Fair officials lose big money due to expensive oversight

Place blame on Bay Area race track; Golden Gate Fields says subsidy check to Ferndale never promised

From the September 1, 2016 print edition

The Humboldt County Fair (HCF) which ended Sunday evening, may have been “one for the books” but the books may end up in the red.

The fair’s pro-bono attorney made a startling announcement Sunday evening when he said on a local radio show, broadcasting live in front of fair board president Dave Mogni’s Ivanhoe restaurant and bar on Ferndale’s Main Street, that the fair and the fund it draws purses from to pay prize monies will suffer a hit of between $130,000 and $140,000 in lost racing revenue.

Last year, the fair earned approximately $300,000 in racing commissions and at the end of the day, the six-day race meet in 2015 earned the fair association a net profit of $46,000.

With Sunday’s announcement, it is possible that the racing program this year could actually cost the fair money. Walnut Creek attorney Jim Morgan has described the matter as “life or death” for the Humboldt County Fair.

Boxed out

HCF representatives, apparently unbeknownst to them at the time, failed a year ago to secure a vitally-important economic arrangement that saw GGF sharing some of its racing commissions and purses during the two-week period when both tracks conduct racing in August and GGF is the designated “host” in Northern California with Ferndale being in an “overlapped” situation.

As late as June of this year, fair officials were still assuming that GGF would continue to share its revenue with Ferndale. The devil, however, was in the details, with no formal agreement solidified by HCF officials at the time that this year’s racing dates were approved last year or in the racing license application, signed by its general manager, submitted to the state for approval.

The arrangement to share in revenue was first established by negotiations in late 2012 by former fair manager Stuart Titus for the 2013 and 2014 fairs. Titus’s 22-year tenure at the fair ended in early 2013 after the fair board voted not to renew his contract. In 2014, the arrangement was amended for the 2015 fair.

However, a year ago, when HCF’s Morgan spoke before the California Horse Racing Board (CHRB) — when it met to decide 2016 race dates — he failed to make sure that the revenue-sharing agreement was included in a final motion that decided the racing calendar or in the fair association’s June application for a racing license. At the August 2015 meeting, a GGF representative stated to the state board that it would only adhere to a state law — spearheaded by Titus in 2009 — that allocates a small portion of GGF’s commissions and purses to Ferndale.

At odds

Morgan on Sunday evening around 9 pm, surrounded by fair revelers at the Ivanhoe, said on the radio that the fair had been “sucker-punched” by the Bay Area race track, which has been subsidizing, according to GGF, Ferndale for many years. Morgan said the fair board, once made aware of the situation, had been trying to obtain extra cash from fair sponsors to shore up the lost revenues.

A representative for GGF this week took exception to Morgan’s description of being “sucker-punched,” stating that GGF can’t afford to keep subsidizing the Ferndale racetrack. Attorney Scott Daruty, who represents GGF, said he was surprised that Morgan and other HCF officials only realized recently that the check from his race track wouldn’t be in the mail to Ferndale. Daruty pointed to the transcript from the August 2015 CHRB meeting which shows that no agreement over subsidies from GGF was reached when the CHRB approved 2016 race dates, except for confirmation that GGF would adhere to Titus’s state law that provided Ferndale with approximately $45,000 in subsidies from GGF last year. The state statute calls for the HCF to receive .75 of one percent in commissions and purses from whatever track overlaps the fair’s race meet. (Titus was later criticized by fair board members for getting the law enacted. Board members stated that Titus’s legislation, approved by the fair board before being signed by the govenor, had a “polarizing” effect. The checks received by the fair since 2009 for racing revenue subsidies has resulted in hundreds of thousands of dollars over the years to Ferndale, including funds desperately needed this year.)

“I personally believe I did everything I could to communicate our position clearly,” Daruty told The Enterprise on Monday. “We said we would abide by the statute but in 2016 we were not going to have a special agreement in addition to what is required by law. The characterization of being ‘sucker-punched’ is unfair. The record is clear that I stated very openly that we would abide by the statute and that was it.”

Stewards inquiry

HCF officials over the past six weeks have taken the issue to the CHRB level but to no avail. In three different letters, obtained from the CHRB by The Enterprise, Morgan complained about Ferndale not receiving the host status commissions and purses this year from GGF.

“I would not be so persistent if it were not for the life or death difference it makes to our fair,” stated Morgan in an email on July 14. On August 12, Morgan realized that his request to have the matter placed on the CHRB’s August 25 monthly meeting agenda had been ignored. In an letter mailed on August 15 from the CHRB to Morgan, the state board’s chief counsel said that the CHRB motion a year ago approving this year’s dates did not include any side agreements between GGF and the HCF. And, that any side deal with GGF was not included in the HCF license application made to the state.

Attorney Robert Browning Miller also stated that the fair and GGF are welcome to figure out side arrangements “as they have in the past and may in the future. “However, should a disagreement arise from such side agreements, the California Horse Racing Board would have no authority to intervene,” said Miller.

CHRB legal counsel made the same point, reported in the August 27, 2015 Enterprise, a year ago regarding its inability legally to interfere with host status issues. Morgan and fair officials as recently as the June 2016 CHRB meeting were apparently counting on the usual subsidy of four host days where Ferndale would be allocated GGF’s commissions and purses during its August meet (two Wednesdays and two Thursdays). At that meeting, Morgan attempted to broach the subject once again of getting more “host status” from the board and GGF but was quickly cut off by the board’s chair since the item was not on the agenda. (Unlike the HCF board, the CHRB is subject to the state’s public meeting laws and cannot discuss business that has not been agendized.) Daruty said when Morgan complained to the board that Ferndale was only receiving from GGF  four host days in 2016, he didn’t interrupt him and correct his statement that Ferndale wouldn’t be receiving any extra subsidies from GGF since they had not been negotiated or included in the motion the prior year that approved the ‘16 calendar. He said it wasn’t his place to interrupt the meeting and correct Morgan’s incorrect assumption.

Scratched comments

Meanwhile, Morgan’s and other fair officials’ responses this week to the lost revenue were discombobulated to say the least. When asked questions regarding the issue via email by The Enterprise, Morgan started an email thread that included the fair’s general manager Richard Conway, board president Mogni, fair board member Cindy Olson and The Enterprise. Morgan stated that he thought he should provide “short answers” to the newspaper.

“What do you think about some quick responses?” Morgan asked the “HCFA Team,” as he described the two board members and the general manager.

“I think we could provide brief answers, she will put her spin on anything we give her,” replied Conway, including The Enterprise in the thread and presumably referring to Enterprise publisher Caroline Titus.

“I’m ok with a brief reply. Would like to see before we send,” stated Mogni, he too including The Enterprise in the thread. Mogni called one of The Enterprise’s questions “baited. “That’s the bullshit that makes you not want to respond at all,” stated Mogni referring to a question asking about the fair receiving public funds. The Enterprise then afforded Mogni and Conway to expound on their assertions of The Enterprise “spinning,” “bullshit” and “baited questions.” Fair officials didn’t respond further by this edition’s deadline.

Run for the money

As for the future of the fair and the race meet, all eyes and ears will be on the September meeting of the CHRB when the board is scheduled to decide the calendar for next year. Despite the HCF’s description of GGF “sucker-punching” them, GGF has offered to give Ferndale one week of exclusive and lucrative race dates next year if the CHRB gives GGF two week of September racing that were awarded to the San Joaquin County Fair in previous years. That fair ended racing last year after 140 years in the business. The fair board wants to start the fair later next year and run racing through Labor Day weekend, in order to obtain one week of exclusive racing dates. In January of 2013, the fair was flush with reserve funds of almost $500,000. That year, however, saw unchecked spending and cost overruns that depleted the fair’s reserve almost 60 percent. Cash flow concerns in 2014 prompted the organization that puts on the racing meet (The California Authority of Racing Fairs) to force the HCF to sign an MOU that it would be paid for the services it is provided before final allocation of commissions were made to the fair.

Dead heat

As for monies bet on HCF horse races this year, preliminary reports from the CHRIMS pari-mutuel show the meet essentially flat, which in an environment of declining betting at other racetracks, is good news for Ferndale. The fair held four fewer races than in 2015 but managed to stay even with a preliminary all-source total handle of $2,926,454 bet compared to 2,920,966 the prior year. On track betters placed wages valued at $615,419 compared to $635,407 in 2015. Other fair results, such as attendance, had not been made available as of deadline.

(Disclosure: The Enterprise publisher and editor is married to the former HCF general manager.)




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