Carny Game: Is the State Fair of Texas taking Dallas for a ride?

Fair Park

Is the State Fair of Texas Killing Fair Park?

In an open letter to the head of the State Fair, former-Trammel Crow Exec Don Williams accuses fair of destroying neighborhoods, possible corruption

Don Williams, the former Trammell Crow executive and current chairman of the Foundation for Community Empowerment, has been fighting the private takeover of Fair Park all year. His outspoken opposition to the so-called Humann Plan, named after former-Hunt Oil CEO Walt Humann, who headed up the privatization effort, played a role in the process that eventually led to a city attorney decision to put Fair Park’s privatized future out to a bid. Now that the takeover has been delayed, Williams has leveled his verbal shotgun at the big dog at the center of the whole debate: The State Fair of Texas.

Throughout much of the conversation over the attempt to turn Fair Park over to a private entity, the State Fair, which just wrapped up over the weekend, ostensibly kept to the role of quiet, backseat passenger. Humann told the Dallas City Council that the State Fair was generally in favor of the terms of his deal. Mayor Mike Rawlings reminded the council that the city was locked into the terms of their 2003 contract with the State Fair and so any new plans for Fair Park would have to operate in and around that agreement.

Well, Williams has different ideas. In a 13-page open letter to State Fair Chairman Richard Knight, he lays out a scathing rebuke of the State Fair, its operations, its impact on the surrounding neighborhoods, and potential mismanagement, corruption, and violation of its non-profit status.  The sum total of his remarks make a strong case that Fair Park will never be the civic asset it should be until Dallas can get the State Fair in line. The only problem, as journalist Mike Wallace once said in a 1972 news report that is quoted in the margins of Williams’ letter, “the people who run the Fair are the people who run Dallas.”

You can read the full letter here, but I’ll pull out some choice excerpts:

Speaking of the Center for Community Empowerment and its UTD-based Institute for Urban Policy Research:

Our work has included a study of the blighted conditions of Fair Park/South Dallas, once over 70,000 mixed income residents, now 23,000 mostly low-income residents. Despite being less than one mile from Dallas’ burgeoning urban core, this community has experienced decades of disinvestment, school closures, withheld mortgages and nearly 50% unemployment. Research and interviews with community residents, as well as current and former tenants at Fair Park, clearly indicate that a principal reason for this decline and the depressed conditions in Fair Park/South Dallas is the dominant and overbearing seasonal presence of the State Fair in Fair Park, whose burdensome operations and footprint stymie the year-round revitalization of Fair Park and its neighborhoods.

Despite repeated meetings over the years with State Fair officials, no changes in operations have been implemented, or even given serious consideration, to help restore the park to year-round use or to assist in economic development and full-time employment for residents in surrounding neighborhoods.

Absent major changes, Fair Park and its neighborhoods stand little chance of achieving the revitalization desperately needed not only for Fair Park and its neighbors, but also for the fiscal well-being of Dallas and its taxpayers.

On the length of time the State Fair requries access to Fair Park:

While other state fairs and amusement parks have been shortening the length of time required for set-up and take-down, the State Fair lease was renegotiated in 2003 to double the State Fair’s set-up period from 30 to 60 days, and its take-down period from 14 to 30 days. Since the State Fair takes over the empty buildings at no rent (and, except for City revenues from off-site parking permits, only the State Fair benefits from parking revenues during the fair), the State Fair actually occupies most of Fair Park for nearly four months. This four-month occupancy and the business disruption that comes with it have been cited by tenants that have moved (Art Museum, Science Museum, Symphony, Opera, and Locomotive Museum) and tenants that have closed (Women’s Museum and Automobile Museum) as a critical factor impeding financial and operating survival. The May 13, 2016 City audit report on Fair Park concluded that three more tenants (Dallas Historical Society, Dallas Summer Musicals, and African American Art Museum) face financial and operational risks.

On Fair Park’s impact on neighborhood property values:

The negative effect of the State Fair on Fair Park is also felt in the neighborhoods surrounding Fair Park. For every great urban park, there is a “park premium”; proximity to a park adds value to real estate, whether residential or commercial. As cited in the April 2016 Baylor University study Reassessing the Economic Impact of Fair Park and the State Fair (attached), based on information provided by the Dallas County Appraisal District, the opposite is true for Fair Park. Real property values suffer from being too near to Fair Park and residences for sale near Fair Park remain on the market for longer periods than residences at a distance from the park. Perversely, the State Fair has expanded its dominion over Fair Park and its neighborhoods, using funds contractually designated for improvement of Fair Park to acquire lots and homes in the immediate vicinity as property values fell. The State Fair itself owns 70 acres around Fair Park, and has taken down homes on this acreage to build high-fenced parking lots used essentially only the day of the Texas-OU game (see Land Purchases). With the cooperation of the State Fair, the City of Dallas collects revenue from the sale of $25 parking permits on residential home lots near Fair Park, further driving down property values.

Can you imagine public parking permitted in the front yards of the homes or neighbors of any of the State Fair Board members in North Dallas or the Park Cities? The concerted actions by the City and the State Fair that diminish property values in and near Fair Park must be reversed.

On potential violations of its non-profit mission:

Although the State Fair’s 2015 IRS 990 filing describes its purpose as being “[T]o conduct annual educational and agricultural state fair,” it in fact conducts only limited educational and agricultural programming and a majority of its uses are aimed at increasing revenues and profits with no educational or agricultural purpose (as Fair Park and its neighborhoods deteriorate, the State Fair’s public disclosures reflect strong revenue growth, nearly doubling from $27 million in 2003 (the year the Hargreaves plan was adopted) to $53 million in 2015.  The latest financials reveal $50 million in cash reserves or liquid investments). Of the approximately 1.2 million square feet of space in Fair Park buildings, less than 400,000 square feet are used (other than sporadically) for agricultural/educational purposes during the Fair. In contrast, over 800,000 square feet of the buildings (not including 400,000 square feet of open space) are used continuously to conduct car and truck shows, flea markets and other retail activities, and food and beverage concessions. Such overreach generates revenues and profits for the State Fair at the expense of better, year-round uses for Fair Park and the non-profit mission of the State Fair.

On misleading or deflated financial figures about charitable activities:

The State Fair touts minority student scholarships as a key mission and recently announced that it has granted a total of $8.7 million in such scholarships over a 24-year history. By comparison, the Houston Rodeo has granted over $400 million in scholarships over its history, about 20% of Houston Rodeo’s revenues, compared to 0.6% of State Fair revenues awarded for scholarships. Excessive compensation and misuse of a public asset and public funds has come at the expense of minority student scholarships. (Even in the annual steer auction in which young people compete to raise scholarship funds, the winning youngster gets less than 25% of the auction price; the State Fair retains more than 75%; in comparison, winning participants in the Fort Worth Stock Show receive the full bid amount.)  The State Fair insists that Fair revenues from food sales and other concessions go to support scholarships.  In fact, its financial statements reflect that scholarships are funded almost entirely from private donations and are not supported by general Fair revenues.

On extreme executive pay:

Internal Revenue Service Forms 990 reveal that former CEO Errol McKoy received compensation of $827,904 in 2012, $880,805 in 2013 and $1,424,693 million in 2014. Comparisons to other State Fairs show this CEO compensation to be about 300% of the median, adjusted for revenues. . . .

Excessive compensation violates IRS federal tax laws and fiduciary duties of public stewardship, and also suggests lax governance and oversight by the Board. In order to conform to best practices, the Board should promptly make demand for repayment of the excessive compensation, and reform its process for reviewing and approving executive compensation.

On manipulation of public funding:

The principal reason the Hargreaves Plan has never been implemented is the continuous and successful effort by the State Fair to dominate Fair Park and shift public funding to the Cotton Bowl and other facilities for its financial benefit. Since 2003, the State Fair has lobbied for and obtained about $100 million of public bond funding for the enlargement and renovation of the Cotton Bowl. The State Fair is currently lobbying for an additional $43 million of 2017 City bond funding for further improvements to the Cotton Bowl. Since the State Fair manages the two football games during the Fair (a third game was added this year, although, like the Heart of Texas Bowl, it is not well attended), and receives the net profits from both events, all taxpayer funded renovations and improvements to the Cotton Bowl primarily benefit the State Fair and the out-of town universities’ athletic programs.

In 2007, the State Fair successfully lobbied the Park and Recreation Department to reallocate for the State Fair’s benefit a total of $14.25 million of public bond funds designated for other purposes at Fair Park: $11.5 million to Cotton Bowl renovations and $2.75 million for a livestock and arena development. As a result of the State Fair’s lobbying efforts, $4.5 million of bond funds designated for the Pan American complex restoration were transferred to the Phase 2 Cotton Bowl renovations (increased seating, locker room expansion, and post-game media center, specifically for the Texas-OU game). In exchange, the State Fair agreed to assume responsibility for restoration of the Pan American complex. In 2010 the State Fair reneged on this commitment by convincing the Park Department to relieve them of the $4.5 million obligation. The State Fair’s rationale was to claim credit for a $1 million grant from the State of Texas Agriculture Department for livestock facilities (benefiting only the State Fair) and to request a redirection of the remaining $3.5 million for its planned (but ultimately failed) Summer Adventures program.

As a result, City of Dallas taxpayers were inveigled out of $4.5 million, the Pan American complex has still not been restored (the Humann Plan documents $3.7 million in current outstanding needs), and the State Fair reaps the primary benefits both of improving the Cotton Bowl for the Texas-OU game and of using a new livestock facility (which apparently will house their lavish new offices, complete with kitchen and bar areas), constructed and maintained in part with public funds. The State Fair then had the audacity to request that “the cost to fully restore the Pan American Arena be included in any future City of Dallas bond programs.”

That the City’s Park Director signed off on this deal is no defense. The then Park Director (now on the State Fair Board) failed to act in the City’s best interests. Was this deal approved by the State Fair Board? We have been unable to find evidence of approval by either the Park and Recreation Board or the City Council.

On land acquisition:

The State Fair reduced its “excess revenues” by purchasing about 70 acres of land outside of but near Fair Park (see attached map). It has torn down houses and replaced residential areas with high-fenced, paved parking lots, devastating surrounding residential neighborhoods.

The State Fair’s contract with the City requires that funds from excess revenues be re-invested for Fair Park and the Fair, not for the purchase of additional land. The State Fair is using what should have been public funds to effect what would otherwise have been illegal eminent domain actions. Had these funds been reinvested in Fair Park as required by the lease, Dallas taxpayers might not be on the hook for ongoing repairs of buildings and areas used exclusively by the State Fair, like the pig, sheep and cattle barns.

Williams also refers to stories of possible corruption, lax internal controls of cash flow, and conflicts of interest:

Audited financial statements reveal, without any details, the existence of conflicts of interest. For example, Robert B. Smith was for many years the Board “Secretary, Counsel and Vice Chairman” of the Executive Committee that oversaw executive compensation. He was paid $300,000 per annum for “routine legal business,” (though reporting “0” dollars in compensation on the IRS Forms 990), while subcontracting for hundreds of thousands of dollars in outside legal fees per year (including fees for the lawsuit described below in “Public Disclosures”). Other conflicts are referenced in the State Fair’s financial statements and 990’s but not explained.

Perhaps more troublesome to Dallas taxpayers are the interlocking relationships among an inner circle of State Fair and City officials that have influenced the administration of the City’s contract with the State Fair and public bond funding in ways that have benefited only the State Fair. As examples:

In 2003 an amendment to the State Fair lease was concluded, doubling set-up and take-down times for the Fair. The network of interlocking relationships at that time suggest undue influence by the State Fair:

  • Dianne Curry was President of the Park and Recreation Board, following which she was appointed to the State Fair Board of Directors, until recently resigning in order to serve on the Board of Walt Humann’s proposed Fair Park Texas Foundation.
  • Then First Assistant City Manager Mary Suhm was appointed to the State Fair Board after resigning from City employment.
  • Then City Council member Alan Walne was appointed to the State Fair Board and served as its chairman after leaving office.
  • Then Park and Recreation Department Director Paul Dyer was appointed to the State Fair Board after resigning from City employment.
  • Then City Council member Lois Finkleman was appointed to the State Fair Board after leaving office.

Comments

  • Eric Foster

    So another Bubble City managed fiasco. The City needs to step in and FIRE the current leadership and replace the board with sound financial people who will OBEY all the contractual obligations. A few local area residents should be on that board and have full access to all the financials. But its like The Arts District: a bunch of rich white folks running a plantation, inside and full insulated from the rest of the city.