Struggling California State Fair eyes bailout from taxpayers to avoid insolvency

Cal Expo, weighed down by years of sagging attendance at the California State Fair, needs a roughly $2.3 million taxpayer bailout to ward off insolvency and a possible shutdown of the fair, state officials say.

Gov. Gavin Newsom’s budget proposal includes a $1.5 million one-time rescue “to offset short-term funding deficiencies” and $750,000 to study long-term solutions for Cal Expo’s problems

The help would be unprecedented. Although Cal Expo is a state agency and received about $15 million for deferred-maintenance projects in last year’s budget, the state has never stepped in to supplement its operating budget, said Tom Martinez, Cal Expo’s chief deputy general manager.

“We’re completely independent in most every sense,” he said.

Martinez called the proposed cash infusion “a pleasant surprise” as officials start to book entertainment for upcoming fairs. “We appreciate the financial support.”

Without help from taxpayers, Cal Expo could become “insolvent within a few years,” according to a budget memo from the California Department of Food and Agriculture, which oversees the agency. CDFA said Cal Expo’s financial problems could lead to the “potential closure of the State Fair.”

Thanks to cost-cutting, Cal Expo is on track to make a surprising $120,000 profit in 2019 after forecasting a $1.5 million loss, according to its budget records. Final figures for 2019 won’t be available until February.

However, the budget for 2020, approved by Cal Expo’s 11-person board of directors, anticipates a $3 million loss. The new budget anticipates a slight dip in revenue and a major increase in expenses, including employee benefits. A big factor is a one-time special payment to CalPERS under SB 84, a 2018 law, Martinez said.

He added that Cal Expo has been trying to fill its calendar with new events, including conferences and conventions that have been displaced by the renovation of the Sacramento Convention Center.

Fewer people attending fair

Nevertheless, Cal Expo is still heavily dependent on State Fair attendance, which accounts for about 60 percent of annual revenue. In the last few years attendance has been dismal, in part because of brutally hot weather.

In the early 2000s, the fair drew 1 million people a year. Last year just 601,761 patrons attended the 17-day event.

While that was a slight increase from 2018, thanks in part to a rebranding as the California State Fair and Food Festival, it was still the second-worst turnout since 1998.

Other challenges loom. Most of Cal Expo’s buildings and other facilities, most of which date to the 1960s, need repairs and upgrades. Cal Expo — formally known as the California Exposition and State Fair — has to pay its employees according to collective bargaining agreements approved by the state.

While it’s been trying for years to develop some of the idle land on its 350-acre campus, by law it would have to surrender to the state any proceeds from land sales.

It’s also going to lose its most famous tenant: Sacramento Republic FC. The club pays $130,000 in annual lease payments to play its home games at Papa Murphy’s Park on the fairgrounds but plans to move to a new downtown stadium in 2022 when it joins Major League Soccer.

This story was originally published January 16, 2020 at 1:35 PM.