To: Sonoma County Board of Supervisors
Department or Agency Name(s): Sonoma County Fair & Exposition, Inc.
Staff Name and Phone Number: Rebecca Bartling, 707-545-4218
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
2022 Sonoma County Fairgrounds Budget
End
Recommended Action:
Recommended action
Adopt a Resolution approving the 2022 Operating and Capital Improvements Budget and the 2022 Position Allocation List, for Sonoma County Fair and Exposition, Inc.
end
Executive Summary:
Pursuant to Government Code 25905, the Board of Supervisors contracts with the Sonoma County Fair and Exposition, Inc. (Fair) to operate the Sonoma County Fairgrounds. The Board of Supervisors retains authority to approve and/or alter the budget of the Fair*. The Fair Board of Directors request that the Sonoma County Board of Supervisors approve the 2022 annual budget, as adopted by the Fair Board of Directors on December 21, 2021.
The 2021 budget was unprecedented, in that it forecasted no 2021 County Fair, due to the effects of the COVID-19 public health emergency. Circumstances improved that allowed the County to loosen restrictions resulting from mass-vaccinations in early 2021. The Fair returned to the Board of Supervisors with an adjusted budget to reflect the changes in projected revenues and expenditures, as well as a request for a revision to our allocated positions.
The 2022 budget forecasts the return of the full annual County Fair. While non-fair Interim revenues (non-fair building and facility rentals, and Recreational Vehicle Park and golf course use) are forecast to increase significantly from 2021, they are not expected to recover to pre-COVID levels, as hesitancy to gather inside and enforce mask mandates will persist with some customers. A return to capacity and/or gathering limits in 2022 would affect revenues at the Fair. The Fair produced a modified annual fair in 2021, limited to a maximum daily attendance, with masking requirements. Restrictions in 2020 precluded holding the annual fair. In 2020, the Fair reduced expenses, primarily through staff reductions that continued through most of 2021. The Fair will maximize revenues under the limitations for gatherings, if any, that are set in 2022. The Fair will reduce expenses, including labor costs, should there be a significant reduction in revenues.
*There are no specific statutes governing the Board of Supervisors process for consideration of the Fairgrounds budget, thus Government Code 29064 public hearing noticing requirements do not apply.
2022 Budget Overview
The 2022 budget includes $11,585,323 in expenditures financed with $11,260,873 in revenues and $324,450 in fund balance, which is a 129.5% increase over the prior year, primarily due to an increase in all operational costs attributable to returning to the renting of the fairgrounds and producing the annual County Fair. The budget projects income of $876,697, and identifies capital improvement projects of $1,135,000.
Fund balance is budgeted to decrease $324,450 in 2022, due primarily to $1,135,000 in capital improvements, and $66,147 in debt service on a $477,500 U.S. Small Business Administration (SBA) Paycheck Protection Program loan obtained in 2021, partially offset by $876,697 in income. The Fair will submit a loan forgiveness request to the SBA in the first quarter of 2022. The 2022 use of fund balance decreased by $1,413,665 from the prior year, an (81.3%) change.
Discussion:
The Fair’s 2022 budget is comprised of operational and non-operational components.
Operating revenues consist of County Fair 45.8%, Interim Events (non-fair building and facility rentals, and Recreational Vehicle Park and golf course use) 31.2%, Horse Racing and Satellite Wagering 12.8%, of total revenues. Non-operating revenues are 10.2% of total revenues.
Operational expenditures by program area include County Fair 25.7%, Maintenance 24%, Interim Events 15.9%, Administration and Debt Service 12.2%, Horse Racing and Simulcast 12.3%, and Capital Improvements 9.8%.
Summary of Significant Budget Changes and Projections from Prior Year’s Adopted Budget
Expenses by Category
1. Salaries and Benefits increased $3,417,087 or 162.7%, to $5,517,801. This includes an increase in seasonal staff expenses $1,968,154, and allocated County staff expenses $1,448,933 associated with the increase in permanent position allocations from 15 to 25 that include positions that were eliminated in June of 2020 in an effort to reduce expenses due to impacts from COVID-19. Increased staffing resources are necessary to produce and operate the return of the annual County Fair, facilitate increased interim event facility rental activity (weddings, concerts, festivals), the return of horse racing to the fairgrounds and reopening of the Jockey Club facility, as well as resumption of full fairgrounds operational and maintenance activities.
2. Services and Supplies increased $2,695,148 or 124.1% to $4,866,375.
• Increase in expenses from the prior year are primarily as a result of producing the annual County Fair, due to the anticipated return of the Fair in 2022, $1,877,718. Expenses include promotion and advertising costs, contracted security, Hall of Flowers and carnival expenses as well as Chris Beck arena shows, and concerts.
• Other expenses include Interim event expenses associated with RV Park services and facility rental activity, $204,868., Administration and Maintenance of building, equipment and grounds expenses, $586,911, and Horse Racing and Satellite Wagering to include advertising and turf material expenses due to the return of horse racing to the fairgrounds and the reopening of the Jockey Club facility, $25,650.
3. Capital Expenditures increased $1,022,000 or 904.4% to $1,135,000.
• The budgeted 2022 Capital Expenditures include roof replacement on a number of buildings, HVAC improvements, partial race track rail replacement, RV park improvement and asphalt repair. Equipment purchases include a forklift, a high lift, metal detectors, a portable ticket booth, and a generator and transfer switch for Grace Pavilion.
• Given the uncertainty over the budget, most capital projects were put on hold during 2021, leading to the high percentage increase in the Capital Expenditures budget.
4. Other Expenses decreased $607,728 (90.2%) to $66,147.
• The decrease in Other Expenses is due to lower scheduled debt service payments on the Fair’s second Paycheck Protection Program loan of $477,500 secured in the prior year, should the loan not be forgiven by the SBA. If the loan is forgiven, these expenditures totaling $66,147 will not be needed.
Revenue (Sources)
1. Use of Fund Balance decreased $1,413,665 (81.33%) to $324,450.
Due to the reduction in budgeted revenues in 2021 as a consequence of continued impacts of the COVID-19 to Fair operations, the Fair relied on fund balance to support remaining operational expenses. Given the anticipated return of the annual County Fair and resumption of other revenue generating activities and external funding contributions for capital expenditures in 2022, use of fund balance has decreased compared to the prior year.
• Operating income of $21,697, as compared to a net loss of ($951,239) in the prior year.
• Capital expenditures of $1,135,000, as compared to $113,000 in the prior year. Funding for 2022 capital improvements include contributions of $780,000 from the Targeted Support Program of the California 2021 Budget Act, $25,000 from Sonoma County Fair Foundation and $50,000 from County of Sonoma
• Principal payments on Paycheck Protection Program loan $66,147, as compared to 673,875 budgeted in the prior year.
2. Fees and Charges for Services increased $7,085,171 or 213.4% to $10,405,873.
• Increase in Fair revenue $5,149,309 or 3,186%.
a. The County Fair will return in 2022 with attendance projected to return to close to pre-pandemic levels. Fair revenues include Commercial Space, Carnival, Concessions, Exhibits, Parking and Sponsorships. Additionally, Fair ticket prices will increase by $3.00 in 2022 for adult and youth tickets at the gate and in advance.
• Increase in Interim revenue $1,583,176 or 77.8%.
a. The Fair is once again booking larger events for 2022.
• Increase in Live and Satellite Horse Racing $352,676 or 31.35%
a. Live Horse Racing returns to the annual fair with eight days of racing in 2022.
b. The Jockey Club is to reopen in the first quarter of 2022.
3. Other Departmental Revenue is increasing by $855,000 due to Capital Improvement contributions of $780,000 from the Targeted Support Program of the California 2021 Budget Act, $25,000 from Sonoma County Fair Foundation and $50,000 from County of Sonoma.
Other Budget and Financial information
Cash Balances - As a result of factors described in detail in the 2021 Financial Overview below, year- end 2021 cash balances are projected to be $8,349,905, an increase of $3,944,579, from December 2020. Cash reserves are projected to be $7,245,455 at December 31, 2022 a decrease of $1,104,450, due primarily to capital asset purchases.
Debt Service -In February 2021, the Fair applied for, and received, a second loan of $477,500 under the U.S. Small Business Administration (SBA) Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Paycheck Protection Program (PPP) provided small businesses funds for 8-24 weeks of payroll costs including benefits, rent, and utilities. The Fair used loan proceeds to cover payroll and operational expenses. The loan carries an annual interest rate of 1% and a term of five years. The program provides borrowers the opportunity to apply for loan forgiveness after all loan proceeds are used, up to the maturity of the loan. The Fair will apply for loan forgiveness on the $477,500 debt and believes that most, or all, of the loan will be forgiven. However, as of the date of this writing, neither the Fair’s lender, nor the SBA has determined the forgiveness amount. There will be no monthly loan payments due if the loan is 100% forgiven. Should the loan not be forgiven, monthly loan payments of approximately $8,268 will be due beginning in May, 2022. In the event that the loan is not forgiven by SBA, the Fair will use available cash reserves to make payments. The impact of debt payments on cash is reflected in the 2022 budget.
2021 Financial Overview
Pre-Depreciation Net Income - 2021 pre-depreciation net income is projected to be $2,855,492, compared to a $385,969 pre-deprecation net income in 2020 (a $2,469,523 increase).
2021 Interim Event net revenue (net revenues other than Annual County Fair that includes facility rentals, and RV Park use) is projected to increase $146,538 when compared to 2020. The increase is primarily due to an increase in rental activity as a result of easing of state and local restrictions on mass gatherings in mid-2021.
2021 Annual County Fair net revenue increased $1,837,908 from 2020. The fairgrounds were able to produce a modified annual fair in 2021, of limited scope, due to the Public Health Officer’s partial relaxation of restrictions on mass gatherings. However, the Fair’s racing meet was again held at Golden Gate Fields, in Berkeley, as the allocation of race dates was finalized before the Fair’ decision to resume the annual fair was made.
Despite the limited scope of the 2021 fair, the Fairgrounds was able to hold a successful, Junior Livestock Auction. The auction was presented in a hybrid live and virtual format, while the livestock show was held live, at the fairgrounds. Proceeds from the sale of animals helps the junior exhibitors pay for the raising of the animal as well as provide much-needed funds to further their education. Approximately $1,469,478 was raised from the sale of 414 lots. This compares to sales of $1,134,510, and 295 lots sold, in 2020. The 2020 was virtual only, with no live show or sale.
2021 Miscellaneous Non-Fair revenue increased $600,713 when compared to 2020. As noted below, the Fairgrounds applied for and received forgiveness on its $940,000 PPP loan. The increase due to the forgiveness was partially offset by a decrease in non-fair revenues related to the County reimbursement for the use of 4.0 Fairgrounds Maintenance Worker employees reinstated by the Board of Supervisors in June 2020 to ensure staffing available to activate the fairgrounds as an evacuation center in the event of a disaster emergency. These positions were assigned to support to the COVID-19 Response Plan RSS warehouse and vaccination efforts, and gradually transitioned back to fully support County Fair operations in the fall of 2021.
SBA Loans - In January 2021, the Fair applied for, and received forgiveness on its $940,000 PPP loan that it obtained in April, 2020.
AB 1499 New Fair Funds - On October 14, 2017, Governor Brown signed Assembly Bill No. 1499.
AB 1499 requires a seller of taxable goods to identify sales made at California fairgrounds. These amounts are reported to the California Department of Finance. The bill requires that an amount equal to 3/4 of 1% of the total amount of gross receipts reported to the Department of Finance be included in the subsequent annual Governor’s Budget for the Department of Food and Agriculture for allocation to fairs. The bill requires that this amount be transferred by the Controller to the Fair and Exposition Fund, which is continuously appropriated, and would allocate these moneys to fairs for specified fair projects and subject to certain conditions. That law also provides that a portion of these funds may be allocated to California fairs for general operational support.
This bill has no specified end date.
The Fair received its first allocation of AB 1499 fund in February 2021 in the amount of $199,240. The California Department of Finance distribution plan was based on the fair's proportionate size relative to the entire fair industry. This distribution plan was developed based on the financial impacts of COVID-19 and may change in the future.
These funds were used by the fair for general repairs, maintenance and operational expenses.
Budget Act of 2021 - On June 28, 2021, Governor Newsom approved the Budget Act of 2021, which included $50 million in General Fund to the entire Network of California Fairs, for operational support {Targeted Support Program}. In September of 2021, Sonoma County Fair & Exposition, Inc. applied for an allocation of funds under the Targeted Support Program. In November 2021, Sonoma County Fair & Exposition, Inc. was awarded $780,000 under the Target Support Program. It is the intent of the fair to use these funds for capital improvements, during 2022.
Capital Improvement Project list
The Capital Improvement Project list is shown as Attachment #3. Improvements include roof replacement on a number of buildings, HVAC improvements, partial race track rail replacement, RV park improvement and asphalt repair. Equipment purchases include a forklift, a high lift, metal detectors, a portable ticket booth, and a generator and transfer switch for Grace Pavilion. As noted in the 2021 Overview (above), the fair will utilize funds received under the Budget Act of 2021 to fund a portion of the Fair’s budgeted $1,135,000 capital improvements. Additional funding will come from 2022 operations, and reserves.
Position Allocation List
Sonoma County Fair revised its 2021 budget to include an annual Fair (modified in size and maximum attendance) and an increase in projected Interim event revenue following the state’s plan to move beyond the Blueprint for a Safer Economy on June 15. On July 13, 2021, the Board approved the Fairgrounds request to add three position allocations necessary to produce the modified Fair, and provide the customer and maintenance support for the Interim events: 1.0 Interim Events Coordinator, 1.0 Booking & Reservation Coordinator, and 1.0 Senior Account Clerk, bringing the total Fairgrounds allocated positions to 18.
Due to changes in the County’s Health Orders, the Fairgrounds anticipates being able to produce a full-scope annual fair, and significantly increase facility rental activity in 2022. Therefore, the Fair is requesting addition of eight (8) new positions, and deletion of one (-1) position for a total of seven (7) net potion adds as part of the 2022 Fair Budget. The majority of the requested allocations are positions that were eliminated in June of 2020 in an effort to reduce expenses as the Fairgrounds could no longer host large gatherings as a result of impacts from the pandemic.
If approved by the Board, the requested allocations will total 25 full time equivalent positions, a 10 or 66.67% increase from the prior year adopted budget. Please see Attachment #4 for the listing requested to be approved.
The 2022 calendar year expenses for the new positions reflect a start date of March 01, 2022. The ten-month position expenses totaling $712,296 are as follows:
• 1.0 Storekeeper - $83,026
• 4.0 Fairgrounds Maintenance Workers - $367,217
• 1.0 Fairgrounds Premium Exhibit Assistant - $113,833
• 1.0 Heavy Equipment Technician - $133,796
• 1.0 Chief Financial Officer/Deputy Fair Manager - $185,003
• (1.0) Fair Financial Services Officer - ($170,579)
The calendar year expenses for the above allocations have been included in the 2022 budget. The additional allocations will be funded by increases in net revenue from the County Fair and non-fair Interim events.
The Storekeeper is responsible for maintaining appropriate inventory levels of tools and materials required to repair and maintain the Fairgrounds campus, set up and tear down events, and facilitate the production of the annual County fair and interim events. This position ensures that stock is rotated, waste is minimized and purchases are made from the most competitive vendors.
Fairgrounds Maintenance Workers perform a wide variety of jobs at the Fairgrounds including setting up for events, janitorial and trash duties during the fair, assisting more senior workers with landscaping and building maintenance and maintenance of the race track.
The Fairgrounds Premium Exhibit Assistant assists in planning, organizing and coordinating the Sonoma County Fair Premium Exhibit Program, during the annual fair. Duties include dealing with exhibitors and judges, answering phones, preparing contracts and agreements, as well as recruiting and supervising seasonal employees. The position is also responsible for assisting in the planning and execution of the annual Harvest Fair. The Harvest Fair has not been held since 2019. It is anticipated that the Harvest Fair will return in 2022.
The Heavy Equipment Technician is responsible for the diagnosis, maintenance and repair of Fairgrounds vehicles and machinery. This position was not required with the reduced operating activity at the Fairgrounds. With the return of a full annual fair, and with the increase in Interim rental activity the Fairgrounds requires a position dedicated to the maintenance and repair of Fairground’s equipment.
The Chief Financial Officer/Deputy Fair Manager position replaces the Fair Financial Service Officer position. The duties required of the current Fair Financial Services Officer have moved beyond this position to now align with the Chief Financial Officer (CFO)/Deputy Fair Manager. The Fair has complex accounting needs, and has expanded role in the financial management of the annual horse racing meet. This role includes distributing approximately 3 million in horse racing purses, payments to off-track wagering facilities, payroll for racing tellers and overseeing all contracting for the annual race meet. Additionally, this position will provide oversight of the Off-Track Wagering Facility and serve as Department Manager for Human Resources.
The proposed position changes have been approved by the Human Resources Department. Sonoma County Fair requests the Board adopt a Resolution amending the Position Allocation List of Sonoma County Fair to add 1 - Storekeeper, 4 - Fairgrounds Maintenance Workers, 1 - Fairgrounds Premium Exhibit Assistant, 1 - Heavy Equipment Technician, 1 - Chief Financial Officer/Deputy Fair Manager, and delete 1.0 Fair Financial Services Officer effective March 01, 2022.
|
|
Calendar Year 2021 Adopted Budget |
July 13, 2021 Board Action |
Calendar Year 2022 Recommended Budget |
Change from 2021 Adopted Budget |
|
Total Permanent Positions |
15 |
3 |
25.00* |
10.00 |
*The 2022 recommended budget includes 3.0 positions approved by the Board on 7/13/21, and addition of 7.0 position allocations.
The 4.0 maintenance positions reinstated by the Board on June 23, 2020 to manage the Fair’s ability to function as an emergency evacuation center in the event of a disaster and provided critical support of the COVID Response Plan through October 2021, resumed full time support of fairgrounds operations effective November 2021.
Strategic Objectives
We have budgeted for a traditional Sonoma County Fair with all the same exhibits, live horse racing and entertainment that have traditionally been presented each year. However due to the continuing uncertainly of the COVID-19 Pandemic, the 2022 budget includes funds for any requirements that may be needed at the entrance gates regarding patrons showing proof of vaccination or negative COVID test.
Many of the Fairgrounds traditional events will be returning in 2022, however we are anticipating that some of our large Interim indoor gatherings, including our Latinx dances, will not occur until mask mandates are no longer required. The 2022 Fairgrounds Interim budget contemplates this loss in revenue and may be noticeable if compared to other non-COVID years. However other unique rental opportunities are on the horizon that may make up for this revenue loss.
With many of the staff positions returning in 2022, the focus will be on building and grounds maintenance and repair and providing services to Interim rental clients who will be returning in the new year. And, as always we will focus our efforts on promoting the Sonoma County Fairgrounds as an attractive regional asset to the community at-large.
Strategic Plan:
N/A
Prior Board Actions:
The Board of Supervisors approves the fair budget, annually.
Fiscal Summary
|
Expenditures |
FY 21-22 Adopted |
FY22-23 Projected |
FY 23-24 Projected |
|
Budgeted Expenses |
|
|
|
|
Additional Appropriation Requested |
|
|
|
|
Total Expenditures |
|
|
|
|
Funding Sources |
|
|
|
|
General Fund/WA GF |
|
|
|
|
State/Federal |
|
|
|
|
Fees/Other |
|
|
|
|
Use of Fund Balance |
|
|
|
|
Contingencies |
|
|
|
|
Total Sources |
|
|
|
Narrative Explanation of Fiscal Impacts:
The Sonoma County Fair budget total expenses, revenues, and fund balance use for calendar year 2022 are $11,585,323.
STAFFING IMPACTS:
|
Position Title (Payroll Classification) |
Monthly Salary Range (A-I Step) |
Additions (Number) |
Deletions (Number) |
|
Storekeeper |
$3,734.21 - $4,537.75 |
1.0 |
|
|
Fairgrounds Maintenance Worker |
$3,642.02 - $4,426.43 |
4.0 |
|
|
Fairgrounds Premium Exhibit Assistant |
$4,175.98 - $5,075.18 |
1.0 |
|
|
Heavy Equipment Technician |
$5,598.70 - $6,804.01 |
1.0 |
|
|
Chief Financial Officer/Deputy Fair Manager |
$9,270.29 - $11,270.45 |
1.0 |
|
|
Fair Financial Services Officer |
$7,863.22 - $9,557.27 |
|
-1.0 |
Narrative Explanation of Staffing Impacts (If Required):
The proposed positions will result in an estimated cost of $712,296 (ten months), and will be funded by increases in net revenue from the County Fair and non-fair Interim events. The estimated annual cost for 2023 is estimated at $840,743 (twelve months).
Requested allocations total 25 full time equivalent positions for 2022, a 10 or 66.67% increase from the prior year (Attachment 4).
Attachments:
Attachment #1 Board Resolution
Attachment #2 Financial Summary
Attachment #3 Capital Improvement Budget
Attachment #4 Sonoma County Fairgrounds Position Allocation List
Attachment #5 Fair 2021 Budget as Approved by Fair Board
Attachment #6 PowerPoint Presentation
Related Items “On File” with the Clerk of the Board:
None