Grand Jury Report: Santa Clara County Fairgrounds Management Corporation

Note: Missing finding numbers detected: F5, F6, F7

Comments 33

• CO1
  The Board of directors and management of the Santa Clara County Fairgrounds Management Corporation (FMC) have reviewed the Grand Jury Report dated June 16, 2011.
• CO2
  Although the FMC Board of Directors presently consists of four members, for most of the last four years there have only been three Board members. The Grand Jury chose to speak to only two of the four Board members, one of whom has served throughout the last four years, and the other of whom was only appointed to the Board in April 2010.
• CO3
  FMC sets out below the Grand Jury's Findings and Recommendations and FMC's responses thereto, in accordance with Penal Code Section 933.05(a) and 933.05(b).
• CO4
  GJFinding 1: The County established FMC as a nonprofit to operate the Fairgrounds; however, FMC has not been successful. FMC has operated at a loss and has required County bailout in all but one of the past sixteen years.
• CO5
  FMC Response to GJ Finding 1: a. FMC disagrees with Finding 1 that FMC has not been successful, and that FMC has operated at a loss and has required County bailout in all but one of the past sixteen years. b. The attached spreadsheet — Appendix 1- Comparison of Statement of Activity 1996 - 2009 (which was provided to the Grand Jury by FMC and appended to the Grand Jury Report) — shows that FMC made a profit in eight of the fourteen years between1996 - 2009. The Grand Jury Report confirms that FMC made a profit in 2010, meaning that FMC has been profitable in nine years out of the past fifteen, or 60% of the time. c. The attached spreadsheet — Appendix 2 - Comparison of Statement of Activity 1996 — 2010 shows that FMC's three-hundred-sixty-day business (its day-to-day operations excluding the County Fair mandated by the County) has been profitable in all but three of the past fifteen years (80% of the time), and has made profits during that time totaling $2,667,056. d. The attached spreadsheet — Appendix 3 — Impact of FMC's management of fairgrounds on County's General Fund — shows that FMC's operation of the Santa Clara County fairgrounds has saved Santa Page 1 of 14 Clara County taxpayers more than $10.8 million dollars over the past sixteen years. e. The attached spreadsheet — Appendix 4 — Equity (Fund Balance) and Profits and Losses since inception — shows that FMC has operated for fifteen years without the benefit of any capital (equity or reserves), and demonstrates the years in which FMC made profits or losses, and its equity deficiency at the end of each year. f. The County has provided a total of $1,165,000, in six different years (1999, 2000, 2001, 2002, 2007 and 2010), to support the mandated County Fairs. Despite those subsidies the County Fairs have lost $2,864,468 over those fifteen years. g. As a result of the $2,864,468 of County Fair losses, the profits of $2,667,056 generated by the three-hundred-sixty-day businesses were reduced to an overall loss for FMC of $197,412 over that period of time. h. The story of the Fairgrounds over the years since their management was taken over by FMC was explained in detail to the members of the Grand Jury: i. In 1995 FMC took over management of the fairgrounds from the Fair Association which had managed the fairgrounds for many years. The Santa Clara County fairgrounds had first been brought into use in 1946, with additional infrastructure built in the period 1946 —1970. ii. The Fair Association incurred losses for years as a result of which, the physical plant of the fairgrounds was allowed to deteriorate under its management. When the Fair Association declared Chapter 11 bankruptcy, the County took back the fairgrounds and placed it in the hands of the FMC. Nothing was done at that time to alleviate the years of neglect and deferred maintenance. iii. At the time of its formation in 1995 FMC had no capital (that means no equity, no reserves, no fund balance) and depended entirely on the cash flow from its various businesses for its day-to- day survival. During the ensuing sixteen years FMC has not been able to be consistently profitable to enable it to accumulate the reserves which a prudent nonprofit would expect to have. FMC's Board has discharged its responsibility to obtain sufficient capital resources by obtaining funding from the County to catch up with some of the deferred maintenance and for capital improvements to the County's property, and to finance the losses on the County- mandated County fairs. Page 2 of 14 iv. The County, as owner of the fairgrounds, had not invested any money to improve or repair the complex's infrastructure over a period of twenty. years. The Facility Conditions Assessment Final Report dated March 6, 1998 (prepared by Kitchell, a finn of land- use development consultants) indicated that improvements and repairs to the existing infrastructure would involve an estimated expenditure of in excess of $21,400,000. No nonprofit, regardless of its management skills, could conceivably generate that kind of capital given the fairgrounds business model and operating impediments. v. As a result of the Kitchell report, the County and FMC prepared a Master Land Use Plan for the fairgrounds designed to result in substantial redevelopment of the fairgrounds. That redevelopment was stopped when the City of San Jose and the San Jose Downtown Association filed law-suits against the County to stop the fairgrounds redevelopment taking place (Superior Court Case # 442629). The Court ruled in favor of the County on February 16, 2006, and the City paid the County's legal fees. However, the delay undennined the redevelopment plan and caused the proposed partners in the redevelopment to walk away from the project. vi. To make way for that redevelopment plan, in 1998 the car race track and other significant revenue-generating facilities were torn down, and FMC experienced a subsequent reduction in its operating revenues. vii. In 2006 the County, together with FMC, initiated the Repair and Modernization Project (RMP) to improve the physical plant of the fairgrounds. In the years 2006 — 2008 the County invested a total of $5,523,000 in catching up with deferred maintenance on, and improving, the facilities which it owned at the fairgrounds. Appendix 5 — Fairgrounds RMP Project — shows how those funds were spent and demonstrates that 42% of the funds were spent on essential maintenance, which had been neglected for many years, and the replacement of aged equipment, and 58% of the expenditures were on improvements to the fairgrounds infrastructure. A balance of RMP Project funds of $406,000 remained unspent at December 31, 2010. viii. Following completion of the RMP project, business at the fairgrounds began to improve, and the complex staged some newsworthy events, such as renting the newly-air-conditioned Expo Hall to the Department of Homeland Security, U.S. Citizenship and Immigration Services, for the swearing in of a Page 3 of 14 large number of new U.S. citizens on August 7 and 14, 2008. Those two events generated an additional $60,000 in new revenue for FMC. ix. On July 31, 2008 the County Executive's Office announced that it expected to recommend to the Board of Supervisors (BOS) that the County enter into an Exclusive Negotiating Agreement (ENA) with Catellus Development Group, the recommended development team for the Fairgrounds Development. Catellus announced on August 1, 2008 that its preliminary vision for the fairgrounds project incorporated a network of streets and paths that would encourage walking and cycling, office and retail buildings that featured green building technology, community gathering places and parks, and affordable housing. x. Catellus's plans called for the re-development of the whole site (158 acres) with only a very small amount of space to be retained for public events. The precise nature of that public space was not identified. Catellus's plans were expected to result in the entire existing fairgrounds infrastructure being torn down and replaced by housing and retail development. It was also expected that FMC would cease to exist. xi. As the Fairgrounds Development plans unfolded over the summer of 2008 it became clear that the development plans would result in FMC ceasing major operations at the fairgrounds in the first quarter of 2011. FMC immediately began the process of developing its business plan to wind down operations towards the scheduled closure of the fairgrounds in 2011. xii. Beginning in September 2008, the largest world-wide economic downturn in 75 years occurred. Santa Clara county businesses suffered huge losses during this period, and there were many lay- offs. FMC suffered a substantial decline in its business, but avoided laying-off any of its employees. The full effect of the Great Recession was felt in 2009 when FMC suffered its largest- ever loss of $348,000. Catellus withdrew from the Fairgrounds Development project in March 2009. xiii. In 2010, with the national economy turning around, the benefits of the County's $5,523,000 investment in the fairgrounds complex began to be felt, and FMC became profitable. xiv. In 2010 the County entered into a three year management agreement with FMC. Prior to that time FMC had only had yearly management agreements, whose short-term nature and short-notice Page 4 of 14 cancellation provision were not conducive to building profitable business arrangements at the fairgrounds. xv. At no time has the County "waived" any fees charged by County agencies to the Fairgrounds. Indeed, all of the examples listed by the Grand Jury as having been "waived" are clearly shown as liabilities on FMC's financial statements, and FMC's independent auditors have consistently given their professional opinion that FMC's financial statements present fairly the state of FMC's liabilities. xvi. Major fairgrounds in California have been unable to maintain profitability, except for those with modern exposition facilities and at least one other substantial-revenue-generating enterprise (e.g. horse-racing; car-racing) to subsidize the operations and maintenance of the fairgrounds. Urban fairgrounds have increasingly become exposition and entertainment centers where private and community-based events are held and the Annual Fair is an ancillary event. Annual fairs have been losing attendance across the State, and not doing well financially.
• CO6
  GJ Recommendation 1: The County should reconsider whether the nonprofit model is the best way to operate the Fairgrounds.
• CO7
  FMC response to GJ Recommendation 1: a. FMC is not the appropriate party to take action.
• CO8
  GJ Finding 2: In the last sixteen years, the FMC Board has not commissioned — nor has the County requested the Board to commission — an independent performance audit of FMC, even though FMC's poor performance warrants this type of audit.
• CO9
  FMC Response to GJ Finding 2: a. FMC disagrees with Finding 2. FMC disputes the Grand Jury's unsubstantiated assessment of poor performance, as fully set out above in response to Finding 1. b. During 2009 two departments of the County (Parks and Recreation, and Facilities) independently performed operational audits of FMC to determine if they would be able to operate the fairgrounds more efficiently than FMC. Each of them found that they could not. The Grand Jury Report identifies that in 1995 the County had calculated that for County departments to operate the fairgrounds, rather than FMC, would cost Santa Clara County taxpayers an additional $900,000 per year. The operating Page 5 of 14 audits performed by County departments in 2009 found that it would now cost taxpayers at least $2,000,000 per year to operate the fairgrounds as a County department, rather than leaving the fairgrounds under the management of FMC. c. FMC's outside auditors (Froshman, Billings and Lewandowski; Abbott Stringham and Lynch, and Berger/Lewis and Company) have routinely commented on FMC's operations by issuing Management Letters, in which they identified any potential deficiency in FMC's organizational structure or internal controls. FMC's Board and management have ensured that the auditors' recommendations were adopted. d. FMC has on staff a person with substantial experience in performance auditing (having been requested by San Jose State University to develop and teach courses on the subject for mid-career professional auditors from abroad). That expertise is consistently applied to the business of FMC. e. During the past sixteen years highly-qualified staff from the Office of the County Executive have analyzed FMC's business extensively. f A land-use consultant - Kitchell - reported on the property/infrastructure in 1998.
• CO10
  G.1 Recommendation 2A: The County should request the FMC Board to commission an independent performance audit of FMC and the FMC Board.
• CO11
  FMC Response to Recommendation 2A: a. FMC is not the appropriate party to take action. b. Requiring FMC to pay an expensive outside consultant (estimated fees $75,000-90,000) for services that it already receives does not seem to FMC to be a wise business decision. c. If the FMC were to be required to hire and pay for an expensive outside consultant to tell it what it already knows about its operations, FMC would need to request funding for those services from the County.
• CO12
  GJ Recommendation 2B: The FMC Board should require FMC to comply with its contractual requirement to produce an annual budget and business plan and financial audit.
• CO13
  FMC Response to Recommendation 2B: a. The recommendation to have an annual audit for the year ended December 31, 2010 will be implemented by December 31, 2011. Page 6 of 14 b. FMC already produces an annual budget and business plan each year for the past sixteen years in accordance with the instructions contained in the Budget Preparation Guide published annually by the California Department of Food and Agriculture, Division of Fairs and Expositions. Each year's budget and plan has been approved by the Santa Clara County Board of Supervisors and the State's Division of Fairs and Expositions. c. As the Grand Jury Report states on Page 6, paragraph 1: "FMC has prepared financial audits". Financial statement audits have been completed by FMC's independent CPAs for thirteen of the past sixteen years. In 2008 and 2009, FMC obtained a waiver from the County to have its independent CPAs perform Financial Statement Reviews (which are less in scope than an audit) rather than audits. Work is in now process on the audit of the 2010 financial statements, and will be completed before December 31, 2011. 14.GJ Finding 3: The County does not hold the FMC Board accountable for its lack of oversight in ensuring FMC meets its contractual obligations, and the FMC Board does not demonstrate the business acumen necessary to effectively oversee the FMC. There is a seat vacant (to be filled by the District 4 Supervisor) on the FMC Board. 15.FMC Response to Finding 3: a. FMC disagrees with Finding 3. b. The explanations of the reasons for disagreement are: i. FMC is not the appropriate party to take action. ii. FMC Board members have considerable knowledge and experience of the fairgrounds business. One has served on FMC's Board since its inception in 1995, and before that served on the Board of the Fair Association. Another Board member, while employed by the County, provided legal services to FMC's Board and management. iii. As stated under Finding 1 above, FMC was formed in 1995 without benefit of capital or reserves, and the FMC Board has consistently sought to discharge its responsibility to "obtain sufficient capital resources" by requesting the County to provide adequate funding.
• CO14
  GJ Recommendation 3A: District 4 Supervisor Yeager should recruit to fill the vacancy with an individual with strong business acumen.
• CO15
  FMC Response to Recommendation 3A: a. FMC is not the appropriate party to take action.
• CO16
  GJ Recommendation 3B: The FMC Board should hold the FMC Executive Director accountable for ensuring appropriate actions are taken to operate FMC as a well-run, break-even or profitable operation.
• CO17
  FMC Response to Recommendation 3B: a. The recommendation has been implemented. b. The FMC Board continues to hold the FMC Executive Director accountable through a process of performance review.
• CO18
  GJ Finding 4: The County, supported by the Office of the County Executive, appears to have only a "land management" concern when FMC is required by contract to pay all expenses of the fair. Page 8 of 14
• CO19
  FMC Response to Finding 4: a. FMC disagrees with Finding 4. b. The explanations of the reasons for disagreement are: i. FMC does not seem to be the party required to take action, in so far as FMC can understand what this Finding is about. ii. As stated above, during the past sixteen years highly-qualified staff from the Office of the County Executive have analyzed FMC's business extensively, and have provided advice and counsel from which FMC has benefited.
• CO20
  GJ Recommendation 4: The County should modify its contractual agreement with FMC stipulating that FMC be required to sustain a break-even or positive cash flow operation.
• CO21
  FMC Response to Recommendation 4: a. FMC is not the party to take action. b. FMC continues to generate new business revenues and continues to strive to retain existing business revenues, to cut costs wherever and to generate profits and positive cash flow from an aging facility - the four major buildings rented by FMC for events, and their related infrastructure, were constructed between 1953 —1972. The injection of $5,523,000 in capital improvements by the County, even though its full fruits were delayed by the Great Recession, is beginning to have a positive impact, but bringing new paying customers to the fairgrounds will continue to be a challenge.
• CO22
  GJ Finding 5: FMC has not optimized its supplier contracts and has demonstrated inability to fully perform its own contract to effectively manage the Fairgrounds, costing the taxpayers in the form of County bailouts.
• CO23
  FMC Response to Finding 5: a. FMC disagrees with Finding 5. b. FMC is already developing its plans to bid the catering concession contract so that a new contract is in place when the existing agreement ends on January 31, 2012. Page 9 of 14 c. FMC has entered into bartering arrangements with its paving and landscaping contractor permitting them to park their equipment at the fairgrounds in exchange for reduced cost services. d. FMC is working continuously to retain existing and generate new business revenues, to cut costs, and to generate positive cash flow from a facility that is sixty-six years old.
• CO24
  GJ Recommendation 5A: The FMC Board should require FMC to prepare plans and implement changes geared toward increasing revenue to cover costs.
• CO25
  FMC Response to Recommendation 5A: a. Recommendation 5A has been, and is continuously implemented. The County injected $5,523,000 in deferred maintenance and capital improvements into the fairgrounds between 2006 - 2008 and, even though the full fruits of that investment were delayed by the Great Recession, it is now beginning to have a positive impact, but bringing new paying customers to the fairgrounds will continue to be a challenge. b. FMC continuously strives to improve the facilities, with its limited resources, in order to generate new revenues. Examples include the recent agreement with Marquez Brothers to install shading over the Arena greatly increasing its revenue potential.
• CO26
  GJ Recommendation 5B: The FMC Board should require FMC to restructure the concessionaire contract to a best practices model, such as paying FMC a percentage on sales, not profits, and should seek competitive bids for this and all other contracts as a means to increase revenue and profits.
• CO27
  FMC Response to Recommendation 5B: a. FMC will implement Recommendation 5B upon termination of the existing agreement in 2012. b. The concessions contract with Ovations emanated from a bid process that was conducted a decade ago. There was only one bid. Ovations were not willing to enter into a contract with a percentage of gross sales arrangement. c. The current contract with Ovations runs for a term of six years ending on January 31, 2012. FMC's management action to change that contract could not be taken earlier. d. FMC will seek competitive bids for the concessionaire contract as it does for all major contracts. Page 10 of 14
• CO28
  GJ Recommendation 5C: The FMC Board should require FMC to seek to increase short- and long-term use agreements to improve the positive cash operation.
• CO29
  FMC Response to Recommendation 5C: a. FMC is implementing Recommendation 5C on an ongoing basis. b. FMC's Board has consistently required FMC to seek to increase short- and long-term use agreements to improve the positive cash operation. c. Rates for Long Term Leases and Annual Licenses are constantly under review. In 2009 rates for the Paint Ball licencee were increased 17% over those of 2008. Their rates were increased 5% in 2010 and in 2011. Rental rates for motocross increased 5% in 2010 over 2009, and another 5% in
• CO30
  GJ Recommendation 5D: The FMC Board should require FMC to be in compliance with the contractual management agreement.
• CO31
  FMC Response to Recommendation 5D: a. The recommendation is being implemented with regard to the completion of FMC's financial statement audit for the year ended December 31, 2010. That independent audit is currently in process and will be promptly completed in the next two-three months. b. FMC is unaware of other specific issues of contract non-compliance.
• CO32
  GJ Finding 6: FMC paid bonuses to employees in 2010. The reason for these bonuses has no apparent connection to any operational decisions that would ensure continued profitability. Rather, the bonuses looked like a distribution of an unexplained windfall.
• CO33
  FMC Response to Finding 6: a. FMC disagrees with this Finding. b. As a means of containing costs during difficult economic times, FMC's rank and file employees did not receive routine cost-of-living salary increases; step increases; bonuses, or merit increases for the ten year period between 2000 and 2010, simply because of losses that were absorbed by the nonprofit on the annual fair. Page 11 of 14 c. In 2010 FMC's Board approved payment of a one-time merit payment to all of FMC's 40 employees. The total amount of that merit payment was $65,000, and it was paid equally to all employees based on their years of service. 36.GJ Recommendation 6: The FMC Board should not permit bonuses to be paid unless FMC demonstrates the ability to consistently run a profitable operation, as measure against specific goals. To this end, the FMC Board should require FMC to develop and implement a business plan with measurable goals specifically tied to the operational success of the Fairgrounds. 37.FMC Response to Recommendation 6: a. See previous comments. 38.GJ Finding 7: The FMC Board does not adequately perform its oversight function of FMC. 39.FMC Response to Finding 7: a. FMC does not agree with this Finding. b. FMC Board meets regularly; receives and approves the annual budget, and periodic and annual financial reports; meets with FMC's independent CPA auditors; discusses, advises on, and approves FMC management's plans for the fairgrounds; considers the future financing needs, and reviews and approves management plans to enter into significant long-term contracts. c. Two members of FMC's Board attended training sessions conducted by the Western Fairs Association (WFA) in November 2010, in order to better-educate themselves about the problems facing fairgrounds in today's marketplace. d. FMC management meets with individual Board members from time-to- time between Board meetings to facilitate communication and receive appropriate advice and guidance. e. With the full knowledge and approval of the Board a plan to restructure the FMC management team during 2009 and 2010 was implemented saving the nonprofit roughly $150,000 over that same two year period. f Appointing an existing member of the management team to head the organization following the former Executive Director's resignation was unequivocally justified in light of his lengthy and successful tenure, his Page 12 of 14 direct involvement in implementing new contractual agreements that were underway, and his demonstrated skills as a manager. 40.GJ Recommendation 7A: The FMC Board should require that FMC provide a training program with orientation for current and future incoming Board members, defining roles, duties and fiduciary responsibilities. This would familiarize board members on how this nonprofit business can be managed. 41.FMC Response to Recommendation 7A: a. FMC agrees with this Recommendation. FMC will train and orient incoming Board members when appointed. 42.GJ Recommendation 7B: The FMC Board should review and approve all requests for proposals and bid documents that would precede issuing a contract to ensure that the best interests of the Fairgrounds are reflected in such requests. 43.FMC Response to Recommendation 7B: a. FMC's Board has received and reviewed all proposal and bid documents issued by FMC, and the relevant responses. 44.GJ Finding 8: The County is undercharging communications tower renters, effectively diluting potential revenue to FMC. 45.FMC Response to Finding 8: a. The tower rental contracts are currently-binding, long-term contracts not subject to rent renegotiation. 46.GJ Recommendation 8: The County should increase communications tower rental fees in line with local rates for similar services. 47.FMC Response to Recommendation 8: a. FMC disagrees with Recommendation I. b. The recommendation will not be implemented by FMC because: i. FMC is not the appropriate party to take action. ii. The tower rental contracts are long-term contracts that were established years ago, with escalator clauses to provide increases in annual rental rates based on the Cost of Living Index. When these contracts are up for renewal — in 2017 and 2019 respectively — Page 13 of 14 FMC anticipates that the County will re-negotiate them at then- current rates. The foregoing instrument is a correct copy of the original. ATTEST: Maria Marines Clerk of the Board St-C20-. (cid:9) BY'r Deputy Clerk AUG 0 9 2011 Date: C Page 14 of 14 a DOCUMENT APPENDICES TO TILE CIVIL GRAND JURY REPORT. Appendix # I -- Comparison of Statement of Activity 1996-2009. Appendix # 2 -- Comparison of Statement of Activity 1996-2009 (Format 2). pent& # 3 — Impact of FMC Management of Fairgrounds on County's General Fund. Appendix # 4 — Equity (fund balance) and Profit and Losses since Inception. Appendix # 5 — RMLP Project Expenditures. (cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)(cid:9) SANTA CLARA COUNTY FAIRGROUNDS MANAGEMENT CORP. APPENDIX 1 Compadsen Mitalvaant of Ac isity • 111014609 NOTR. 2009 noiM ant a. pwolected IP fall 200 for details of 400 2009 resat sae APPENDIX 2 Statemrat of Actiwky for Comblmd Admin., Greuntk Rental and Satellite W ageing, Exclusive of Coot Pair (cid:9) PreleeNd Fourteen Year (30 NOTE) (14* NOTE) tan (cid:9) 1097 (cid:9) 19911 (cid:9) 11199 (cid:9) 2000 (cid:9) 2001 (cid:9) 2002(cid:9) 2003 (cid:9) 2004 2005(cid:9) 2003 (cid:9) 2407 (cid:9) 20011 (cid:9) 2009 Total • Revenue 3570,778 3.716301 4,766939 5,457,011 5.232015 4092200 4,06247 4,401.440 4,380.223 4,357.839 4925,338 4704641 3,554,850 3.049.468 69021.223 COGS 492.077 645,694 090.699 666.2114 5641154 538,336 534335 619,449 142235 277.830 233.507 223923 2725.293 Direct Crab 2347.205 2405,757 0338,550 6020,370 2539.100 2105.732 1005.018 1000256 1.767.285 1,814,611 1,610,857 1,887.341 1.005.866 1.555.923 29.460.950 Other Direct Cols 22595 22.595 Marketing 24070 (cid:9) 10.086 (cid:9) 3.240 (cid:9) 24,592 13.512 14,141 (cid:9) 12125(cid:9) 10,801 (cid:9) 8,728 4.356 (cid:9) 21,041 (cid:9) 13.481 (cid:9) 46.135 (cid:9) 41.520 245,537 Actritlattation C01110 564,630 949799 1,456590 1,83403 1.844512 1.597,174 2.013.370 1.869,125 1110,437 1.012,442 1,528,472 1.0706 1.471.780 1,411,589 22.053.059 reMilostd Excluslea of Coe y nth* 336907 289.710 (22400 131,602 (155457) 314.244 134560 (cid:9) 234,125 (cid:9) 20942 0400 424,720 356,803 137,484 (286196) 2296794 300101011 of Activtly Ca ray Fair 0.4 1906 (cid:9) MT (cid:9) ISIS (cid:9) NMI (cid:9) 200 (cid:9) 2001 (cid:9) 2002 (cid:9) 2003 (cid:9) 004 (cid:9) 2005 , • 24413 (cid:9) 2807 20011 (cid:9) 20011 Poorfaen Yea (12 Dale) (11 Days) (10 Days) (19 DM) (19 0104) (19 Days) (3 Days) 13 Days) (cid:9) (3 Days) (cid:9) (4 Days) (cid:9) Days) (5 Om) 13 DM) 14 Days) Total Revenue 2483.703 3.432.111 2.313.115 2134572 2198,200 1760,545 579.111 (cid:9) 520,107 518,054 300.059 247,340 591.984 (cid:9) 26199 (cid:9) 30.930 (cid:9) 18.133.3991 COG/ o 14499 (cid:9) 9.059 (cid:9) 3,947 4.210 0 0 O 0 (cid:9) 0 (cid:9) 0 (cid:9) 32.354' Dim 44 CM: 1,422.021 1.295928 1.146149 1,991,648 1.014202 1,004,1365 04.360 (cid:9) 272452 340,307 234931 236417 455,090 (cid:9) 77,01 (cid:9) 112006 (cid:9) 9,036500 Other 0004 Costs o O 0 (cid:9) 0 220,274 0 (cid:9) 0 0 0 O 0 (cid:9) 0 (cid:9) 0 (cid:9) 229,274 Merkathar 1,032413 881,306 1,072438 750.771 808.815 884,497 257,585 (cid:9) 275,856 256.065 90.2111 114.400 450,311 (cid:9) 2.073 (cid:9) 5,361 (cid:9) 6,989.325 Administration Costs 420.944 509,638 609,040 524,909 510.721 469,149 127.290 (cid:9) 114,605 154.876 95,034 102504 136,995 (cid:9) 60.097 (cid:9) 45,008 (cid:9) 3,773,515 Preflaosa Breitedm of Caw* Subsidy (391.670 (114.638) (426909) 052940 (230.145) (631.159) (280.120 1142680) (233,181) (119,657) (208.971) 1455,0151 (10,4221 (1121261 049,032 CounlySubsidy 0(cid:9) 0 (cid:9) 0 20000 104030 203.000 200,000 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 286000(cid:9) 0 (cid:9) 0 1.015000 Profit/Lon 1591075) Mt 838) (424000) 47,555 (30,345) 061601 101231 1142585) (236181) 1110,601 (201971) 0749151 (1133922) (112125) 854 810010nt of Adivity far Facgibir and 01.41141 Iterdal tads Fronted Pauttmen Year 1095 (cid:9) 1997(cid:9) 1013 (cid:9) 194(cid:9) 2008 (cid:9) 2001 (cid:9) 002 (cid:9) 2003 (cid:9) 2004 2001(cid:9) 2007 2005 200 Total Renew 1.420.407 1,449,458 3.632.812 3 011203 2,667.033 2537.095 2029,416 2.096,012 2.031.702 2046.103 1.747.707 1,460.579 1,580,030 1,314.117 26,580,336 C003 0 0 314933 367.072 370.01 299.913 231.842 235,442 235,086 218.911 10,046 0 0 .14,677 2.286508 Dim/ Cost. 781,110 309.030 1914490 1,543,047 1,700.441 1,528,01 1,278,076 1,150.800 1.100,116 1,204.770 992.345 1,007.117 1,037,072 1.002.120 10,710,685 Othre Direct Costs 0 0 O 0 (cid:9) 0 22,565 (cid:9) 0 0 0 0 (cid:9) 0 (cid:9) 0 a 0 22.505 Maltellms 28.970 8,127 2,240 (cid:9) 21,621 (cid:9) 11,512 10,716 (cid:9) 6,064 1,734 2,94a 2,838 (cid:9) 8.676 (cid:9) 9.012 44.606 20,077 175,433 Mainistration Carte 530,755 655547 1,051990 1271,2013 1.492,684 1,470,132 1,570.250 1454,615 1354263 1,434609 (cid:9) 1.039.101 (cid:9) 663,045 1,017,788 1.035,1107 16.237.121 ifitIlLese) Fatally Grads Rental 44686 (cid:9) (5 386) (10208) 1101,070) 01137.365) 1792.841) (74A20) 0366501 0397.620 0160641 4581 (4236651 00147) (822096) 936 76 &Moment (cid:9)of AelbrItY (cid:9) Wafering Only ProMelesi (cid:9) Fowtsen Year I 1990 (cid:9) WV (cid:9) 1008 (cid:9) 1909 (cid:9) 2000 (cid:9) 2001 (cid:9) 202 (cid:9) 2003 (cid:9) 2004(cid:9) 2006 (cid:9) 21358 (cid:9) 2807(cid:9) MB (cid:9) 143611 (cid:9) Total Roseman 9 Lesions 469.471 426689 (cid:9) 423.734 412.483 378.998 (cid:9) 320,622 07.036 505,060 (cid:9) 475,083 (cid:9) 430,453 424165 02745 400.788 (cid:9) 389,600 (cid:9) 4754337 missions 847,416 662,653 (cid:9) 030,05 1,137,570 1.194700 1,219.020 1,130.957 1,073,545 1.043,536 1,048944 1,011,366 1,015,551 (cid:9) 609,770 (cid:9) 02.480 (cid:9) 14,362,2311 w Remus '630,452 979 351 (cid:9) 779,307 803.814 787,05 1,013,257 571,776 724,582 (cid:9) 758.602 (cid:9) 836,237 742,059 615 916 714,485(cid:9) 403,291 (cid:9) 11,133 Total Remus 2147.371 2.284953 2133.127 2443753 2344832 2552104 2.209.020 2100,403 3.270,401 2312,730 2.177,629 2.240,162 104,044 1.733,351 (cid:9) 31,244840 COGS O 0 (cid:9) 177,044 177,022 320.128 (cid:9) 358.351 032,712 302.03 (cid:9) 303.209 (cid:9) 302,5311 332.191 277.830 238,801 (cid:9) 230,590 (cid:9) 3,454985 Meet Corte ect Fors 497,000 600.544(cid:9) 512,2511 46460 401,357 (cid:9) 0 o o (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 2.372005 My Fro 247,401 (cid:9) 293,015 (cid:9) 139,660 323,573 (cid:9) 74.700 (cid:9) 0 O 0 (cid:9) 0 (cid:9) . 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 1.077409 w Meat Copb 021,614 853,128(cid:9) 789,942 600,362 602,811 (cid:9) 059401 026,342 (cid:9) 503.306 (cid:9) 801,170 (cid:9) 0099,341 (cid:9) 510,514(cid:9) 1300,154 (cid:9) 001.753(cid:9) 563.000 (cid:9) 9317040 Total DIM Cads 1,60890 1056.767 (cid:9) 1.421.861 1.476,623 1.13408 (cid:9) 49,401 826342 (cid:9) 582.386 (cid:9) 581,170 (cid:9) 601,541 (cid:9) 815,514(cid:9) 50404(cid:9) 0247841 (cid:9) 503.800 (cid:9) 1 770,255 MarksWei O 1,00 (cid:9) 0 (cid:9) 3,071 (cid:9) 1,000 (cid:9) 3.425 0,401 (cid:9) 5,667 (cid:9) 777 (cid:9) 1,720 (cid:9) 1230 (cid:9) 4,450 (cid:9) 1540(cid:9) 21.449 (cid:9) 67,104 MadnistraNws Costs 332575 314,132 394.02 353965 354,128 427.042 443.114 (cid:9) 414007 (cid:9) 455,674(cid:9) 477,394 (cid:9) 487.371 (cid:9) 525,441 (cid:9) 454,003(cid:9) 372702 (cid:9) 6815.130 Pro111/3m) 7401 0 .008 139 660 (cid:9) 988(cid:9) 885 801 (cid:9) 1 675 (cid:9) 927 1(cid:9) 92 043 727 187 (cid:9) MB 676111 imp In Catering Contract :aunty fees and kaput fm abolislmd Stakwasal 0 Activity for Combismd 0116 Projected Fontana ,Year 1996 (cid:9) 1097 (cid:9) 1998 (cid:9) 1999 (cid:9) 2000 (cid:9) 2001 (cid:9) 2002 (cid:9) 2003 (cid:9) 2004 2005 2008 200 2006 2309 Total Combined Profitie-oss) 155,709) 6 34,651 9(494417) lam 0004.230 3016915) 8 54,267 6 141540 6 4731 $ 00000) 015,7511 3114,466 33.042 $ 00324 (cid:9)(cid:9)(cid:9)(cid:9) SANTA CLARA COUNTY FAIRGROUNDS MANAGEMENT CORP. APPENDIX 2 Comparison of Statement of Activity 1996.2010 NOTE: A copy of this report was provided to the Grand Jury Statement of Activity Exclusive of County Fair Flftrien Year 1996 1997 1993 1999 2000 2001 2002 2003 2004 2005 2008 2007 2005 2009 2010 Total Revenue 3,676,776 3.716,391 4,766.939 5,467.011 5,232285 5.090,200 4,629,247 4,401,440 4,360223 4,357,839 3.925.336 3.704.841 3,554,850 3,100,713 3,617,893 63,390,386 COGS 492,977 645294 890.659 656284 554,384 538,335 535,335 519,449 342238 277,630 133,607 287,550 201.263 6,986.463 Direct Coats 2.347,205 2.463.757 2,836,550 3.020.370 2,839.109 2.185.782 1.905.018 1,699.255 1,767285 1,814,611 1,610.357 1.887,341 1,885,553 1,516,366 1.541289 30482,678 Othr Direct Costs 22,595 22,595 MickeEng 23,976 10.086 2,240 24.592 12512 14,141 12,125 10,801 3.723 4,358 21,041 13,481 46,135 36,185 20,089 260.244 AdminlatratIon Costs 884,530 949,799 1,458580 1434.953 1,346512 1,897,174 2.013,370 1,869.125 1,810,937 1,912.442 1,328,472 1,387.386 1,471.789 1.496998 1,430,844 23,569.310 ProftliZose) Exclusive of County Falr 335,967 289,719 (22,408) 131,502 (158,457) 314,244 134,380 284,125 239,942 106,979 . 424,729 358,803 137,484 (238,383) 324,429 2,667,066 Statement of Activity - County Fair 1996 (cid:9) *1997 (cid:9) 1993 (cid:9) 1699 (cid:9) 2000 (cid:9) 2001 2092 2003 2004 2005 2006 2007 2003 2009 ' 2010 Fourteen Year (// of days of County Fair) (12 DaD) (11 Days) (10 Date) (10 DIP) 00 Days) (10 DWI) 13 DM) (3 DaYe) (3 DWI) (3 Oen) (3 Days) (6 Dave) (3 Dm.) (4 Dan) (48884) Total Revenue 2,483,703 2,432,171 2,312,115 2,134.572 2,198,200 1.760,643 879,111 520,107 515.054 300,059 247,349 591,984 24,199 30.700 51,187 16284,356 COGS 0 (cid:9) 0 14,499 (cid:9) 9,689 (cid:9) 3,947 (cid:9) 4,219 0 0 0 0 0 0 0 0 0 32.354 Direct Cade 1,422.022 1295426 1.143,149 1,001243 1,015,282 1,004,665 464,350 272,432 340,307 234,431 239,417 455,093 77.481 89.002 75270 9.130.858 Other Dime Costs 0 O 0 (cid:9) 0 229,274 0 0 0 0 0 0 0 0 0 229,274 Marketing 1,032,413 (cid:9) 881.395 1573.436 750,771 898,815 884,497 287485 275,655 256,053 10,261 114,400 456,811 2.073 5.361 3,22S 6,992560 Administration Costa 420,944 609,688 509,040 (cid:9) 524,909 (cid:9) 510,721 (cid:9) 469,149 127,299 114,605 164,876 95.034 102,504 138,995 50.057 47,907 53,053 3,523.790 PratWLO County Subsidy (381,676 (2644313) (428.009) (152.845) (2443245) 031.1591 (280,123) (142585) (233,1612 (119,667) (208,971) 01,1915) (105,422) (111,51 (806361) 0,029068 County Subsidy 0 O 200 000 200 200 000 200 000 0 0 0 ILA FrofitiLoss ti.0*(141Efl.29.11111112tiA30WREEXID11211 ) (2464.4136) Satellite Wanting • Statement of ActivitY Remus: (cid:9) * (cid:9) : Adndulona(cid:9) 469,471 (cid:9) 423.889 (cid:9) 423,734 412.463 378,998 320.822 (cid:9) 297.066 (cid:9) 608.060 (cid:9) 476,063 (cid:9) 430.453 424,185 410,745 409,784 (cid:9) 378,715 (cid:9) 350,285 (cid:9) 8,11 .737 Commissions(cid:9) 847,418 862.633 (cid:9) 430,088 1,137476 1.1912789 1219.025 1,130,987 1,073,848 1,043,536 1.046,048 1,011,385 1.018,531 (cid:9) 869,770 (cid:9) 756.278 (cid:9) 793.983 (cid:9) 14.952,037 00nor Revenue (cid:9) 830,482 979,351 (cid:9) 779,307 898,614 787,0451,013257 (cid:9) 671,776 (cid:9) 724.502 (cid:9) 758,862 (cid:9) 636.237 742,059 618.986 714,486 (cid:9) 578248 (cid:9) 702.400 (cid:9) 12,011,220 Total Revenue (cid:9) 2047,771 2,255,333 2,133,127 2,443,753 Z344,322 063,104 2,209,320 2,306,4441 2,276,461 2,312,736 2,177,629 2243,282 1,994,044 1,725237 1.8420111,664 (cid:9) 33,077494 COGS(cid:9) 9 (cid:9) 0 (cid:9) 177,044 277,922 320,123 356261 332,712 (cid:9) 302,393 (cid:9) 303,269 (cid:9) 302.533 332,191 277,630 233,607 (cid:9) 3,644452 Direct Costs impact Few (cid:9) 997,080 500,504 (cid:9) 512,259 464,588 401,367 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 2,375.808 County Fees (cid:9) 247.401 293,085 (cid:9) 139,830 322,573 (cid:9) 74,700 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 0 (cid:9) 1,077,409 Other Dir.:Mosta (cid:9) 021,614 (cid:9) 863,126 (cid:9) 789,942 (cid:9) 689.382 (cid:9) 662,611 (cid:9) 659,401 (cid:9) 828,942 (cid:9) 562,386 (cid:9) 581,170 (cid:9) 609,841 (cid:9) 618!514 (cid:9) 680,154 (cid:9) 628,753 9.874,23 Total Direct Costs (cid:9) 1,585,095 (cid:9) 1,636,757 (cid:9) 1,421251 1,474,623 (cid:9) 1,138,865 (cid:9) 469,401 (cid:9) 625,342 (cid:9) 532,346 (cid:9) 531,170 (cid:9) 8019,8 41 (cid:9) 11514 (cid:9) 660,154 (cid:9) 24.1,763 (cid:9) 555556:56 (cid:9) 53S656,411: 13,327,47 Marludind (cid:9) 0 (cid:9) 1,953 (cid:9) 0 (cid:9) 3.071 (cid:9) 1,000 (cid:9) 3.426 (cid:9) 6,461 (cid:9) 8,847 (cid:9) 777 (cid:9) 4,463 (cid:9) 1,540 (cid:9) 8,320 (cid:9) 1568 56,843 Administrative Coat. (cid:9) 333,876 (cid:9) 314,132 (cid:9) 394,582 (cid:9) 363,866 (cid:9) 354,123 (cid:9) 427,042 (cid:9) 443.114 (cid:9) 414,807 (cid:9) 456,674 (cid:9) 477,594 (cid:9) 437,371 (cid:9) 523,441 (cid:9) 464,003 (cid:9) 378,919 (cid:9) 386,013 6,189,165 Divisional profiti(lns) •688 (cid:9) 139660 (cid:9) 3• 8 (cid:9) 1106 (cid:9) 681 (cid:9) 21043 (cid:9) 72747 (cid:9) 78 (cid:9) 676111 (cid:9) 169 (cid:9) 71 (cid:9) 095 C fobmi nei Ohbtna Combined PrOfltf(L095) (cid:9) (56,788) (cid:9) 34,381 (458,417) 176,857 (133,502) (315,913) (cid:9) 64,267 141,540 (cid:9) 6,781 (1208) 215,766 164,330 (cid:9) 32,042 (cid:9) 047,9331 (cid:9) 324,068 (197,412) Proof with Appandtt 1 (0) (0) •a Chang. In Catering Contract • • County area and Impact lees abohned (cid:9) • Ingrid of Ff40 management of Fairgrounds on County's General Fund (cid:9) APPENDIX 3 1995 estimate of annual amount that a County-managed department would cost in excess of FMC costs as reputed by Grand Jury in their report dated June 2011. (cid:9) $ (cid:9) 900,000 Since those savings were expressed in 1995 dollars they need to be re-calculated on an annual basis Into then-current Man The following CPI Index year-on-year increases are used to calculate the annual savings for each of the years 1996 - 2010 Year-on-year " (cid:9) increase CPI Index of price Increases: 1995 2.80% $ (cid:9) 900.000 1996 3.00% $ (cid:9) 925.200 1997 2.30% $ (cid:9) 952.956 1996 1.60% $ (cid:9) 974,874 1999 2.20% $ (cid:9) 990,472 2000 3.40% $ (cid:9) 1.012,262 2001 2.80% $ (cid:9) 1,046,679 2002 1.60% $ (cid:9) 1,075,986 2003 2.30% $ (cid:9) 1.093,202 2004 2.70% $ (cid:9) 1,118,346 2005 3.40% $ (cid:9) 1,148.841 2006 3.20% $ (cid:9) 1,187,591 2007 2.80% $ (cid:9) 1.225,544 2008 3.80% $ (cid:9) 1,259,911 2009 -0.04% $ (cid:9) 1.307,788 2010 $ (cid:9) 1,307,265 Anticipated cost to County of running Fairgrounds over actual cost generated by FMC $ (cid:9) 17,526,668 Amounts paid by County as subsidies to FMC: Subsidies provided by County to support Co My-mandated County Fairs -1999, 2000, 2001,2002, 2010 880,000 Subsidy provided by County to FMC's, support of County Fair and for general operations - 2007 285,000 Amount paid by County to Improve County-owned property at the Fairgrounds, 2005-2008 5523,000 Total savings to County General Reid over sixteen years of Fairgrounds being managed by FMC $ (cid:9) 10,830,088 SCCFMC(cid:9) APPENDIX4 Equity (Fund Balance) and Profits and Losses since inception Per annual P&Ls FMC Equity (Fund Balance) Profits Losses Beginning P&L PT Ad( Ending 1995 (cid:9) Equity deficiency on inception (50593) FMC operated for part-year only in 1995 1996 (cid:9) Internally-prepared (55,709) (50593) (55.709) (106,302) 1097 (cid:9) Internally-prepared 34,881 (106,302) . 34,881 (71,421) 1998 (cid:9) Intemally-pmpared (450,417) (71,421) (450,417) (521.838) 1999 (cid:9) Internally-prepared 178,857 (521,838) 178,857 (342,981) 2000 (cid:9) Intemally-prepared (186.802) (342,981) (186,802) (529.783) 2001 (cid:9) Internally-prepared (316,915) (529,783) (316,915) (846,698) 2002 (cid:9) Internally-prepared 54,257 (846,698) 54,257 (792,441) 2003 (cid:9) Internally-prepared 141,540 (792,441) 141,540 (650,901) 2004 (cid:9) Intemelly-prepared 6.761 (650,901) 8.761 (644,140) Audit pdor p3rIod adjustment (644,140) 127,159 (516,981) 2005 (cid:9) Internally-prepared (12.688) (516,981) (12,688) (529,669) 2006 (cid:9) Internally-prepared 215.758 (529,669) 215,758 (313,911) Audit prior period adjustment (313,911) (62,422) (376,333) 2007 (cid:9) Internally-prepared 184.888 (376,333) 184,888 (191,445) 2008 (cid:9) Internally-prepared 32,042 (191,445) 32,042 (159,403) 2009 (cid:9) Internally-prepared (347.933) (159,403) (347,933) (507,336) 2010 (cid:9) Internally-prepared 324,068 (507,336) 324,068 (183,268) 1,173,052 (1,370,464) (50,593) (197,412) 64,737 (1133,2682 ProfitqLoss) reported fifteen years, Internally reported (197,412) Add: (cid:9) Prior period adjustment In 2006 rotated to 2001 189,580 Nor period adjustment in 2005 related to 2003 (62,421) Net 2005 Prior period adjustment 127,159 Prior period adjustment in 2006 (62,472) Profitl(Loss) for fifteen years If (cid:9) (132,675) FROM INCEPTION: (cid:9) Number of years with profits 9 (cid:9) Number of years with losses 6 PAST TEN TEARS .2001-2010 (cid:9) Number of years with profits 7 (cid:9) Number of years with losses 3 (cid:9) 12131/2010 Total Fund Balance per unaudited (cid:9) Balance Sheet 727,421 Long-term debt due to SC County (910,689) (cid:9) Total Equity (Deficiency)/Fund Balance per unaudited Balance Sheet (183,266) (0) RMP PROJECT EXPENDITURES APPENDIX 5 Maintenance & Improvements to Fairgrounds) Deferred maintenance & replacement equipment expenditures: Sewer repairs 551,554 Electrical repairs - Expo Hall 326,117 Ceiling repair - Expo Hall 79,699 Grounds maintenance 38,179 Structural repairs - Fiesta 18,210 Underground transformers 61,520 Roofing repairs: Admin building 38,077 Fiesta Hall 74,306 Cafeteria and Restrooms 65,981 CTRC 54,747 Painting, preparation, gutters, concrete, etc. 526,965 Misc, repairs 55,164 Replacement equipment: Irrigation 5,800 Tractor/mower 38,760 Kitchen equipment 64,098 Gator tractors 28,732 Computers & office equipment 26,655 Operational equipment 23,475 Traffic control system 5,030 Water truck 46,621 Total deferred maintenance & replacement equipment 2,129,690 42% Fairgrounds Improvements: Airconditioning: Expo Halt 1,399,711 Pavilion 484,410 Gateway 163,685 Fire control system 13,594 Expo Hall lounge conversion 76,052 Bleachers for Arena 849,853 Total fairgrounds improvements 2,987,305 58% Total RMP expenditures to December 31, 2010 5,116,995 100% Funds available at December 31, 2010 for future projects 406,003 TOTAL RMP PROJECT FUNDING 5,522,998

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