The agency that runs the state-owned Del Mar Fairgrounds took the first step toward turning an underperforming satellite wagering center into a 1,900-seat concert venue, agreeing to spend $250,000 on preliminary planning for the conversion.
The board of directors of the 22nd District Agricultural Association, which oversees fairgrounds operations, voted unanimously to make the expenditure at its meeting on Tuesday, Jan. 3. The vote followed a report presented at the board’s December meeting, by a team of California State University San Marcos business students, that the project - which will cost an estimated $11 million in up-front construction costs - makes financial sense.
“The numbers they (the Cal State San Marcos team) presented show this does make sense for the 22nd DAA to re-purpose the SSRP to a 1,900-seat venue for music and entertainment,” said board member Stephen Shewmaker, who heads up a committee seeking new uses for the Surfside Race Place, as the satellite wagering center is called. The center is designed to allow patrons to bet on horse races beamed in by satellite from around the United States and even from other countries.
The 22nd DAA has been struggling for years to find a new use for the satellite wagering center, a 91,000-square-foot building that was completed in 1991 at a cost of $12 million in state funds. In recent years, both attendance and revenue have plummeted; in 2010, some 108,000 people visited the center, but that number had dropped to about 62,000 in 2014. Similarly, annual revenue generated by the center dropped from $471,771 in 2010, to $128,489 in 2014.
The trend has continued - a report showed that both daytime revenue and attendance declined in December 2016 compared to the same month one year earlier.
22nd DAA officials have blamed industry changes, such as the rise of Internet gambling and Indian casinos, for the declines.
Among the ideas considered and rejected for “re-purposing” the satellite wagering center were a high-end movie complex, a bowling and entertainment center and a mico-brewery.
Officials then began considering the idea of a concert venue. After conducting research internally, the 22nd DAA commissioned the study by the CSUSM business students.
“The team’s findings revealed that there is a demand for a concert venue of 1,900 seats in San Diego that has not been met by existing competitors. By analyzing the industry and the competitors in the local area, the team was able to determine that investing in a concert venue would be profitable,” said the executive summary of the business students’ report.
The students also determined that the 22nd DAA would recoup its initial investment in about five years.
The study based its financial assumptions on an average ticket price of $45, with 90 shows booked per year. It also recommended that the 22nd DAA partner with the Belly Up Tavern in Solana Beach to book talent for the new concert venue.
As the 22nd DAA moves forward with its plans, the $250,000 appropriation will be used for such tasks as exploring financing options and completing engineering drawings. One official said full construction plans could cost as much as $800,000, but Shewmaker said the board will have to approve any costs over the initial seed money authorized Jan. 3.
The district will also have to work with the California Coastal Commission to determine if the new use for the building will require an amendment to a previously obtained coastal permit.
Director David Watson said an amendment may not be needed, because the size of the building will not change, and it is already permitted for up to 5,000 people per day. Current daily attendance at the satellite wagering center is far below that number.
Officials said a portion of the building would be reserved for satellite wagering after the renovation.
Board president Russ Penniman said the district has set aside $5 million for re-purposing the satellite wagering center, and officials will be looking at a number of options for financing the rest of the project.
Officials stressed that the Jan. 3 vote was not a final go-ahead for the project. Penniman said the board will want to know more precisely how much the renovation will cost, where the money will come from and what will be required by the Coastal Commission.
“Once we get answers to those questions, then there will be a board discussion on moving forward,” Penniman said.
That discussion could take place within the next six months, officials said.
If the district does move forward with the concert venue project, officials said they will hire a project manager to oversee the work.