A performance audit of the Coliseum and Exposition Center Board

              STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
A PERFORMANCE AUDIT
OF THE
D COLISEUM AND EXPOSITION CENTER BOARD
APRIL 1983
A REPORT TO THE
ARIZONA STATE LEGISLATURE
REPORT 83- 9
DOUGLAS R. NORTON. CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
April 29, 1983
Members of the Arizona L e g i s l a t u r e
The Honorable Bruce Babbitt, Governor
Mr. W i l l i a m P. R e i l l y , Jr., Chairman
Arizona Coliseum and Exposition Center Board
Transmitted herewith is a report of the Auditor General, A Performance
Audit of the Arizona Coliseum and Exposition Center. This report is i n
response t o a January 18, 1982, r e s o l u t i o n of the J o i n t L e g i s l a t i v e
Oversight Committee. The performance a u d i t was conducted as a p a r t of the
Sunset Review set f o r t h i n A. R. S. SS41- 2351 through 41- 2379.
The blue pages present a summary of the r e p o r t ; a response from the
Arizona Coliseum and Exposition Center Board is found on the yellow pages.
My s t a f f and I w i l l be pleased t o discuss o r c l a r i f y i t e m s i n the report.
Respectfully submitted,
Douglas R. Norton
Audit or General
S t a f f : W i l l i a m Thomson
Steve H. Thacker
Mary C. O'Connor
Richard B. Booth
Samuel L. Harris
Sarah K. Leake
Enclosure
-
1 1 1 WEST MONROE SUITE 600 PHOENIX, ARIZONA 85003 ( 602) 255- 4385
OFFICE OF THE AUOITOR GENERAL
A PERFORPUPJCE AUDIT OF THE
ARIZONA COLISEUM AND EXPOSITIOE CENTER BOARD
A REPORT TO THE
ARIZONA STATE LEGISLATURE
REPORT 83- 9
TABLE OF CONTENTS
SrnmARY
INTRODUCTION AND CACKGROUND
SUNSET FACTORS
FINDINGS
FINDING I
I m p r o v e n e n t s are needed i n State F a i r operations.
CONCLUSION
RECOFIPENDATIONS
FILU'DING I1
T h e B o a r d should i m p r o v e its a d m i n i s t r a t i o n of t w o
l o n g - t e r m space r e n t a l a g r e e m e n t s .
CONCLUSION
RECOPPIENDAT IONS
OTHER PERTINENT INFORMATION
AREAS FOR FURTHEk AUDIT WORK
WRITTEN RESPONSE TO AUDITOR GENERAL'S REPORT
Page
i
1
7
LIST OF TABLES
TABLE 1 - S p e c i a l L e g i s l a t i v e Appropriations
F i s c a l Years 1977- 78 through 1981- 82
TABLE 2 - F i n a n c i a l Data F i s c a l Years 1977- 78
through 1981- 82
TABLE 3 - Operating P r o f i t ( Loss) F i s c a l Years 1977- 78
through 1981- 82 ( I n Thousands)
TABLE 4 - Analysis of Parking at 1982 S t a t e F a i r
TABLE 5 - Parking P a s s e s I s s u e d f o r 1982 S t a t e F a i r
LIST OF FIGURES
Page
FIGURE 1 - Layout of S t a t e Fairgrounds
Page
19
SUMMARY
The Office of the Auditor General has conducted a performance a u d i t of the
Coliseum and Exposition Center Board i n response t o a January 18, 1982,
r e s o l u t i o n of the J o i n t L e g i s l a t i v e Oversight Committee. This performance
a u d i t was conducted a s p a r t of the Sunset review s e t f o r t h i n Arizona
Revised S t a t u t e s ( A. R. S.) SS41- 2351 through 41- 2379.
The five- member Arizona Coliseum and Exposition Center Board, a s custodian
of a l l S t a t e fairgrounds and Memorial Coliseum property, d i r e c t s and
conducts the annual Arizona S t a t e F a i r , d i r e c t s the annual Livestock Show
and l e a s e s the Coliseum and fairgrounds f a c i l i t i e s . The Board is charged
with t h e r e s p o n s i b i l i t y t o generate s u f f i c i e n t revenues t o defray
operating expenses and t o pay bond i n t e r e s t and r e t i r e outstanding bonds
from the $ 6.9 m i l l i o n bond i s s u e used f o r the c o n s t r u c t i o n of the Coliseum.
We reviewed S t a t e Fair and Coliseum operations t o determine 1 ) whether the
Board has f u l f i l l e d the purposes f o r which it was e s t a b l i s h e d and 2)
whether operations a r e e f f i c i e n t , e f f e c t i v e and within s t a t u t o r y
guidelines. We found t h a t the S t a t e F a i r and Coliseum a r e generally well
run but t h a t several minor improvements would increase the p r o f i t a b i l i t y
of t h e s e o p e r a t i o n s .
The Board's s t a f f has made s e v e r a l improvements i n the S t a t e F a i r i n
r e c e n t y e a r s by 1 ) encouraging County p a r t i c i p a t i o n i n the S t a t e F a i r ,
2) increasing the number of noncommercial e x h i b i t s i n the S t a t e F a i r ,
3) e s t a b l i s h i n g t i g h t e r c o n t r o l s over midway t i c k e t s , and 4) eliminating
i n e q u i t i e s i n the r e n t a l r a t e s among r i d e operators. The 1982 S t a t e Fair
had a record attendance of 801,651 and a p r o f i t of $ 860,700.
Although generally e f f e c t i v e , S t a t e Fair procedures could be improved i n
the a r e a s of parking, Coliseum entertainment, midway management, r e n t a l of
commercial e x h i b i t space and purchasing of Fair- related goods and s e r v i c e s :
The S t a t e F a i r is f o r f e i t i n g p o t e n t i a l parking revenue each year
because of the r e l a t i v e l y small number of parking spaces
a v a i l a b l e f o r F a i r patrons. Limited parking capacity may a l s o
have a negative e f f e c t on F a i r attendance. The purchase of
a d d i t i o n a l parking a r e a s adjacent t o the fairgrounds does not
appear t o be a f e a s i b l e s o l u t i o n . However, Board s t a f f should
study a l t e r n a t i v e ways of increasing parking capacity during peak * p e r i o d s , i n c l u d i n g 1 ) use of a s h u t t l e between the fairgrounds
and parking areas f a r t h e r away and 2) r e e v a l u a t i o n of the number
of f r e e parking passes issued t o employees and e x h i b i t o r s ( see
page 17).
- The Board could recover a s u b s t a n t i a l p o r t i o n of entertainment
c o s t s by charging a minimal f e e f o r Coliseum e v e n t s d u r i n g the
F a i r ( see page 23).
Several f u r t h e r improvements would enhance t h e image and
p r o f i t a b i l i t y of midway operations. F i r s t , midway revenues could
be enhanced by i n c r e a s i n g the r e n t a l r a t e f o r food booths on the
midway and making a l l p o t e n t i a l food vendors aware of the
opportunity t o r e n t space on the midway. Second, Board s t a f f
should r e t a i n documentation r e l a t i n g t o the l o c a t i o n and
evaluation of games, r i d e s and concessions i n order t o a l l o c a t e
f u t u r e space assignments more e f f e c t i v e l y ( s e e page 24).
- The commercial space r e n t a l process could be improved by
e s t a b l i s h i n g a separate a p p l i c a t i o n deadline f o r prior- year
e x h i b i t o r s and r e q u i r i n g nonrefundable d e p o s i t s p r i o r t o payment
of the t o t a l r e n t a l f e e . Board s t a f f should a l s o consider more
r e n t a l r a t e d i f f e r e n t i a l s a s a way of i n c r e a s i n g revenues i n t h i s
a r e a ( see page 25).
- Specialized s e r v i c e s purchased by Board s t a f f f o r the S t a t e Fair
should be obtained through competitive bidding when p o s s i b l e ( s e e
page 27).
The Board has been successful i n increasing the u t i l i z a t i o n of the
Coliseum and fairgrounds f a c i l i t i e s . During c a l e n d a r y e a r 1982, 155
events were held i n the Coliseum or on the fairgrounds ( excluding S t a t e
Fair events). This was a 60 percent increase over the 96 e v e n t s h e l d i n
1981. However, our review of the Board's f i n a n c i a l statements f o r the
l a s t f i v e years i n d i c a t e s t h a t , while the S t a t e F a i r has c o n s i s t e n t l y
shown a p r o f i t , Coliseum or non- Fair operations have c o n s i s t e n t l y shown a
n e t l o s s . I n e f f e c t , the annual production of the S t a t e F a i r helps t o pay
f o r the year- round operation of the Coliseum f a c i l i t y .
The Board's a b i l i t y t o improve the p r o f i t a b i l i t y of the Coliseum
f a c i l i t i e s ( non- Fair) is limited by a t l e a s t t h r e e f a c t o r s : 1) l o c a t i o n
of the f a c i l i t i e s ; 2 ) age of the f a c i l i t i e s ; and 3) l o c a l competition
f o r concerts and other nonsporting events from S t a t e , p r i v a t e or municipal
f a c i l i t i e s .
In a d d i t i o n , p r o f i t a b i l i t y from two of the agency's long- term space r e n t a l
c o n t r a c t s could be improved. Contract documents f o r the Coliseum Club
operation and f o r video games located on the Coliseun~ concourse do not
adequately c o n t r o l t h e performance of the p a r t i e s involved ( see Finding
11, page 31).
Current l e g i s l a t i o n proposed by t h e Board is aimed a t increasing the
p r o f i t a b i l i t y of Coliseum operations by allowing beer and wine t o be sold
t o the public a t s e l e c t e d Coliseum events. The Board h a s u n s u c c e s s f u l l y
sought such l e g i s l a t i o n i n p r i o r years. The Board claims t h a t the s a l e of
a l c o h o l i c beverages t o the g e n e r a l p u b l i c would s u b s t a n t i a l l y increase
Coliseum revenues and would e l i m i n a t e t h e c u r r e n t inequity of allowing a
minority of Coliseum patrons ( Coliseum Club and Stadium Club members) t o
purchase l i q u o r .
We i d e n t i f i e d s e v e r a l p o t e n t i a l a r e a s f o r f u r t h e r a u d i t work t h a t we could
not pursue due t o time c o n s t r a i n t s or inadequate d a t a . For a list of
t h e s e a r e a s , s e e page 39.
iii
INTRODUCTION AND BACKGROUND
The Office of tlie Auditor General has conducted a performance a u d i t of the
Coliseum and Exposition Center Board i n response t o a January 18, 1982,
r e s o l u t i o n of the J o i n t L e g i s l a t i v e Oversight Committee. This performance
a u d i t was conducted a s a part of the Sunset review s e t f o r t h i n Arizona
Revised S t a t u t e s ( A. R. S.) Ss41- 2351 through 41- 2375.
The o r i g i n a l agency administering the Arizona S t a t e F a i r was the
T e r r i t o r i a l Fair Commission e s t a b l i s h e d i n 1905. This agency eventually
became the Arizona S t a t e F a i r Commission, which operated under t h a t t i t l e
u n t i l the c o n s t r u c t i o n of the Veterans PIemorial Coliseum i n the
mid- 1960s. In 1967, an amendment t o A. R. S. $ 3- 1006 changed the name of
the agency from the Arizona S t a t e F a i r Commission t o the Arizona Coliseum
and Exposition Center Board.
The five- member Arizona Coliseum and Exposition Center Board, a s custodian
of a l l S t a t e fairgrounds and Memorial Coliseum property, d i r e c t s and
conducts the annual Arizona S t a t e F a i r , d i r e c t s the annual Livestock Show,
and l e a s e s the Coliseum and fairgrounds f a c i l i t i e s . The Board is charged
with the r e s p o n s i b i l i t y t o generate s u f f i c i e n t revenues t o defray
operating expenses and t o pay bond i n t e r e s t and r e t i r e outstanding bonds
from the $ 6.9 m i l l i o n bond i s s u e used f o r the c o n s t r u c t i o n of the Coliseum.
In past budget documents the Board has s t a t e d its goal a s follows:
" blaintain, replace and develop the Physical Plant i n a
manner t h a t w i l l provide f o r optimal u t i l i z a t i o n of a l l
f a c i l i t i e s i n such a manner t o make it a showcase of
the S t a t e of which a l l of i t s c i t i z e n s w i l l be proud."
The Coliseum and Exposition Center Board receives nonreverting l e g i s l a t i v e
a p p r o p r i a t i o n s each year i n the amount of 100 percent of agency r e c e i p t s .
Major r e c e i p t s c o n s i s t of S t a t e F a i r admissions, r e n t a l s of f a c i l i t i e s ,
commissions on t i c k e t s a l e s f o r Coliseum events, parking, concessions,
commercial space r e n t a l s ( during S t a t e F a i r ) , a percentage of midway
monies and i n t e r e s t income. I n a d d i t i o n , A. R. S. $ 5- 113 g r a n t s the Board 5
percent o f the S t a t e ' s revenues fron; pari- mutuel wagering (" racing
r e c e i p t s " ) , which is used f o r bond retirement and c a p i t a l o u t l a y . The
same s t a t u t e g r a n t s another 10 percent of the S t a t e ' s racing r e c e i p t s t o a
fund
". . . f o r the purpose of conducting an annual
l i v e s t o c k f a i r by the Arizona coliseum and exposition
c e n t e r board. . . ."
I n s e v e r a l r e c e n t y e a r s t h e Board a l s o received s p e c i a l l e g i s l a t i v e
a p p r o p r i a t i o n s f o r r e p a i r s and improvements t o the buildings and grounds
( s e e Table 1 ) . I n February 1981, the L e g i s l a t u r e appropriated $ 1,335,000
from the S t a t e General Fund f o r the i n s t a l l a t i o n of a d d i t i o n a l permanent
s e a t i w and the c o r r e c t i o n of f i r e and l i f e s a f e t y hazards a t the
Coliseum. Unlike the p r i o r s p e c i a l a p p r o p r i a t i o n s , the f u l l amount of
t h i s a p p r o p r i a t i o n i s t o be repaid without i n t e r e s t and a t a r a t e
determined by the Board but not l e s s than $ 50,000 per year beginning i n
f i s c a l year 1981- 82.
The Board's 1967 bond r e s o l u t i o n r e q u i r e s t h a t the Board s e t a s i d e money
i n a bond sinking fund t o be used f o r purchase o r redemption of the
Coliseum c o n s t r u c t i o n bonds. For the l a s t two years the Coliseum Board
has s e t a s i d e more monies f o r bond r e t i r e m e n t t h a n the bond r e s o l u t i o n
r e q u i r e s . T h i s e n a b l e s the Board t o generate i n t e r e s t income with the
excess balance which w i l l e f f e c t i v e l y decrease the S t a t e ' s c o n t r i b u t i o n t o
the f i n a l r e t i r e m e n t of the bonds i n 1993.
Table 1 contains a schedule of s p e c i a l l e g i s l a t i v e a p p r o p r i a t i o n s received
from f i s c a l year 1977- 78 t o the present. Table 2 contains a c t u a l revenues
and expenses f o r the Coliseum and Exposition Center Board f o r f i s c a l years
1977- 78 through 1981- 82.
TABLE 1
SPECIAL LEGISLATIVE APPROPRIATIONS
FISCAL YEARS 1977- 78 THROUGH 1982- 83
F i s c a l Date of Amount
Year Appropriation Appropriated
1977- 78 7/ 1/ 77 $ 10,076 Mechanic shop building s p r i n k l e r system
5/ 1/ 78 233,480 Coliseum roof replacement
5/ 1/ 78 166,520 Coliseum s i d e r i s e r s and c h a i r s
$ 410,076
7/ 1/ 79 $ 120,000 Roof r e p a i r s , fairground
7/ 1/ 79 43,000 Restroom r e p a i r s , fairground
7/ 1/ 79 65,000 Non- Coliseum building improvements
7/ 1/ 79 550,000 Demolition and replacement of 4- H building
7/ 1/ 79 100,000 Paving f o r Youth A c t i v i t y Center
7/ 1/ 79 165,000 Coliseum s e a t i n g r e p a i r and replacement
$ 1,043,000
7/ 1/ 80 $ 50,000 F i r e s p r i n k l e r system
7/ 1/ 80 88,000 A r c h i t e c t u r a l f e e s , arena s e a t i n g expansion
2/ 21/ 81* 1,200,000 Arena s e a t i n g
2/ 21/ 81" 135,000 F i r e and l i f e s a f e t y hazards
$ 1,473.000
Source: " Detail of Appropriated Funds Expenditures" from f i n a n c i a l
statements prepared by the Coliseum c o m p t r o l l e r ' s o f f i c e f o r the
a p p l i c a b l e f i s c a l years
* These funds r e p r e s e n t a $ 1,335,000 i n t e r e s t - f r e e loan from the S t a t e
General Fund t o be repaid a t a r a t e of not l e s s than $ 50,000 p e r y e a r .
FINANCIAL DATA
FISCAL YEARS 1977- 78 THROUGH 1981- 82
F i s c a l Year
( I n Thousands)
1977- 78 1978- 79 1979- 80 1980- 81 1981- 82
a
Operating Income:
Non- Fair
F a i r
Total
Operating Expense:
Non- Fair
F a i r
Total
Operating P r o f i t ( Loss)
Nonopera t i n g Income:
Racing r e c e i p t s *
I n t e r e s t earned
Gain on Coliseum bonds
Sale of land
Total
Nonoperating Expenses:
Bond i n t e r e s t expense
Amortized bond i s s u e cost
Judgment expense -
Total
Net P r o f i t - A l l Funds
FTE P o s i t i o n s Authorized**
Source: Financial statements prepared by the Coliseum c o m p t r o l l e r ' s o f f i c e and
appropriat. ions r e p o r t s a p p l i c a b l e t o f i s c a l years ending June 30, 1978, through
June 30, 1982
? t This l i n e item does not include t h e p o r t i o n of racing r e c e i p t s received f o r the
purpose of conducting t h e a n n u a l l i v e s t o c k show, s i n c e the monies a r e
r e s t r i c t e d f o r t h a t purpose and a r e expended by the a s s o c i a t i o n which produces
the show ( w i t h t h e approval of the Governor's o f f i c e ) . * * The majority of the agency's FTE p o s i t i o n s a r e f i l l e d by part- time and/ or
temporary employees. According t o the Coliseum's personnel c l e r k , there a r e
c u r r e n t l y 78 permanent, full- time employees.
a
Scope of Audit
The scope of our a u d i t of the Coliseum and Exposition Center Board
included the operation of the S t a t e F a i r a s well a s the operation of
Coliseum f a c i l i t i e s . Our major a u d i t o b j e c t i v e s were t o determine:
- Whether the Coliseum and Exposition Center Board has f u l f i l l e d
the purpose f o r which i t was e s t a b l i s h e d and
- Whether the Board operates i n an e f f i c i e n t and e f f e c t i v e manner
and within s t a t u t o r y provisions.
I n s u f f i c i e n t data prevented us from evaluating s t a f f i n g l e v e l s a t the
Coliseum. Due t o time c o n s t r a i n t s , we were a l s o unable t o examine i n
d e t a i l the Coliseum's concession operations or evaluate the use of
Livestock and Breeders' Award funds. This is discussed i n Areas f o r
Further Audit Work, page 39.
The Auditor General and s t a f f express a p p r e c i a t i o n t o the members of the
Coliseum and Exposition Center Board and the Coliseum s t a f f f o r t h e i r
cooperation and a s s i s t a n c e during the course of our a u d i t .
SUNSET FACTORS
In accordance with A. R. S. § $ 41- 2351 through 41- 2379, 11 f a c t o r s were
considered t o determine, i n p a r t , whether the Coliseum and Exposition
Center Board sliould be continued or terminated. Not a l l of the 11 f a c t o r s
were applicable t o the Board since it does not perform a regulatory
function.
1. Obiective and purpose i n e s t a b l i s h i n g the agency
S t a t e law includes s e v e r a l references t o the purposes and o b j e c t i v e s
of the Coliseum and Exposition Center. The 1967 l e g i s l a t i o n which
changed the agency's t i t l e from the Arizona S t a t e Fair Commission t o
the Arizona Coliseum and Exposition Center Board s t a t e s :
" It is the i n t e n t of the l e g i s l a t u r e t o e s t a b l i s h an
Arizona coliseum and exposition c e n t e r board of f i v e
members who a r e q u a l i f i e d t o understand the unique
character of the operation of the Arizona coliseum and
e x p o s i t i o n c e n t e r . Moreover, s i n c e t h e center is a
f a c i l i t y which belongs t o the people of Arizona, - the
operation thereof should be so administered t h a t it can
be used and enjoyed by a l l of the people of t h i s
s t a t e . "( A. R. S. 63- 1001. H i s t o r i c a l Notes. e m ~ h a s i s
added)
Arizona Revised S t a t u t e s $ 3- 1003, Section A, includes among the
Board's r e s p o n s i b i l i t i e s :
" 1. Have exclusive custody and d i r e c t i o n of a l l s t a t e
f a i r property, construct and maintain necessary
improvements i n connection therewith, and a s s i s t i n
r a i s i n g funds theref or.
" 2 . Direct and conduct s t a t e f a i r s , e x h i b i t s , c o n t e s t s
and entertainments f o r the purposes of promoting and
advancing t h e p u r s u i t s and i n t e r e s t s of the s e v e r a l
counties and of the s t a t e , and of providing s u f f i c i e n t
revenue t o defray the expenses incurred by the board i n
conducting such events."
Thus, i n summary, the o b j e c t i v e of the Board i s t o conduct s t a t e f a i r s
and operate t h e e v e n t f a c i l i t i e s i n a way which
- maintains the f a c i l i t i e s i n good condition,
- provides enjoyment f o r " all of the people of t h i s s t a t e " and
advances t h e " i n t e r e s t s of t h e s e v e r a l c o u n t i e s and of the
S t a t e , " and
- generates " s u f f i c i e n t revenue t o defray" operating expenses.
Goals expressed i n interviews w i t h t h e f i v e c u r r e n t Board members were
c o n s i s t e n t with these s t a t u t o r y r e s p o n s i b i l i t i e s .
2. The e f f e c t i v e n e s s with which the Agency has met its o b j e c t i v e and
purpose and the e f f i c i e n c y with which the agency has operated
Efficiency and e f f e c t i v e n e s s of the agency's operations may be
evaluated by determining how well it has met t h e o b j e c t i v e s s t a t e d i n
Sunset Factor 1.
Maintaining the F a c i l i t i e s - The Board appears . t o have met the
requirements of the law and the bond r e s o l u t i o n concerning
maintainence of the f a c i l i t i e s , with one exception. The bond
r e s o l u t i o n a p p l i c a b l e t o the Coliseum's c o n s t r u c t i o n r e q u i r e s a n
i n s p e c t i o n of the Coliseum and its surrounding f a c i l i t i e s every t h r e e
years by a consulting a r c h i t e c t . The purpose of the i n s p e c t i o n i s t o
provide recommendations f o r r e p a i r s and inprovements t o the f a c i l i t y .
The l a s t i n s p e c t i o n was conducted i n 1979; thus, the next i n s p e c t i o n
is overdue. The Board has sought l e g i s l a t i v e a p p r o p r i a t i o n s f o r a
number of major r e p a i r s and improvements t o the f a c i l i t y ( see Table
1 ) . The most r e c e n t major improvement t o the f a c i l i t y was the
a d d i t i o n of 1,714 s e a t s t o the Coliseum i n f i s c a l year 1981- 82, which
was paid f o r by a loan from the S t a t e General Fund. Long- term plans
f o r improvements a r e addressed i n the f i s c a l year 1982- 83 Budget
Request, which shows proposed improvements t o t a l l i n g $ 2,575,006 over a
five- year period. Those proposed improvements i n c l u d e upgrading of
e l e c t r i c a l power, paving, and renovation of box o f f i c e , horse barn,
and grandstand f a c i l i t i e s .
Providing Enjoyment and Advancing the I n t e r e s t s of the Counties and the
S t a t e - The Board appears t o be f u l f i l l i n g t h i s o b j e c t i v e , a s evidenced
by improvements i n the annual S t a t e F a i r , o v e r a l l u t i l i z a t i o n of the
f a c i l i t i e s and t h e v a r i e t y of a c t i v i t i e s held i n these f a c i l i t i e s .
The Board's s t a f f has made s e v e r a l improvements i n t h e S t a t e F a i r i n
r e c e n t y e a r s . County p a r t i c i p a t i o n i n t h e S t a t e F a i r has been
encouraged by providing f r e e booth space t o each county and by sending a
s t a f f nember to each of the county f a i r s t o promote the S t a t e F a i r . I n
a d d i t i o n , the Board's s t a f f h a s i n c r e a s e d the number of noncommercial
e x h i b i t s i n the S t a t e F a i r . Furthermore, the s t a f f has improved midway
operations by e s t a b l i s h i n g t i g h t e r c o n t r o l s over t i c k e t s and e l i m i n a t i n g
i n e q u i t i e s i n the r e n t a l r a t e s among r i d e operators. The 1982 S t a t e
F a i r had a record attendance of 801,651 and a p r o f i t of $ 860,700.
Although the F a i r appears t o be well r u n g e n e r a l l y , our review shows
t h a t s e v e r a l minor improvements a r e needed i n S t a t e F a i r o p e r a t i o n s ( s e e
page 17).
The Board has been s u c c e s s f u l i n i n c r e a s i n g t h e . u t i l i z a t i o n of the
f a c i l i t i e s . During calendar year 1982, 155 events were held i n the
Coliseum or on t h e fairgrounds ( excluding S t a t e F a i r e v e n t s ) . This was
a 60 percent i n c r e a s e over the 96 events held i n 1981.
A wide v a r i e t y of events a r e held i n these f a c i l i t i e s , appealing t o a
broad s e c t i o n of the p u b l i c . The events may be broken down i n t o four
general c a t e g o r i e s ( excluding S t a t e F a i r ) :
1 ) Major events - Events with moderate t o sold- out a t t e n d a n c e s ,
generally held i n s i d e the Coliseum, o f t e n longer than one day
i n d u r a t i o n . Examples of t h i s type o f event a r e the Jaycee
Rodeo, Ringling Brothers Circus, Arizona National Livestock
Show and I c e F o l l i e s .
2) llinor events - Events with low t o moderate attendance,
generally held i n o u t l y i n g b u i l d i n g s on Coliseum grounds.
Examples of t h i s type of event a r e t r a d e shows, small animal
o r a g r i c u l t u r a l shows, p r o f e s s i o n a l examinations and rummage
s a l e s .
3) Sporting events - Primarily held i n Coliseum but may a l s o be
held i n o u t l y i n g buildings. Examples of s p o r t i n g events a r e
p r o f e s s i o n a l b a s k e t b a l l , soccer, t e n n i s , boxing and k a r a t e .
4) Concerts - Plusical events, primarily rock- and- roll.
Attendance f i g u r e s vary f o r these events.
Recovering Operating Expenses - The Board has been s u c c e s s f u l i n
generating enough revenues t o cover a l l o r most of i t s operating
expenses, although the non- Fair operations i n c u r a s u b s t a n t i a l l o s s .
Revenues from non- Fair events cover a l l d i r e c t c o s t s b u t n o t a l l
overhead c o s t s . The Board's a b i l i t y t o improve the p r o f i t a b i l i t y of
the f a c i l i t i e s , however, i s l i m i t e d by s e v e r a l f a c t o r s .
Our review of the Board's f i n a n c i a l statements f o r the l a s t f i v e years
i n d i c a t e s t h a t , while the S t a t e F a i r has c o n s i s t e n t l y shown a p r o f i t ,
Coliseum or non- Fair operations have c o n s i s t e n t l y shown a net l o s s .
In e f f e c t , the annual production of the S t a t e F a i r helps t o pay f o r
the year- round operation of the Coliseum f a c i l i t y . Table 3 shows the
operating p r o f i t ( l o s s ) of the S t a t e F a i r and non- Fair a c t i v i t i e s f o r
the past f i v e years.*
* Table 3 shows only the operating income and expenses. As explained i n
the Introduction, bond retirement is funded by the Board's percentage
of racing r e c e i p t s , and major improvements t o the f a c i l i t i e s have
u s u a l l y been funded by s p e c i a l l e g i s l a t i v e a p p r o p r i a t i o n s .
TABLE 3
lion- Fair :
Operating income
Operating expense
Operating p r o f i t
( l o s s )
S t a t e Fair:
Operating income
Operating expense
Operating p r o f i t
OPERATING PROFIT ( LOSS)
FISCAL YEmS 1977- 78 THROUGH 1981- 82
( IN THOUSANDS)
F i s c a l Year
Source: Financial data from Table 2, page 4
* Coliseum personnel c i t e d t h e l o s s of s e v e r a l major tenants during f i s c a l
years 1980- 81 and 1981- 82 a s the cause of the increased l o s s e s from
non- Fair operations during those years-- notably the' l o s s of hockey and
team t e n n i s i n 1980- 81 and the c a n c e l l a t i o n s of s e v e r a l major events i n
1981- 82 due t o problems with the Coliseum's roof.
We reviewed r e n t a l c o n t r a c t s f o r events held a t the f a c i l i t i e s during
f i s c a l year 1981- 82 t o determine i f the Coliseum or non- Fair operating
l o s s e s were p a r t i a l l y due t o inadequate r e n t a l r a t e s . Rental r a t e s
charged appear adequate t o recover the majority of the c o s t s associated
with holding events; however, the Coliseum's record- keeping system does
not capture such c o s t s a s u t i l i t i e s and maintenance by event. For
example, tenants a r e charged a f l a t f e e f o r setup and cleanup; due t o
the way maintenance s t a f f time is recorded, we were unable t o determine
i f t h i s f e e is appropriate ( see page 39).
The Board's a b i l i t y t o improve the p r o f i t a b i l i t y of the Coliseum
f a c i l i t i e s ( non- Fair) is l i m i t e d by a t l e a s t t h r e e f a c t o r s : I)
l o c a t i o n of the f a c i l i t i e s ; 2) age of the f a c i l i t i e s ; and 3) l o c a l
competition f o r concerts and other nonsporting events from S t a t e ,
p r i v a t e or municipal f a c i l i t i e s .
According t o Coliseum personnel, the Coliseum's l o c a t i o n a t 19th
Avenue and McDowell Road i s c u r r e n t l y " maximized" with no land
a v a i l a b l e f o r expansion. Our a u d i t revealed t h a t , during the S t a t e
F a i r , increased parking capacity would provide a d d i t i o n a l revenue ( see
page 17). Also, a d d i t i o n a l acreage would y i e l d more e x h i b i t space
which could be rented during the f a i r . However, expansion appears
u n l i k e l y s i n c e the Coliseum is located i n a developed urban area.
The age of the f a c i l i t i e s on the fairgrounds causes high maintenance
c o s t s which d e t r a c t from p r o f i t a b i l i t y . Most of the f a c i l i t i e s on the
fairgrounds a r e between 40 and 50 years old and r e q u i r e renovation i n
order t o increase t h e i r a b i l i t y t o produce r e n t a l revenue. The
grandstand, a g r i c u l t u r a l and e x h i b i t buildings, ' f o r example, were
b u i l t between 1934 and 1939. In the Board's f i s c a l year 1982- 83
budget request, $ 950,000 was requested f o r improvements t o the
grandstand and horse barn f a c i l i t i e s . The Coliseum building i s over
15 y e a r s o l d . In recent years major expenditures have been necessary
f o r roof r e p a i r s . These roof problems have a l s o caused a l o s s i n
revenue due t o the c a n c e l l a t i o n of s e v e r a l major events.
The Board could possibly recover a g r e a t e r portion of a n e v e n t ' s
i n d i r e c t c o s t s by increasing Coliseum r e n t a l r a t e s ; however, t h i s does
not appear t o be a f e a s i b l e s o l u t i o n because r e n t a l r a t e s a r e already
higher than those charged by l o c a l competitors. We surveyed f i v e
major l o c a l entertainment f a c i l i t i e s which compete with the Coliseum:
Arizona S t a t e U n i v e r s i t y ' s Gamrnage Center and A c t i v i t y Center, Phoenix
Civic Plaza, Mesa Amphitheater and Compton Terrace. All of the above
f a c i l i t i e s have r e n t a l r a t e s t r u c t u r e s s i m i l a r t o t h a t used by the
Coliseum.* Survey responses revealed t h a t the r a t e s f o r these
f a c i l i t i e s range between 11 and 26 percent lower than the Coliseum's
r e n t a l r a t e ( except during the summer months when the Coliseum's
r e n t a l r a t e decreases s l i g h t l y ) . In a d d i t i o n to lower r e n t a l r a t e s ,
these competitors a l s o o f f e r other incentives-- such as the
a v a i l a b i l i t y of a l c o h o l i c beverages t o patrons ( t h r e e of the f i v e
f a c i l i t i e s ) , f r e e parking ( t h r e e of the f i v e ) and discounted r a t e s f o r
n o n p r o f i t o r g a n i z a t i o n s ( two of t h e f i v e ) . Statutory provisions
applicable t o the Coliseum prevent the s a l e of alcoholic beverages t o
t h e g e n e r a l p u b l i c and the Coliseuni's bond r e s o l u t i o n appears t o
prevent discounts f o r n o n p r o f i t o r g a n i z a t i o n s .
3. The e x t e n t t o which the Agency has operated within the public i n t e r e s t
The extent to which the Board has operated within the public i n t e r e s t
is indicated by the degree t o which i t has f u l f i l l e d its purposes and
o b j e c t i v e s a s s t a t e d i n Sunset Factor 1. See Sunset Factor 2 f o r a
discussion of how well the Board has achieved these purposes/
o b j e c t i v e s .
Finding I1 ( page 31) explains how the Board could b e t t e r p r o t e c t t h e
S t a t e ' s i n t e r e s t s and i n c r e a s e operating revenues by improving the
a d m i n i s t r a t i o n of two space- rental agreements.
* Rental r a t e s a r e expressed a s a percentage of gross t i c k e t s a l e s or a
minimum charge p e r e v e n t , whichever is higher.
4. The extent t o which r u l e s and r e g u l a t i o n s promulgated by the Agency
a r e c o n s i s t e n t with the l e g i s l a t i v e mandate
A. R. S. § 3- 1003. A. 9. s t a t e s t h a t t h e Arizona Coliseum and Exposition
Center board s h a l l :
". . . Pron~ ulgate r u l e s and r e g u l a t i o n s necessary t o
c a r r y out the provisions of t h i s chapter. . . ."
( emphasis added)
The Board has not promulgated any o f f i c i a l r u l e s and regulations. The
majority of Board members s t a t e d t h a t they saw no need f o r r u l e s and
regulations. According t o one Board = ember, any need was adequately
covered by terms of l e a s e / r e n t a l agreements and o t h e r c o n t r a c t s ,
guidelines provided by other S t a t e agencies ( f o r exaaple, Purchasing,
Personnel) and job d e s c r i p t i o n s of Coliseum employees.
5. The e x t e n t t o which the agency has encouraged input from the public
before promulgating i t s r u l e s and r e g u l a t i o n s and the extent t o which
i t has informed the public a s t o its a c t i o n s and t h e i r expected impact
on the public
As noted above, the Board has not promulgated r u l e s and regulations.
The Board complies with s t a t u t o r y requirements regarding the posting
of meeting notices. We found, however, t h a t the Board did not keep
minutes of 25 executive sessions held between July 31, 1979, and
July 7, 1982. This i s contrary t o A. R. S. $ 38- 431. During the course
of the a u d i t we discussed t h i s noncompliance with the Board's s t a f f
and learned t h a t they were not aware of t h i s requirement. Since then
minutes have been taken of a l l e x e c u t i v e s e s s i o n s .
6. The e x t e n t t o which the Agency has been able t o i n v e s t i g a t e and
resolve complaints t h a t a r e within its j u r i s d i c a t i o n
The Board does not have s t a t u t o r y a u t h o r i t y t o handle complaints,
since i t does not perform a regulatory f u n c t i o n . Complaints by
patrons or tenants regarding Coliseum operations or p o l i c i e s may be
14
handled by the Coliseum's Public Relations Department, a p p l i c a b l e
department heads, Executive D i r e c t o r ' s o f f i c e o r , a s a f i n a l r e s o r t ,
by the Board. The Board a l s o has no s t a t u t o r y a u t h o r i t y t o impose
d i s c i p l i n a r y a c t i o n s .
7. The extent t o which the Attorney General o r any other a p p l i c a b l e
agency of S t a t e government has t h e a u t h o r i t y t o prosecute a c t i o n s
under enabling l e z i s l a t i o n
NO v i o l a t i o n s and p e n a l t i e s a r e e s t a b l i s h e d by the Board" s enabling
s t a t u t e s .
8. The extent t o which the Agency has addressed d e f i c i e n c i e s i n the
enabling s t a t u t e s which prevent it from f u l f i l l i n g its s t a t u t o r y
mandate
The Board has unsuccessfully sought l e g i s l a t i o n i n p r i o r years t o
allow beer s a l e s t o the general public on the Coliseum premises
during sporting events. Alcoholic beverages a r e c u r r e n t l y a v a i l a b l e
t o members of the Coliseum Club and Stadium Club but n o t t h e general
p u b l i c ( s e e page 31). * The Board claims t h a t the s a l e of a l c o h o l i c
beverages to t h e g e n e r a l p u b l i c would s u b s t a n t i a l l y i n c r e a s e Coliseum
revenues and would e l i m i n a t e the i n e q u i t y of allowing a m i n o r i t y of
Coliseum patrons t o purchase l i q u o r .
9. The extent t o which changes a r e necessary i n t h e laws of the Agency
t o adequately comply w i t h t h e f a c t o r s l i s t e d i n t h i s subsection
The Board i s not complying with A. R. S. § 3- 1001( C), which r e q u i r e s
t h a t the Board meet monthly and e l e c t o f f i c e r s i n February of each
year. Board meetings have not been held every month and o f f i c e r s
were usually e l e c t e d i n J u l y of e a c h y e a r . I f the Board determines
t h a t it is not necessary o r p r a c t i c a l t o meet on a monthly b a s i s and
e l e c t o f f i c e r s i n February, then the s t a t u t e s should be changed
accordingly.
10. The extent t o which the termination of the Agency would s i g n i f i c a n t l y
ham the public h e a l t h , s a f e t y or welfare
The Board i s n o t a r e g u l a t o r y agency; t h e r e f o r e , t h e " public h e a l t h ,
s a f e t y and welfare" concerns of t h i s f a c t o r a r e l a r g e l y unapplicable.
Termination of the Board could a f f e c t the public welfare, i n a s e n s e ,
because the Board i s responsible f o r repaying a l l Coliseum
c o n s t r u c t i o n bonds by 1993. I f the Board were terminated, it would
be necessary t o make some other agency responsible f o r the repayment
of those bonds.
11. The extent t o which the l e v e l of r e g u l a t i o n exercised by the Agency
is appropriate and whether l e s s o r more s t r i n g e n t l e v e l s of
r e g u l a t i o n would be appropriate
The Board does not perform a r e g u l a t o r y f u n c t i o n , except i n the
broadest sense, i n i t s a d m i n i s t r a t i o n of the f a c i l i t i e s .
FINDING I
IMPROVEMENTS ARE NEEDED I N STATE FAIR OPERATIONS.
We i d e n t i f i e d a number of improvements which should be made i n S t a t e F a i r
o p e r a t i o n s , i n c l u d i n g s e v e r a l changes which would i n c r e a s e F a i r revenues.
These improvements f a l l i n t o f i v e c a t e g o r i e s : 1 ) F a i r parking, 2) F a i r
entertainment, 3) midway operations, 4) commercial space r e n t a l s , and 5)
purchasing of goods and s e r v i c e s .
F a i r Parking
The S t a t e Fair is f o r f e i t i n g s u b s t a n t i a l amounts of parking revenue each
year because of the r e l a t i v e l y small number of parking spaces a v a i l a b l e
f o r Fair patrons. Limited parking capacity may a l s o have a negative
e f f e c t on F a i r attendance. The purchase of a d d i t i o n a l parking areas
adjacent to the fairgrounds does not appear t o be a f e a s i b l e s o l u t i o n .
However, Board s t a f f should study a l t e r n a t i v e ways of i n c r e a s i n g parking
capacity during peak p e r i o d s , i n c l u d i n g a s h u t t l e between the
fairgrounds and parking a r e a s f a r t h e r away.
Inadequate Parking Capacity - Existing parking l o t s cannot accomodate
a l l Fair- goers on most days, p a r t i c u l a r l y on weekends. Therefore, many
patrons park on the s t r e e t s and on t h e premises of businesses and
p r i v a t e residences i n the surrounding neighborhoods.
Board s t a f f have not had accurate information on the t o t a l number of
parking spaces-- either during the F a i r o r at other times. The parking
s u p e r v i s o r e s t i m a t e d t h a t 15,000 spaces a r e a v a i l a b l e when the f a i r i s
not being held. Another source lists parking capacity a t 6,200.
However, during our a u d i t the a r c h i t e c t u r a l firm which designed the
Coliseum and performs p e r i o d i c i n s p e c t i o n s of the f a c i l i t i e s gave us an
estimate of only 5,883 t o t a l spaces i n the four main parking l o t s . This
l a t t e r estimate appears t o be the most r e l i a b l e . This t o t a l of 5,883 is
s u b s t a n t i a l l y reduced, though, during the f a i r because much of the
parking a r e a is occupied by t r a i l e r s , stock trucks and the midway.
Figure 1 shows the layout of the f a i r g r o u n d s , i n c l u d i n g parking
a r e a s . Note t h a t when the f a i r is not being held, the four main
parking l o t s a r e a v a i l a b l e with the following c a p a c i t i e s :
South 1,687
North 2,286
20th Ave. & Encanto Blvd. 1,160
DPS
Total
As shown i n Figure 1, when the f a i r is being held, none of the south
l o t i s a v a i l a b l e t o the public because it contains the midway and
reserved parking. In a d d i t i o n , p o r t i o n s of the north l o t and the 20th
Avenue l o t a r e reserved f o r c r e d e n t i a l s parking and t r a i l e r s and stock
trucks belonging t o exhibitors/ concessionaires. This reduces the
number of spaces a v a i l a b l e t o F a i r patrons t o w e l l under 4,000. This
i s then f u r t h e r reduced by hundreds of employees and e x h i b i t o r s which
have passes t o park i n unreserved a r e a s ( see page 22).
FIGURE 1
LAYOUT OF STATE FAIRGROUNDS
I
I
i
I
8
PARKING
LEGrnD :
space not
parking
The e x i s t i n g parking a r e a s w i l l not accomodate a l l Fair- goers on niost
days of the F a i r , according t o our a n a l y s i s . Table 4 shows the paid
attendance and paid parking f o r each day of the 1982 S t a t e F a i r . I f
we assume t h a t each vehicle had an average of t h r e e t o four occupants,
then we can estimate the number of v e h i c l e s which did n o t park i n
State- owned l o t s each day. Table 4 shows t h e s e c a l c u l a t i o n s .
TABLE 4
ANALYSIS OF PARKING AT 1982 STATE FAIR
1 F r i
2 Sat
3 Sun
4 Mon
5 Tues
6 Wed
7 Thurs
8 F r i
9 Sat
10 Sun
11 Mon
12 Tues
13 Wed
14 Thurs
15 F r i
16 Sat
17 Sun
Daily
A t tendance
Number of
Paying Cars
Parked
Number of Cars Not Parking i n
State- owned Lots*
Case 1: Case 2:
Three Persons Four Persons
Per Car Per Car
* These numbers do not r e f l e c t a c t u a l spaces needed since they do not take
i n t o account the following f a c t o r s : 1 ) the p o s s i b i l i t y of turnover i n
parking spaces ( e. g., more than one c a r i n a space per day) and 2) the
p r o b a b i l i t y t h a t some patrons would continue t o park on the s t r e e t or
the premises of surrounding homes and businesses even i f s u f f i c i e n t
parking spaces were a v a i l a b l e on the fairgrounds. I n a d d i t i o n , parking
spaces needed a r e n o t evenly dispersed throughout the day because of the
g r e a t e r demand f o r spaces during peak periods ( evenings and weekends).
Parking and Attendance Revenue Lost - A s u b s t a n t i a l amount of parking
revenue is l o s t each year because of l i m i t e d parking c a p a c i t y . I f we
assume t h a t each c a r had an average of four occupants, then according
t o Table 4 a t o t a l of 117,000 c a r s did not park i n State- owned l o t s
during the I982 F a i r . A t the r a t e of $ 2 p e r c a r , t h i s r e p r e s e n t s
$ 234,000 i n p o t e n t i a l parking revenues."
The u n a v a i l a b i l i t y of parking spaces may a l s o have a negative e f f e c t
on F a i r attendance and r e l a t e d revenues, although t h e e x t e n t of t h i s
e f f e c t is not measureable. Limited parking is a r e c u r r i n g problem
each year and u s u a l l y receives a t t e n t i o n i n the news media. This may
discourage some p o t e n t i a l Fair- goers.
Purchasing Additional Parking Areas Not Feasible - The purchase of
a d d i t i o n a l land adjacent t o the fairgrounds does not appear t o be a
f e a s i b l e s o l u t i o n t o the shortage of parking a r e a s . F i r s t , the amount
of land needed may not be a v a i l a b l e ; and second, t h e c o s t of
purchasing land f o r parking only may not be j u s t i f i e d by the l i m i t e d
use of t h a t land throughout the year.
The amount of land needed f o r a d d i t i o n a l F a i r parking may not be
a v a i l a b l e adjacent t o the fairgrounds. The a r c h i t e c t u r a l firm which
designed ttie Coliseum estimates t h a t one a c r e would provide 132
parking spaces. A t t h i s r a t e , each a d d i t i o n a l 1,000 spaces desired
would require approximately 7.5 a c r e s of land. This much land may not
be a v a i l a b l e s i n c e t h e fairgrounds a r e located i n a developed urban
area.
Even i f t h a t much land could be purchased, t h e c o s t would probably not
be j u s t i f . i e d by t h e u s e of the land throughout most of the year. The
land would be needed f o r parking only during the S t a t e F a i r and thus
would not be used the r e s t of the year.
* Even i f s u f f i c i e n t parking spaces were a v a i l a b l e i n State- owned l o t s
8 f o r a l l Fair- goers, some patrons would probably still park on the
s t r e e t s or t h e premises of surrounding homes and businesses.
Therefore, t h i s t o t a l of $ 234,000 may be o v e r s t a t e d .
2 1
A l t e r n a t i v e s f o r Increasing Parking Capacity - Board s t a f f should
study a l t e r n a t i v e ways of i n c r e a s i n g parking c a p a c i t y , p a r t i c u l a r l y
during peak attendance periods. One possible s o l u t i o n might be t o run
a s h u t t l e between the fairgrounds and e x i s t i n g parking l o t s f a r t h e r
away. For example, perhaps arrangements could be made with Phoenix
College, West High School o r S t a t e Capitol o f f i c i a l s t o use these
parking l o t s * on weekends and run s h u t t l e s t o t h e fairgrounds. I f the
s h u t t l e s were frequent and convenient, t h i s a l t e r n a t i v e should appeal
t o many Fair- goers who a r e f r u s t r a t e d by t h e c u r r e n t parking shortage.
I n a d d i t i o n , Board s t a f f should c a r e f u l l y r e e v a l u a t e t h e number of
parking passes issued t o employees and e x h i b i t o r s . As mentioned
e a r l i e r , these passes, along with spaces occupied by t r a i l e r s and
s t o c k t r u c k s , s u b s t a n t i a l l y reduce the already l i m i t e d number of
parking spaces a v a i l a b l e t o the public. Table 5 shows the types and
number of parking passes issued t o employees and e x h i b i t o r s f o r the
1982 F a i r .
TABLE 5
PARKING PASSES ISSUED FOR 1982 STATE FAIR
Number of
Type of Pass Passes Issued
Employee parking -
Season*
Daily
Guest parking -
Season*
Exhibitor parking -
Season*
Daily
* " Season" means the 17- day F a i r period.
** Most of these passes a r e issued t o employees, at the d i s c r e t i o n of
department heads, t o be given t o " guests" ( g e n e r a l l y f a m i l i e s of
employees).
*** The number of season passes issued t o e x h i b i t o r s depends on the
number and/ or value of e x h i b i t spaces r e n t e d . E x h i b i t o r s may
exchange season passes f o r an equivalent number of d a i l y passes.
* These l o t s a r e a l l within two miles of the fairgrounds.
According t o Board s t a f f , giving f r e e passes t o employees and
e x h i b i t o r s is a common p r a c t i c e a t other f a i r s and we assume t h a t most
of the passes issued f o r t h e Arizona S t a t e F a i r a r e necessary.
However, i n l i g h t of the severely l i m i t e d parking a r e a s f o r the paying
public, we suggest the Coard s t a f f r e e v a l u a t e the number of f r e e
passes issued i n each category during f u t u r e f a i r s .
2) F a i r Entertainment
The Board could recover a s u b s t a n t i a l p o r t i o n of entertainment c o s t s
by charging a minimal f e e f o r Coliseum e v e n t s d u r i n g the F a i r .
However, the e f f e c t of t h i s a c t i o n on F a i r attendance-- and thus on
o v e r a l l F a i r p r o f i t s - - i s not known and t h e r e f o r e should be t r i e d on a
s e l e c t i v e , experimental b a s i s .
Each S t a t e Fair i n recent years has included f r e e " big- name"
entertainment i n the Coliseum. The 1982 F a i r f e a t u r e d 1 6 concerts by
well- known performers. No admission f e e was charged f o r these
c o n c e r t s ; attendance was open t o a l l F a i r patrons. The Executive
Director claims t h a t t h i s f r e e entertainment is one of the major
drawing cards f o r the f a i r . Most of the 1982 F a i r concerts were well
attended. I n f a c t , according t o estimates by Board s t a f f , 9 of the 16
concerts were each attended by 13,000 or more people,* and
approximately 5,000 were turned away at one concert.
Coliseum entertainment is the second l a r g e s t c o s t category of the
F a i r , a f t e r employee s a l a r i e s . Fees paid t o Coliseum performers f o r
the 1982 F a i r t o t a l e d $ 478,500. Related overhead expenses of Coliseum
e n t e r t a i n m e n t ( u s h e r s , s e c u r i t y , instrument r e n t a l s , limousine
s e r v i c e , e t c . ) increased the t o t a l c o s t t o at l e a s t $ 562,000. Under
current p r a c t i c e s , t h i s c o s t is paid f o r by a l l f a i r g o e r s ; although
according t o estimates by Board s t a f f , only 25 percent ( 204,000) of
those attending the 1982 F a i r attended Coliseum entertainment.
* Coliseum capacity f o r these concerts w a s approximately 16,000.
Some f a i r s i n other s t a t e s charge admission f o r " big- name" entertainment
acts-- between $ 4 and $ 10 per seat-- according t o our survey of other
f a i r s . For example, the 1982 Minnesota S t a t e F a i r charged $ 6 and $ 8 f o r
reserved s e a t s f o r two shows by the Beach Boys ( t h e same group f o r which
approximately 5,000 people were turned away during the 1982 Arizona
S t a t e F a i r ) .
A t l e a s t a p o r t i o n of F a i r entertainment c o s t s could be recovered by
charging a minimal admission f e e ($ 3 t o $ 5). For example, had $ 3 per
t i c k e t been charged f o r the nine most popular c o n c e r t s a t t h e 1982 F a i r ,
more than $ 351,000 i n a d d i t i o n a l gross revenue might have been
generated." The Board and i t s s t a f f have considered t h i s p o s s i b i l i t y i n
the past but a r e concerned t h a t an a d d i t i o n a l charge f o r Coliseum events
might decrease F a i r attendance and consequently t h e o v e r a l l p r o f i t s of
the f a i r . The e x t e n t of t h i s e f f e c t i s unknown and is impossible t o
p r e d i c t . However, an informal survey conducted by Board s t a f f a t the
1982 F a i r i n d i c a t e d t h a t 74 percent of the respondents*" would be
w i l l i n g t o pay a " minimal fee" f o r Coliseum events. A charge o f $ 3 t o
$ 5 per t i c k e t would s t i l l appear t o be a bargain when compared t o normal
concert p r i c e s of $ 9-$ 12 per t i c k e t .
I n our opinion, the Board should experiment with t h i s concept during the
1983 F a i r . For the most popular shows, a l l s e a t s could be put on s a l e
or a combination approach could be t r i e d , i n which some reserved s e a t s
a r e sold and the r e s t a r e open t o a l l Fair- goers.
Midway Operations
Although the Board s t a f f has improved midway operations i n recent
y e a r s ( s e e page 9 ) , s e v e r a l f u r t h e r improvements would enhance the
image and. prof i t a b i l i t y of midway operations.
* Let revenue would be sonewhat lower due t o the a d d i t i o n a l c o s t s of
t i c k e t s ( Q. 35 each) and the need f o r t i c k e t t a k e r s .
** Total number of respondents was 621.
F i r s t , midway revenues could be enhanced by i n c r e a s i n g t h e r e n t a l r a t e
f o r food booths on the midway and making a l l p o t e n t i a l food vendors
aware of t h e opportunity t o rent space on the midway. The midway
appears to be a prime l o c a t i o n i n the F a i r f o r food booths because of
the heavy t r a f f i c through t h a t area. However, presently the r e n t a l
charge f o r a food booth on the midway i s only $ 5 per foot more than t h a t
charged for some spaces o f f t h e midway ($ 85 per foot versus $ 80 per
f o o t ) . In our opinion, the r a t e d i f f e r e n t i a l could be higher and s t i l l
a t t r a c t enough q u a l i t y concessionaires f o r the midway spaces since each
y e a r t h e F a i r receives many more a p p l i c a t i o n s than a v a i l a b l e spaces. I n
a d d i t i o n , m a t e r i a l s s e n t t o a l l p r o s p e c t i v e c o n c e s s i o n a i r e s do not
i n d i c a t e t h a t some spaces a r e a v a i l a b l e on the midway. Informing a l l
a p p l i c a n t s of t h i s p o s s i b i l i t y would heighten the competition f o r those
spaces and t h u s a l l o w h i g h e r r a t e s t o be charged.
Second, documentation should be retained regarding the l o c a t i o n and
evaluation of games, r i d e s and concessions i n the midway. Beginning
with the 1981 F a i r , midway r i d e s and booths are evaluated f o r appearance
of u n i t s and personnel, s a f e t y f a c t o r s , e t c . , and t h e s e e v a l u a t i o n s a r e
taken i n t o account the following year when deciding which operators and
concessionaires w i l l be a p a r t of the midway. When we asked t o review
the 1981 evaluations, however, Board s t a f f could not f i n d them. This
documentation would be b e n e f i c i a l t o Board s t a f f when deciding on f u t u r e
space assignments.
4) Commercial Space Rentals
The commercial space r e n t a l process could be improved by e s t a b l i s h i n g
e a r l i e r a p p l i c a t i o n deadlines and requiring nonrefundable d e p o s i t s p r i o r
t o payment of the t o t a l r e n t a l fee. Board s t a f f should a l s o consider
more r e n t a l r a t e d i f f e r e n t i a l s a s a way of increasing revenues i n t h i s
area.
In order to secure a space a t the Arizona S t a t e F a i r , a prospective
exhibitor/ concessionaire f i r s t completes an a p p l i c a t i o n requesting
space. Prior- year e x h i b i t o r s a r e mailed a p p l i c a t i o n s f i r s t so t h a t they
may be given preference f o r spaces; however, no s p e c i f i c deadline is
e s t a b l i s h e d f o r r e t u r n of those a p p l i c a t i o n s p r i o r t o the deadline f o r
a l l a p p l i c a n t s . * I f selected by the Board s t a f f , an applicant is then
sent a c o n t r a c t which he must sign and r e t u r n within approximately one
month. He must a l s o remit the t o t a l r e n t a l f e e by the end of t h a t
one- month period. No deposit is required p r i o r t o t h a t time.
Therefore, an applicant can cancel h i s r e s e r v a t i o n without any
monetary l o s s up t o a month a f t e r receiving the c o n t r a c t . This allows
the l a t e r a p p l i c a n t s t o cancel without penalty j u s t a few days before
opening day of the f a i r .
We noted two p r a c t i c e s i n our survey of other f a i r s across the
country*" which would improve the commercial space r e n t a l process f o r
the Arizona S t a t e Fair. F i r s t , e a r l i e r a p p l i c a t i o n deadlines f o r
prior- year e x h i b i t o r s would allow the remaining spaces t o be f i l l e d i n
a more timely manner, well before opening day. Second, Board s t a f f
could discourage last- minute c a n c e l l a t i o n s and improve cash flow by
requiring a nonrefundable deposit p r i o r t o the due date f o r the t o t a l
r e n t a l f e e . In our opinion, these a r e good business p r a c t i c e s which
should be adopted by the Board's s t a f f .
Our survey of other f a i r s a l s o revealed t h a t some f a i r s have more
r e n t a l r a t e d i f f e r e n t i a l s than Arizona. Some f a i r s charge a higher
space r e n t a l r a t e f o r d i r e c t s a l e s p r i v i l e g e s ( a s opposed t o only
displaying a product or s e r v i c e ) . For example, the Iowa S t a t e Fair
charges an a d d i t i o n a l $ 300 per e x h i b i t o r f o r d i r e c t s a l e s p r i v i l e g e s .
We a l s o noted t h a t some f a i r s charge a higher r a t e f o r food
concessions than f o r nonfood ( f o r example, Iowa S t a t e F a i r , Houston
Livestock Show) or charge food concessionaires a percentage of gross
r e c e i p t s r a t h e r than a f l a t f e e ( f o r example, New Mexico S t a t e F a i r ,
Dade County F a i r ) . Board s t a f f should review the f e a s i b i l i t y of
adopting a d d i t i o n a l r a t e d i f f e r e n t i a l s a s a way of increasing revenues
from t h i s part of the Arizona S t a t e Fair.
* Deadline For a l l commercial space a p p l i c a t i o n s is two weeks before the
F a i r opens.
** We received responses from 29 s t a t e and county f a i r s .
5) Purchasing of Goods and
Services for S t a t e F a i r
We found two areas of concern i n the purchasing of goods and s e r v i c e s
f o r the S t a t e F a i r :
1) Not a l l purchases f o r t h e 1982 F a i r were approved by the S t a t e
Purchasing Office ( SPO) a s required, and
2) Bid advertisements were used i n a p p r o p r i a t e l y t o o b t a i n
s p e c i a l i z e d s e r v i c e s .
Not A l l Purchases Approved by SPO - Not a l l F a i r - r e l a t e d purchases
made by the s t a f f were authorized i n advance by the SPO. S t a t e law
r e q u i r e s t h a t SPO a c t a s t h e purchasing r e p r e s e n t a t i v e f o r S t a t e
agencies except when SPO a u t h o r i z e s an agency t o purchase t h e i r own
goods or s e r v i c e s . Each year the Board s t a f f request a u t h o r i z a t i o n t o
purchase on i t s own a number of f a i r - r e l a t e d items; a l l other
purchases are t o be handled by SPO. We found, however, t h a t 9 out of
79 purchases by the s t a f f f o r the 1982 F a i r were - n o t a u t h o r i z e d by
SPO. Unauthorized purchases included t y p e s e t t i n g s e r v i c e s , d i s p l a y
cases, pennants and money boxes. According t o the Board's purchasing
s t a f f , t h i s was due t o oversight and not i n t e n t i o n a l noncompliance.
Inappropriate Use of Bid Advertisements - Board s t a f f have
inappropriat- ely used newspaper bid advertisements f o r obtaining some
s p e c i a l i z e d p r o f e s s i o n a l s e r v i c e s . Their use of a d v e r t i s i n g was
i n a p p r o p r i a t e because 1 ) i t was not e f f e c t i v e i n providing a wide
s e l e c t i o n of prospective c o n t r a c t o r s and f e e s and 2) i n most
i n s t a n c e s a d v e r t i s i n g was not necessary.
Each year Board s t a f f wish t o c o n t r a c t with many of the same persons
who performed i d e n t i c a l s e r v i c e s i n p r i o r y e a r s . In order t o o b t a i n
the s e r v i c e s of t h e s e i n d i v i d u a l s , an advertisement is placed annually
i n one of the smaller newspapers i n the Phoenix metropolitan area.
Then the i n d i v i d u a l s whom t h e Board s t a f f wish t o h i r e a r e n o t i f i e d of
the advertisement so they can apply. Board s t a f f s a i d the smaller
newspaper i s used because a d v e r t i s i n g c o s t s a r e l e s s than a paper with
l a r g e r c i r c u l a t i o n .
Specialized s e r v i c e s obtained i n t h i s manner include an a r t i s t , a
photographer and photographic s u p p l i e s , a stage manager, t i c k e t s a l e s
s u p e r v i s o r s , e l e c t r i c i a n s and a motorized events promoter. Fees f o r
these s e r v i c e s ranged between $ 900 and $ 29,000.
T h i s p r o c e s s i s not e f f e c t i v e i n providing a wide s e l e c t i o n of
prospective c o n t r a c t o r s and f e e s . Board s t a f f received few responses
t o the advertisements, apparently because of the paper's r e l a t i v e l y
low c i r c u l a t i o n . Also, since the c o n t r a c t o r s know they have been
hired previously and w i l l be hired again, they may be a b l e t o s e t
higher p r i c e s f o r t h e i r s e r v i c e s than i f more competition was p r e s e n t .
Newspaper a d v e r t i s i n g was a l s o unnecessary f o r most of these s e r v i c e s
because o t h e r a c c e p t a b l e means were a v a i l a b l e . I n i n s t a n c e s where
s p e c i f i c knowledge of the F a i r o r its f a c i l i t i e s is r e q u i r e d , the
Executive Director appears t o be j u s t i f i e d i n wanting t o h i r e t h e same
person each year and should have an a l t e r n a t i v e t o the competitive
bidding procedures f o r obtaining such services." One a l t e r n a t i v e
would be f o r the S t a t e Personnel Division t o c r e a t e temporary S t a t e
p o s i t i o n s f o r these areas.**
Services which do not require s p e c i f i c knowledge of the f a i r o r of the
f a c i l i t i e s should be obtained through a competitive bidding process.
However, f e e s f o r most of the s e r v i c e s were l e s s than $ 5,000. S t a t e
law r e q u i r e s newspaper a d v e r t i s i n g only f o r c o n t r a c t s over $ 5,000.
Therefore, Board s t a f f could have obtained informal b i d quotes i n s t e a d
of a d v e r t i s i n g f o r bids. For c o n t r a c t s over $ 5,000, however, Board
s t a f f should a d v e r t i s e i n a newspaper " of general c i r c u l a t i o n . "
* For example, the F a i r stage manager is a l s o the Coliseum manager
during the r e s t of the year.
** llost of t h e o t h e r S t a t e Fair p o s i t i o n s a r e already tenlporary p o s i t i o n s
which can be f i l l e d without going through the S t a t e Personnel Division
and the normal c o m p e t i t i v e r e c r u i t m e n t process.
CONCLUSION
S t a t e F a i r procedures, although generally e f f e c t i v e , could be improved i n
the areas of parking, Coliseum entertainment, midway management, r e n t a l of
commercial e x h i b i t space and purchasing of F a i r - r e l a t e d goods and
s e r v i c e s . Some of these improvements would s u b s t a n t i a l l y i n c r e a s e F a i r
revenues.
RECOM?. EL. JDATIONS
1. Board s t a f f should thoroughly study a l t e r n a t i v e s f o r i n c r e a s i n g
parking capacity during peak periods of t h e F a i r . A l t e r n a t i v e s
reviewed should include the use of a s h u t t l e s e r v i c e t o o t h e r e x i s t i n g
parking areas i n reasonable proximity t o the fairgrounds.
2. Board s t a f f should r e e v a l u a t e the number of f r e e parking passes issued
f o r the F a i r .
3. The Board should consider charging a minimal f e e ($ 3 t o $ 5) f o r
s e l e c t e d Coliseum e v e n t s d u r i n g the 1983 F a i r .
4. Board s t a f f should r e t a i n documentation r e l a t i n g t o t h e l o c a t i o n and
evaluation of games, r i d e s and concessions i n order t o a l l o c a t e f u t u r e
space assignments more e f f e c t i v e l y .
5. The Board should i n c r e a s e t h e r e n t a l r a t e f o r food booths on the
midway and inform a l l prospective food concessionaires t h a t spaces are
a v a i l a b l e on the midway.
6. Loard s t a f f should e s t a b l i s h a s e p a r a t e a p p l i c a t i o n deadline f o r
prior- year e x h i b i t o r s and r e q u i r e a nonrefundable d e p o s i t p r i o r t o
payment of the t o t a l r e n t a l fee.
7. The Executive Director should e s t a b l i s h procedures which w i l l help
ensure t h a t a l l purchases made by Board s t a f f a r e authorized by the
S t a t e P u r c h a s i n ~ Office.
8. The Executive Director should consult with the S t a t e Purchasing Office
and S t a t e Personnel Division t o find an acceptable a l t e r n a t i v e t o
competitive bidding-- when j u s t i f i e d - - f o r o b t a i n i n g s p e c i a l i z e d
s e r v i c e s f o r the F a i r . I n a l l other cases the Board's s t a f f should
f u l f i l l the i n t e n t of the competitive bidding requirements by 1)
a d v e r t i s i n g f o r bids i n a newspaper of general c i r c u l a t i o n f o r
c o n t r a c t s over $ 5,000 and 2) obtaining informal b i d q u o t a t i o n s f o r
s e r v i c e s under $ 5,000.
FINDING I1
THE BOARD SHOULD IMPROVE ITS ADl~ lINISTRATION OF TWO LONG- TERM SPACE RENTAL
AGREElENTS .
The Coliseum Board should improve the a d m i n i s t r a t i o n of two agreements
governing the r e n t a l of space f o r the Coliseum Club and video games. We
found a lack of sound business p r a c t i c e s i n the a d m i n i s t r a t i o n of these
agreements, including inadequate c o n t r o l over concessionaires' r e c e i p t s ,
incomplete contract documents and a lack of competitive bidding of r e n t a l
r a t e s . As a r e s u l t , the Board does not have adequate c o n t r o l over the
performance of the p a r t i e s involved.
Coliseum Club
The Board needs t o improve its a d m i n i s t r a t i o n of the Coliseum Club
c o n t r a c t . Administration of t h e c o n t r a c t is inadequate because 1) no
provision e x i s t s f o r a u d i t of the concessionaire's r e c e i p t s , 2) a l l
revenues due the Board have not been c o l l e c t e d , and 3) the contract was
extended without adequate r e v i s i o n s t o t h e c o n t r a c t documents.
In October 1977, the Board entered i n t o a four- year c o n t r a c t w i t h a
concessionaire f o r the l e a s e of t h e a r e a s w i t h i n the Coliseum known a s the
Coliseum Club and the Stadium Club. The Coliseum Club is a p r i v a t e club
where dinners and alcoholic beverages a r e served t o paying club members
only. The Stadium Club serves sandwiches and a l c o h o l i c beverages t o
Phoenix Suns season t i c k e t holders. The concessionaire obtains s p e c i a l
permits from the Department of Liquor Licenses and Controls, and h i s clubs
a r e the only places on the Coliseum premises where l i q u o r is sold. The
concessionaire a l s o uses the Coliseum Club f a c i l i t y t o provide c a t e r i n g
s e r v i c e s t o many of the entertainment a c t s which perform i n the Coliseum.
According t o the c o n t r a c t , the Board i s t o receive a percentage of the net
r e c e i p t s ( a f t e r s a l e s taxes) f o r food and l i q u o r s a l e s and a percentage of
t h e g r o s s r e c e i p t s f o r Club memberships. The Board received approximately
$ 23,000 i n f i s c a l year 1981- 82 a s i t s portion of the concessionaire's
r e c e i p t s .
No Audit of Concessionaire's Receipts - The Coliseum/ Stadium Club
( r e f e r r e d t o h e r e a f t e r a s the Coliseum Club) c o n t r a c t does n o t c o n t a i n a
provision f o r verifying the accuracy of t h e r e c e i p t s reported by the
concessionaire. The c o n t r a c t r e q u i r e s only t h a t each month the
concesssionaire f u r n i s h the Board with a l e t t e r - - s i g n e d by the
concessionaire-- setting f o r t h the amount of net d a i l y r e c e i p t s , deductions
f o r taxes and c a l c u l a t i o n s of monies due t o the Board. The Board r e l i e s
on the concessionaire t o report h i s r e c e i p t s accurately.
Good business p r a c t i c e d i c t a t e s some provision f o r a u d i t i n the c o n t r a c t .
Such provisions could include Board access t o c o n c e s s i o n a i r e r e c o r d s ,
a u t h o r i t y t o observe cash counts on a s u r p r i s e b a s i s o r an independent CPA
a u d i t a t the concessionaire's expense. Apparently the absence of such a
provision i n the contract was due t o oversight.
Board Was Not Collecting Percentage of Catering Receipts - Until recently
the Board was not c o l l e c t i n g a percentage of the c o n c e s s i o n a i r e ' s r e c e i p t s
f o r c a t e r i n g s e r v i c e s . This appears t o be contrary t o the i n t e n t of the
c o n t r a c t , which s t a t e s i n p a r t :
"?& NT: [ Concessior, aire] s h a l l pay t o the Board, as
r e n t , the sum of eleven percent ( 11%) of the net
r e c e i p t s f o r food, twelve and one- half percent
( 12- 1/ 2%) of the net r e c e i p t s f o r l i q u o r s a l e s and ten
percent ( 10%) of gross r e c e i p t s received f o r the Clubs
memberships. " Net r e c e i p t s " a r e intended t o mean a l l
revenues from the s a l e s of food or beverage, l e s s any
and a l l s a l e s or excise taxes and customer refunds."
According t o Coliseum personnel, since t h e c o n t r a c t does not mention
c a t e r i n g s p e c i f i c a l l y , no attempts were made t o c o l l e c t a p o r t i o n of the
c a t e r i n g r e c e i p t s .
The concessionaire agreed t o begin paying the Board a p o r t i o n of h i s
catering r e c e i p t s a f t e r a u d i t s t a f f recommended t h i s t o the Coliseum
Executive Director i n December 1982. Records were inadequate t o a l l o w u s
to estimate how much revenue was l o s t p r i o r t o t h i s change.
Contract Extended Without Adequate Revisions to Contract Documents - In
1980 the Board approved a five- year extension of the Coliseum Club c o n t r a c t
without making appropriate r e v i s i o n s i n the contract document. A t t h a t
time t h e c o n c e s s i o n a i r e wanted t o make c e r t a i n improvements t o the Club
f a c i l i t y but would not do so without a n e x t e n s i o n of the c o n t r a c t . The
Board agreed t o extend the contract f o r f i v e years on the condition t h a t
the improvements would be made. However, t h e c o n t r a c t document was not
revised to include a d e s c r i p t i o n of these improvements. Furthermore, a s of
January 1983 the Board had not v e r i f i e d t h e nature or value of the
improvements a c t u a l l y made. In summary, then, the c o n t r a c t was extended
without s u f f i c i e n t c o n t r o l s over the performance of the concessionaire.
Video Games
An agreement governing the operation of video games i n the Coliseum is
a l s o inadequate because 1 ) no provisions e x i s t f o r a u d i t of the
c o n c e s s i o n a i r e ' s r e c e i p t s o r f o r c a n c e l l a t i o n of the agreement and 2)
competitive bidding was not used p r i o r t o making the agreement.
A video game concessionaire contacted Board s t a f f and requested the
p r i v i l e g e of placing video games i n the Coliseum. The Executive Director
agreed t o the arrangement or; a t r i a l b a s i s f o r one year. A c o n t r a c t was
signed i n January 1982. The concessionaire agreed t o pay ". . . 50
percent of the gross s a l e s a f t e r taxes f o r the purpose of operating Video
Machines p r i o r t o , during and a f t e r Coliseum events." As of Oecember 8,
1982, the concessionaire had paid the Coliseum $ 10,827 a s a r e s u l t of t h i s
agreement.
No Provisions f o r Audit or Cancellation - Like the Coliseum Club c o n t r a c t ,
the video games agreement does not contain a provision f o r verifying the
accuracy of t h e c o n c e s s i o n a i r e ' s r e p o r t e d r e c e i p t s . The agreement s t a t e s
t h a t the concessionaire w i l l " present an accurate money count on a l l
machines and present these f i g u r e s t o the Coliseum r e p r e s e n t a t i v e a t the
t i n e of payment." These terms i n e f f e c t put the concesionaire on the
" honor system" for reporting monies due t o the Board. The i n t e r e s t s of the
Board would be b e t t e r served by including a provision which gives them
r i g h t of access t o c o n c e s s i o n a i r e r e c o r d s and the r i g h t t o observe and
count money a s i t is withdrawn from the machines. An a l t e r n a t i v e t o these
c o n t r o l s would be t o e s t a b l i s h a f l a t r e n t a l f e e f o r t h e p r i v i l e g e of
placing video games i n the Coliseum.
In a d d i t i o n t o the lack of a provision f o r a u d i t , t h e agreement does not
contain a clause which allows c a n c e l l a t i o n of the agreement f o r
nonperformance. Since the agreement was entered i n t o on a t r i a l b a s i s , it
would have been advisable f o r the Board t o have the a u t h o r i t y t o cancel the
agreement i n the event of nonperformance by the concessionaire.
The absence of t h e s e p r o v i s i o n s appears t o be due t o o v e r s i g h t . The
agreement was made without involvement of e i t h e r the Board o r the Attorney
General. I n the f u t u r e , t h e Board should approve the terms of the
agreement and the Attorney General should approve the c o n t r a c t documents a s
t o forn. Involvement by these p a r t i e s should help improve the q u a l i t y of
t h e c o n t r a c t documents.
Competitive Bidding Not Used - The Board's s t a f f did not use competitive
bidding procedures before - entering i n t o t h i s agreement, d e s p i t e the
presence of many p o t e n t i a l bidders i n the Phoenix area. As a r e s u l t , Board
income from t h i s source may not be maximized.
S t a t e law does - not require the Board t o obtain bids i n t h i s s i t u a t i o n
because it is receiving r e n t a l monies from the concessionaire r a t h e r than
paying f o r h i s s e r v i c e s with S t a t e funds. However, good business p r a c t i c e
suggests t h a t competitive bidding should be used t o obtain t h e b e s t terms
f o r t h i s r e n t a l agreement - t h a t is, t o maxinlize the Ijoard's p o r t i o n of
r e c e i p t s . The Phoenix Yellow Pages lists 20 businesses t h a t s e l l o r rent
video games, i n d i c a t i n g t h e r e would be a number of p o t e n t i a l bidders f o r
the r i g h t t o place video games i n the Coliseum. No attempt was made to
obtain bids because t h e r e was no requirement t o do so, and the arrangement
was undertaken on a t r i a l b a s i s a t the suggestion of the concessionaire.
I n February 1982, the Director of the S t a t e Purchasing Off i c e recommended
t h a t competitive bids be obtained f o r any f u t u r e c o n t r a c t s f o r video games.
However, i n January 1983 the agreement was extended f o r s i x months to allow
time f o r Board s t a f f t o write bid s p e c i f i c a t i o n s . According t o the
Executive D i r e c t o r , competitive bidding w i l l be used a t the end of t h e
c u r r e n t c o n t r a c t .
CONCLUSION
The Board needs t o improve i t s a d m i n i s t r a t i o n of two lank- term space
r e n t a l agreements. The c o n t r a c t documents do n o t adequately c o n t r o l t h e
performance of the p a r t i e s involved. I n a d d i t i o n , competition has not
been u t i l i z e d t o maximize revenues from one of the agreements.
IIECOPPlLNDATIOKS
1. The Coliseum Board should see t h a t a l l f u t u r e long- term c o n t r a c t s
c o n t a i n t h e p r o v i s i o n s n e c e s s a r y t o c o n t r o l the performances of the
other p a r t i e s involved. Such provisions include, a s appropriate:
- Provisions f o r access t o records and/ or a u d i t s f o r c o n t r a c t s i n
which the Board receives a percentage of r e c e i p t s as the r e n t a l
f e e ,
- Cancellation c l a u s e s f o r nonperformance, and
- Complete d e s c r i p t i o n s of t h e c o n d i t i o n s o r terms upon which an
extension is granted.
2. The Board should c o l l e c t a p o r t i o n of a l l c a t e r i n g r e c e i p t s from the
Coliseum Club concessionaire.
3. The Board should use competitive bidding f o r f u t u r e c o n t r a c t s covering
video games i n the Coliseum.
OTHER PERTINENT INFORMATION
Annual Livestock F a i r
S t a t e law requires the Coliseum Board t o conduct " an annual l i v e s t o c k f a i r , "
which t r a d i t i o n a l l y has been the Arizona National Livestock Show.* The show
is held i n January each year and runs f o r about 10 days. The show is funded
l a r g e l y by a portion of the S t a t e ' s revenues from h o r s e r a c i n g . Although
the s t a t u t e s make the Board responsible f o r conducting t h e l i v e s t o c k f a i r ,
i n r e a l i t y the Board has only l i m i t e d involvement i n the planning and
d i r e c t i o n of t h i s event.
The Coliseum Board receives funds f o r the production of the Arizona National
Livestock Show through the Governor's Office pursuant t o A. R. S. 55- 113 which
s t a t e s i n p a r t :
" A. A l l revenues derived from permittees, permits and
l i c e n s e s , a s provided by t h i s a r t i c l e , s h a l l be paid t o
the s t a t e t r e a s u r e r , who s h a l l c r e d i t . . ten per
cent of the revenue t o a fund known a s the county f a i r s
l i v e s t o c k and a g r i c u l t u r e promotion fund.
" C. The county f a i r s l i v e s t o c k and a g r i c u l t u r e
promotion fund s h a l l be under the c o n t r o l of the
governor and s h a l l be used f o r the purpose of promoting
the l i v e s t o c k and a g- r i c u l t u r a l resources of the s t a t e
and f o r the purpose of conducting an annual l i v e s t o c k
f a i r by the Arizona coliseum and exposition c e n t e r
board t o f u r t h e r promote l i v e s t o c k resources. The
d i r e c t expenses l e s s r e c e i p t s of the l i v e s t o c k f a i r
s h a l l be paid from t h i s fund, but such payment s h a l l
not exceed t h i r t y per cent of t h e r e c e i p t s of the fund
f o r the preceding f i s c a l year. A l l expenditures from
the county f a i r s l i v e s t o c k and a g r i c u l t u r e promotion
fund s h a l l be made upon claims approved by the
governor." ( emphasis added)
* According t o a 1957 statement of l e g i s l a t i v e i n t e n t from the Journal of
the Senate, " the Arizona National Livestock Show held annually i n
Phoenix" was one of the intended r e c i p i e n t s of monies from the
l i v e s t o c k , a g r i c u l t u r e and breeders ' award fund. A 1979 opinion issued
by the Arizona Attorney General noted t h a t the fund may be used t o
conduct a l i v e s t o c k show other than the Arizona National, so long a s the
l i v e s t o c k show is f o r the purpose of promoting the l i v e s t o c k resources
of the S t a t e .
3 7
Thus, the l i v e s t o c k f a i r is supported by up t o 30 percent of the previous
y e a r ' s revenues from the governor' s " county f a i r s l i v e s t o c k and
a g r i c u l t u r e promotion fund," plus any r e c e i p t s from the f a i r i t s e l f .
Although the s t a t u t e s appear t o give the Coliseum Board r e s p o n s i b i l i t y
f o r conducting the l i v e s t o c k f a i r , i n r e a l i t y , the Board h a s o n l y limited
involvement i n the planning and d i r e c t i o n of t h e l i v e s t o c k f a i r . For
many y e a r s t h e f a i r has been planned and conducted by the Arizona
National Livestock Show, Inc. ( ANLS) , a n o n p r o f i t o r g a n i z a t i o n
e s t a b l i s h e d t o promote the l i v e s t o c k i n d u s t r i e s of Arizona. Each year
the Governor's Office n o t i f i e s the Coliseum Board and ANLS o f f i c i a l s of
the amount i n the fund a v a i l a b l e f o r t h e l i v e s t o c k show. ANLS s t a f f then
prepare a budget, a time frame plan and an events schedule which nust be
approved by the Coliseum Board. The main purpose of the Board's review
i s t o see t h a t a l l expenses-- including c o s t s incurred by the Coliseum f o r
the event-- will be covered by e i t h e r the governor's fund or r e c e i p t s from
the show.
The January 1982 show cost a t o t a l of $ 464,861 t o produce. Show- related
r e c e i p t s were $ 136,385, and the governor ' s fund provided $ 328,117. The
only admission f e e s charged f o r the show a r e f o r the Turquoise Rodeo.
According t o the show's manager, an annual a u d i t performed by a l o c a l
independent CPA firm is submitted t o the Coliseum Board and the
Governor's Office. The a u d i t is not required by s t a t u t e .
AREAS FOR FURTHER AUDIT WORK
We i d e n t i f i e d t h r e e a r e a s f o r f u t h e r a u d i t work t h a t we could not pursue due
t o time c o n s t r a i n t s o r inadequate data. These a r e a s a r e :
Coliseum Concessions Operations - We did not research the f e a s i b i l i t y of
c o n t r a c t i n g out Coliseum concessions which a r e c u r r e n t l y handled in- house.
A survey of the Coliseum's l o c a l competitors ( exposition/ concert f a c i l i t i e s )
i n d i c a t e d t h a t most of those e n t i t i e s c o n t r a c t out t h e i r concessions
operations.
S t a f f i n g Levels i n the Maintenance Department - The Coliseum's Operations
Department has 45 permanent employees ( approximately 58 percent of the 78
permanent employees on Coliseum s t a f f ) . Due t o inadequate d a t a we were
unable t o determine i f the number of permanent maintenance
employees-- skilled and nonskilled-- are j u s t i f i e d by the work load. This
evaluation could be performed i n the f u t u r e , however, i f more complete
records of employees' d a i l y a c t i v i t i e s were maintained.
Currently the Coliseum's Operations Department has a system of " work s l i p s "
which a r e completed by i t s employees f o r the purpose of charging t e n a n t s f o r
event- related expenses incurred by the Department. Information provided on
the work s l i p s includes: employee name, department, d e s c r i p t i o n of work
performed and hours charged. Work s l i p s a r e not completed by employees
whose d u t i e s are primarily c u s t o d i a l ( s i n c e t e n a n t s a r e charged a f l a t r a t e
f o r setup and cleanup), employees whose t a s k s r e l a t e t o general maintenance
of the f a c i l i t y and grounds and any employees d u r i n g p e r i o d s when a l l e f f o r t
is devoted t o production o f a major event such a s t h e S t a t e F a i r . Many work
s l i p s examined by a u d i t s t a f f were incomplete a s t o the d e s c r i p t i o n of work
performed. Therefore work s l i p s could not be used t o determine: a ) whether
c u r r e n t s t a f f i n g l e v e l s a r e a p p r o p r i a t e , b) t h e percentage of time spent by
s k i l l e d workers on t a s k s which might be performed by l e s s s k i l l e d s t a f f ,
and c ) the v a l i d i t y of f l a t - r a t e charges t o t e n a n t s . Those determinations
could be made i n the f u t u r e i f work s l i p s were completed by a l l employees
and s p e c i f i c tasks were recorded on a l l work s l i p s .
Livestock and Breeders Award - As explained on page 37, the Coliseum Board
receives a portion of racing r e c e i p t s each year t o sponsor an annual
l i v e s t o c k f a i r . We did not evaluate t h e b e n e f i t s of t h i s p r a c t i c e and
whether such funding should be continued.
April 27, 1983
M r . Douglas R. Norton
Auditor General
111 West Monroe, Suite 600
Phoenix, Arizona 85003
Dear M r . Norton:
The Arizona Coliseum and Exposition Center Board would l i k e t o thank the
Auditor General's s t a f f f o r t h e i r professional manner and cooperation
during the sunset audit of our agency.
We believe t h a t during the past several years many improvements have
been made to upgrade t h e q u a l i t y of the Coliseum and the Arizona State
Fair, and t h a t i n f u t u r e years more and b e t t e r improvements w i l l be made.
We appreciate any suggestions t h a t w i l l help us make these improvements.
Enclosed you w i l l find our comments which r e f l e c t our views on the audit
findings .
If you have any questions, p l e a s e d o n ' t h e s i t a t e t o c a l l me.
Sincerely, /
Executive Director
TRT : gw
Enc .
ARIZONA COLISEUM AND EXPOSITION CENTER BOARD
RESPONSE TO PERFORMANCE AUDIT
FINDING I IMPROVEMENTS ARE NEEDED I N STATE FAIR OPERATIONS
1. Fair Parking
On the busiest days of the f a i r there is a d e f i n i t e parking space shortage
on the fairgrounds. There is no way to judge how t h i s shortage a f f e c t s our
admissions, but it does. In an e f f o r t t o park as many vehicle as possible
we a r e looking a t s h u t t l e bus service between parking l o t s i n the near
v i c i n i t y of the fairgrounds. We a r e only i n the planning stages, but it
looks l i k e a f e a s i b l e a l t e r n a t i v e to our problem.
It wouldn't be f i n a n c i a l l y f e a s i b l e f o r the f a i r to purchase more land because
a) there is no land available i n the immediate area surrounding the fairgrounds;
b) t h e c o s t of the land would be too expensive t o j u s t i f y its limited use.
The Arizona S t a t e Fair s t a f f has made every e f f o r t t o g i v e out as few f r e e
passes during the f a i r as possible. Between our own employees and exhibitors
there are a great number of f r e e but necessary passes given out. Each
exhibitor is limited to what we f e e l is the bare minimum and must purchase
any additional passes needed. The only way to f u r t h e r l i m i t passes would
be to make everyone pay for every pass issued.
2. Fair Entsrtainmcnt
In order to reduce the cost of entertainment f o r the 1983 S t a t e Fair, a
$ 3.00 t i c k e t f o r admission to the Coliseum Show w i l l be sold f o r three
d i f f e r e n t shows during the f a i r . Entertainment costs could be reduced by
as much as $ 135,000.00 due to t h i s action.
3. Midway Operations
As in the past two years, the s t a f f w i l l be doing evaluations of a l l
exhibitors a t the State Fair. These evaluations help greatly i n exhibitor
placement from year to year. These evaluations a r e kept on f i l e i n the
Executive Office and are available f o r review.
Arizona Coliseum and Exposition Center Board
Response t o Perforamnce Audit
Page two
4. Com~ ercial Sales
As suggested, a s e p a r a t e a p p l i c a t i o n deadline f o r p r i o r year e x h i b i t o r s
has been s e t f o r the 1983 S t a t e F a i r . We a r e not requesting a deposit be
a p p l i e d , b u t a r e requiring t h a t the c o n t r a c t s b e p a i d i n f u l l a t an e a r l i e r
date than i n p a s t years.
Purchasing of Goods & Services f o r S t a t e Fair
It is always the policy of t h e S t a t e F a i r Board t o follow S t a t e Purchasing
r u l e s and r e g u l a t i o n s and w i l l continue t o make every e f f o r t i n the f u t u r e
t o do so.
FINDING I1 THE BOARD SHOULD IMPROVE ITS ADMINISTRATION OF TWO LONG- TERM
RENTAL AGREEMENTS
Coliseum Club
The Board concurs with t h e a u d i t f i n d i n g s . When the p r e s e n t c o n t r a c t period
e x p i r e s , a new contract w i l l be negotiated and w i l l include the provisions
necessary to c o n t r o l the performance of the concessionaire.
The concessionaire is now paying the Board a percentage of c a t e r i n g r e c e i p t s .
Video Games
Competitive bidding is now being used t o obtain the vendor f o r the up- coming
year ( Bid # 83- 0429H). W e did not f e e l we could ask the c o n t r a c t o r t o pay a
f l a t f e e each month because we could not guarantee a c e r t a i n number of events
during t h a t month. The c o n t r a c t o r w i l l prepare and d e l i v e r a monthly f i n a n c i a l
r e p o r t , prepared by t h e c o n t r a c t o r ' s accountant, t h a t c l e a r l y r e f l e c t s the
gross s a l e s by machine.