Red tape and the O.C. Fair

When Gov. Arnold Schwarzenegger proposed selling the O.C. fairgrounds in May, he may have been thinking about closing the beleaguered state’s massive budget deficit. But local officials have other reasons for supporting the move.

Orange County’s fair is in a unique position: It’s called an enterprising agency of the state. Unlike many California fairs, it is not funded by tax dollars; like a private business, the fair can spend only what it brings in. But it must still deal with strict state regulations and a bureaucracy, which can often stifle its ability to compete with other entertainment businesses.

In recent weeks the fair’s governor-appointed board of directors and officials with Costa Mesa, where the fairgrounds are, have both indicated support for selling the fairgrounds to a nonprofit entity as long as it continued to be used to hold a fair.

The Orange County Board of Supervisors will also consider passing a similar formal resolution to the same effect in a couple of weeks, according to Supervisor John Moorlach.

The county has even been discussed as a possible buyer.

“If the fair weren’t a government entity, then maybe it could do business better,” said state Sen. Tom Harman.

He is the chairman designate of the Joint Legislative Fairs Committee, a newly reignited body that oversees the state’s fairs.

For years the committee sat dormant, with no members and no mission, because horse-racing operations financed fairs through fees that it paid to hold races on fairgrounds.

As horse racing’s popularity declined, the state took the burden of supporting the fairs itself, prompting the committee to be reinstated to oversee the state’s investment.

The Orange County Fair, on the other hand, doesn’t get anything from the state.

The fair even refused a subsidy for $35,000 per year that the state offered.

Nonetheless, when the fair wants to hire an employee, it must pay a set state wage regardless of how valuable the employee is to the organization, making it difficult to retain talent, said fair Chief Executive Steve Beazley.

For instance, the fair brings in revenue by leasing out its space to companies that want to hold events when the fair isn’t in full swing.

The more high-paying events the sales force can bring in, the more money the fair has to spend.

Yet, salespeople can’t get commissions or bonuses, which a private business would award — they have to be paid a set state wage.

Also, the fair’s financial transactions are public record. When the fair makes a deal with a musician, say, to perform at the Pacific Amphitheatre (its on-site performance venue) other artists may see how much the fair paid and use that information to their advantage during their own negotiations.

When the fair wants to install equipment or buy supplies it has to go through formal state channels to solicit bids and hire state-approved contractors, which limits the pool of possibilities and drives up the price.

Beazley can cite many other examples of strict government rules requiring transparency and bureaucracy making business tougher, but he doesn’t blame the state.

“When you’re dealing with public dollars that’s the way the world should work, but when you’re dealing in commodities like entertainment it becomes very inefficient and sometimes very costly,” Beazley said.

“We are a staff that has to work harder and not smarter because we have to maintain two identities.”

Despite support of a sale from the governing bodies of the fair, the city and perhaps the county, the final decision about a sale will be made by the state legislature and the governor.

Preliminary state appraisals have valued the land at up to $180 million, but many experts say it would be worth much less to prospective buyers if it remained a fair instead of becoming high-rise office buildings or houses.

Harman thinks that could be a sticking point in a possible deal.

If the city holds firm on its commitment not to change the zoning to allow anything but a fair, and the state finds that it can get only $20 million or $30 million from the sale, the legislature might not pass it or the governor might veto it, he said.

However, the state might be paying personnel costs and insurance premiums because of its ownership that might prompt them to just “unload the thing” anyway even if the price isn’t enticing.

The state legislature is expected to reach a budget deal soon.