Grand Jury Report: The Santa Clara County Fairgrounds: a Diamond in the Rough.*

"The Santa Clara County Fairgrounds is a financially unproductive asset for the County of Santa Clara which is accruing millions of dollars in deferred maintenance and has continually required the County's financial support to address deferred maintenance." Response to Finding 1a: The County agrees with Finding 1a.

"There is no realistic chance that Fairgrounds Management Corporation (FMC) will have sufficient financial ability to address the backlog of deferred maintenance." Response to Finding 1b: The County agrees with Finding 1b.

"Many of the current uses of Fairground property are inconsistent with FMC's purpose to provide '...county fair and similar educational, cultural, and community functions.' The County knows that these uses are inconsistent with FMC's purpose." Response to Finding 2a: The County agrees in part and disagrees in part with Finding 2a. Some of the current uses of Fairground property would appear to be inconsistent with FMC's purpose as stated in its Articles of Incorporation. However, the County disagrees with Finding 2a in so far as the parties who negotiated the Management Agreement intended to allow FMC to take on other ancillary or supporting activities in connection with the managing the Fairgrounds so long as such activities do "not interfere" with the use of the property for Fair purposes. The County acknowledges that the Articles of Incorporation are not entirely clear on this point and will require FMC to amend its Articles of Incorporation to provide clarity accordingly.

"FMC is not adhering to the Agreement. The County knows that FMC is not adhering to the Agreement." Response to Finding 2b: The County agrees in part and disagrees in part with Finding 2b. The Management Agreement dated April 18, 2000, as Amended, articulates multiple responsibilities for FMC and it establishes an inherent hierarchy of responsibilities. The Management Agreement states several responsibilities that are obligations, and it permissively allows FMC to enter into agreements for other certain uses that do not interfere with the conduct of the annual County Fair. The Management Agreement states as follows (emphasis added): FMC shall annually present an Annual Fair and it shall pay all expenses of the Fair (Section . 1.02.); FMC shall cover annual operating expenses and capital improvement expenses (Section 3.01.); and, FMC shall maintain and repair the existing improvements (Section 6.01.). Section 4.01 of the Agreement again restates that FMC "...shall permit the Residual Property to be used and occupied for purposes of conducting the annual County Fair on behalf of the County of Santa Clara. Section 4.01 goes on to permissively state that FMC "...may allow the property to be used for 0 promotion of any educational, charitable, informational, cultural, entertainment, or amusement purpose...and no events shall be permitted which shall interfere with the conduct of the annual County Fair." The County recognizes that the Management Agreement is silent on whether FMC may allow the property to be used for any use which is not an "educational, charitable, informational, cultural, entertainment, or amusement purpose." Many of the current uses of the Fairgrounds are temporary, short-term uses of otherwise empty land and do not "interfere with the conduct of the annual County Fair." FMC enters into such licenses to provide revenue in support of FMC's obligation to cover all operations costs, to cover the cost of maintenance and capital improvement, and to cover the cost of presenting an Annual County Fair, an event that for years has required financial subsidy. Furthermore, all revenue generated from such, temporary, short- term uses remain with FMC for operations of the Fairgrounds consistent with the terms of the Management Agreement. Numerous events conducted at the Fairgrounds are community-based and do not cover the full cost of the operations of the Fairgrounds. Those opportunities for non-profit and community events to take place would not be possible without the additional revenue provided by short-term uses that cover other operational and maintenance costs. However, in light of the Grand Jury's observations, the County will consider which allowable uses are consistent with the Agreement. The County agrees that the Management Agreement should be revised to provide guidance regarding short-term, revenue-producing uses until they can ultimately be replaced as opportunities arise with other educational, cultural and community activities that can be both financially viable and widely supported. See also Response to Finding 2c, and Response to Recommendation 2 below.

"The 25-year old Management Agreement is woefully outdated and in need of review and revision." Response to Finding 2c: The County agrees with Finding 2c but notes that the current Management Agreement is up-to-date and incorporates all relevant current County and Board policies. The County is currently negotiating an Amended and Restated Agreement to replace the current Management Agreement when it terminates on December 31, 2019.

"Contractor storage yards, the RV park, RV(/Boat) storage and vehicle auctions are inconsistent with FMC's purpose to provide "...county fair and similar educational, cultural, and community functions." Response to Finding 3: The County agrees in part and disagrees in part with this finding. See Responses to Finding 2a and Finding 2b above, which reiterate the County's understanding that the parties who negotiated the original Management Agreement intended to allow FMC to take on such ancillary or supporting activities to produce revenue to support Fairgrounds operations, so long as such activities do "not interfere" with the use of the property for Fair purposes. Furthermore, the County understands that FMC terminated the RV/Boat Storage use as of June 30, 2019.

"FMC's bingo games do not comply with many County bingo regulations." Response to Finding 4: The County agrees in part and disagrees in part with Finding 4 to the extent that it is conducting further analysis, including research into bingo operations at other venues, to determine the extent of compliance and/or non-compliance and to obtain FMC compliance.