State fairgrounds find themselves in ‘survival mode’

Fairgrounds across California are in the same dire financial straits.

Forced by the COVID-19 pandemic to cancel all mass gatherings since mid-March, the districts that run the state-owned operations say revenue has “all but dried up.” Nearly half report they will be out of money by the end of the year.

Some say they may be forced to close, including the 22nd District Agricultural Association in Del Mar.

“This is catastrophic for the fairs and fairgrounds industry,” said Sarah Cummings, general manager on the Western Fairs Association, a nonprofit trade group founded in 1922.

“Fairs were already in survival mode, and this (COVID crisis) just compounds that,” Cummings said. “It’s devastating, unprecedented and unimaginable.”

The San Diego County Fair alone generates $12 million in annual net profit. In all, large events at the Del Mar Fairgrounds provide 90 percent of the 22nd DAA’s $87 million in annual revenue.

California has 52 district agricultural associations, most formed by state law in the 1930s and ‘40s for promotional purposes when farming still dominated the state’s economy.

Most of the districts were created along county boundaries and supervise state-owned property used primarily for entertainment, education and agricultural-related activities. The associations host a total of 24 county fairs, large and small, along with other regional fairs, a few fruit and nut festivals, and a wide range of other events.

Nearly all those events have been shut down or postponed this year by the COVID-19 restrictions that prevent large gatherings.

Fairgrounds officials also partner with various industries such as food and merchandise vendors, carnival operators, entertainers, and other small businesses. All are feeling the effects of the novel coronavirus.

A survey by the fairs association showed that 40 percent of agricultural districts will be out of money by December, Cummings said.

Agricultural districts are different from most other government agencies, in that they receive virtually no tax revenue. Almost all their revenue is generated by the events they hold and the businesses they operate.

Horse racing was a big money-maker for many of the districts decades ago. But the popularity of horse racing has declined in recent years for a number of reasons, including an increased public focus on animal welfare. Because of that the fair industry has slowly been stepping away from the sport.

Also, Gov. Jerry Brown, as part of budget cuts in 2011, eliminated what little state funding there was for agricultural districts and their events.

Many fairgrounds have had to lay off full-time employees, Cummings said. Also, they can’t hire the thousands of part-time and temporary workers they normally need this time of year.

Fairgrounds across California are looking at alternative business models as a way to diversify their revenue. The more fortunate ones already have long-term leases with tenants that used buildings for office space or retail businesses.

“Many fairgrounds have schools on the property,” Cummings said. “That works well because the fairs are held when school are on summer break ... it’s a nod to adaptability.”

She commended Del Mar fairgrounds General Manager Tim Fennell and the fair board for some innovative approaches they’ve already taken to survive the tough times.

Del Mar, which has 156 full-time permanent employees, leased a large chunk of its fairgrounds parking lot to car companies in April for the storage of thousands of vehicles. With hardly anyone traveling, the companies need a place to store their surplus inventory.

Also, fairgrounds officials have asked Gov. Gavin Newsom for $20 million in emergency aid. So far, there’s been no response, but Fennell said Thursday he’s hopeful.

Another avenue Del Mar is taking is to request a $5 million loan from the Orange County Fair board, which oversees the 32nd District Agricultural Association.

Fennell and other Del Mar officials made their case for the loan at the Orange County board’s meeting in May. The board members there agreed to consider the request and will discuss it further at their next meeting.

Orange County also cancelled its fair this year, but the financial outfall there is less than in San Diego County.

Attendance at the Orange County Fair is about 1.3 million, second in the state only to Del Mar’s 1.5 million. However, the 32nd DAA has more money in reserves, no significant outstanding debt, and some reliable sources of year-round revenue.

The fairgrounds in Costa Mesa includes a year-round, three-acre working farm that showcases the typical crops grown in California, such as lettuce, green beans and strawberries, and livestock such as cows, pigs, goats, sheep and chickens. About 100,000 school children tour the farm every year.

“That keeps us very closely tied to our mission of keeping agriculture alive,” said 32nd DAA General Manager Michele Richards.

In all, the Orange County fairgrounds normally holds 150 events a year, half the number of Del Mar, but with a similar range of pet expos, gem fairs, craft festivals and entertainment. Most of those events have been cancelled since mid-March.

The 32nd DAA is projecting a loss of $15 million to $18 million this year as a result, Richards said.

Large gatherings such as fairs were the first to close and probably will be the last to open again under California’s public health guidelines for the pandemic. That means the ag districts that run fairgrounds were hit harder than most other agencies.

Still, with cost-cutting measures in place, the 32nd DAA will survive until large events return and the district is back in black ink, Richards said.

“The staff and board have been very fiscally responsible over the years,” Richards said. “We carefully plan our events and budget conservatively. Our fair has been successful, and we put money away for a rainy day.

Fairgrounds have been a place for people in the farm industry to meet, celebrate and make money for centuries.

“Fairs are important to our community,” she said. “We really are the community gathering place.”

The San Diego County Farm Bureau is only marginally involved with the Del Mar Fairgrounds, but recognizes the need for activities there.

“It’s very important to help educate the public about the connections between agriculture and everyday life,” said Farm Bureau Executive Director Hannah Gbey. “We hope to see that continue.”

The Farm Bureau is a big supporter of the fair’s annual junior livestock auction, an important event for students in 4-H and Future Farmers of America. Club members raise their own animals and sell them at the fair, an experience that for some can lead to careers in agriculture.

This year’s junior livestock auction will be conducted online, which will help the students recover their investments in their animals, but it won’t do anything for bottom line at the fairgrounds.

Early this year, before the COVID-19 crisis began, the Del Mar fair board launched a strategic planning initiative to look at how the fairgrounds might be better used by the public for agriculture, education, entertainment and recreation.

Participants include members of NeverAgainCA, a Del Mar-based group of residents formed to stop gun violence after the mass shootings at a Florida high school in 2018. Their efforts helped obtain state legislation that will end gun shows at the fairgrounds beginning next year.

Members of NeverAgainCA have attended most of the Del Mar fair board meetings for more than two years and have strong opinions about the property’s future use.

“The current operation has left 340 acres of beautiful, strategically located land unused but for small events the balance of the year,” said Rose Ann Sharp, the group’s founder, in a recent email. “This unique parcel, with year-round moderate weather, adjacent to a lagoon, hiking trails, the beach and ocean, with good public transportation and highway access, should operate year-round for the benefit of the community.”

Year-round revenue could be generated by public-private partnerships or leases for a university research facility or a conference center. Public walking trails, biking, horseback riding, sports events and concerts could be scaled back quickly to COVID-19 requirements, she said.

“Facilities would be dedicated to conducting agricultural, environmental, oceanic research, with acres dedicated to demonstrating environmentally responsible farming and a conference center promoting education and research, and the almost-built entertainment center,” Sharp said.

Instead of focusing on hosting the largest county fair and the biggest horse-racing calendar in the state, a smaller fair and less horse-racing would allow Del Mar’s general manager to devote more time to overseeing the contracts and leases need to operate the new year-round ventures.

“This would regularize the revenue to the fairgrounds and expand its use to the community,” Sharp said.

The 340-acre fairgrounds and the nearby 65-acre equestrian park also owned by the 22nd DAA are worth millions of dollars, but the actual value of the property is difficult to determine. It depends on many factors, such as what the site is used for and what might come next.

“The range of value could be all over the place,” said Gary London, a real estate economist with the San Diego firm London Moeder Avisors in San Diego. “The issues relate to whether it’s raw land or entitled.”

“It’s worth more if they were to be a little creative, and invited large urban developers to create a master plan for the property,” London said.

A master plan would build around the site’s historical uses including parts of the county fair, perhaps horse racing, and the new concert venue being built. All those activities are likely to return, at least in some form, after the COVID-19 crisis passes.

However, the entitlement process is a costly investment and probably would take a minimum of five to 10 years, he said. It would involve numerous federal, state and local agencies, and could face push-back from residents and legal challenges.

Recent local examples include the Marisol resort project proposed for Del Mar’s North Beach bluffs, which was defeated by city voters in March. Also the North River Farms residential development, approved last year by the Oceanside City Council, but placed on the ballot by a citizens’ referendum to be decided by voters in November.

“There would be all kinds of contingencies,” London said of the fairgrounds property. “A project of this scale, there are very few players that would be willing to tackle that.”

Gov. Arnold Schwarzenegger proposed selling the fairgrounds along with several other state properties in 2009 as a way to raise as much as $1 billion in much needed cash. The idea was widely opposed, and few months later the governor said it was off the table.

Fennell, Del Mar’s general manager, said Thursday any sale is unlikely.

“I don’t see that happening at all,” he said. “This is San Diego’s fairgrounds. You want it here for entertainment, education ... and in times of need.”

Several times over the years, Del Mar has provided emergency shelter for horses and other livestock from across the county during the region’s catastrophic wildfires. In April, the fairgrounds teamed up with the San Diego Food Bank to provide emergency food distribution for about 1,000 families in need because of the COVID-19 crisis.

Fennell fully expects the county fair to return next year, probably with new health care precautions, more hand-washing stations and other changes throughout the property, he said.

The year-round entertainment center in the fairgrounds’ remodeled offtrack betting complex should be finished and open by the end of this year or early next year, added. In the meantime, fairgrounds administrators are exploring all their options for boosting revenue.

“I’m very optimistic, or I wouldn’t be in this business,” he said.

-- Phil Diehl is a reporter for The San Diego Union-Tribune