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Fiscal Research Division Justification Review Natural & Economic Resources May 1, 2012 Executive Summary In FY 2011-12, Fiscal Research Division staff conducted a justification review of the Department of Agriculture & Consumer Services’ (DACS) Southeastern North Carolina Agricultural Center & Farmers Market (SENCAC). Staff found that while SENCAC provides a hospitable place for meetings and events, visitation and revenue are low relative to DACS’ other facilities. SENCAC requires the largest General Fund subsidy as a percentage of total expenditures, 77 percent. The Charlotte and Asheville farmers markets each require a subsidy of about 25 percent; the Agricultural Center in Williamston requires a 62 percent subsidy. Facilities in Raleigh, Colfax, and Fletcher are self-supporting. In FY 2011-12, SENCAC requires $362,230 in General Fund appropriation. With the opening of the multi-purpose pavilion, DACS is requesting an additional $392,200 from the General Fund for operations and lists over $2.1 million in outstanding pavilion needs. Given SENCAC’s expansion, staff is concerned that DACS has no business plan or performance measures that can be compared to other facilities for SENCAC. From a broader perspective, all of DACS’ farmers markets and agricultural centers are enterprise-type operations that compete with public and/or private facilities. It is reasonable to expect that these facilities should operate like businesses, with thoughtful planning and evaluation and the goal of being self-supporting. To address these concerns, staff recommends that the General Assembly: 1. Cease General Fund support for SENCAC’s current business model; 2. Provide nonrecurring support in FY 2012-13 and require DACS to evaluate SENCAC’s operations and recommend an alternative operating model or plans for closing the facility; and 3. Require DACS to develop business plans for each farmers market and agricultural center as well as a system-wide strategic plan. Scope and Methodology This report on the Department of Agriculture & Consumer Services’ (DACS) Southeastern North Carolina Agricultural Center & Farmers Market (SENCAC) is one of four “justification reviews” of State government programs required by S.L. 2011-145, Sec. 6.6. The Fiscal Research Division’s (FRD) objectives for each justification review are to: Provide a description of each program; Identify major policy issues that the General Assembly should address; Explore means to achieve program objectives more efficiently; Characterize the likely results of alternative funding levels and opportunities to save taxpayer dollars; and Identify performance measures that have been established by the agency and the usefulness of those performance measures as well as the agency's progress toward meeting their established measures. To accomplish these objectives, FRD visited SENCAC as well as two other State farmers markets (Asheville and Raleigh) and one agricultural center (Asheville). Staff conducted interviews with SENCAC personnel, DACS officials, and officials from the Departments of Agriculture in Virginia, Tennessee, Georgia, and South Carolina. Fiscal Research staff also reviewed relevant studies, reports, and fiscal data. The results of this study are laid out as findings and recommendations in this report. Map 1: North Carolina’s Farmers Markets and Agricultural Centers History and Mission North Carolina operates five farmers markets and four agricultural centers. The farmers markets are located in Asheville, Charlotte, Colfax (Piedmont-Triad), Lumberton, and Raleigh. The agricultural centers are located in Fletcher, Lumberton, Raleigh,1 and Williamston. SENCAC is home to the only combined farmers market and agricultural center, the Southeastern Agricultural Center & Farmers Market (SENCAC). The Justification Review focuses on this facility. Map 1 shows the location of North Carolina’s farmers markets and agricultural centers. According to DACS, SENCAC is designed to meet the needs of the agricultural community in the southeastern region of the state. The farmers market provides local growers with a direct sales opportunity and the agricultural center provides meeting space for regional events.2 SENCAC has a long history that begins in 1985 when the North Carolina General Assembly (NCGA) established the Southeastern North Carolina Farmers Market Commission and first appropriated funds. During the subsequent 26 years, two consultants have studied proposals for a facility in southeastern North Carolina; both studies found demand for services but little revenue potential. Nevertheless, since 1985, the NCGA has appropriated over $12.8 million for the development of a facility in this area, $11.15 million of which has been used to purchase and construct SENCAC. The most recent appropriation in FY 2008- 09 provided DACS $3.7 million to build a multi-purpose pavilion. 3 With these funds, DACS has purchased the 84 acre site east of the intersection of I-95 and US-74 and constructed: A 39,309 square foot, 84 space farmers market facility, which opened in 1999; An 16,840 square foot meeting center, which opened in 2000; and A new multi-purpose pavilion opened in April 2012.4 Appendix 1 provides the funding history of the State’s facility in Southeastern North Carolina from conception as a shipping point facility in Roseboro through construction of the multipurpose pavilion. Appendix 1 includes both State appropriations and non-State funds awarded to DACS for the development of SENCAC. Budget Information In FY 2011-12, SENCAC is budgeted to receive $362,230 in General Fund appropriation. Table 1 provides a five year budget history for SENCAC. Table 1 Five year budget history for SENCAC* FY 2007-08 Actual FY 2008-09 Actual FY 2009-10 Actual FY 2010-11 Actual FY 2011-12 Certified Expenditures 472,640 457,059 410,742 427,584 473,330 Less Receipts 132,366 113,098 114,301 119,686 111,100 Appropriation $ 340,274 $ 343,960 $ 296,441 $ 307,898 $ 362,230 * FY 2011-12 shows budgeted not actual data. Depending upon reversion requirements and other factors, SENCAC may not expend the full $362k in FY 2011-12 Three of the State’s seven farmers markets and agricultural centers – the Raleigh Farmers Market, the Piedmont Farmers Market, and the Western NC Agricultural Center (Western NC Ag. Center) – are self-supporting, requiring no General Fund appropriation. Wholesale activities in Raleigh and Colfax support these markets while the Mountain State Fair subsidizes operations at the Western NC Ag. Center. These self-supporting facilities are not eligible for repair and renovations funds.5 Therefore, DACS must use over-realized receipts (i.e. receipts not expended on operations) for repairs and renovations. SENCAC, the Charlotte and Western NC Farmers Markets, and the Senator Bob Martin Agricultural Center (SBMAC) all receive a General Fund appropriation to support operations. Table 2 provides a summary of the FY 2011-12 Certified Budget for DACS’ seven facilities. Table 2: FY 2011-12 Certified Budget by Facility Facility Location Expenditures Receipts General Fund Appropriation Percent General Fund SENCAC Lumberton 473,330 111,100 362,230 77% WNC FM Asheville 1,143,302 863,129 280,173 25% Charlotte FM Charlotte 309,930 240,856 69,074 22% SBMAC Williamston 1,257,942 473,927 784,015 62% Self-supporting facilities +/- Fund Balance Raleigh FM Raleigh 1,590,628 1,589,903 (725) 0% Piedmont FM Colfax 864,738 864,738 - 0% WNC Ag Center Fletcher 1,115,187 1,039,787 (75,400) 0% Other States Each of the states surrounding North Carolina uses a slightly different model to operate its farmers markets. The Departments of Agriculture in these states operate no agricultural centers. Table 3 provides a summary of the facilities and operating models used for facilities in Virginia, South Carolina, Tennessee, and Georgia. Table 3: Summary of Surrounding States Departments of Agriculture Facility Information North Carolina South Carolina Georgia Tennessee Virginia Number of Markets 5 3 9 0 4 Number of Ag. Centers 3 0* 0* 0 0 State-owned? Yes Yes Yes N/A Yes State-operated? Yes Varies Yes N/A No Self-supporting? Varies Yes** Yes N/A Yes Retail or Wholesale Both Both Both N/A Wholesale * South Carolina and Georgia each have a State-run Agricultural Center; South Carolina’s is operated out of Clemson University and Georgia’s is operated by a State authority. ** Historically, but asking for an appropriation in FY 2012-13. South Carolina The South Carolina Department of Agriculture (SCDA) owns three farmers markets. Two of the markets are owned and operated by SCDA while the third, in Columbia, was recently converted to a public-private partnership.6 Columbia is heavily dependent upon its wholesale operations, but SCDA is trying to grow its retail operations. South Carolina’s markets are not self-supporting individually, but, historically, excess receipts in Columbia have subsidized the other markets. However, receipts in Columbia are down due to the operating transition and a recent move. Consequently, SCDA is planning to ask for a nonrecurring appropriation from the State’s General Fund to support operations in FY 2012-13.7 Georgia The Georgia Department of Agriculture (GDA) fully owns and operates nine farmers markets; four of GDA’s facilities operate seasonally. Together, GDA’s markets are self-supporting. However, individually, some of the markets break even, others operate at a loss, and others make a profit. GDA uses its markets primarily for wholesale and packing opportunities, finding that renting shed space for retail purposes is unprofitable. Georgia’s General Fund pays for repairs and renovations and capital improvements for the markets. GDA no longer owns or operates any agricultural centers or fairgrounds but a State Authority owns and operates the Georgia National Fairgrounds in Perry, GA. 8 This center receives General Fund support for its operations, repairs and renovations, and capital improvements.9 Virginia The Virginia Department of Agriculture and Consumer Services (VDACS) owns but does not operate four farmers markets. The farmers markets, which focus on wholesale activities, were built with State funds, but VDACS contracts with an outside vendor to operate each facility. Operators depend entirely upon fees to support operations and report quarterly to VDACS. Currently, all four of the State’s farmers markets are profitable.10 Tennessee Tennessee’s Department of Agriculture (TNDA) has never owned or operated farmers markets or agricultural centers. TNDA finds it more effective to assist private operators with funds and technical assistance, giving annual grants to local operators through the Tennessee Agricultural Enhancement Program. TNDA Marketing Specialists help market operators develop, market, and manage their markets.11 Findings This report includes six findings: one finding related to general farmers market operations; one related to the budget and operations of North Carolina’s facilities; and four findings specific to SENCAC. Finding 1: Studies suggest that farmers markets & agricultural centers provide economic benefit to states, but, excluding one 1996 study, North Carolina has not studied the impact of its facilities. In conducting this review, FRD reviewed three external studies on the economic impact of farmers markets. These studies all found that the farmers markets reviewed have a positive impact on the surrounding economy.12 In addition, there have been several studies of North Carolina’s farmers markets and agricultural centers that indicate that these facilities were expected to provide economic benefit to the State. Conclusions from some of these studies are noted below: A 1991 study of the Piedmont Triad farmers market estimated a $6.5 million direct economic benefit.13 A 1991 feasibility study of an equine facility in Williamston concluded that in the first year of operations the facility would create total direct expenditures of $7 million and that “the multiplier effect would double these impacts.”14 The 1994 Economic Research Associates (ERA) feasibility study of SENCAC estimated that equine events would result in direct economic impacts of $3.8 million in the first year increasing to over $4.5 million as the facility matures.15 With the economic multiplier, a total impact of $9 million annually was predicted. These conclusions are from feasibility studies conducted prior to facility construction. To FRD’s knowledge, only one study has been done on DACS’ facilities post construction. This Farmers Market Special Review, conducted by the Office of State Budget and Management (OSBM), was undertaken in 1996 at the behest of the 1995 NCGA. 16 OSBM found that “when adding in economic impact of market operations…the state receives a 305 percent return on annual expenditures.” OSBM estimated that the four farmers markets created tax revenue for the General Fund of $6.7 million.17 Since this study, neither the NCGA nor DACS has commissioned a study of the economic impact of the constructed State’s farmers markets and agricultural centers. Finding 2: The NCGA has expressed an interest in requiring the State’s facilities to be self-supporting yet many, including SENCAC, still require General Fund support for operations. The 1995 NCGA required the State to review the operations of the State’s farmers markets “to identify the steps required to transform them into financially self-supporting operations.”18 In conducting this review, OSBM concluded that DACS should strive “to bring market revenues more in line with market expenditures” and that “the markets should strive to be self-supporting operationally.”19 In recent years, the NCGA has taken steps to decrease the facilities’ reliance on General Fund. In the FY 2009-10 budget, the NCGA eliminated $175,000 in General Fund support and directed the farmers markets and agricultural centers to increase fees. In the FY 2011-12 budget, at DACS’ recommendation, the NCGA eliminated all funds for the Piedmont Triad farmers market and directed that that facility be operated as a self-supporting enterprise similar to the Raleigh farmers market. Despite these actions, the NCGA has never required DACS to make all of its markets self-supporting. Lumberton is not the only farmers market or agricultural center that requires support from the General Fund to cover its expenses; three of the seven complexes are self-supporting (See Table 2). In terms of total dollars, SBMAC requires more General Fund support ($784,015) than SENCAC ($362,230). However, 77 percent of SENCAC’s total expenditures come from General Fund dollar while only 62 percent for SBMAC total expenditures are from the General Fund. It is unlikely that SENCAC would be able to continue to operate in FY 2012-13 without General Fund support, especially in light of the opening of the new multi-purpose pavilion. DACS has requested nearly $400,000 per year to operate the new pavilion (See Finding 6). In a national study of farmers markets, Tim Payne of the US Department of Agriculture (USDA) found that 18 percent of farmers markets were not self-sustaining. “These markets were primarily supported by various government agencies (city, county, state, and federal), business groups, nonprofit organizations, individual donations, and grants.”20 USDA’s study did not consider agricultural centers like North Carolina’s facilities in Lumberton, Williamston, and Fletcher. Finding 3: SENCAC underperforms relative to the State’s other facilities. SENCAC has very few users of or visitors to the farmers market, and, despite relatively good performance as a meeting center, the overall facility has far lower revenue collections and visitation than the State’s other facilities. Since the equestrian/ multipurpose complex is not yet complete, comparable usage data is not available. More detailed performance information for SENCAC’s services is available in Appendix 2. The Department notes that the performance information provided for its farmers markets and agricultural centers is self-reported and that not all facilities track and calculate measures in the same way (See Recommendation 4). Consequently, FRD has focused on the most basic performance measures where calculation method is less subjective: number of spaces rented, events held, etc. Nevertheless, even simple counts can be calculated differently. For example, does a two-day rental for a single customer count as one rental or two? Farmers Market In CY 2010, SENCAC staff counted 64 unique individuals who used the facility, renting 923 of the approximately 30,000 daily rental spaces available throughout the year, an occupancy rate of about three percent.21 The Charlotte market, which rented the next fewest number of spaces, rented over 15,250 of more than 52,500 available daily spaces, an occupancy rate of 29 percent. Similarly, SENCAC had 96,119 total visitors in CY 2010 while Charlotte, the facility with the next lowest visitation, had 676,295, over seven times as many visitors. Raleigh, which had the highest visitation in CY 2010, topped 3.3 million visitors. Unlike the other State farmers markets, SENCAC has no wholesale activity. According to the Department, they are currently pursuing talks with a possible wholesale tenant for the market; the results of these discussions are not known at this time. Wholesale activity is an important revenue source for the State’s farmers markets. While the definition of wholesale is subjective, DACS stated that Raleigh has seven wholesale tenants, Asheville has five, and Greensboro and Charlotte each have one. Other states have also indicated that wholesale activity is vital to profitability.22 Meeting Center As a meeting center, SENCAC matches or outperforms the other agricultural centers in terms of bookings. In CY 2010, SENCAC hosted 150 meetings, down from a high of 193 in CY 2008. Bookings for the Western NC and SBMAC peaked in CY 2007 at 97 and 154 bookings respectively. Attendance of SENCAC’s meetings approached 31,000 in CY 2010, far exceeding attendance at the other agricultural centers – nearly 25,000 for SBMAC and 14,302 for events at the Western NC Ag. Center. Multipurpose Pavilion Like the farmers market, usage of the SENCAC current multi-purpose facility lags behind the State’s other facilities. However, underperformance relative to the SBMAC and the Western NC Ag. Center is expected since SENCAC does not have comparable facilities.23 Until recently, SENCAC lacked an indoor/ enclosed multipurpose building and still has no stalls to support multi-day livestock activities. Despite these challenges, SENCAC booked 15 events in CY 2010. This compares to 39 events at SBMAC and 127 at the Western NC Ag. Center. SENCAC does not track attendance for these events. The Department feels that “the failure to build the exhibition complex…of the project has led to continuing budget challenges” for SENCAC.24 Nevertheless, DACS has taken steps to make SENCAC a viable facility for events prior to completion of the indoor pavilion. For example, DACS partnered with the Eastern Border Belt Horse Association to build a 120’ x 246’ competitive outdoor ring with a warm-up ring in 2006. This ring will remain in use and complement the multipurpose facility that opened in April 2012. Finding 4: SENCAC suffers from a lack of operations planning and performance reporting. SENCAC has no specific planning documents or measures – no strategic plan, business plan, consistent performance measures, and goals and/or objectives. DACS was able to produce a Business Plan for the Multi-purpose that it developed as part of an application for a US Department of Commerce grant.25 Each December, the Markets Division hosts a Manager’s Meeting that includes the managers of all DACS operated farmers markets and agricultural centers. At this meeting, the managers review the following: Market operational guidelines; Market trends and budget needs; Current fees and fee structures; and Any operational business that needs to be addressed. Managers submit Monthly Performance Reports that the Department uses to evaluate each facility. Neither the performance measures nor the methodology for calculating the measures are consistent across DACS’ facilities. However, the Department is now using OSBM’s Program Inventory to track performance for the farmers markets and agricultural centers. FRD did not receive any information that indicated that the facilities are using a consistent methodology to calculate performance measures. Nevertheless, this performance information will provide additional data for review when allocating resources and making budget decisions. Finding 5: Several external factors have hindered SENCAC’s performance. As noted previously, both studies evaluating the concept of a facility in southeastern North Carolina indicated that such a facility would struggle to be self-supporting. Nevertheless, the NCGA decided to construct SENCAC. Other factors hindering SENCAC’s operations include: Economic Recession and Fee Increase The weak economy and required fee increase have led to reduced bookings. In FY 2009-10, the NCGA directed DACS to increase fees at the State’s farmers markets and agricultural centers. A list of current fees for SENCAC is provided in Appendix 3. According to the Department, the 2010 fee increase has had an impact on bookings at all of its facilities. Based on the information in Table 4, which shows a significant decline in bookings between CY 2008 to CY 2009, FRD maintains that the fee increase is only one factor in declining demand, and that the economic recession has had an impact as well. This hypothesis is supported by the fact that demand for equine events increased following the fee increase but remains below the CY 2008 level. Booking data from the State’s other facilities further supports this hypothesis: not all bookings declined from CY 2009 to 2010. Receipt collections at all seven facilities increased following the fee change. Thus, despite the drop in demand, revenues still increased. Table 4: SENCAC Booking & Revenue Data Phased Construction The facility has been built in stages: the farmers market and meeting center opened in 1999 and 2000 respectively; an outdoor equestrian ring was completed in 2006; a multi-purpose building opened in April 2012; and stalls, equipment, and supporting facilities are still needed. Interchange Redesign The 2009 redesign of the Interstate 95 (I-95) and Highway 74 interchange hinders access to and visibility of SENCAC. When DACS purchased the SENCAC property, it was located near the intersection of I-95 and Highway 74. Due to the redesign, SENCAC is now one mile east of the interchange, lacks direct access to I-95, and cannot be seen from Highway 74 East until after cars have passed the facility’s exit. Consequently, SENCAC has fewer drop-by visitors, making it more reliant upon destination visitors. Local Government Partners Until recently, local government support for SENCAC appeared to have waned. The City of Lumberton was a strong initial supporter of SENCAC, providing $485,000 for sewer and electrical services. Yet, in February 2010, when Golden LEAF reserved $300,000 for the construction of horse stalls contingent upon two conditions: (1) an application from the Department and (2) $50,000 in matching funds from both Lumberton and Robeson County, neither local government acted upon the offer. However, with the opening of the new multi-purpose pavilion, local support has increased. Lumberton voted to provide matching funds on April 16, 2012 while Robeson County voted in support January 27, 2012, paving the way for the Department to formally apply for the funds.26 Upon receipt of an application, the Golden LEAF Board will consider the application and determine whether to award funds. Competition SENCAC faces a competitive environment. There are several farmers markets and event facilities capable of hosting meetings and livestock shows within 90 miles of SENCAC. Appendix 4 provides a current list of SENCAC’s nearby competition. FRD does not have rate and booking information for SENCAC’s competitors. Finding 6: DACS needs funding to equip and operate the new multi-purpose pavilion. SENCAC’s new multi-purpose pavilion opened April 17, 2012. DACS has no capital funds to (1) purchase equipment (tractors, a water truck, etc.), tables, chairs, a removable floor, or an HVAC system or to (2) build stalls necessary for multi-day equine events. DACS estimates that up to $2.1 million in additional funds are needed to fully equip the facility, not including stalls. According to SENCAC staff, event promoters have expressed interest in the new pavilion but the lack of stalls “kills the conversation.”27 Until stalls are built, SENCAC’s complex will remain uncompetitive for multi-day events, which bring in the most revenue and create the largest multiplier effect in the surrounding community.28 The Department estimates that a 100 stall barn would cost between $550,000 and $650,000.29 Appendix 5 provides a full list of remaining direct and complimentary needs. DACS also has no operating reserve for the pavilion, meaning there are no funds to pay for additional employees, utilities, and other operating costs. SENCAC staff is hesitant to book the facility without knowing whether funds will be available for operations. DACS needs $392,000 in additional recurring General Fund support and three FTE to run the pavilion. This would increase staffing to nine FTE and total appropriation to just over $750,000. Nine FTE at SENCAC will still be less than DACS has at any other facility except the Charlotte farmers market (4 FTE), despite the fact that SENCAC is the only facility that operates three distinct programs – a meeting center, an agricultural center, and a farmers market. SBMAC has 12 FTE and the Western NC facility has 14 FTE. SBMAC and the Western NC Ag. Center each expend over $1 million annually. DACS projects that the new multipurpose facility will add 12 new events and increase revenues by $7,800 in FY 2012-13, increasing to over $14,000 per year by FY 2016-17. Even with the new pavilion, SENCAC is CY 2008 CY 2009 CY 2010 Rentals & Bookings Farmers Market 1,964 1,566 923 Meeting Center 193 161 150 Equine Event 16 7 15 Revenue Farmers Market $20,321 $16,669 $17,869 Meeting Center & Equine Events* $95,811 $83,596 $95,485 * Historically, SENCAC did not differentiate between Meeting Center & Equine Event revenues. expected to bring in less than $120,000 in total revenue. This projection assumes no stalls are constructed; DACS does not have an estimate of the increase in revenue if stalls and other facilities were completed. SBMAC and the Western NC Ag. Center had equine and non-equine event revenue of just over $350,000 in FY 2009-10. Even if SENCAC performs as well as these two facilities, receipts would still not offset the additional cost to operate the pavilion ($392,000). The Department notes that, unlike SBMAC and the Western NC Ag. Center, SENCAC’s new facility is designed to be a true multi-purpose space, able to accommodate equine events, trade shows, and other large exhibitor events. Since the pavilion is more versatile, SENCAC should be able to book events that the State’s other facilities cannot accommodate, increasing the revenue potential of the facility. Nevertheless, if additional funds are provided as requested by the Department, 86 percent of SENCAC’s operations would be supported by the General Fund. Recommendations Based on the findings listed above, FRD presents the following three recommendations for review: Recommendation 1: Cease General Fund support for SENCAC’s current business model. Due to lack of demand, lack of planning, price sensitive customers, access issues, nearby competition, and other factors, SENCAC cannot be self-supporting in the short term; FRD believes that, unless substantial operational changes are made, it cannot be self-supporting even in the longer-term. The Department is requesting additional General Fund support and capital funding for SENCAC but based on the proposed increase in events and revenues provided in the expansion request (12 additional events, a 2 percent increase in visitation, and $7,800 in new revenues for FY 2012-13), FRD feels that the Department has not demonstrated the benefits associated with SENCAC’s expansion. However, the 1994 study (See Finding 1) indicated that equine events have a direct economic impact of “approximately $1,200 per horse shown.”30 Recommendation 2: Provide nonrecurring support in FY 2012-13 and require DACS to evaluate SENCAC’s operations and recommend an alternative operating model or closure plans. The NCGA could fund the facility on a nonrecurring basis and request that DACS submit a plan for a new operating model that includes becoming self-sufficient or justifies why a continued subsidy is warranted. Using nonrecurring funds for FY 2012-13 will require the NCGA to consider SENCAC’s budget and DACS’ report next year. However, it could also increase staff turnover, reduce SENCAC’s ability to attract community partners, and limit the Department’s ability to compete for grants. There are many alternative operating models that could be used. According to DACS, North Carolina has never explored an alternative managing authority for SENCAC or its other facilities. DACS has utilized an alternative method of service delivery model once – DACS entered into a lease-purchase agreement with the local Economic Development Corporation to construct an additional multipurpose barn at SBMAC. At a minimum, in the study, DACS should consider: Closing the facility: There may be no operating model under which SENCAC is viable. In the report, DACS should assess options for the property if closure is recommended. Changing the services provided: DACS should consider changing the services provided by SENCAC. For example, given the poor performance of the farmers market, the Department could end the retail farmers market either, converting the covered farmers market area to stalls31 or leasing out the facility to be utilized as seen fit by the leasee. Pooling profits: DACS should consider the effect of operating its facilities as a system – sharing staff, resources, and profits. In this model, which is used in South Carolina and Georgia, more profitable facilities support less profitable ones. Contracting out all operations: This is the model used in Virginia. The State built the facilities but contracts with private entities to operate them. Contracting out part of the operations: This model is used for the Columbia farmers market in South Carolina, in which a private contractor operates the wholesale portion of the farmers market. Recommendation 3: Require DACS to develop business plans for each farmers market and agricultural center as well as a system-wide strategic plan. SENCAC suffers from a lack of strategic planning, business planning, and performance tracking. However, lack of planning is not unique to SENCAC. None of DACS’ farmers markets or agricultural centers has a business plan, and there is no system-wide strategic plan.32,33 The NCGA should require DACS to develop a business plan for each of its facility as well as a system-wide strategic plan. In the planning process, DACS should: Justify the programs provided by each facility, and eliminate unviable services; Update each facility’s site plan to reflect the current configuration and any planned expansions; Develop consistent performance measures to enhance management decision-making and inter-facility comparisons; Aim to increase partnerships with local organizations; and Evaluate way to decrease costs and increase revenue, such as an Eastern State Fair. DACS should be required to submit these plans and any progress toward implementing and achieving the objectives described in the plans to the 2013-15 NCGA. For additional information, please contact: Lanier McRee Fiscal Research Division NC General Assembly 300 N. Salisbury St., Room 619 Raleigh, North Carolina 27603-5925 (919) 733-4910 http://www.ncleg.net/fiscalresearch Lanier.McRee@ncleg.net Endnotes 1 The Raleigh Fairgrounds (Agricultural Center) was excluded from the comparison data because its size and scope are significantly different from the other agricultural centers. 2 North Carolina Department of Agriculture & Consumer Services. Response to FRD Request for Information. October 31, 2011. 3 In 1988, DACS and the Southeastern North Carolina Farmers Market Commission hired the Fantus Company to “objectively research, analyze, and confirm the viability of establishing one or more farmers market facilities in eastern North Carolina.” (Fanuts Group, pg. 1) Based on demographics, infrastructure, and surveys, the Fantus Company determined that neither a wholesale facility nor a farmers market would be feasible in Eastern NC. The study then considered a shipping point facility and concluded that, assuming a facility must ultimately be self-supporting, there was “insufficient revenue potential to warrant constructing a shipping point facility at [this] time.” (Fantus Group, p. 59) Nevertheless, the NCGA continued to provide funding for the development of a facility in Roseboro. By 1993, the Roseboro Shipping Point facility was put aside and replaced with a plan to build a farmers market and agricultural center near Lumberton. In 1994, the Department retained Economics Research Associates (ERA) to evaluate the feasibility of a facility with farmers market, meeting center, and agricultural center components. While ERA’s final report documented demand for an equine facility, retail farmers market, and meeting space, it also noted that the cost of operating these facilities would exceed expected revenues. The report did not indicate that the facility would ever be self-sustaining but highlighted that the direct economic impacts to the surrounding community would be expected to exceed $4.3 million, the bulk of which would be derived from multi-day equine events. (ERA, p.II-1-II-3, IX-8) The Fantus Company. Northeast and Southeast North Carolina Farmers’ Market Study. Report prepared for the North Carolina Department of Agriculture, March 21, 1988. Economic Research Associates. Feasibility Study for Southeastern North Carolina Equestrian/ Agricultural Center and Farmers Market in Robeson County, North Carolina. Prepared for: North Carolina Department of Agriculture. April 1994. 4 At the time, the estimated cost of the building, fully equipped, was $6 million; this estimate has now increased to approximately $7 million. In addition to the original $3.7 million in State funds, DACS secured a $1.29 million grant from Golden LEAF to help cover part of the shortfall, leaving $2.1 million in needs. (See Appendix 5) 5 According to G.S. 143C-4-3(b), “funds in the Repairs and Renovations Reserve Account shall be used only for the repair and renovation of State facilities and related infrastructure that are supported from the General Fund.” 6 GAO defines a Public Private Partnership as “a contractual arrangement…between public and private-sector partners.” Public-private partnerships “differs from typical service contracting in that the private-sector partner usually makes a substantial cash, at-risk, equity investment in the project, and the public sector gains access to new revenue or service delivery capacity without having to pay the private-sector partner.” (GAO, p. 13, 14) Government Accountability Office. Public-Private Partnerships: Terms related to Building and Facility Partnerships. GAO/GGD-99-71 (Washington, D.C., 1999) 7 Tompkins, David. South Carolina Department of Agriculture. Telephone Interview. February 26, 2012. 8 Kulinski, Matthew. Georgia Department of Agriculture. Telephone Interview. March 8, 2012. 9 Shimp, Tonisha. Georgia National Fairgrounds and Agri-center. Telephone Interview. March 8, 2012. 10 Lewis, Kent. Virginia Department of Agriculture & Consumer Services. Telephone Interview. October 13, 2011. 11 Bartholomew, Pamela. Tennessee Department of Agriculture. Telephone Interview. September 22, 2011. 12 One study concluded that “farmers markets play a vital role in enabling farmers to gain direct access to customers. Without this access the existence of many small- and medium-sized growers would be threatened.” Payne, Tim. “U.S. Farmers Markets 2000: A Study of Emerging Trends.” Journal of Food Distribution Research 33, no. 1. (March 2002): 173-175. p. 174. A 2010 study found that the 26 seasonal farmers markets surveyed had “$948,640 in direct farmers market revenues” which created “a total economic impact of $1.6 million in business revenues, 15.88 part-time jobs, $213,720 in wages, and $16,000 in state and local taxes.” Myles, Albert and Ken Hood. “Economic Impact of Farmers’ Markets in Mississippi” Publication 2582, Extension Service of Mississippi State University. (Starkville: Mississippi State University, 2010) p. 4. The authors of a third study of the net impact of 34 farmers markets in West Virginia concluded that the net economic impact of farmers markets was 82 part-time jobs (43 full-time) and a $653,000 increase in the gross state product. This impact is after adjusting for direct revenue losses to competitors. Hughes, David W. et al. “Evaluating the Economic Impact of Farmers’ Markets Using an Opportunity Cost Framework.” Journal of Agricultural and Applied Economics 40, no.1 (April 2008): 253- 265. P. 261. 13 Vines, Donna. The Economic Impact of the Piedmont Agricultural Marketing and Processing Center. (Greensboro: UNC-Greensboro, Dept. of Economics. April 1991). p. 15. 14 Economic Research Associates. Feasibility Study for Eastern Horse Complex Center in Martin County, North Carolina. Prepared for: Martin County, North Carolina. August 1991. p. II-3 15 Economic Research Associates. Feasibility Study for Southeastern North Carolina. p. IX-8. 16 In 1996, the State had farmers markets in Raleigh, Asheville, Charlotte, and the Piedmont Triad. 17 Office of State Budget & Management. Farmers Market Special Review. Prepared for the North Carolina Department of Agriculture, February 1996. p. 11. 18North Carolina Department of Agriculture & Consumer Services. State Farmers Market Operations Review: Legislative Summary. Prepared for the North Carolina General Assembly, April 2, 1996. p. 1. 19 OSBM. p. 11. 20 Payne. p. 3. 21 The number of total daily spaces is calculated by taking the number of rental spaces available for daily rental and multiplying by the number of days the farmers market is open. 22 Kulinski, Phone Interview. 23 The Department notes that the multi-purpose pavilion at SENCAC may never be fully comparable to SBMAC or the Western NC Ag. Center since the facility is designed as a multi-purpose pavilion not an equine complex. The pavilion will be able to host equine events but is designed so that the floor can easily be converted into a space compatible with the needs of a trade show or other large exhibitor event. Meeting Notes, April 24, 2012. 24 North Carolina Department of Agriculture & Consumer Services. Response to FRD Request. 25 North Carolina Department of Agriculture & Consumer Services. Business Plan: Southeastern NC Agricultural Center and Multipurpose Pavilion.” Prepared for a United States Department of Commerce Grant, April 2011. 26 Meeting Notes. April 24, 2012. Phone Interview, County Managers Office, Robeson County. April 24, 2012. 27 SENCAC Staff, Site Visit. November 15, 2011. 28 A 2009 study by the North Carolina Rural Economic Development Center determined that the total average spending per adult visitor attending equine-related event in North Carolina to be $317.61. This average spending occurs in the areas surrounding event facilities – on hotel rooms, restaurants, and other local businesses. North Carolina Rural Economic Development Center. North Carolina’s Equine Industry: Findings & Recommendations. Prepared for the North Carolina General Assembly, May 2009. p. 2-3 29 Meeting Notes, Site Visit. November 15, 2011. 30 Economic Research Associates. Feasibility Study for Southeastern North Carolina. p. IX-8. 31 This change could be temporary or permanent but would allow stalls to be built at less expense and be in place more quickly. Portable stalls, which could be used in the farmers market shed, cost $80,000 for 42 stalls. During the site visit, the Department provided this idea and indicated that it is an option that they are actively considering. Meeting Notes, Site Visit. November 15, 2011. 32 According to the Small Business Administration (SBA), a business plan “outlines the route a company intends to take to reach, maintain and grow revenues” and includes a market analysis, information on organizational structure, marketing, sales, and finances. (SBA) A Strategic Plan takes a higher level view by defining the company’s purpose, strengths, weaknesses, opportunities, and challenges and outlining the organization’s path to its desired position. (Policastro, p. 2) U.S. Small Business Administration. How to Write a Business Plan. http://www.sba.gov/category/navigation-structure/starting-managing- business/starting-business/writing-business-plan. Policastro, Michael. Introduction to Strategic Planning. Prepared for the US Small Business Administration. http://archive.sba.gov/idc/groups/public/documents/sba_homepage/pub_mp21.pdf 33 Meeting Notes, Site Visit. November 15, 2011. Appendix 1: Capital and Operating Funding History for a DACS Facility in Southeastern NC, FY 1985-86 to 2010-11 Description Location Year Session Law Section Funding Appropriations Appropriates $900k for capital development of a facility Roseb oro* 19 85 S.L. 1985-480 Sec. 4, Sec. 5.5 $ 900,000 Appropriates $1.85m for capital and Est. SE Commission Roseboro 1985 S.L. 1985-1014 Sec. 4 $ 1,850,000 Reallocates $25k of 1986 appropriation for operations if land purchased Roseboro 1987 S.L. 1987-738 Sec. 137 - Repeals $1.5 million Roseboro 1989 S.L. 1989-1074 Sec. 2 $ (1,500,000) Reverts $137,676 of reserve for SE Center Roseboro 1991 S.L. 1991-689 Committee Report $ (137,676) Reverts $92,841 of reserve for SE Center Roseboro 1991 S.L. 1991-689 Committee Report $ (92,841) Appropriates $1m for SE Shipping Point facility Roseboro 1991 S.L. 1991-1044 Sec. 4 $ 1,000,000 Reallocates $1m from 1993 appropriation as grants - $90K to Roseboro for water & sewer; $910k to Sampson County for a Livestock Facility Roseboro 1993 S.L. 1993-561 Sec. 96 $ (1,000,000) Total Roseboro Appropriations* $ 1,019,483 Appropriates $2.5M for capital development SENCAC 1993 S.L. 1993-561 Sec.4 $ 2,500,000 Appropriates $3.6 M for capital development SENCAC 1993 S.L. 1993-769 Sec. 32 $ 3,600,000 Appropriates $1m for continued capital development SENCAC 1997 S.L. 1997-443 Sec. 2 $ 1,000,000 Est. Special Revenue Fund for SE Center SENCAC 1998 S.L. 1998-212 Sec. 13.2(b) - Appropriates $500k for capital SENCAC 1998 S.L. 1998-212 Sec. 29 $ 500,000 Repeals SE Commission N/A 1999 S.L. 1999-44 Sec. 7 - Appropriates $500k for capital SENCAC 1999 S.L. 1999-237 Sec. 29.1 $ 500,000 Reallocate $250k of FY 1998-99 funds for electronic signage SENCAC 1999 S.L. 1999-237 Sec. 29.4 - Appropriates $3.7 million for a multi-purpose pavilion SENCAC 2008 S.L. 2008-107 Sec. 27.8 $ 3,700,000 Total SENCAC Appropriations $ 11,800,000 Required Reversions Disaster Relief 2000 $ (634,313) Budget Shortfall 2002 $ (11,424) T otal State Funds Exp ended on SENCAC $ 11,154,263 Grants-in-Aid City of Lumberton - Funds for sewer and electric services 1998 $ 485,000 Golden LEAF - Provided $1.29M to complete Pavilion project 2008 $ 1,290,000 Total Funds Exp ended on SENCAC $ 12,929,263 *Roseboro’s Appropriations were for land purchase and architectural services to develop a SE Shipping Point facility. No construction was ever completed. Appendix 2: Performance Information The Department notes that the performance information provided for the farmers markets and agricultural centers is self-reported and that not all facilities track and calculate measures in the same way. For example, as you can see in Table C, during Calendar Years (CY) 2007 and 2008 the Western NC farmers market tracked receipts written to renters instead of actual number of spaces rented. DACS does not require standard performance measures and methodologies for tracking the performance of these facilities. For attendance counts, the Department tracks cars entering the facility and uses the standard multiplier of 2.5 individuals per car. Meeting Center SENCAC matches or outperforms the other agriculture centers in terms of meeting center bookings. Table 1 shows meeting center bookings and total attendance for SENCAC, SBMAC, and the WNC Ag. Center. Table A: Meeting Center Bookings and Total Attendance by Calendar Year CY 2007 CY 2008 CY 2009 CY 2010 Number of Bookings SENCAC -* 193 161 150 SBMAC 154 146 131 152 WNC Ag. Center 97 73 73 75 Total Attendance SENCAC -* 32,661 28,121 30,804 SBMAC 18,617 19,171 18,737 24,428 WNC Ag. Center 10,092 11,208 7,460 14,302 * Prior to CY 2008, all activities at SENCAC were tracked together with no differentiation between the meeting center, equine activities, and the farmers market bookings and attendance. Multipurpose Complex/ Equine Facility Usage of the SENCAC multipurpose complex also lags behind the State’s facilities. However, this is to be expected since SENCAC does not have an indoor/ enclosed multipurpose building or the facilities needed to support livestock activities at the complex. Table 2 provides performance information on the number of events hosted and attendance of those events for SENCAC, SBMAC, and the WNC Agriculture Center. Table B: Multipurpose Complex Events and Total Attendance CY 2007 CY 2008 CY 2009 CY 2010 Number of Equine & Non-equine Events SENCAC n/a 16 7 15 SBMAC 47 48 52 39 WNC Ag. Center 82 103 91 127 Total Attendance - Events SENCAC * - - - - SBMAC 36,734 34,589 35,350 27,655 WNC Ag. Center 138,018 185,347 124,665 141,551 * Prior to CY 2008, all activities at SENCAC were tracked together with no differentiation between the meeting center, equine activities, and the farmers market bookings and attendance. Farmers Market Usage of the SENCAC farmers market lags behind the State’s other farmers markets. Table 3 provides performance information on spaces rented and the number of visitors for the five State-owned and operated farmers markets. Table C: Farmers Market Space Rentals and Total Visitors Number of Rental Spaces Available Days Open Per Year SENCAC 84/ day 30,492/ year 363 Charlotte 189/day 52,353/ year 277 Piedmont Triad 154/day 55,902/ year 363 Raleigh 184/day 66,792/ year 363 Western NC 270/ day 98,010/ year 363 * This number excludes optional and uncovered spaces CY 2007 CY 2008 CY 2009 CY 2010 No. of Spaces Rented - Farmers Market SENCAC 939 1,964 1,566 923 Charlotte 14,096 13,614 14,467 15,267 Piedmont Triad 55,160 52,656 55,656 44,493 Raleigh 80,668 81,203 94,488 62,622 Western NC 9,020* 9,608* 39,687 68,243 * This number is the number of receipts written for spaces, not the actual number of daily spaces rented. Number of Visitors - Farmers Market SENCAC 185,643 157,399 101,178 96,119 Charlotte 606,913 578,895 741,902 676,295 Piedmont Triad 1,548,156 1,570,173 1,790,015 1,677,509 Raleigh 3,499,365 3,632,856 3,420,580 3,334,955 Western NC 1,981,141 1,872,553 1,729,224 1,611,508 Additional performance information is available upon request. Appendix 3: Rental Rates for SENCAC Service Provided Pre-2010 Fee Current Fee Meeting Center Kitchen $ 150 $ 150 No Kitchen Use, Bring in Food 100 100 Whole Meeting Center Building (whole day) 700 800 Whole Meeting Center Building (less than 6 hours) 400 Eliminated Meeting Center, Area 3 (whole day) 400 300 Meeting Center, Area 3 (less than 6 hours) 250 Eliminated Meeting Center, Areas 1,2,4,5 (whole day) 200 150 Meeting Center, Areas 1,2,4,5 (less than 6 hours) 125 Eliminated Meeting Center, Conference Room 3 or more hrs. 75 75 Building Overtime Rate 35/hour 40/ hour Farmers Market Farmers Shed, Retail & Wholesale Spaces $ 10 $ 15 Out-of-State Farmers Shed, Retail, Wholesale 12 25 Enclosed Retail Plaza 10 15 Out-of State Enclosed Retail Plaza 10 25 Wholesale Plaza 10 15 Out-of State Wholesale Plaza 10 25 Retail Room in Farmers Area 200 200 Storage N/A 5 per 200 sq ft/ day Delivery Fee – less than 50 packages 3/ delivery 3/ delivery Delivery Fee – 51 to 100 packages 5/ delivery 6/ delivery Delivery Fee – more than 100 packages 5/ delivery 10/ delivery Restocking Fee 5/ delivery 6/ delivery Out-of-State Restocking Fee 5/ delivery 12/ delivery Multi-purpose Facility Outdoor Horse Ring $ 250 $ 250 Outdoor Grounds Rental 100 minimum 150 minimum Pavilion – Equine N/A $500/ day Pavilion – Non-equine N/A $800/ day Rates for the State’s other farmers markets and agricultural centers are available upon request. Appendix 4: Competition within 90 miles of SENCAC Facility Owner/Operator Distance from SENCAC Robeson Co. Farmers Market Robeson County 5 miles Carolina Horse Park Carolina Horse Park Foundation 30 mile Crown Center & Convention Hall Complex City of Fayetteville 35 miles Exhibition Center at Lake Waccamaw Boys & Girls Homes of NC 40 miles Duplin Co. Events Center Duplin County 82 miles South Carolina Equine Park Kershaw County, SC/ SC Equine Promotion Foundation 90 miles Certified Roadside Farmers Markets Eight certified operators Throughout Robeson Co. Appendix 5: Remaining Needs SENCAC Multi-purpose Building Multi-purpose Building Needs Portable flooring 315,735 Air conditioning 1,450,000 Scoreboards and bleachers 65,850 Arena cord reel power system and road show switches 80,580 Arena sound system 90,070 Upgrade from fabric mechanical ducts to rigid galvanized rigid duct painted 106,600 Subtotal Multi-purpose Building Needs $ 2,108,835 Complementary Needs Maintenance building and all related work, including fence and site work 302,850 Secondary entrance drive and related elements 143,750 Landscaping plantings 33,000 Electronic marque LED 60,000 RV campsite 410,000 100 stall horse barn A. Open-sided pre-engineered metal building with portable stable 500,000 B. Modular Stall Barn 650,000 C. "Williamston" style Stall Barn 1,500,000 Subtotal Complementary Needs (Modular Barn) $ 1,599,600 Total with Open-sided Barn $ 3,558,435 Total with Modular Barn $ 3,708,435 Total with "Williamston" style Barn $ 4,558,435 Note: SENCAC’s Multi-purpose Pavilion differs from the facilities in Williamston and Fletcher in that it is envisioned and designed to be truly multi-purpose not just a livestock facility. Consequently, outstanding needs include a portable floor and an air conditioning system, neither of which are used at SBMAC or the WNC Ag. Center. Department of Agriculture & Consumer Services Response The Fiscal Research Division solicited input from the Department of Agriculture & Consumer Services on a draft of this Justification Review. The following document is the Department of Agriculture & Consumer Service’s response. It has not been altered or edited in any way by the Fiscal Research Division.
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Title | Southeastern North Carolina Agricultural Center and Farmers Market in Lumberton, NC. |
Contributor | North Carolina. General Assembly. Fiscal Research Division. |
Date | 2012-05-01 |
Subjects |
Southeastern North Carolina Agricultural Center and Farmers Market (Lumberton, N.C.) Farmers' markets--North Carolina--Lumberton |
Place | Lumberton, Robeson County, North Carolina, United States |
Description | Title from caption.; "May 1, 2012."; Includes bibliographical references (p. 10-11). |
Publisher | Fiscal Research Division |
Agency-Current | North Carolina General Assembly |
Rights | State Document see http://digital.ncdcr.gov/u?/p249901coll22,63754 |
Physical Characteristics | 17, 2 p. : map ; 28 cm. |
Collection | North Carolina State Documents Collection. State Library of North Carolina |
Type | Text |
Language | English |
Format | Reports |
Digital Characteristics-A | 867 KB; 20 p. |
Series | Justification review. Natural & economic resources. |
Digital Collection | North Carolina Digital State Documents Collection |
Digital Format | application/pdf |
Related Items | http://worldcat.org/oclc/795353991/viewonline |
Audience | All |
Pres File Name-M | pubs_southeasternncagricultural201205.pdf |
Pres Local File Path-M | \Preservation_content\StatePubs\pubs_borndigital\images_master\ |
Full Text | Fiscal Research Division Justification Review Natural & Economic Resources May 1, 2012 Executive Summary In FY 2011-12, Fiscal Research Division staff conducted a justification review of the Department of Agriculture & Consumer Services’ (DACS) Southeastern North Carolina Agricultural Center & Farmers Market (SENCAC). Staff found that while SENCAC provides a hospitable place for meetings and events, visitation and revenue are low relative to DACS’ other facilities. SENCAC requires the largest General Fund subsidy as a percentage of total expenditures, 77 percent. The Charlotte and Asheville farmers markets each require a subsidy of about 25 percent; the Agricultural Center in Williamston requires a 62 percent subsidy. Facilities in Raleigh, Colfax, and Fletcher are self-supporting. In FY 2011-12, SENCAC requires $362,230 in General Fund appropriation. With the opening of the multi-purpose pavilion, DACS is requesting an additional $392,200 from the General Fund for operations and lists over $2.1 million in outstanding pavilion needs. Given SENCAC’s expansion, staff is concerned that DACS has no business plan or performance measures that can be compared to other facilities for SENCAC. From a broader perspective, all of DACS’ farmers markets and agricultural centers are enterprise-type operations that compete with public and/or private facilities. It is reasonable to expect that these facilities should operate like businesses, with thoughtful planning and evaluation and the goal of being self-supporting. To address these concerns, staff recommends that the General Assembly: 1. Cease General Fund support for SENCAC’s current business model; 2. Provide nonrecurring support in FY 2012-13 and require DACS to evaluate SENCAC’s operations and recommend an alternative operating model or plans for closing the facility; and 3. Require DACS to develop business plans for each farmers market and agricultural center as well as a system-wide strategic plan. Scope and Methodology This report on the Department of Agriculture & Consumer Services’ (DACS) Southeastern North Carolina Agricultural Center & Farmers Market (SENCAC) is one of four “justification reviews” of State government programs required by S.L. 2011-145, Sec. 6.6. The Fiscal Research Division’s (FRD) objectives for each justification review are to: Provide a description of each program; Identify major policy issues that the General Assembly should address; Explore means to achieve program objectives more efficiently; Characterize the likely results of alternative funding levels and opportunities to save taxpayer dollars; and Identify performance measures that have been established by the agency and the usefulness of those performance measures as well as the agency's progress toward meeting their established measures. To accomplish these objectives, FRD visited SENCAC as well as two other State farmers markets (Asheville and Raleigh) and one agricultural center (Asheville). Staff conducted interviews with SENCAC personnel, DACS officials, and officials from the Departments of Agriculture in Virginia, Tennessee, Georgia, and South Carolina. Fiscal Research staff also reviewed relevant studies, reports, and fiscal data. The results of this study are laid out as findings and recommendations in this report. Map 1: North Carolina’s Farmers Markets and Agricultural Centers History and Mission North Carolina operates five farmers markets and four agricultural centers. The farmers markets are located in Asheville, Charlotte, Colfax (Piedmont-Triad), Lumberton, and Raleigh. The agricultural centers are located in Fletcher, Lumberton, Raleigh,1 and Williamston. SENCAC is home to the only combined farmers market and agricultural center, the Southeastern Agricultural Center & Farmers Market (SENCAC). The Justification Review focuses on this facility. Map 1 shows the location of North Carolina’s farmers markets and agricultural centers. According to DACS, SENCAC is designed to meet the needs of the agricultural community in the southeastern region of the state. The farmers market provides local growers with a direct sales opportunity and the agricultural center provides meeting space for regional events.2 SENCAC has a long history that begins in 1985 when the North Carolina General Assembly (NCGA) established the Southeastern North Carolina Farmers Market Commission and first appropriated funds. During the subsequent 26 years, two consultants have studied proposals for a facility in southeastern North Carolina; both studies found demand for services but little revenue potential. Nevertheless, since 1985, the NCGA has appropriated over $12.8 million for the development of a facility in this area, $11.15 million of which has been used to purchase and construct SENCAC. The most recent appropriation in FY 2008- 09 provided DACS $3.7 million to build a multi-purpose pavilion. 3 With these funds, DACS has purchased the 84 acre site east of the intersection of I-95 and US-74 and constructed: A 39,309 square foot, 84 space farmers market facility, which opened in 1999; An 16,840 square foot meeting center, which opened in 2000; and A new multi-purpose pavilion opened in April 2012.4 Appendix 1 provides the funding history of the State’s facility in Southeastern North Carolina from conception as a shipping point facility in Roseboro through construction of the multipurpose pavilion. Appendix 1 includes both State appropriations and non-State funds awarded to DACS for the development of SENCAC. Budget Information In FY 2011-12, SENCAC is budgeted to receive $362,230 in General Fund appropriation. Table 1 provides a five year budget history for SENCAC. Table 1 Five year budget history for SENCAC* FY 2007-08 Actual FY 2008-09 Actual FY 2009-10 Actual FY 2010-11 Actual FY 2011-12 Certified Expenditures 472,640 457,059 410,742 427,584 473,330 Less Receipts 132,366 113,098 114,301 119,686 111,100 Appropriation $ 340,274 $ 343,960 $ 296,441 $ 307,898 $ 362,230 * FY 2011-12 shows budgeted not actual data. Depending upon reversion requirements and other factors, SENCAC may not expend the full $362k in FY 2011-12 Three of the State’s seven farmers markets and agricultural centers – the Raleigh Farmers Market, the Piedmont Farmers Market, and the Western NC Agricultural Center (Western NC Ag. Center) – are self-supporting, requiring no General Fund appropriation. Wholesale activities in Raleigh and Colfax support these markets while the Mountain State Fair subsidizes operations at the Western NC Ag. Center. These self-supporting facilities are not eligible for repair and renovations funds.5 Therefore, DACS must use over-realized receipts (i.e. receipts not expended on operations) for repairs and renovations. SENCAC, the Charlotte and Western NC Farmers Markets, and the Senator Bob Martin Agricultural Center (SBMAC) all receive a General Fund appropriation to support operations. Table 2 provides a summary of the FY 2011-12 Certified Budget for DACS’ seven facilities. Table 2: FY 2011-12 Certified Budget by Facility Facility Location Expenditures Receipts General Fund Appropriation Percent General Fund SENCAC Lumberton 473,330 111,100 362,230 77% WNC FM Asheville 1,143,302 863,129 280,173 25% Charlotte FM Charlotte 309,930 240,856 69,074 22% SBMAC Williamston 1,257,942 473,927 784,015 62% Self-supporting facilities +/- Fund Balance Raleigh FM Raleigh 1,590,628 1,589,903 (725) 0% Piedmont FM Colfax 864,738 864,738 - 0% WNC Ag Center Fletcher 1,115,187 1,039,787 (75,400) 0% Other States Each of the states surrounding North Carolina uses a slightly different model to operate its farmers markets. The Departments of Agriculture in these states operate no agricultural centers. Table 3 provides a summary of the facilities and operating models used for facilities in Virginia, South Carolina, Tennessee, and Georgia. Table 3: Summary of Surrounding States Departments of Agriculture Facility Information North Carolina South Carolina Georgia Tennessee Virginia Number of Markets 5 3 9 0 4 Number of Ag. Centers 3 0* 0* 0 0 State-owned? Yes Yes Yes N/A Yes State-operated? Yes Varies Yes N/A No Self-supporting? Varies Yes** Yes N/A Yes Retail or Wholesale Both Both Both N/A Wholesale * South Carolina and Georgia each have a State-run Agricultural Center; South Carolina’s is operated out of Clemson University and Georgia’s is operated by a State authority. ** Historically, but asking for an appropriation in FY 2012-13. South Carolina The South Carolina Department of Agriculture (SCDA) owns three farmers markets. Two of the markets are owned and operated by SCDA while the third, in Columbia, was recently converted to a public-private partnership.6 Columbia is heavily dependent upon its wholesale operations, but SCDA is trying to grow its retail operations. South Carolina’s markets are not self-supporting individually, but, historically, excess receipts in Columbia have subsidized the other markets. However, receipts in Columbia are down due to the operating transition and a recent move. Consequently, SCDA is planning to ask for a nonrecurring appropriation from the State’s General Fund to support operations in FY 2012-13.7 Georgia The Georgia Department of Agriculture (GDA) fully owns and operates nine farmers markets; four of GDA’s facilities operate seasonally. Together, GDA’s markets are self-supporting. However, individually, some of the markets break even, others operate at a loss, and others make a profit. GDA uses its markets primarily for wholesale and packing opportunities, finding that renting shed space for retail purposes is unprofitable. Georgia’s General Fund pays for repairs and renovations and capital improvements for the markets. GDA no longer owns or operates any agricultural centers or fairgrounds but a State Authority owns and operates the Georgia National Fairgrounds in Perry, GA. 8 This center receives General Fund support for its operations, repairs and renovations, and capital improvements.9 Virginia The Virginia Department of Agriculture and Consumer Services (VDACS) owns but does not operate four farmers markets. The farmers markets, which focus on wholesale activities, were built with State funds, but VDACS contracts with an outside vendor to operate each facility. Operators depend entirely upon fees to support operations and report quarterly to VDACS. Currently, all four of the State’s farmers markets are profitable.10 Tennessee Tennessee’s Department of Agriculture (TNDA) has never owned or operated farmers markets or agricultural centers. TNDA finds it more effective to assist private operators with funds and technical assistance, giving annual grants to local operators through the Tennessee Agricultural Enhancement Program. TNDA Marketing Specialists help market operators develop, market, and manage their markets.11 Findings This report includes six findings: one finding related to general farmers market operations; one related to the budget and operations of North Carolina’s facilities; and four findings specific to SENCAC. Finding 1: Studies suggest that farmers markets & agricultural centers provide economic benefit to states, but, excluding one 1996 study, North Carolina has not studied the impact of its facilities. In conducting this review, FRD reviewed three external studies on the economic impact of farmers markets. These studies all found that the farmers markets reviewed have a positive impact on the surrounding economy.12 In addition, there have been several studies of North Carolina’s farmers markets and agricultural centers that indicate that these facilities were expected to provide economic benefit to the State. Conclusions from some of these studies are noted below: A 1991 study of the Piedmont Triad farmers market estimated a $6.5 million direct economic benefit.13 A 1991 feasibility study of an equine facility in Williamston concluded that in the first year of operations the facility would create total direct expenditures of $7 million and that “the multiplier effect would double these impacts.”14 The 1994 Economic Research Associates (ERA) feasibility study of SENCAC estimated that equine events would result in direct economic impacts of $3.8 million in the first year increasing to over $4.5 million as the facility matures.15 With the economic multiplier, a total impact of $9 million annually was predicted. These conclusions are from feasibility studies conducted prior to facility construction. To FRD’s knowledge, only one study has been done on DACS’ facilities post construction. This Farmers Market Special Review, conducted by the Office of State Budget and Management (OSBM), was undertaken in 1996 at the behest of the 1995 NCGA. 16 OSBM found that “when adding in economic impact of market operations…the state receives a 305 percent return on annual expenditures.” OSBM estimated that the four farmers markets created tax revenue for the General Fund of $6.7 million.17 Since this study, neither the NCGA nor DACS has commissioned a study of the economic impact of the constructed State’s farmers markets and agricultural centers. Finding 2: The NCGA has expressed an interest in requiring the State’s facilities to be self-supporting yet many, including SENCAC, still require General Fund support for operations. The 1995 NCGA required the State to review the operations of the State’s farmers markets “to identify the steps required to transform them into financially self-supporting operations.”18 In conducting this review, OSBM concluded that DACS should strive “to bring market revenues more in line with market expenditures” and that “the markets should strive to be self-supporting operationally.”19 In recent years, the NCGA has taken steps to decrease the facilities’ reliance on General Fund. In the FY 2009-10 budget, the NCGA eliminated $175,000 in General Fund support and directed the farmers markets and agricultural centers to increase fees. In the FY 2011-12 budget, at DACS’ recommendation, the NCGA eliminated all funds for the Piedmont Triad farmers market and directed that that facility be operated as a self-supporting enterprise similar to the Raleigh farmers market. Despite these actions, the NCGA has never required DACS to make all of its markets self-supporting. Lumberton is not the only farmers market or agricultural center that requires support from the General Fund to cover its expenses; three of the seven complexes are self-supporting (See Table 2). In terms of total dollars, SBMAC requires more General Fund support ($784,015) than SENCAC ($362,230). However, 77 percent of SENCAC’s total expenditures come from General Fund dollar while only 62 percent for SBMAC total expenditures are from the General Fund. It is unlikely that SENCAC would be able to continue to operate in FY 2012-13 without General Fund support, especially in light of the opening of the new multi-purpose pavilion. DACS has requested nearly $400,000 per year to operate the new pavilion (See Finding 6). In a national study of farmers markets, Tim Payne of the US Department of Agriculture (USDA) found that 18 percent of farmers markets were not self-sustaining. “These markets were primarily supported by various government agencies (city, county, state, and federal), business groups, nonprofit organizations, individual donations, and grants.”20 USDA’s study did not consider agricultural centers like North Carolina’s facilities in Lumberton, Williamston, and Fletcher. Finding 3: SENCAC underperforms relative to the State’s other facilities. SENCAC has very few users of or visitors to the farmers market, and, despite relatively good performance as a meeting center, the overall facility has far lower revenue collections and visitation than the State’s other facilities. Since the equestrian/ multipurpose complex is not yet complete, comparable usage data is not available. More detailed performance information for SENCAC’s services is available in Appendix 2. The Department notes that the performance information provided for its farmers markets and agricultural centers is self-reported and that not all facilities track and calculate measures in the same way (See Recommendation 4). Consequently, FRD has focused on the most basic performance measures where calculation method is less subjective: number of spaces rented, events held, etc. Nevertheless, even simple counts can be calculated differently. For example, does a two-day rental for a single customer count as one rental or two? Farmers Market In CY 2010, SENCAC staff counted 64 unique individuals who used the facility, renting 923 of the approximately 30,000 daily rental spaces available throughout the year, an occupancy rate of about three percent.21 The Charlotte market, which rented the next fewest number of spaces, rented over 15,250 of more than 52,500 available daily spaces, an occupancy rate of 29 percent. Similarly, SENCAC had 96,119 total visitors in CY 2010 while Charlotte, the facility with the next lowest visitation, had 676,295, over seven times as many visitors. Raleigh, which had the highest visitation in CY 2010, topped 3.3 million visitors. Unlike the other State farmers markets, SENCAC has no wholesale activity. According to the Department, they are currently pursuing talks with a possible wholesale tenant for the market; the results of these discussions are not known at this time. Wholesale activity is an important revenue source for the State’s farmers markets. While the definition of wholesale is subjective, DACS stated that Raleigh has seven wholesale tenants, Asheville has five, and Greensboro and Charlotte each have one. Other states have also indicated that wholesale activity is vital to profitability.22 Meeting Center As a meeting center, SENCAC matches or outperforms the other agricultural centers in terms of bookings. In CY 2010, SENCAC hosted 150 meetings, down from a high of 193 in CY 2008. Bookings for the Western NC and SBMAC peaked in CY 2007 at 97 and 154 bookings respectively. Attendance of SENCAC’s meetings approached 31,000 in CY 2010, far exceeding attendance at the other agricultural centers – nearly 25,000 for SBMAC and 14,302 for events at the Western NC Ag. Center. Multipurpose Pavilion Like the farmers market, usage of the SENCAC current multi-purpose facility lags behind the State’s other facilities. However, underperformance relative to the SBMAC and the Western NC Ag. Center is expected since SENCAC does not have comparable facilities.23 Until recently, SENCAC lacked an indoor/ enclosed multipurpose building and still has no stalls to support multi-day livestock activities. Despite these challenges, SENCAC booked 15 events in CY 2010. This compares to 39 events at SBMAC and 127 at the Western NC Ag. Center. SENCAC does not track attendance for these events. The Department feels that “the failure to build the exhibition complex…of the project has led to continuing budget challenges” for SENCAC.24 Nevertheless, DACS has taken steps to make SENCAC a viable facility for events prior to completion of the indoor pavilion. For example, DACS partnered with the Eastern Border Belt Horse Association to build a 120’ x 246’ competitive outdoor ring with a warm-up ring in 2006. This ring will remain in use and complement the multipurpose facility that opened in April 2012. Finding 4: SENCAC suffers from a lack of operations planning and performance reporting. SENCAC has no specific planning documents or measures – no strategic plan, business plan, consistent performance measures, and goals and/or objectives. DACS was able to produce a Business Plan for the Multi-purpose that it developed as part of an application for a US Department of Commerce grant.25 Each December, the Markets Division hosts a Manager’s Meeting that includes the managers of all DACS operated farmers markets and agricultural centers. At this meeting, the managers review the following: Market operational guidelines; Market trends and budget needs; Current fees and fee structures; and Any operational business that needs to be addressed. Managers submit Monthly Performance Reports that the Department uses to evaluate each facility. Neither the performance measures nor the methodology for calculating the measures are consistent across DACS’ facilities. However, the Department is now using OSBM’s Program Inventory to track performance for the farmers markets and agricultural centers. FRD did not receive any information that indicated that the facilities are using a consistent methodology to calculate performance measures. Nevertheless, this performance information will provide additional data for review when allocating resources and making budget decisions. Finding 5: Several external factors have hindered SENCAC’s performance. As noted previously, both studies evaluating the concept of a facility in southeastern North Carolina indicated that such a facility would struggle to be self-supporting. Nevertheless, the NCGA decided to construct SENCAC. Other factors hindering SENCAC’s operations include: Economic Recession and Fee Increase The weak economy and required fee increase have led to reduced bookings. In FY 2009-10, the NCGA directed DACS to increase fees at the State’s farmers markets and agricultural centers. A list of current fees for SENCAC is provided in Appendix 3. According to the Department, the 2010 fee increase has had an impact on bookings at all of its facilities. Based on the information in Table 4, which shows a significant decline in bookings between CY 2008 to CY 2009, FRD maintains that the fee increase is only one factor in declining demand, and that the economic recession has had an impact as well. This hypothesis is supported by the fact that demand for equine events increased following the fee increase but remains below the CY 2008 level. Booking data from the State’s other facilities further supports this hypothesis: not all bookings declined from CY 2009 to 2010. Receipt collections at all seven facilities increased following the fee change. Thus, despite the drop in demand, revenues still increased. Table 4: SENCAC Booking & Revenue Data Phased Construction The facility has been built in stages: the farmers market and meeting center opened in 1999 and 2000 respectively; an outdoor equestrian ring was completed in 2006; a multi-purpose building opened in April 2012; and stalls, equipment, and supporting facilities are still needed. Interchange Redesign The 2009 redesign of the Interstate 95 (I-95) and Highway 74 interchange hinders access to and visibility of SENCAC. When DACS purchased the SENCAC property, it was located near the intersection of I-95 and Highway 74. Due to the redesign, SENCAC is now one mile east of the interchange, lacks direct access to I-95, and cannot be seen from Highway 74 East until after cars have passed the facility’s exit. Consequently, SENCAC has fewer drop-by visitors, making it more reliant upon destination visitors. Local Government Partners Until recently, local government support for SENCAC appeared to have waned. The City of Lumberton was a strong initial supporter of SENCAC, providing $485,000 for sewer and electrical services. Yet, in February 2010, when Golden LEAF reserved $300,000 for the construction of horse stalls contingent upon two conditions: (1) an application from the Department and (2) $50,000 in matching funds from both Lumberton and Robeson County, neither local government acted upon the offer. However, with the opening of the new multi-purpose pavilion, local support has increased. Lumberton voted to provide matching funds on April 16, 2012 while Robeson County voted in support January 27, 2012, paving the way for the Department to formally apply for the funds.26 Upon receipt of an application, the Golden LEAF Board will consider the application and determine whether to award funds. Competition SENCAC faces a competitive environment. There are several farmers markets and event facilities capable of hosting meetings and livestock shows within 90 miles of SENCAC. Appendix 4 provides a current list of SENCAC’s nearby competition. FRD does not have rate and booking information for SENCAC’s competitors. Finding 6: DACS needs funding to equip and operate the new multi-purpose pavilion. SENCAC’s new multi-purpose pavilion opened April 17, 2012. DACS has no capital funds to (1) purchase equipment (tractors, a water truck, etc.), tables, chairs, a removable floor, or an HVAC system or to (2) build stalls necessary for multi-day equine events. DACS estimates that up to $2.1 million in additional funds are needed to fully equip the facility, not including stalls. According to SENCAC staff, event promoters have expressed interest in the new pavilion but the lack of stalls “kills the conversation.”27 Until stalls are built, SENCAC’s complex will remain uncompetitive for multi-day events, which bring in the most revenue and create the largest multiplier effect in the surrounding community.28 The Department estimates that a 100 stall barn would cost between $550,000 and $650,000.29 Appendix 5 provides a full list of remaining direct and complimentary needs. DACS also has no operating reserve for the pavilion, meaning there are no funds to pay for additional employees, utilities, and other operating costs. SENCAC staff is hesitant to book the facility without knowing whether funds will be available for operations. DACS needs $392,000 in additional recurring General Fund support and three FTE to run the pavilion. This would increase staffing to nine FTE and total appropriation to just over $750,000. Nine FTE at SENCAC will still be less than DACS has at any other facility except the Charlotte farmers market (4 FTE), despite the fact that SENCAC is the only facility that operates three distinct programs – a meeting center, an agricultural center, and a farmers market. SBMAC has 12 FTE and the Western NC facility has 14 FTE. SBMAC and the Western NC Ag. Center each expend over $1 million annually. DACS projects that the new multipurpose facility will add 12 new events and increase revenues by $7,800 in FY 2012-13, increasing to over $14,000 per year by FY 2016-17. Even with the new pavilion, SENCAC is CY 2008 CY 2009 CY 2010 Rentals & Bookings Farmers Market 1,964 1,566 923 Meeting Center 193 161 150 Equine Event 16 7 15 Revenue Farmers Market $20,321 $16,669 $17,869 Meeting Center & Equine Events* $95,811 $83,596 $95,485 * Historically, SENCAC did not differentiate between Meeting Center & Equine Event revenues. expected to bring in less than $120,000 in total revenue. This projection assumes no stalls are constructed; DACS does not have an estimate of the increase in revenue if stalls and other facilities were completed. SBMAC and the Western NC Ag. Center had equine and non-equine event revenue of just over $350,000 in FY 2009-10. Even if SENCAC performs as well as these two facilities, receipts would still not offset the additional cost to operate the pavilion ($392,000). The Department notes that, unlike SBMAC and the Western NC Ag. Center, SENCAC’s new facility is designed to be a true multi-purpose space, able to accommodate equine events, trade shows, and other large exhibitor events. Since the pavilion is more versatile, SENCAC should be able to book events that the State’s other facilities cannot accommodate, increasing the revenue potential of the facility. Nevertheless, if additional funds are provided as requested by the Department, 86 percent of SENCAC’s operations would be supported by the General Fund. Recommendations Based on the findings listed above, FRD presents the following three recommendations for review: Recommendation 1: Cease General Fund support for SENCAC’s current business model. Due to lack of demand, lack of planning, price sensitive customers, access issues, nearby competition, and other factors, SENCAC cannot be self-supporting in the short term; FRD believes that, unless substantial operational changes are made, it cannot be self-supporting even in the longer-term. The Department is requesting additional General Fund support and capital funding for SENCAC but based on the proposed increase in events and revenues provided in the expansion request (12 additional events, a 2 percent increase in visitation, and $7,800 in new revenues for FY 2012-13), FRD feels that the Department has not demonstrated the benefits associated with SENCAC’s expansion. However, the 1994 study (See Finding 1) indicated that equine events have a direct economic impact of “approximately $1,200 per horse shown.”30 Recommendation 2: Provide nonrecurring support in FY 2012-13 and require DACS to evaluate SENCAC’s operations and recommend an alternative operating model or closure plans. The NCGA could fund the facility on a nonrecurring basis and request that DACS submit a plan for a new operating model that includes becoming self-sufficient or justifies why a continued subsidy is warranted. Using nonrecurring funds for FY 2012-13 will require the NCGA to consider SENCAC’s budget and DACS’ report next year. However, it could also increase staff turnover, reduce SENCAC’s ability to attract community partners, and limit the Department’s ability to compete for grants. There are many alternative operating models that could be used. According to DACS, North Carolina has never explored an alternative managing authority for SENCAC or its other facilities. DACS has utilized an alternative method of service delivery model once – DACS entered into a lease-purchase agreement with the local Economic Development Corporation to construct an additional multipurpose barn at SBMAC. At a minimum, in the study, DACS should consider: Closing the facility: There may be no operating model under which SENCAC is viable. In the report, DACS should assess options for the property if closure is recommended. Changing the services provided: DACS should consider changing the services provided by SENCAC. For example, given the poor performance of the farmers market, the Department could end the retail farmers market either, converting the covered farmers market area to stalls31 or leasing out the facility to be utilized as seen fit by the leasee. Pooling profits: DACS should consider the effect of operating its facilities as a system – sharing staff, resources, and profits. In this model, which is used in South Carolina and Georgia, more profitable facilities support less profitable ones. Contracting out all operations: This is the model used in Virginia. The State built the facilities but contracts with private entities to operate them. Contracting out part of the operations: This model is used for the Columbia farmers market in South Carolina, in which a private contractor operates the wholesale portion of the farmers market. Recommendation 3: Require DACS to develop business plans for each farmers market and agricultural center as well as a system-wide strategic plan. SENCAC suffers from a lack of strategic planning, business planning, and performance tracking. However, lack of planning is not unique to SENCAC. None of DACS’ farmers markets or agricultural centers has a business plan, and there is no system-wide strategic plan.32,33 The NCGA should require DACS to develop a business plan for each of its facility as well as a system-wide strategic plan. In the planning process, DACS should: Justify the programs provided by each facility, and eliminate unviable services; Update each facility’s site plan to reflect the current configuration and any planned expansions; Develop consistent performance measures to enhance management decision-making and inter-facility comparisons; Aim to increase partnerships with local organizations; and Evaluate way to decrease costs and increase revenue, such as an Eastern State Fair. DACS should be required to submit these plans and any progress toward implementing and achieving the objectives described in the plans to the 2013-15 NCGA. For additional information, please contact: Lanier McRee Fiscal Research Division NC General Assembly 300 N. Salisbury St., Room 619 Raleigh, North Carolina 27603-5925 (919) 733-4910 http://www.ncleg.net/fiscalresearch Lanier.McRee@ncleg.net Endnotes 1 The Raleigh Fairgrounds (Agricultural Center) was excluded from the comparison data because its size and scope are significantly different from the other agricultural centers. 2 North Carolina Department of Agriculture & Consumer Services. Response to FRD Request for Information. October 31, 2011. 3 In 1988, DACS and the Southeastern North Carolina Farmers Market Commission hired the Fantus Company to “objectively research, analyze, and confirm the viability of establishing one or more farmers market facilities in eastern North Carolina.” (Fanuts Group, pg. 1) Based on demographics, infrastructure, and surveys, the Fantus Company determined that neither a wholesale facility nor a farmers market would be feasible in Eastern NC. The study then considered a shipping point facility and concluded that, assuming a facility must ultimately be self-supporting, there was “insufficient revenue potential to warrant constructing a shipping point facility at [this] time.” (Fantus Group, p. 59) Nevertheless, the NCGA continued to provide funding for the development of a facility in Roseboro. By 1993, the Roseboro Shipping Point facility was put aside and replaced with a plan to build a farmers market and agricultural center near Lumberton. In 1994, the Department retained Economics Research Associates (ERA) to evaluate the feasibility of a facility with farmers market, meeting center, and agricultural center components. While ERA’s final report documented demand for an equine facility, retail farmers market, and meeting space, it also noted that the cost of operating these facilities would exceed expected revenues. The report did not indicate that the facility would ever be self-sustaining but highlighted that the direct economic impacts to the surrounding community would be expected to exceed $4.3 million, the bulk of which would be derived from multi-day equine events. (ERA, p.II-1-II-3, IX-8) The Fantus Company. Northeast and Southeast North Carolina Farmers’ Market Study. Report prepared for the North Carolina Department of Agriculture, March 21, 1988. Economic Research Associates. Feasibility Study for Southeastern North Carolina Equestrian/ Agricultural Center and Farmers Market in Robeson County, North Carolina. Prepared for: North Carolina Department of Agriculture. April 1994. 4 At the time, the estimated cost of the building, fully equipped, was $6 million; this estimate has now increased to approximately $7 million. In addition to the original $3.7 million in State funds, DACS secured a $1.29 million grant from Golden LEAF to help cover part of the shortfall, leaving $2.1 million in needs. (See Appendix 5) 5 According to G.S. 143C-4-3(b), “funds in the Repairs and Renovations Reserve Account shall be used only for the repair and renovation of State facilities and related infrastructure that are supported from the General Fund.” 6 GAO defines a Public Private Partnership as “a contractual arrangement…between public and private-sector partners.” Public-private partnerships “differs from typical service contracting in that the private-sector partner usually makes a substantial cash, at-risk, equity investment in the project, and the public sector gains access to new revenue or service delivery capacity without having to pay the private-sector partner.” (GAO, p. 13, 14) Government Accountability Office. Public-Private Partnerships: Terms related to Building and Facility Partnerships. GAO/GGD-99-71 (Washington, D.C., 1999) 7 Tompkins, David. South Carolina Department of Agriculture. Telephone Interview. February 26, 2012. 8 Kulinski, Matthew. Georgia Department of Agriculture. Telephone Interview. March 8, 2012. 9 Shimp, Tonisha. Georgia National Fairgrounds and Agri-center. Telephone Interview. March 8, 2012. 10 Lewis, Kent. Virginia Department of Agriculture & Consumer Services. Telephone Interview. October 13, 2011. 11 Bartholomew, Pamela. Tennessee Department of Agriculture. Telephone Interview. September 22, 2011. 12 One study concluded that “farmers markets play a vital role in enabling farmers to gain direct access to customers. Without this access the existence of many small- and medium-sized growers would be threatened.” Payne, Tim. “U.S. Farmers Markets 2000: A Study of Emerging Trends.” Journal of Food Distribution Research 33, no. 1. (March 2002): 173-175. p. 174. A 2010 study found that the 26 seasonal farmers markets surveyed had “$948,640 in direct farmers market revenues” which created “a total economic impact of $1.6 million in business revenues, 15.88 part-time jobs, $213,720 in wages, and $16,000 in state and local taxes.” Myles, Albert and Ken Hood. “Economic Impact of Farmers’ Markets in Mississippi” Publication 2582, Extension Service of Mississippi State University. (Starkville: Mississippi State University, 2010) p. 4. The authors of a third study of the net impact of 34 farmers markets in West Virginia concluded that the net economic impact of farmers markets was 82 part-time jobs (43 full-time) and a $653,000 increase in the gross state product. This impact is after adjusting for direct revenue losses to competitors. Hughes, David W. et al. “Evaluating the Economic Impact of Farmers’ Markets Using an Opportunity Cost Framework.” Journal of Agricultural and Applied Economics 40, no.1 (April 2008): 253- 265. P. 261. 13 Vines, Donna. The Economic Impact of the Piedmont Agricultural Marketing and Processing Center. (Greensboro: UNC-Greensboro, Dept. of Economics. April 1991). p. 15. 14 Economic Research Associates. Feasibility Study for Eastern Horse Complex Center in Martin County, North Carolina. Prepared for: Martin County, North Carolina. August 1991. p. II-3 15 Economic Research Associates. Feasibility Study for Southeastern North Carolina. p. IX-8. 16 In 1996, the State had farmers markets in Raleigh, Asheville, Charlotte, and the Piedmont Triad. 17 Office of State Budget & Management. Farmers Market Special Review. Prepared for the North Carolina Department of Agriculture, February 1996. p. 11. 18North Carolina Department of Agriculture & Consumer Services. State Farmers Market Operations Review: Legislative Summary. Prepared for the North Carolina General Assembly, April 2, 1996. p. 1. 19 OSBM. p. 11. 20 Payne. p. 3. 21 The number of total daily spaces is calculated by taking the number of rental spaces available for daily rental and multiplying by the number of days the farmers market is open. 22 Kulinski, Phone Interview. 23 The Department notes that the multi-purpose pavilion at SENCAC may never be fully comparable to SBMAC or the Western NC Ag. Center since the facility is designed as a multi-purpose pavilion not an equine complex. The pavilion will be able to host equine events but is designed so that the floor can easily be converted into a space compatible with the needs of a trade show or other large exhibitor event. Meeting Notes, April 24, 2012. 24 North Carolina Department of Agriculture & Consumer Services. Response to FRD Request. 25 North Carolina Department of Agriculture & Consumer Services. Business Plan: Southeastern NC Agricultural Center and Multipurpose Pavilion.” Prepared for a United States Department of Commerce Grant, April 2011. 26 Meeting Notes. April 24, 2012. Phone Interview, County Managers Office, Robeson County. April 24, 2012. 27 SENCAC Staff, Site Visit. November 15, 2011. 28 A 2009 study by the North Carolina Rural Economic Development Center determined that the total average spending per adult visitor attending equine-related event in North Carolina to be $317.61. This average spending occurs in the areas surrounding event facilities – on hotel rooms, restaurants, and other local businesses. North Carolina Rural Economic Development Center. North Carolina’s Equine Industry: Findings & Recommendations. Prepared for the North Carolina General Assembly, May 2009. p. 2-3 29 Meeting Notes, Site Visit. November 15, 2011. 30 Economic Research Associates. Feasibility Study for Southeastern North Carolina. p. IX-8. 31 This change could be temporary or permanent but would allow stalls to be built at less expense and be in place more quickly. Portable stalls, which could be used in the farmers market shed, cost $80,000 for 42 stalls. During the site visit, the Department provided this idea and indicated that it is an option that they are actively considering. Meeting Notes, Site Visit. November 15, 2011. 32 According to the Small Business Administration (SBA), a business plan “outlines the route a company intends to take to reach, maintain and grow revenues” and includes a market analysis, information on organizational structure, marketing, sales, and finances. (SBA) A Strategic Plan takes a higher level view by defining the company’s purpose, strengths, weaknesses, opportunities, and challenges and outlining the organization’s path to its desired position. (Policastro, p. 2) U.S. Small Business Administration. How to Write a Business Plan. http://www.sba.gov/category/navigation-structure/starting-managing- business/starting-business/writing-business-plan. Policastro, Michael. Introduction to Strategic Planning. Prepared for the US Small Business Administration. http://archive.sba.gov/idc/groups/public/documents/sba_homepage/pub_mp21.pdf 33 Meeting Notes, Site Visit. November 15, 2011. Appendix 1: Capital and Operating Funding History for a DACS Facility in Southeastern NC, FY 1985-86 to 2010-11 Description Location Year Session Law Section Funding Appropriations Appropriates $900k for capital development of a facility Roseb oro* 19 85 S.L. 1985-480 Sec. 4, Sec. 5.5 $ 900,000 Appropriates $1.85m for capital and Est. SE Commission Roseboro 1985 S.L. 1985-1014 Sec. 4 $ 1,850,000 Reallocates $25k of 1986 appropriation for operations if land purchased Roseboro 1987 S.L. 1987-738 Sec. 137 - Repeals $1.5 million Roseboro 1989 S.L. 1989-1074 Sec. 2 $ (1,500,000) Reverts $137,676 of reserve for SE Center Roseboro 1991 S.L. 1991-689 Committee Report $ (137,676) Reverts $92,841 of reserve for SE Center Roseboro 1991 S.L. 1991-689 Committee Report $ (92,841) Appropriates $1m for SE Shipping Point facility Roseboro 1991 S.L. 1991-1044 Sec. 4 $ 1,000,000 Reallocates $1m from 1993 appropriation as grants - $90K to Roseboro for water & sewer; $910k to Sampson County for a Livestock Facility Roseboro 1993 S.L. 1993-561 Sec. 96 $ (1,000,000) Total Roseboro Appropriations* $ 1,019,483 Appropriates $2.5M for capital development SENCAC 1993 S.L. 1993-561 Sec.4 $ 2,500,000 Appropriates $3.6 M for capital development SENCAC 1993 S.L. 1993-769 Sec. 32 $ 3,600,000 Appropriates $1m for continued capital development SENCAC 1997 S.L. 1997-443 Sec. 2 $ 1,000,000 Est. Special Revenue Fund for SE Center SENCAC 1998 S.L. 1998-212 Sec. 13.2(b) - Appropriates $500k for capital SENCAC 1998 S.L. 1998-212 Sec. 29 $ 500,000 Repeals SE Commission N/A 1999 S.L. 1999-44 Sec. 7 - Appropriates $500k for capital SENCAC 1999 S.L. 1999-237 Sec. 29.1 $ 500,000 Reallocate $250k of FY 1998-99 funds for electronic signage SENCAC 1999 S.L. 1999-237 Sec. 29.4 - Appropriates $3.7 million for a multi-purpose pavilion SENCAC 2008 S.L. 2008-107 Sec. 27.8 $ 3,700,000 Total SENCAC Appropriations $ 11,800,000 Required Reversions Disaster Relief 2000 $ (634,313) Budget Shortfall 2002 $ (11,424) T otal State Funds Exp ended on SENCAC $ 11,154,263 Grants-in-Aid City of Lumberton - Funds for sewer and electric services 1998 $ 485,000 Golden LEAF - Provided $1.29M to complete Pavilion project 2008 $ 1,290,000 Total Funds Exp ended on SENCAC $ 12,929,263 *Roseboro’s Appropriations were for land purchase and architectural services to develop a SE Shipping Point facility. No construction was ever completed. Appendix 2: Performance Information The Department notes that the performance information provided for the farmers markets and agricultural centers is self-reported and that not all facilities track and calculate measures in the same way. For example, as you can see in Table C, during Calendar Years (CY) 2007 and 2008 the Western NC farmers market tracked receipts written to renters instead of actual number of spaces rented. DACS does not require standard performance measures and methodologies for tracking the performance of these facilities. For attendance counts, the Department tracks cars entering the facility and uses the standard multiplier of 2.5 individuals per car. Meeting Center SENCAC matches or outperforms the other agriculture centers in terms of meeting center bookings. Table 1 shows meeting center bookings and total attendance for SENCAC, SBMAC, and the WNC Ag. Center. Table A: Meeting Center Bookings and Total Attendance by Calendar Year CY 2007 CY 2008 CY 2009 CY 2010 Number of Bookings SENCAC -* 193 161 150 SBMAC 154 146 131 152 WNC Ag. Center 97 73 73 75 Total Attendance SENCAC -* 32,661 28,121 30,804 SBMAC 18,617 19,171 18,737 24,428 WNC Ag. Center 10,092 11,208 7,460 14,302 * Prior to CY 2008, all activities at SENCAC were tracked together with no differentiation between the meeting center, equine activities, and the farmers market bookings and attendance. Multipurpose Complex/ Equine Facility Usage of the SENCAC multipurpose complex also lags behind the State’s facilities. However, this is to be expected since SENCAC does not have an indoor/ enclosed multipurpose building or the facilities needed to support livestock activities at the complex. Table 2 provides performance information on the number of events hosted and attendance of those events for SENCAC, SBMAC, and the WNC Agriculture Center. Table B: Multipurpose Complex Events and Total Attendance CY 2007 CY 2008 CY 2009 CY 2010 Number of Equine & Non-equine Events SENCAC n/a 16 7 15 SBMAC 47 48 52 39 WNC Ag. Center 82 103 91 127 Total Attendance - Events SENCAC * - - - - SBMAC 36,734 34,589 35,350 27,655 WNC Ag. Center 138,018 185,347 124,665 141,551 * Prior to CY 2008, all activities at SENCAC were tracked together with no differentiation between the meeting center, equine activities, and the farmers market bookings and attendance. Farmers Market Usage of the SENCAC farmers market lags behind the State’s other farmers markets. Table 3 provides performance information on spaces rented and the number of visitors for the five State-owned and operated farmers markets. Table C: Farmers Market Space Rentals and Total Visitors Number of Rental Spaces Available Days Open Per Year SENCAC 84/ day 30,492/ year 363 Charlotte 189/day 52,353/ year 277 Piedmont Triad 154/day 55,902/ year 363 Raleigh 184/day 66,792/ year 363 Western NC 270/ day 98,010/ year 363 * This number excludes optional and uncovered spaces CY 2007 CY 2008 CY 2009 CY 2010 No. of Spaces Rented - Farmers Market SENCAC 939 1,964 1,566 923 Charlotte 14,096 13,614 14,467 15,267 Piedmont Triad 55,160 52,656 55,656 44,493 Raleigh 80,668 81,203 94,488 62,622 Western NC 9,020* 9,608* 39,687 68,243 * This number is the number of receipts written for spaces, not the actual number of daily spaces rented. Number of Visitors - Farmers Market SENCAC 185,643 157,399 101,178 96,119 Charlotte 606,913 578,895 741,902 676,295 Piedmont Triad 1,548,156 1,570,173 1,790,015 1,677,509 Raleigh 3,499,365 3,632,856 3,420,580 3,334,955 Western NC 1,981,141 1,872,553 1,729,224 1,611,508 Additional performance information is available upon request. Appendix 3: Rental Rates for SENCAC Service Provided Pre-2010 Fee Current Fee Meeting Center Kitchen $ 150 $ 150 No Kitchen Use, Bring in Food 100 100 Whole Meeting Center Building (whole day) 700 800 Whole Meeting Center Building (less than 6 hours) 400 Eliminated Meeting Center, Area 3 (whole day) 400 300 Meeting Center, Area 3 (less than 6 hours) 250 Eliminated Meeting Center, Areas 1,2,4,5 (whole day) 200 150 Meeting Center, Areas 1,2,4,5 (less than 6 hours) 125 Eliminated Meeting Center, Conference Room 3 or more hrs. 75 75 Building Overtime Rate 35/hour 40/ hour Farmers Market Farmers Shed, Retail & Wholesale Spaces $ 10 $ 15 Out-of-State Farmers Shed, Retail, Wholesale 12 25 Enclosed Retail Plaza 10 15 Out-of State Enclosed Retail Plaza 10 25 Wholesale Plaza 10 15 Out-of State Wholesale Plaza 10 25 Retail Room in Farmers Area 200 200 Storage N/A 5 per 200 sq ft/ day Delivery Fee – less than 50 packages 3/ delivery 3/ delivery Delivery Fee – 51 to 100 packages 5/ delivery 6/ delivery Delivery Fee – more than 100 packages 5/ delivery 10/ delivery Restocking Fee 5/ delivery 6/ delivery Out-of-State Restocking Fee 5/ delivery 12/ delivery Multi-purpose Facility Outdoor Horse Ring $ 250 $ 250 Outdoor Grounds Rental 100 minimum 150 minimum Pavilion – Equine N/A $500/ day Pavilion – Non-equine N/A $800/ day Rates for the State’s other farmers markets and agricultural centers are available upon request. Appendix 4: Competition within 90 miles of SENCAC Facility Owner/Operator Distance from SENCAC Robeson Co. Farmers Market Robeson County 5 miles Carolina Horse Park Carolina Horse Park Foundation 30 mile Crown Center & Convention Hall Complex City of Fayetteville 35 miles Exhibition Center at Lake Waccamaw Boys & Girls Homes of NC 40 miles Duplin Co. Events Center Duplin County 82 miles South Carolina Equine Park Kershaw County, SC/ SC Equine Promotion Foundation 90 miles Certified Roadside Farmers Markets Eight certified operators Throughout Robeson Co. Appendix 5: Remaining Needs SENCAC Multi-purpose Building Multi-purpose Building Needs Portable flooring 315,735 Air conditioning 1,450,000 Scoreboards and bleachers 65,850 Arena cord reel power system and road show switches 80,580 Arena sound system 90,070 Upgrade from fabric mechanical ducts to rigid galvanized rigid duct painted 106,600 Subtotal Multi-purpose Building Needs $ 2,108,835 Complementary Needs Maintenance building and all related work, including fence and site work 302,850 Secondary entrance drive and related elements 143,750 Landscaping plantings 33,000 Electronic marque LED 60,000 RV campsite 410,000 100 stall horse barn A. Open-sided pre-engineered metal building with portable stable 500,000 B. Modular Stall Barn 650,000 C. "Williamston" style Stall Barn 1,500,000 Subtotal Complementary Needs (Modular Barn) $ 1,599,600 Total with Open-sided Barn $ 3,558,435 Total with Modular Barn $ 3,708,435 Total with "Williamston" style Barn $ 4,558,435 Note: SENCAC’s Multi-purpose Pavilion differs from the facilities in Williamston and Fletcher in that it is envisioned and designed to be truly multi-purpose not just a livestock facility. Consequently, outstanding needs include a portable floor and an air conditioning system, neither of which are used at SBMAC or the WNC Ag. Center. Department of Agriculture & Consumer Services Response The Fiscal Research Division solicited input from the Department of Agriculture & Consumer Services on a draft of this Justification Review. The following document is the Department of Agriculture & Consumer Service’s response. It has not been altered or edited in any way by the Fiscal Research Division. |
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