Kentucky State Fair Board

SummaryLegislative Research CommissionProgram Review And InvestigationsThe Louisville Convention and Visitors Bureau estimated the economic impact forapproximately half of the events held at KSFB facilities in 2013. KEC provided more than 200 million of estimated economic impact, primarily through conventions. KICC providedmore than 70 million of estimated economic impact, also primarily through conventions.Based on their depreciated values, KSFB assets decreased from 277 million in FY 2009 to 250 million in FY 2013. Buildings and land improvements are nearly 90 percent of KSFBassets. As of FY 2013, KSFB’s debt was nearly 63 million, a 4 percent decrease from FY 2009.KSFB identified multiple financial challenges for its operations, with the largest being the loss ofbusiness from the opening of the KFC Yum! Center. Events moved from KSFB facilities to theKFC Yum! Center, and a process was created to compensate KSFB for losing the business.However, the funds were never available, and KSFB was not compensated. KSFB estimated thatlosing the events cost it 7.5 million in business from FY 2011 to FY 2013.Program Review staff compared net income from the two KSFB facilities to other conventioncenters by reviewing financial documents from 53 convention centers. Convention centersgenerally generate no profit or a small profit. Convention centers that generated a large profitreceived governmental support, such as a transfer of tax revenue.Based on a review of US event facilities with at least 100,000 square feet of exhibit space, mostare relatively small, with less than 250,000 square feet. Only 7 percent (including KEC) hadmore than 1 million square feet of exhibit space. More than 90 percent of reviewed facilitieswere owned by a state, county, or local government agency.Two-thirds of 77 facilities reviewed, including KSFB facilities, are publicly owned, are publiclyoperated, use public employees to provide some services, and use private contractors to provideothers. A few publicly owned facilities use in-house staff exclusively. An even smaller numberof facilities contract with private firms to provide all services. KSFB considers the possibility ofusing outside vendors for providing services by conducting an analysis of each show hosted at itsfacilities.Nearly one-fourth of event facilities are publicly owned facilities that have hired a private firm tomanage operations. Based on a review of a private manager and government entities that ownevent facilities, the five contracts were similar except for compensation. Each contract specifiedthat the company was hired to be the sole manager of one or more facilities and was responsiblefor managing, operating, maintaining, promoting, and providing concessions for the facility. Thecontracts had a base management fee and an additional fee based on performance.Of the 77 facilities reviewed, only one is privately owned and operated.viii

Legislative Research CommissionProgram Review And InvestigationsChapter 1Chapter 1Governance And OrganizationThe Kentucky State Fair Board(KSFB), an agency of theTourism, Arts and HeritageCabinet, owns and operates twoevent facilities in Louisville.The Program Review and Investigations Committee voted toinitiate a study of the Kentucky State Fair Board (KSFB) onDecember 11, 2013. KSFB, an agency of the Tourism, Arts andHeritage Cabinet, owns and operates two event facilities inLouisville. The committee directed staff to review the agency andoptions for privatization.The Kentucky Exposition Center(KEC) is a multipurpose complexwith 1.2 million square feet ofexhibit space. It is the sixth largestconvention center in the US. Ithosted 217 events in FY 2013,including the Kentucky State Fair,the National Farm MachineryShow, and the North AmericanInternational Livestock Exposition.The Kentucky Exposition Center (KEC) opened in 1956 as amultipurpose complex that hosts major trade shows, conventions,concerts, sporting events, and agricultural shows. KEC is the sixthlargest convention center in the country, with 1.2 million squarefeet of exhibit space, including Broadbent Arena, Freedom Hall,and four exhibition wings. Its facilities were booked year-round infiscal year 2013 and hosted 217 events, including three KSFBproduced events: the Kentucky State Fair, the National FarmMachinery Show, and the North American International LivestockExposition.The Kentucky InternationalConvention Center (KICC) has200,000 square feet of exhibitspace for hosting events includingnational and internationalconventions and trade shows. Ithosted 166 events in FY 2013.The Kentucky International Convention Center (KICC), built in1977, hosts events including national and international conventionsand trade shows. A 1999 renovation doubled the facility’s size to200,000 square feet of contiguous exhibit space. KICC was bookedyear-round and hosted 166 events in FY 2013.Table 1.1 shows the number and types of events held at eachfacility during FY 2013. One half of the events held at KICC weremeetings and seminars. Trade shows and conventions representedan additional quarter of all KICC events. KEC hosted more diversetypes of events, with sports events, meetings, public expositions,and catered affairs accounting for more than one-half of events.1

Chapter 1Legislative Research CommissionProgram Review And InvestigationsTable 1.1Kentucky International Convention Center AndKentucky Exposition Center Events By TypeFiscal Year 2013Event TypeCatered eventsConcertsConventionsFamily-oriented attractionsHorse showsLivestockMeetings and seminarsPublic expoPublic salesSporting eventsTrade showsMiscellaneous eventsKSFB-produced shows*Total eventsKICC19022100836392210166% Of 00.0%KEC21171211412382210438154217% Of 0.0%Note: Percentages may not add to 100.0 due to rounding.*The Kentucky State Fair, the World’s Championship Horse Show, the National Farm MachineryShow, and the North American International Livestock Exposition were not included in the sourceand were added by Program Review staff.Source: Kentucky. State Fair Board. “Business Plan Biennial Budget 2014-2016.”ConclusionsThis report has four conclusions. KSFB events affect local and state economies by attracting outof-state visitors. The Louisville Convention and VisitorsBureau calculated the economic impact for approximately halfof the events held at KSFB facilities in 2013 to be 277 million, not including tax revenue or secondary spending.From FY 2007 to FY 2013, KSFB’s net income ranged from an 11.1 million deficit to a 1.1 million surplus. Low or negativenet income is typical of US event facilities. More than80 percent of sampled facilities had a net income of less than 1 million in FY 2013, including 64 percent that reported aloss. Facilities that generated large annual profits in FY 2013received significant funding from grants, tax breaks, orgovernmental appropriations.KSFB has a comparatively high level of oversight. It isgoverned by a board, is included in the state’s annual audit, andproduces an annual report voluntarily.The ownership and management of KSFB facilities and thedegree to which they privatize services are typical of US event2

Legislative Research CommissionProgram Review And InvestigationsChapter 1facilities. KICC and KEC are publicly owned and operated anduse public employees to provide some services but contractwith private companies for other services.Kentucky State Fair BoardBy statute, KSFB is governed by a15-member board consisting of3 voting ex officio members (thegovernor, the commissioner of theDepartment of Agriculture, and thedean of the University of KentuckyCollege of Agriculture) and12 members appointed by thegovernor to 4-year renewableterms.KSFB is governed by a 15-member board, composed of thegovernor, the commissioner of the Department of Agriculture, thedean of the University of Kentucky College of Agriculture,10 members who are appointed by the governor from the state atlarge, one member who is appointed by the president pro temporeof the Senate from the state at large, and one member who isappointed by the speaker of the House of Representatives from thestate at large (KRS 247.090).The two KSFB members who statute says should be appointed bythe Senate and House are in practice appointed by the governor. InLegislative Research Commission ex rel. Prather v. Brown (1984),the Kentucky Supreme Court declared invalid the GeneralAssembly’s authority to appoint executive branch board membersbecause it infringes on the governor’s right to make suchappointments. The court ruled that the governor should fill suchvacancies.1The remaining 10 state-at-large gubernatorial appointments mustinclude one eligible representative each from the American SaddleHorse Breeders Association, the Kentucky Association of Fairsand Horse Shows, the Kentucky Farm Bureau Federation, theKentucky Livestock Improvement Association, and the KentuckyState National Farmers Organization.aThe governor, commissioner, and dean are ex officio KSFBmembers with full voting rights. The remaining 12 KSFB membersare appointed to 4-year renewable terms with full voting rights.Board members receive 100 per day for attending KSFB meetingsand are reimbursed for necessary travel expenses.In October 2014, the Governorreorganized KSFB by executiveorder. The voting membershipwas increased to 17, and twononvoting members were added.The three voting ex officiomembers are as before, but somegubernatorial appointments wererevised.On October 6, 2014, the governor issued Executive Order2014-834 relating to the reorganization of KSFB. The number ofvoting members is increased from 15 to 17, and two nonvotingmembers are added. Remaining on the board are the governor, thecommissioner of the Department of Agriculture, the dean of theUniversity of Kentucky College of Agriculture and gubernatorialaThe American Saddle Horse Breeders Association has changed its name to theAmerican Saddlebred Horse Association.3

Chapter 1Legislative Research CommissionProgram Review And Investigationsappointees representing the Kentucky Association of Fairs andHorse Shows, the American Saddlebred Horse Association, and theKentucky Farm Bureau Federation. A gubernatorial appointeerepresenting the Louisville Convention and Visitors Bureau isadded. The governor also appoints 10 state-at-large members,including one who is experienced in animal agriculture and anotherwho is experienced in agribusiness. The added nonvoting membersare the state presidents of the Kentucky FFA Association and theKentucky 4-H Organization. Removed from the board wererepresentatives of the Kentucky Livestock ImprovementAssociation and the Kentucky State National Farmers Organizationbecause these organizations were not locally active or no longerexisted.Under KRS 247.110, KSFB elects a chairman and vice chairmanfrom among the members appointed by the governor. UnderExecutive Order 2014-834, the governor appoints the chairmanand vice chairman. Under KRS 247.100(2), a quorum of the boardconsists of five members, and a majority of those present at anymeeting for the transaction of business. Under the executive order,a majority of voting members (nine) constitutes a quorum.Statutory ResponsibilitiesBy statute, KSFB is responsiblefor promoting the progress of thestate and stimulating publicinterest in the advantages anddevelopment of the state byproviding KEC and KICC forhosting events.KRS 247.140(1)(c) states that KSFB[s]hall promote the progress of the state and stimulatepublic interest in the advantages and development of thestate by providing the facilities of the state fairgrounds foragricultural and industrial exhibitions, public gatherings,cultural activities, and other functions calculated to advancethe educational, physical, and cultural interests of thepublic and by providing the facilities of the exhibitioncenter for conventions, trade shows, public gatherings, andother functions calculated to advance and enhance thevisitor industry, economy, entertainment, cultural andeducational interests of the public.In fulfilling its mandate, KSFB canacquire and hold property. It hascustody and control of any suchproperty, including KEC andKICC.In fulfilling this mandate, KRS 247.140(2) states that KSFBmay take, acquire and hold property, and all interesttherein, by deed, gift, devise, bequest, lease, or eminentdomain, or by transfer from the State Property andBuildings Commission, and may dispose of any property soacquired in the manner provided by law.4

Legislative Research CommissionProgram Review And InvestigationsChapter 1KSFB has custody and control of any such property, includingthose of the Kentucky state fairgrounds and the KentuckyInternational Convention Center. It may erect or repair buildingson these properties and carry out a program of development toaccomplish the above stated objectives.The only event KSFB is requiredby statute to host is the NorthAmerican International LivestockExposition.Although KSFB has exclusive control of concessions, exhibitions,shows, entertainment, and attractions on its properties, the onlyevent that statute requires it to host is the North AmericanInternational Livestock Exposition (KRS 247.140(1)(f)). Theproduction of the annual Kentucky State Fair is not mandated.According to KRS 247.140(1)(d), the board[m]ay hold an annual fair on the state fairgrounds, for theexhibition of agricultural, mechanical, horticultural, dairy,forestry, poultry, livestock, mineral, and all other industrialinterests of the state, and prepare premium lists andestablish rules of exhibition for the fair.The board is also responsible forhiring a president, from outside itsmembership, to serve as the chiefexecutive officer.The board is also responsible for hiring a president, from outsideits membership, to serve as the chief executive officer under acontract not to exceed 4 years without renewal. The board alonedetermines the terms, conditions, and compensation of itspresident. KSFB may also employ or contract with other persons,firms, or corporations it deems necessary to accomplish its duties.OperationsKSFB members meet monthly in Louisville to establish and reviseagency policies, to evaluate the progress on short- and long-rangeplanning, and to address other issues. Meetings are open to thepublic, and proceedings are a matter of public record. Newlyappointed members are given an orientation packet and meet withthe president to review the board’s function and the duties of itsmembers.There is no documentationshowing the items that requireboard approval. Board staffexplained that they rely on theprovisions o

business from the opening of the KFC Yum! Center. Events moved from KSFB facilities to the KFC Yum! Center, and a process was created to compensate KSFB for losing the business. However, the funds were never available, and KSFB was not compensated. KSFB estimated that losing the events cost it 7.5 million in business from FY 2011 to FY 2013.