Del Mar Fairgrounds money problems pre-date COVID-19

DEL MAR — The Del Mar Fairgrounds and Racetrack faced structural financial warning signs for years, before event cancellations and the resultant collapse of revenues due to COVID-19.

The 22nd District Agricultural Association (DAA) and its “blended component units” incurred net operating losses in several years between 2014 and 2018, according to some recent audited financial statements. And the state-run board has also seen its net position steadily decline.

Net position is the bottom line — “the difference between assets and deferred outflows of resources, and liabilities and deferred inflows of resources,” according to the financial statements. The statements explain: “Over time, increases or decreases in the District’s net position are one indicator of whether its financial health is improving or deteriorating.”

The DAA’s component units include bodies — separate but related financially and in terms of board governance — that oversee capital improvement and financing, as well as a lease with the Del Mar Thoroughbred Club to operate horse races.

The DAA also runs the annual San Diego County Fair and hosts myriad events, such as concerts, horse shows, car shows and rodeos.

As The Coast News goes to press, the DAA administration and certain board members hadn’t responded to requests for comment. But others say the DAA has overextended itself for some time — particularly by issuing bonds worth $44 million in 2015, largely against future horse racing revenues, even though horse-racing attendance has long been in decline.

As of 2019, on-track attendance declined by 36% from a recent high in 2014, and 45% since an all-time high in 1987, according to stats from the Del Mar Thoroughbred Club’s 2020 Media Guide. Including off-track betting, attendance declined by 23% between 2001 and 2009, according to the DAA’s 2009 financial statements.

Fitch, a credit rater, recently downgraded the race track’s bonds from BBB- (“good”) to BB- (“speculative”).

“The 22nd DAA is facing a time of great difficulty and uncertainty,” said former DAA board member David Watson in his April resignation letter. “Even before the advent of COVID- 19, the organization was facing extreme financial turmoil because of historical reliance on horse racing revenues. Significant bond financing is based on future revenue from racing as well as the creation of a new concert venue. Those revenues are now at great risk. … The current board majority seems content with the status quo leadership and management team, which I do not believe will be sufficient to meet this moment.”

“These things have been known for a long time,” said Lesa Heebner, a former Solana Beach City Councilwoman and current mayoral candidate.

The DAA tried to solve its money problems by doing “more and bigger of the same instead of revisioning” the land’s use, she said. “If not mismanagement,” that amounts to “lazy thinking.”

The DAA used to be “much less ambitious,” pursuing activities more in line with its budget, said Pam Slater-Price, a former Encinitas City Councilwoman and County Supervisor. Even profitable activities are “not enough to compensate for continually taking on new debt,” she said.

“They’re somewhat responsible for their own situation,” in that they’ve gotten into financial hardship despite owning prime, untaxed coastal real estate, said Del Mar City Councilman Dwight Worden. He thinks the DAA could perhaps downsize its activities to include just the fair and repurpose land currently dedicated to horse racing to some other purpose.

For instance, he said the City of Del Mar, which previously sought to buy the Fairgrounds, might collaborate with DAA in building affordable housing. Doing so could help Del Mar meet its state-mandated housing production targets, and also provide the DAA new revenue.