DEL MAR — The Del Mar Fairgrounds has crafted a cautiously optimistic budget for the upcoming year following higher-than-expected revenues in 2022 and the addition of income streams, including a new concert venue and the full return of the Del Mar Horsepark.
During a Jan. 11 presentation to the 22nd District Agricultural Association, the state board managing the Fairgrounds, CEO Carlene Moore said the organization is in a “strong financial position,” with financial analysis indicating that 2022 revenues were $23 million higher than budgeted as of November.
“From where we had forecasted to be to where we turned out to be, is almost miles apart,” Moore said.
Revenues were expected to be higher in 2022 than in previous years with the full return of the fair, which had not taken place since the beginning of the COVID-19 pandemic. However, the difference in anticipated and actual revenue was primarily caused by the unexpected transition to an independent midway, where multiple companies operate games and rides.
The midway was briefly in jeopardy in the months leading up to the 2022 fair after a judge issued an injunction preventing the fair from proceeding with their selected midway operator, Ray Cammack Shows, in a lawsuit that alleged bid-rigging in the request for proposals process.
However, a court agreement allowed the midway to continue with multiple operators, which led to a revenue difference of around $14.5 million for the fairgrounds. This time, the fairgrounds are budgeting for an independent midway at the 2023 fair, which runs from June 7 to July 4.
“The 2022 budget did not imagine an independent midway for 2022. That is also part of what drives revenue and expenses higher,” Moore said.
Over the upcoming year, the 22nd DAA is projecting just over $76.5 million in gross revenue in its operating budget, including $49 million from the fair, compared to just under $56 million in gross operating expenses, not including personnel costs.
Leaders at the 22nd DAA said they considered several factors when creating the budget, including several planned to increase revenues in the coming years. These include the Horsepark’s planned return to full operations in July, increased rates for facility rentals, and the opening of a new music venue, The Sound, with 50 scheduled shows for the year.
According to financial statements, the Sound is conservatively projected to bring in $1.5 million in gross operating revenue that the fairgrounds did not have last year.
Paquin Entertainment will also operate Beyond King Tut: An Immersive Experience at the fairgrounds seven days a week beginning Jan. 27 and running early May.
Alongside positive factors, the 22nd DAA also has to plan for 2023 without the $20 million in pandemic-related grants that provided some padding over the past two years.
According to finance director Michael Sadegh, ongoing inflation and the risk of a recession continue to be a concern for the fairgrounds’ budget.
This is especially concerning since the 22nd DAA’s significant revenue only comes from three of the 12 months of the year — June and July when the fair is operating, and January, when additional revenues add up.
“If the inflation factor goes up 3%, our costs go up by $2.1 million, which would wipe out all the excess cash profit we have for 2023,” Sadegh said. “There are three months out of the 12 months that we are in positive territory. The rest, we are in red; we are in a deficit. What this is kind of highlighting is the enormous amount of risk we are carrying by having one very profitable program during the year, and that’s the fair for 21 [or] 22 days.”
While the fairgrounds have been primarily focused on cost-cutting since the pandemic hit, Moore said they have now hit a saturation point and will need to pivot to raising rates as costs continue to grow.
Annually, Moore added, the fairgrounds should contribute between five and six million dollars toward capital improvements to maintain facilities and grounds properly.