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F I S C A L I M P A C T R E P O R T

SPONSOR Stewart

DATE TYPED 1/19/05

HB 6

SHORT TITLE State Fair Commission Appropriation Act

SB

ANALYST Hadwiger

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

14,555.8

Recurring State Fair Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Appropriation in the General Appropriation Act

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

14,555.8

Recurring

State Fair Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

Legislative Finance Committee Report for Fiscal Year 2005 - 2006

SUMMARY

Synopsis of Bill

House Bill 6 appropriates $14.6 million to the New Mexico State Fair. The bill reflects the

Legislative Finance Committee (LFC) recommendation for the Fair FY06 budget. HB6 also

shows projected performance measures and targets.

Significant Issues

For FY06, the State Fair requested growth in its budget of $734.2 thousand or 5.5 percent,

including a $442.9 thousand increase for temporary employees. This request does not include

House Bill 6 -- Page 2

additional revenues and expenditures pursuant to Chapter 119, Laws 2004. The LFC

recommends a $1.3 million increase in the State Fair budget reflecting an additional $1.3 million

in pari-mutuel revenues. However, no additional enterprise revenues are projected due to

declining attendance at recent fairs and an operating loss of $219.8 thousand in FY04.

Appropriations are reduced to reflect actual filling of positions at the fair. Technical changes are

made to match the insurance charges set by the Department of Finance and Administration and

actual debt service payments due in FY06.

Fair revenues/operating balance. According to the State Fair’s December income statement,

Fair revenues are $522 thousand lower during the first six months in FY05 than during the same

period in FY04. The State Fair’s balance sheet indicates there is a negative balance in the

operations account.

Fair attendance. One of the challenges facing the State Fair Commission every year is to

develop a strategy to sustain or expand attendance. Paid attendance at the State Fair has declined

almost every year since 1998 when the fair drew 641,000 visitors. Despite an additional day this

year, paid attendance at the 2004 State Fair was 503,000, a drop of 21.5 percent from the 1998

level and 4 percent from the 2003 level.

Concert attendance. The Tingley Coliseum acts drew disappointing crowds in 2004. The

headliner, Reba McEntire, sold only 4,000 tickets, less than half of capacity. Clay Aiken (from

"American Idol") sold 3,100 tickets; Chubby Checker, 900 tickets; and, the gospel group Mighty

Clouds of Joy, 400 tickets.

Children's attractions. The major successes of the 2004 fair were events targeted at youth. The

McDonald's Farm, staffed by volunteers, allowed children to move through various venues

representing the process whereby food is grown and harvested. Children who visited the exhibit

received healthy snacks at the end of the trek as compensation. An estimated 60,000 children

visited the exhibit. Another success was the junior livestock auction, which raised a record $450

thousand.

Fair staffing and vacant positions. In recent years, the fair has maintained a high vacancy rate

among its authorized permanent and term positions. In FY04, on average, 22 percent of the

authorized positions were vacant. The FY05 budget added 21 positions at the fair, resulting in a

36.5 percent vacancy rate through September. Two of the positions have been vacant since

2002; six more have been vacant since 2003. The LFC recommendation deletes these eight

positions and applies a 5 percent vacancy rate to nonexempt salaries. With these changes,

funding for personal services would increase 2.3 percent from the FY05 level.

Capital Improvements and the New Mexico Finance Authority Bond. The New Mexico Finance

Authority (NMFA) and Board of Finance have approved the issuance of $5.55 million of

revenue bonds for capital and infrastructure improvements at the fairgrounds, including upgrade

of sewage and water lines, paving, roof repair and replacement, structural repair, and

construction of new buildings. The bonds would be retired with revenues from the pari-mutuel

tax pursuant to Chapter 119, Laws of 2004. Consistent with the bond resolution and other

documents, the Committee recommendation budgets the pari-mutuel tax revenues for debt

service on the NMFA bonds and for other capital improvements.

House Bill 6 -- Page 3

POSSIBLE QUESTIONS

1.

Why are State Fair revenues about $500 thousand lower in the first half of FY05 than in

the first half of FY04.

2.

Does the Fair have sufficient funds to make payroll without borrowing or running an

operating deficit.

3.

What will the Fair do in 2005 to increase attendance and revenues.

4.

What is the current status of the Fair’s plans to build a casino on Central Avenue in

Albuquerque. Have plans been completed for this project. How will the project be

funded given the current revenue outlook.

DH/yr