (SFLA) by shifting the California Exposition and State
Fair (Cal Expo) in its entirety from the state to SFLA.
Specifically, this bill:
1)Declares the intent of the Legislature for Cal Expo to
reorganize as a separate, independent entity.
2)Requires the Board of Directors for Cal Expo to establish a
policy to ensure fiscal independence.
3)Shifts all proceeds from the annual California State Fair,
leasing of the fairgrounds or the sale of Cal Expo property
from the state to Cal Expo.
4)Allows Cal Expo to enter into contracts outside of the state's
contracting process through the Department of General Services
(DGS).
5)Allows the Board to purchase or lease goods and services as
necessary.
6)States the intent of the Legislature that the Cal Expo board
has an affirmative duty to ensure the participation of small
businesses owned by socially and economically disadvantaged
persons in its procurement programs.
FISCAL EFFECT
1)Because this legislation shifts all proceeds from the sale or
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leasing of Cal Expo property from the state to Cal Expo, this
represents a loss of potential GF revenue, should the state
ever decide to declare Cal Expo surplus property and sell all
or a portion of the land. During the 2009-2010 Kings Arena
negotiations, the value of the 350 acre Cal Expo site was
estimated to be $200 million.
2)Unknown, likely significant costs to the Cal Expo board for
developing procurement policies and procedures, including
competitive bidding methods and for hiring staff or
contracting for on-going procurement and real estate
activities. All of those costs would be borne by Cal Expo
under this legislation.
SUMMARY (continued)
1)Requires the Board to establish a separate account for
depositing funds received by the State Fair Leasing Authority
(SFLA) in the course of its business. All funds maintained in
the SFLA account are to be appropriated to the Board and SFLA
to carry out business operations.
2)Allows the Board to delegate to officers and employees of Cal
Expo the independent authority to appoint civil service
personnel.
3)Transfers approval powers from DGS to SFLA in financial
matters relating to the use of Cal Expo property. These
powers include the purchasing, acquiring, disposing, holding,
improving, leasing, and/or permanent improvements of real or
personal property owned by Cal Expo.
4)Transfers approval powers from DGS to SFLA in financial
matters related to Cal Expo's pledges or bonds. These powers
include pledging any of its properties and any and all
revenues, money, accounts, accounts receivable, contract
rights, and other rights to payment of whatever kind, pursuant
to such terms and conditions as are approved by the Board.
5)Deletes requirements for the Board to report annually to the
governor and the Legislature on Cal Expo's finances,
operations and plans for future activities at Cal Expo.
6)Requires Cal Expo to annually report to the SFLA all events
and operations of the preceding year and Cal Expo's financial
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condition.
7)Requires Cal Expo's finances to be audited annually by an
independent registered, certified public accountancy (CPA)
firm.
COMMENTS
1)Intent . This bill defines Cal Expo as an independent entity in
state government. According to the author, this serves as the
first stage of giving Cal Expo the flexibility to operate the
state fairgrounds as a business enterprise. The greater
independence sought by this bill includes replacing standard
state procurement and contracting rules for Cal Expo and
removing any oversight activities by the Legislature and the
governor over Cal Expo. In addition, this bill shifts DGS's
approval authority over fiscal matters related to the selling,
purchasing or leasing of Cal Expo property to SFLA. Supporters
state that these changes are needed to aid Cal Expo in gaining
new revenue streams and streamlining business operations.
Currently, Cal Expo has a backlog of deferred maintenance in
excess of $45 million and supporters think this bill is an
important step in securing funding to help Cal Expo upgrade
its facilities. Supporters state this bill is the first step
in helping Cal Expo preserve and create jobs, improve its
property and grow its business.
2)Background . The current 375 acre site of the California
Exposition and State Fair opened in 1968 as a modern state of
the art entertainment center and home to California's annual
state fair. Cal Expo is visited annually by more than 1.5
million people and it is estimated that these visitors
generate $250 million in economic activity. Cal Expo is an
aging facility, however, with a deteriorating infrastructure
which now accounts for more than $45 million in deferred
maintenance.
3)State Fair Leasing Authority . Given the deteriorating nature
of Cal Expo, in 2007 the Legislature passed a bill
establishing the SFLA. The intent of that legislation was to
create autonomy for Cal Expo by allowing them to enter into
leases and other agreements for the use of any property owned
or operated by Cal Expo and to issue bonds and other forms of
debt to carry out the SFLA's purposes. That legislation did
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not, however, give them the authority to sell or dispose of
the property. The structure of the SFLA and their authority is
modeled after the State Race Track Leasing Commission (SRTLC)
that exercises similar duties as it pertains to the Del Mar
fairgrounds and race track. The SRTLC has been overseeing the
Del Mar race track since 1968.
The SFLA board of governors is comprised of the Director of
Finance (DOF) (Chair), the Director of General Services (DGS),
the Secretary of Food and Agriculture (CDFA), and four members
of the Cal Expo Board of Directors. The State Treasurer and
the State Controller are also be seated on the board in the
event the SFLA decides to issue bonds or enter into other
forms of indebtedness.
4)Funding for the State's Network of Fairs . Prior to the
2009-2010 budget, the state's network of fairs and Cal Expo
were funded in part through horse racing licensing fees.
However, SB 16 X2 (Ashburn; Chapter 12, Statutes of 2009-10
Second Extraordinary Session) removed that funding stream and
declared that beginning on July 1, 2009, and annually
thereafter, $32 million would be appropriated from the state's
General Fund and paid into the Fair and Exposition Fund for
the financial support of Cal Expo and the network of
California fairs.
Fairs' operating budgets were comprised of locally generated
revenue and state support. The amount of General Fund dollars
each fair received varied depending on the size of its
operating budget. Fairs that have smaller operating budgets
received a greater amount of General Fund support. For
example, fairs with relatively small operating budgets, like
the Yolo County Fair, received a larger share of General Fund
support. In contrast, fairs with larger operating budgets,
such as the Orange County fair, did not receive any General
Fund support. In 2010-11, 71 local fairs received General Fund
base allocations in amounts that ranged from roughly $25,000
to $200,000 each, depending on the size of their operating
budget and the three county agricultural events received
combined support in the amount of roughly $400,000.
In 2010, Cal Expo received a total of $1.1 million from the
Fair and Exposition fund. Much of that funding was for
infrastructure, development planning, health and safety, and
unemployment insurance. For its general operating budget, Cal
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Expo received $265,000 from the fund.
5)Governor's Plan for the State's Fairs . Given the state's dire
fiscal situation, the 2011-12 budget eliminated the $32
million in General Fund support for the fairs. The
administration is currently evaluating the future structure of
oversight and control over the fairs. While Cal Expo is not
part of the fairs network, they share many of the same
obstacles to progress. A comprehensive proposal that includes
Cal Expo is expected from the administration.
In addition, there are 42 state-owned fairgrounds, including
Cal-Expo. Part of the overall solution is expected to include
ways in which these properties can be better managed to
increase revenue and assist with deferred maintenance.
Moreover, the Little Hoover Commission will soon be issuing
its recommendations for the future of the fairs and will
address the overall financial and structural problems
associated with the state's network of fairs, including Cal
Expo.
6)Constitutional Question . As currently drafted, this bill
appears to require the Cal Expo board to use minority and
women-owned businesses as contractors. This requirement may
violate Article 1, Section 31 of the California Constitution
which prohibits racial or gender discrimination or granting of
preferences in the awarding of government contracts.
7)Related Legislation . SB 282 (Cox; Chapter 293, Statutes of
2007) established the SFLA, for the purpose of entering into
leases or other agreements for the use of the Cal Expo race
track, or any other property owned or controlled by Cal Expo,
and to create a long term infrastructure master plan for the
development and improvement of Cal Expo.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081