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New Fair Funding
1. CHANGING FOR THE BETTER A Guide to Understanding the New Model for Fair Funding
2. Overview Grounds for Protection B road Consensus: Fairs are valuable and required rescuing Grounds for Concern Downward Spiral: Vanishing source of fair funding Grounds for New Funding Stable Funding Source: Shift to General Fund continuous allocation Grounds for the Future Infrastructure Project: Leverage stable funding for infrastructure
3. Grounds for Grounds Protection The Value & Importance of California Fairs “ Aside from their rich history, California’s fairgrounds are unheralded community assets that must be preserved and protected during these difficult times.” – A.G. Kawamura, Secretary, California Department of Food & Agriculture
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18. Grounds for Concern Since 2004/2005, total license fee revenue generated each year has been inadequate to fully fund all license fee beneficiaries to the extent allowed by law. Because the law is silent on funding priorities, the fairs have absorbed each year’s shortfall in its entirety. The chart below depicts the steady decline in license fee revenue to the fairs since 2004/2005. [source: CDFA – Division of F&E]
19. Grounds for Concern The Negative Impact on Fairs The annual revenue shortfalls in fair funding since 2004/2005 have placed a heavy burden on fairs and fair programs, including: Beginning in 2008-09, fairs are now required to cover their fair share of property insurance premiums At a time when the cost of doing business continues to rise annually, the Division of F & E has been forced to freeze base allocation levels to small and medium sized fairs, while eliminating base allocations to larger fairs altogether 69% decrease in infrastructure funding to fairs in 2007-08 represents a $12 million decline when compared to 2001-02 levels Fair & Exposition Fund reserves used to mitigate annual revenue shortfalls are projected to be fully depleted by June 2010
20. Grounds for Concern After 70 plus years, Bay Meadows shuts down; the same operator announces plans to close Hollywood Park. Magna Entertainment Corporation, the owner of Golden Gate Fields and Santa Anita, sees its stock price drop to 11 cents per share and has filed for bankruptcy. These two horse racing tracks together generate almost 40 percent of fair funding; Golden Gate fields is being auctioned off and its future is questionable.
21. Grounds for Concern How We Got Here Legalization of a state lottery opens the door for an explosion of: * Card Rooms * Indian Gaming (Bingo) * Tribal Casinos * Rise of Internet Gaming These new gaming enterprises undermine the historical monopoly horse racing has had over gaming and contribute to downward funding trend
22. Grounds for A New Strategy Urgent Need to Shift Funding Source “ Given the dire situation confronting us, the fair industry convened to develop a strategy for shifting funds to a more stable source. Swift action was necessary to avert disaster.” – Rebecca Desmond, Former Chair, California Fair Alliance
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24. Grounds for New Strategy A New Model for Fair Funding Takes Shape The State’s leaders see the crisis and work to build a solution. T hey recognize that the General Fund is now receiving millions in new income from tribal gaming, an activity that has had a major impact on Fair Funding. They understand the importance of the fair network, especially the $200 million plus that fairs generate for state and local tax coffers.
25. Grounds for a Grounds New Funding Solution The Legislature Takes Action “ It was very clear that the Legislature needed to act to identify a new and more stable source of funding for our fairgrounds. “ It's a bright spot in the budget process that we succeeded in establishing a new funding source for fairs, restored lost revenues and mitigated the unintentional impact tribal gaming has been having on California's historical source of fair funding, while saving thousands of jobs in the process. Additionally, the horseracing industry, and the tens of thousands of jobs that go with it, has been given new life.” - Senator Roy Ashburn (R-Bakersfield), who authored the new budget legislation to fund California fairs
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27. Grounds for a New Funding Solution Time for a New Funding Plan On July 1, 2009, and every year thereafter, the General Fund is required by law, to pay $32 million into the Fair & Exposition Fund to support the fair network. As a continuous appropriation set in statute, this funding is not a component of the states annual budget process. Fairs remain special fund agencies as the General Fund is obligated to only a fixed sum. Local fair deficits and/or surpluses remain a local responsibility. All other components of the Fair Funding structure including the annual expenditure plan and the role of F & E in fund management remain intact.
28. Grounds for New Funding Solution Changes Do Not Impact Fair Funding Approval Process CDFA Secretary will continue to develop annual expenditure plan California Fair Alliance will continue to participate in expenditure planning Legislative Joint Fairs Committee will continue to review and approve expenditure plans Fair allocations and other special programs will continue to be funded by the F & E fund
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30. Grounds for the Future Stable Funding: Key to Infrastructure Projects “ While the new funding system stabilizes funding with restoration of funds, we plan to leverage this foundation for infrastructure bonds necessary to rebuild and improve every fairground in California.” – Stephen Chambers, Executive Director, Western Fairs Association
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32. Summary C risis point H orse-racing revenues unsustainable A greement fairs valuable and require protection N ew funding stream needed G eneral fund is the solution E asy and transparent transition