Lawmakers on a state audit panel Wednesday expressed support for a major review of the Los Angeles County Fair Assn., citing concerns about compensation levels for its executives and whether the nonprofit organization was straying from its agrarian roots.
The Joint Legislative Audit Committee set a vote for next week on a proposal by Assemblyman Freddie Rodriguez (D-Pomona) to examine the fair association's finances and operations, including its use of public money. Rodriguez, whose district includes the county fairgrounds in Pomona, called for the audit after a Times investigation in November found that the head of the association received nearly $900,000 in total compensation in 2013, the fourth consecutive year the organization reported financial losses, according to its federal tax filings.
"The residents of my district are now questioning what benefit the association is having on our community," Rodriguez said Wednesday.
Association Chief Executive James Henwood Jr. and four members of his executive team collected a combined $2.8 million in bonuses from 2010 to 2013, boosting their total compensation to $8.75 million, the Internal Revenue Service records showed. At the same time, the association's fair no longer featured demonstrations by 4-H clubs and instead emphasized carnival attractions, concerts and shopping. The organization also runs a hotel and conference center, a catering company, a trailer park and other businesses that have little or nothing to do with agriculture.
For decades, the association has been exempt from federal income tax because its mission is to promote the local agricultural industry. It operates on county-owned land and, according to its tax filings, has received millions of dollars in government grants and other support from taxpayers.
Association executives have defended the pay levels as appropriate for their positions and said their financial losses merely reflect depreciation and interest expenses. They also have said advancing agriculture remains a key part of the association's activities, including education and vocational programs it offers and a 5-acre demonstration farm at the fairgrounds, known as the Fairplex.
"The organization that we work for, and the board that we serve, has a very high interest in engagement in making certain that we are connecting to communities," Henwood said in an interview with The Times last week.
A lobbyist for the association, Anthony Gonsalves, said Wednesday that the organization will fully cooperate with a state audit. "They believe they have nothing to hide," he said of the executives.
Committee members from both parties Wednesday said they were concerned about the association's pay and benefit packages, which dwarf those found at any other California fair organization.
Assemblyman Mike Gipson (D-Carson), who chairs the panel, said the salaries and bonuses "raised eyebrows, red flags." He said the audit would "make sure taxpayers' monies are handled appropriately."
"I don't know of too many CEOs of businesses that make that kind of money while their businesses are going in the tank," said Assemblyman Brian Jones (R-Santee), referring to the financial losses. "I think there are some accountability questions that need to be answered."
State Sen. Ricardo Lara (D-Bell Gardens) agreed, saying, "Any time you're dealing with public funds, it's important to ensure that we're being the best stewards possible."
Assemblywoman Catharine Baker (R-San Ramon), who sits on the audit committee, said, "If you're not supporting 4-H and smart policies for compensation, you're calling for someone to take a look at how you're operating."
In addition to scrutinizing the spending of public dollars, the audit would examine the organization's compensation policies and accounting practices, and its nonprofit status, said State Auditor Elaine Howle. It would also look at whether the association has been posting annual deficits and, if so, why, Howle said. The audit would take about six months to complete, she said.
Henwood and other association executives said their pay is based on a 2011 salary survey commissioned by the organization's board of directors. They also said they shouldn't be compared with other fair organization managers in California because the association is a more complex enterprise, with businesses such as its hotel and conference center.
But Rodriguez said he was troubled by the association's forays into such ventures over the years. He and other lawmakers also said they were concerned about the association's recent staging of rave concerts. Two young women who attended one concert in August were rushed to hospitals and died of apparent overdoses.
"The L.A. County Fair Assn. was formed in 1940 to promote the agriculture industry, yet it has evolved far beyond its original purpose," Rodriguez said. "The association has prioritized commercial enterprises instead."
The association already is in the midst of an audit ordered by the county Board of Supervisors. Gonsalves said he expects that audit to be wrapped up by the end of this month.
Meanwhile, U.S. Rep. Norma Torres (D-Pomona) has asked the IRS and the state attorney general's office to launch inquiries into whether the association's tax exemption should be rescinded.