BILL ANALYSIS �
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