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The NM State Fair: Enron with a carnival midway

By   /   October 20, 2011  /   No Comments

A scathing evaluation of the New Mexico State Fair released to the Legislative Finance Committee on Thursday (Oct. 20) shows the fair is financially insolvent, has lost $17 million in five years, owes $1.9 million in insurance coverage and has mismanaged its lease with the Downs at Albuquerque as well as its concessions contract.

In short, it’s not much of a stretch to consider the state fair as Enron with a carnival midway.

“It’s not right,” Rep. Dennis Kintigh (R-Roswell) said, “and I don’t think the rest of the state should pay for it.”

“It’s embarassing,” Sen. Tim Keller (D-Albuquerque) said as committee members learned the fair’s actual losses are greater than previously disclosed.

Sitting before the committee was Dan Mourning, the new manager of the State Fair, who took over in March. After the hearing, Mourning told reporters he didn’t know how badly managed the fair was when he accepted the appointment from Gov. Susana Martinez.

“It is what it is,” Mourning said. “It’s the job I took on, it’s the job the administration took on. There are more problems than just the state fair. My job from the governor was to put a staff together to clean it up and put it back on the right track and I think we’re on that right track.”

There’s plenty to fix, judging from the evaluation. Among some of the most alarming findings:

1) Including depreciation, the fair’s operational losses between fiscal years 2006-2010 totaled $17 million and its unrestricted cash reserves have been exhausted

2) The amount fair owes creditors exceeds the cash available to pay those creditors — and the biggest creditor is the Risk Management Division of the state’s General Services Department (paid for through tax dollars), which is owed $1.9 million for insurance coverage dating back to fiscal year 2009

3) The state fair’s lease with the Downs at Albuquerque “is fraught with problems,” the evaluation reported, pointing out the Downs is underpaying its electricity bill; is not meeting its obligation to provide $420,000 in promotional events, marketing and advertising; and owes the state fair $215,000 in revenue from horse racing.

4) Even though a new contract was awarded in 2010 for carnival concessions, the financial terms of the deal were never enforced, leading the state fair to be underpaid by an estimated $477,000

5) In a related matter, an amendment to the contract that led to the underpayment was written in October of 2010 and approved by the former general manager of the state fair and was not disclosed until after the former GM had left the state fair office

6) It is conservatively estimated that $3.5 million in cash is collected each year at the state fair (through parking, admissions to rides, concessions, etc.) but the cash is handled in a potentially sloppy way. At the 2011 Fair, a temporary cashier allegedly embezzled about $5,000.

Amidst all this, the current management of the fair, in order to keep generating revenue, put out a bid for a new lease for race track and casino operations on the state fair site but the evaluation criticized the fair for limiting response time for potential bidders to just 30 days, “potentially reduc[ing] the number of respondents.”

Only two bidders have responded and reportedly, one of them is the Downs at Albuquerque — even though the Downs has not lived up to the terms of the current agreement and owes the state fair money.

Sen. Keller — whose district includes the state fair property — told the committee he’s urging that the bidding process be reopened, a long-term plan should be enacted, optimal lease rates determined and community input sought before signing a new lease. “We can do a lot better than this,” Keller said.

The hearing also exposed some tension that legislators in rural districts feel about the state fair.

“I don’t think we have a state fair,” Sen. Clint Harden (R-Clovis) said. “It doesn’t exist anymore.”

And Rep. Kintigh said the Eastern New Mexico State Fair is run without taxpayers dollars “and functions quite well.”

Sen. Mary Kay Papen (D-Las Cruces) echoed those remarks, praising the Southern New Mexico State Fair in Las Cruces while saying, “I question whether Albuquerque/Bernalillo really is a state fair … I think the term ‘state fair’ is a bit of misnomer.”

As for how to recoup the $420,000 the Downs at Albuquerque owes in promotions, marketing and advertising, fair manager Mourning told the committee the Downs has 15 days to cough up the money.

Asked after the meeting by Capitol Report New Mexico to expand on that, Mourning said, “That’s why we have attorneys, that’s why we have a process. We’ll follow that process and ensure that everything that is due to the state will be worked out and we’ll collect those monies.”

Does that mean lawsuits? “That’s something we’ll have to review,” Mourning said.

To read the entire, hair-raising, 37-page evaluation, click here.

Here’s an interview with Keller, including a question I asked him about whether the state fair should even exist, given its fiscal problems.

 

And here’s an interview with the guy in charge of fixing the mess, Dan Mourning:

 

And here are a couple of charts from the evaluation that are worth noting:

 

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Since 2010, Rob Nikolewski has covered New Mexico politics and investigated fraud, waste and abuse in government. He also writes an opinion column in the Sunday editions of the Santa Fe New Mexican. Rob joined New Mexico Watchdog after 20 years in television as a sports anchor and reporter. He anchored at MSNBC, New York City, Boston, Pittsburgh, Phoenix, Reno and Boise, winning three regional Emmy awards along the way. He holds a master's degree in journalism from Northwestern University, a master's in public administration from Columbia University's School of International and Public Affairs and a bachelor's degree in journalism from Trinity University in San Antonio.