Cal Poly Pomona President Emeritus J. Michael Ortiz, the former CPP president, now leads the Los Angeles County Fair Association. Ortiz is filling in as an interim chief executive after James Henwood, Jr. resigned at the end of March after the association came under public scrutiny.
A Los Angeles Times investigation in November found the association’s top executives were given $8.75 million in bonuses and incentive pay during the 2010-13 fiscal years, a period in which the organization’s 990-tax forms were written in red ink and indicated a total lost revenue of $6.25 million.
The 990 tax figures reported in the LA Times not only show revenue, but also the depreciation and value of bonds, such as recent construction bonds used to build and renovate. Such factors calculated during the tax process show a loss on paper, though in terms of the revenue that is generated, it is not really a loss, according to Ortiz.
“I do think we had been misrepresented in news,” said Ortiz.
Yet given the information in the public venue, Pomona resident Eunice Russell said it is hard not to question how LACFA is running Fairplex, though she said Pomona holds a great deal of potential and the fair has been beneficial throughout the years.
Profits in “for-profit” organizations inure to the benefit of the owners, while profits at nonprofits are supposed to be reinvested to achieve the purpose for which the corporation was established, according to Bill Kennedy, a 42-year California attorney who spent 41 years dealing with nonprofit legal services. Nonprofit owners, the board of directors, may be entitled to payment for their services but not distribution of profits, said Kennedy.
Yet there are many nonprofit entities, such as Kaiser Permanente and the National Rifle Association, that generate tens of millions of dollars and pay their directors and high-level employees handsomely, Kennedy wrote in an email correspondence.
Although the California attorney said it is not unusual to show a negative balance on the 990-tax form, it is also something that requires a response.
The association was misrepresented by the LA Times, Ortiz said, when it compared Henwood’s salary, approximately slightly over $1 million in 2014, to the salaries of CEOs at other California fairs with roughly a fifth of Henwood’s compensation.
Unlike most major California fairs run by state agencies, the LACFA is a private entity that leases the fairgrounds from the county and includes entities such as The Learning Centers, a Sheraton Hotel and Conference Center and Cornucopia Foods on the Fairplex grounds.
“Mr. Henwood’s salary was right where it needed to be. It was at the 75th percentile,” said Ortiz, who served as a board member of the association since 2003 and chair since 2014.
Henwood’s salary was established through Frederic W. Cook & Co., Inc., a firm that does compensation studies for the attorney general, according to Ortiz.
Aside from the organization’s finances, LACFA has been reprimanded for holding electronic music festivals that, according to several residents, have brought drugs into the city and for improperly imposing a “transient occupancy” tax while failing to provide habitable conditions for tenants at the association’s trailer park, as was reported in the LA Times.
A complaint was made in February 2015, citing broken windows, floors needing replacement and water-damaged walls, according to California Department of Housing and Community Development documents.
“Those people who lived in that trailer park have for years been complaining,” said Russell.
Ortiz said after meeting with the state, he learned not only was LACFA out of compliance, but many residents as well.
After hearing the news of what needed to be done on their end, many residents out of compliance at the trailer park were “not happy about it,” Ortiz said.
“Well, the first time that information came out, the people at the trailer park said that we were retaliating for them raising these issues, and that’s not it at all,” said Ortiz. “We didn’t send that letter. It was sent by the state. We just shared what the state sent us.”
The association’s nonprofit status has also been a topic of controversy with allegations that the association is straying from its exempt agricultural, labor or horticulture status, which exempted it from taxes under Internal Revenue Code 501(c)(5).
“I think the fair long ago may have stepped outside [of it’s nonprofit status],” said Russell.
Ortiz said the association has not diminished its agricultural presence in terms of its student education, as Fairplex engages with and educates over 150,000 students through The Learning Centers.
Two different long-term ground leases and operating agreements were established in 1948 and 1988 between the county and association to educate the public, improve the community and make the fairgrounds “financially viable,” according to a LA County Board of Supervisors motion in November.
That same motion, co-authored by county supervisors Hilda Solis and Michael Antonovich, called for an audit into the association’s financial operations, including all funding and revenue sources and all funds allocated to the county, governance structure and compliance with appropriate responsibilities as a nonprofit organization. It included a possible amendment to “further enhance the revenue generation and public benefits” on the fairgrounds.
The motion authorized the Auditor-Controller to conduct the audit report back to the LA County Board of Supervisors within 120 days.
In response to concerns that Henwood’s resignation will stall the audit, Andrew Veis, assistant press deputy for LA County Supervisor Don Knabe, disclosed in an email correspondence that county staff is working with LACFA “to ensure that the audit staff has appropriate access to the records it needs to complete the audit” and that “the complexity of the audit has resulted in the need for additional time.”
The special county audit, requested by the Board of Supervisors, is pending with at least 60 days until completion, according to Tony Bell, assistant chief deputy for Antonovich.
Russell said only when results of the audit are out can she “get the real meat and gravy on whether or not they did lose money.”
“I would hope that the audit shows there has been no malfeasance,” said Russell. But if it isn’t, Russell said it’s time for citizens to take a hard look and have politicians reevaluate how people do business.
“It should have raised a flag somewhere, even though a public entity isn’t in direct supervisory position over the fair,” said Russell. “It should have sparked a question, and the fact that it didn’t leads to other questions.”
To other residents, Fairplex has been a good neighbor.
Ron VanderMolen, a member of the Pomona Rotary who has lived next to the fairgrounds for 20 years, said Fairplex is beneficial for the city, as it has improved county property.
“Literally in the last 20 years the improvements of what they’ve done there is amazing,” said VanderMolen.
“As far as Fairplex is concerned, I’ve never had anything except wonderful experiences with them,” said M. Joyce Bakersmith, a member of the Pomona Breakfast Optimist Club, Willie White Park Focus Group and Neighborhood Watch. Bakersmith said she lives about three miles from Fairplex.
Bakersmith said LACFA has allowed the Community Engagement Group to make use of the fairgrounds for a campout with about 300 children from across the city under the supervision of the Pomona Police Department.
“They build a rapport with not only the police department, but the fire department comes in, and I mean, it’s just like a great event,” said Bakersmith.
However, some residents voiced concerns over Fairplex’s many ventures.
“If Fairplex were concerned about the surrounding neighborhood’s well-being they would not have held a further rave after the first one,” said Judy St. John, who also lives near Fairplex.
In addition to parking in neighborhood spaces, about 60,000 attendees at a two-day August 2015 rave caused uproar among some neighbors, who “reported that these attendees were urinating in their yard and even the next day passed out on the lawn,” said St. John.
With the death of the two teens that attended the HARD Summer music festival in August 2015, according to St. John, it is imperative that they not have any more raves.
Since the August rave, Ortiz said the association went through improvements to ensure the safety of attendees through screenings and sharing of information about the impact of drugs. About 300 arrests were made in November 2015, as authorities cracked down on drugs and confiscated false IDs. LACFA said it has no plans for more raves this year.
What some residents, such as Russell and St. John, want is transparency, particularly through implementing the Brown Act, which guarantees the public’s right to attend the meetings of local legislative bodies and having open meetings.
Especially when it comes to discussing their vision for the future with the city, said St. John.
“I think it would be good public relations for them to be transparent, even if it’s not legally required,” said St. John.
In addition to requests for no more raves and transparency, St. John said she would like LACFA to pay more attention to the county fair itself.
Some residents say it is not surprising to see Fairplex evolved with its urban surroundings. Yet St. John disagrees, saying CPP is proof that the area has and should continue to maintain it’s agricultural roots.
“I don’t see how they can forget that we do have agriculture in area and that there is an interest,” said St. John.
Growing up, St. John said there were orange and avocado groves in the fairgrounds, dairy farms in Chino and vineyards in Rancho Cucamonga.
“Yes there was more agriculture,” said St. John reminiscing. Yet the more the surrounding grounds urbanize, the more important it is for the fair to increase and nurture animals and agriculture, said St. John.