Report 2016-106 Recommendation 7 Responses

Report 2016-106: Los Angeles County: Weak Oversight of Its Lease With the Los Angeles County Fair Association Has Likely Cost Millions of Dollars in Revenue (Release Date: November 2016)

Recommendation #7 To: Los Angeles County

To protect its interests and maximize its future revenue, the county should strongly consider ensuring that any potential amendment to the lease includes an agreement on the types of entities whose gross revenues the association must include in rent calculations. This agreement should cover any new businesses the association creates that operate at the Fairplex.

Annual Follow-Up Agency Response From November 2021

County and Fair Association have executed Amendment No. 6 to the Lease that addresses this issue. Will send a copy of the amendment to the e-mail address set forth below.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Los Angeles County's amendment to the Lease includes an updated definition of gross revenues, which generally incorporates new businesses or affiliates of the association that operates at the Fairplex into the rent calculations.

Annual Follow-Up Agency Response From January 2020

County's proposal regarding a revised rent structure is being evaluated by the Association. Amendment should be completed by the end of calendar year 2020.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From November 2018

County has retained an economic consulting company which is advising the County on the type of categories upon which a percentage of gross receipts will be collected as rent.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

The County continues to have dialogue with LACFA in an effort to reach agreement on the direction that this potential amendment will take. The County's objective is to protect its interests and maximize its future revenue. Accordingly, the consultant will advise on an appropriate rent structure for the current and future types of business that operate at the Fairplex and the County will propose incorporating the new rent structure as part of the proposed lease amendment.

ANTICIPATED COMPLETION DATE: TBD- the County's ability to successfully implement this recommendation is dependent on LACFA cooperation.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The County has begun dialogue with the new leadership at the LACFA in an effort to reach agreement on the direction that this potential amendment will take. The County's objective is to protect its interests and maximize its future revenue. Accordingly, during negotiations for a lease amendment, County will seek more clarity on the types of entities whose gross revenues must become part of the rent calculations.

Anticipated Completion Date: TDB- the County's ability to successfully implement this recommendation is dependent on LACFA cooperation.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The County acknowledges and agrees with this recommendation and will consider it when preparing to negotiate a potential amendment to the current ground lease and operating agreement. The County's ability to successfully implement this recommendation is dependent on LACFA cooperation.

Anticipated Completion Date for new draft language: March 30, 2017; Completion date for reaching agreement with the Fair Association remains TBD.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2016-106

Agency responses received are posted verbatim.