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City officials reject fairgrounds impact study, call it flawed

DEL MAR — A collaborative study conducted to determine the financial impacts events at the Del Mar Fairgrounds have on Del Mar and Solana Beach was deemed flawed by council members at the June 20 meeting.

According to the study by Economic & Planning Systems, Del Mar nets a little more than $1 million annually, with most of that coming from sales and transient occupancy taxes.

Council members agreed with conclusions from the city’s Finance Committee that the TOT, paid by hotel visitors, is based on flawed intercept surveys and the allocation is “mathematically highly improbable.”

The joint study was ordered as part of a 2013 legal settlement over proposed development at the fairgrounds between Del Mar, Solana Beach, the San Dieguito River Park Joint Powers Authority and the 22nd District Agricultural Association, which governs the state-owned fairgrounds.

Together both cities and the 22nd DAA developed a scope of work and selected the consultant. The three entities equally split the $90,000 cost.

The consultants collected data from both cities on sales and transient occupancy taxes. They also included parimutuel revenue from satellite wagering and possessory interest tax, the latter of which only Del Mar receives.

Del Mar receives sales tax revenue from all onsite sales because the facility is in that city. Solana Beach receives no money from that source.

Information was also garnered from intercept surveys during the Good Guys Car Show, Del Mar National Horse Show, San Diego County Fair, summer thoroughbred race meet and three-day KAABOO music festival.

Additional data was collected from area businesses and city departments such as public works.

Economic benefits not included were direct employment and nontaxable spending.

Three types of costs incurred by the cities that could not be quantified were also not included.

For example, if a law enforcement officer or firefighters assigned to Del Mar responded to an incident at the fairgrounds and something happened in Del Mar, Solana Beach safety personnel would be called.

Those costs incurred by Solana Beach were not included. Also not considered were the costs of responding to incidents not at the fairgrounds caused by people who were in the area to attend events there.

Quality-of-life costs such as the impacts of noise and traffic were also not addressed in the final analysis.

According to the report Del Mar receives $681,300 in sales tax and $561,600 in TOT funds. The consultants estimate the city spends $285,100 for fire, medical and sheriff services during fairgrounds events.

Another $55,000 is spent on public works and other general government expenses.

After reviewing a draft of the study the Finance Committee passed a resolution declaring the report does not meet the terms of the settlement agreement and council members should not accept it.

Committee member Will Holliday, who said he appreciates the challenges presented by the cross-agency collaborations, noted the report includes good data.

“But there’s some imperfections in this study and we believe those imperfections to be quite material,” he said. “The study’s conclusions should be rejected. … To just take this report as it is I think would be a mistake.”

Barry Entous, also a Finance Committee member, said the report is “incomplete” and “based on assumptions that are not acceptable.”

“They did a lot of work but the conclusions are not accurate,” he said. “I believe this is a very flawed study.”

According to the committee’s analysis the city’s fiscal benefit is not $1,035,200.  The group estimates Del Mar nets about $50,000 “and could in fact have a net fiscal cost of as much as $1.153 million.”

Council members said they appreciate the work that was done but agreed with the committee’s conclusions.

“I think it’s a challenging task to work with three different hats,” Councilman Al Corti said, adding that in that scenario the result will likely be “gray.”

He said the way the report was crafted may be accurate but he doesn’t agree with the final impact numbers.

Councilman Don Mosier said the involvement of three parties would result in “some inherent compromises.”

He said there were some common-sense failures, such as assumptions that fairgrounds vendors, not visitors, would stay at L’Auberge Del Mar, one of the area’s priciest hotels.

“I think we should just move on,” he said.

“We’ve got, I think, much more information than we’ve ever had related to the revenue and expense side so I think this is a study that’s advanced our understanding of the situation,” Councilman Terry Sinnott said.

But based on the Finance Committee review and a review by city officials, it “needs to be further improved to be a workable document,” he added.

Del Mar council members said they are not accepting the findings of the of the study and plan to issue a press release saying the city does not get a $1 million benefit by having the venue within its jurisdiction.

“I don’t want the message to get traction,” Mosier said.

Solana Beach Councilman Mike Nichols called the study one-sided.

Last month council members in that city, which according to the study receives a net fiscal gain of $209,400, agreed to note the report included incomplete data.

The 22nd District Agricultural Association, which governs the fairgrounds, will comment on the study in August or September.