State fairgrounds could get a temporary boost from tax receipts

It’s been a tough couple of years for the Minnesota State Fair. Canceled due to the pandemic in 2020, the fair returned in 2021, but the delta variant was on the upswing and attendance was about a third lower than customary.

And that wreaked havoc with the fair’s economic model, which relies upon ticket sales to fund the upkeep of the fairgrounds and all of its buildings.

Would it help if the fair were allowed to keep the state sales tax portion of those ticket sales and dedicate the receipts to the maintenance and improvement of facilities?

Rep. John Huot (DFL-Rosemount) hopes so. That’s why he’s sponsoring HF4640, a bill that would allow that for the 2022 and 2023 state fairs.

“They’ve definitely had an attendance issue the last couple of years, through no fault of their own,” Huot told the House Taxes Committee Friday. “The fair doesn’t get any money from the state. They’re basically self-supported. They also don’t bond through the state; they bond on their own. So they have their own debt service they’ve got to keep up. I know in the last couple of years, this committee and the state have allowed the county fairs to retain their sales tax to help with the maintenance of their buildings. This would allow the state fair to do the same.”

The bill was laid over for possible inclusion in an omnibus taxes bill. It has no Senate companion.

So how much money would this channel toward fairgrounds maintenance? The Department of Revenue estimates the change would reduce General Fund revenues by $3 million in fiscal year 2023 and $3.3 million in fiscal year 2024. State fairs held in calendar years 2022 and 2023 impact fiscal years 2023 and 2024, respectively.

“Prior to 2002, the fair actually was allowed to retain sales tax on ticket sales, provided it was used for maintenance and improvements,” said Jerry Hammer, Minnesota State Fair general manager. “The fairgrounds are 322 acres with a lot of facilities. They’re defined by law as state property in the care, custody and control of the State Agricultural Society, the governing body of the fair, which was founded in 1854.

“In 2002, there was a budget deficit, and the state fair lost our sales tax exemption at that time. … In a typical year, the fair generates between $55 million and $60 million in operating revenue, and a net operating gain of about 10% of that, all of which is invested in the fair. The better the attendance, the more work we’re able to do on the fairgrounds, the better fair we’re able to produce. And all that revenue produces a huge economic impact on the Twin Cities.

“Despite being shut down in 2020 and the soft year last year, we worked hard to keep our operation intact, our staff intact. And we did. But, to do that, we basically spent all our reserves. We shut down our maintenance and improvement programs, and it’s essential to keep those going. COVID changed everything for us. We’re in a position where we really could use some help for a couple of years.”