DEL MAR — The Del Mar Fairgrounds announced Tuesday that they have returned $5.6 million in COVID-19-era federal loans to settle a dispute with the U.S. Attorney’s Office, which argues that they were not eligible for the funds in the first place.
In 2020, the Fairgrounds was facing a dire financial situation and the possibility of permanent closure due to the shutdown of major revenue-producing events like the fair in response to the COVID-19 pandemic.
The 22nd District Agricultural Association, the entity that owns and manages the Fairgrounds, applied for a Paycheck Protection Program loan through the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act as a last resort to stay afloat.
The Fairgrounds had been unsuccessful in finding other sources of aid, including a requested $5 million loan from the neighboring Orange County Fairgrounds.
Mission Valley Bank approved a $4.7 million loan for the organization in the summer of 2020. The 22nd DAA was one of 17 district agricultural associations in the state to receive a PPP loan.
“The PPP program was a lifeline to the 22nd DAA and to many DAAs across California. We are very grateful that we received the loan, which enabled the Del Mar Fairgrounds and other 22nd DAA properties to continue to operate as a community gathering place in times of celebration — and to serve as an emergency resource center in times of need,” the 22nd DAA said.
The Small Business Administration later forgave this loan and reclassified it as a grant, removing any obligation for the 22nd DAA to pay it back.
However, as of 2023, the Fairgrounds has been facing allegations from the Department of Justice that it was never eligible to receive the loan due to being a “government-owned agency.”
After a year of back-and-forth conversations with the U.S. Attorney’s Office, the Fairgrounds said they are returning the loan with interest to avoid litigation and settle the situation.
The $5.6 million payment covers the original loan in addition to interest and processing fees.
“These loans were intended to provide critical relief to eligible businesses during a time of global crisis,” said U.S. Attorney Tara McGrath. “This settlement upholds the integrity of the COVID relief program and holds the DAA accountable for obtaining millions in taxpayer-funded benefits to which they were not entitled.”
Leaders of the 22nd DAA maintain that they were eligible for the loan, and followed all proper procedures in obtaining it. They said there was a debate over its eligibility as a “state institution” and that this needs to be clarified going forward.
“While we maintain that the 22nd DAA was indeed eligible, the inquiry has made one thing abundantly clear: there is a lack of clarity about DAAs’ standing as ill-defined ‘state institutions’ under the law and their eligibility for state and federal funding and grant programs. Going forward, we now plan to take a leadership role within our industry and work with our lawmakers to better clarify DAAs’ status under state law and the federal tax code,” the 22nd DAA said.
According to the 22nd DAA’s website, the DAA is a state institution and a state-affiliated organization that acts independently and does not receive tax dollars. The governor’s office appoints officers to the board.
The organization also noted that they are in a much better financial position now than four years ago, with a cash position of $39.8 million in August compared to just over $1 million in May 2020, according to financial records.
They said their improved financial situation allowed them to pay back the taxpayers “who rescued the 22nd DAA” in 2020.