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City eyes fairgrounds purchase, works to bridge revenue gap

DEL MAR — As the recent proposal to sell the Del Mar Fairgrounds moved forward with momentum not seen when similar plans were previously suggested, the city was positioning itself to ensure “a seat at the table.” Those plans haven’t changed even though the site is off the for-sale list.
At their July 13 meeting, council members agreed to send Gov. Arnold Schwarzenegger’s office a letter stating the city is interested in possibly purchasing the property, either alone or by forming a joint powers authority with another agency. The letter was sent July 17.
Council also authorized staff to begin making contacts to determine who in the financial community would be best suited to work with the city if it decides to make a bid.
Schwarzenegger proposed selling several state-owned properties, including the fairgrounds, to help close California’s $26 billion deficit. But at about 8 p.m. July 21, Mayor Crystal Crawford learned the site had been taken off the for-sale list.
Crawford said the city will continue to monitor developments in Sacramento and proceed with due diligence process.
“We have to remember this is just a proposal,” Crawford said about the latest budget that no longer included the fairgrounds sale. “It’s my understanding there will still be a shortfall.
“Maybe (the property) is off the table in the short-term, which is just fine with us, but the smart thing to do is to keep an eye on this moving target. It could be put back on the table,” she said.
During a recent press conference in Escondido, Schwarzenegger said he believes the property should remain in the public domain under local control. He said even with a change of ownership, activities such as the annual fair and horse races should continue.
Councilman Carl Hilliard said he took those comments as “an invitation to local agencies to consider submitting a proposal.”
“It made perfect sense for us to take a good hard look at it,” he said. Appraisers have been on the property and a report is expected to be released Aug. 1. Some estimates value the property at $700 million. If the city were to buy the site, which the governor proposed selling to help close the state’s $26 billion budget deficit, it would have to do so using a bond based on revenue produced by the fairgrounds.
The city itself couldn’t provide a revenue stream to cover the debt, assistant City Manager Mark Delin said, adding that the city is “well positioned” to secure a loan based on its recently obtained AAA credit rating.
Before any decision is made, Councilman Richard Earnest said additional community input is needed. During the recent fair, 99.99 percent of 57,000 postcards collected indicated opposition to the sale. Most respondents were San Diego County residents.
Crawford said staff will continue to gather information about financing a possible purchase. The item will be discussed at the July 27 meeting. Crawford doesn’t anticipate any change in direction.
Meanwhile, Crawford and Hilliard are working with officials from the 22nd District Agricultural Association, which operates the site, to get an accurate estimate of how much money the city receives from the fairgrounds versus the amount it spends to support the facility.
Crawford said the cost to provide services such as fire protection, street maintenance and litter removal has increased while revenue have been decreasing. The city also provides law enforcement for all events except the fair and horse races.
Facts and figures
Annual activities at the 340-acre fairgrounds have increased from about 100 in 1993 to more than 300, attracting nearly 3 million visitors per year.
Crawford said the facility is the city’s largest water and sewer customer and is the greatest source of false fire alarms — more than 42 percent in the past four years. She said the 22nd DAA owes the city $177,000 in clean water fees — but is working “very diligently to decrease that — and is perhaps the main reason Del Mar has the highest per-capita sheriff costs when compared to other beach cities.
The fairgrounds accounts for about 20 percent of the city’s land area but is exempt from property taxes. The city pays rent to have its fire station on the site. More than $14 million in capital improvement projects related to the property are planned within the next 10 years.
In 1984, the city elected to eliminate its admissions tax and instead receive a percentage of race wagers. Revenues jumped from $208,000 in 1984 to a high of $471,000 in 1990. In subsequent years that amount declined dramatically — less than $200,000 annually since 1997 — partially due to the advent of Indian gaming and off-track betting.
The city receives 1 percent of all sales tax revenue from the fairgrounds. That number peaked at slightly more than $600,000 in 2006 and declined to less than $500,000 during this past fiscal year.
One source indicated fairgrounds gross revenues in 2007 were $95 million. That year the city received $782,000, or less than 1 percent. Crawford said fairgrounds officials said the gross revenue numbers weren’t accurate. Crawford said she has not yet received more detailed information but she expects that to be forthcoming.
In response, Becky Bartling, the fairgrounds deputy general manager, said revenue at the fairgrounds has also been declining, but added that events at the site accounted for more than 35 percent of the city’s annual sales tax revenue in 2008.
She said additional activities since 1993 have drawn more people who spend money within the city with no significant increase in traffic. She said fewer cars were parked this year compared to 10 years ago.
Bartling noted that when the clean water fee was proposed, the fairgrounds believed it was exempt. She also said the facility now pays for false alarms.
She said the 22nd DAA spent $1.9 million to build Jimmy Durante Boulevard. Because the city receives a percentage of the horse racing handle, it is required to provide traffic control during the race season, but does not. Bartling said that equates to more than $1 million for the past 24 years.
She also said the fairgrounds performs street sweeping and trash removal on Jimmy Durante during the fair. “We clean up what we mess up,” she said. During emergencies, it provides free, on-call use of heavy equipment such as tractors, water and vacuum trucks, street sweepers and dump trucks. The site is used at no cost for emergency drills and to store lifeguard towers.
Council members agreed the facility is an asset to the city. “We have enjoyed a very good working relationship,” Hilliard said. “They have been a good neighbor to us in many respects, but we have differences and we’re trying to work through those differences.”