Financial Report 2017

FINANCIAL REPORT

2017

LOS ANGELES COUNTY FAIR ASSOCIATION

CONSOLIDATED FINANCIAL STATEMENTS
WITH

INDEPENDENT AUDITOR'S REPORT

DECEMBER 31, 2017 AND 2016

LOS ANGELES COUNTY FAIR ASSOCIATION Page
DECEMBER 31, 2017 AND 2016 1

CONTENTS 3
4
INDEPENDENT AUDITOR'S REPORT 5
CONSOLIDATED FINANCIAL STATEMENTS 6

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
CONSOLIDATED STATEMENTS OF ACTIVITIES AND NET ASSETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Los Angeles County Fair Association
Pomona, California

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of the Los Angeles County Fair Association
(the Association) (a California nonprofit organization), which comprise the consolidated statements of financial

position as of December 31, 2017 and 2016, and the related consolidated statements of activities and net assets

and their cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the Association's
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Association's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

1

10681 Foothill Blvd., Suite 300, Rancho Cucamonga, CA 91730 P 909.466.4410 F 909.466.4431 W vtdcpa.com

Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the Los Angeles County Fair Association as of December 31, 2017 and 2016,
and the changes in its net assets and its cash flows for the years then ended in accordance with accounting
principles generally accepted in the United States of America.
Rancho Cucamonga, California
March 16, 2018

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LOS ANGELES COUNTY FAIR ASSOCIATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31,

2017 2016

ASSETS $ 8,030,330 $ 4,464,626
4,219,600 7,860,512
CURRENT ASSETS 2,293,847 2,082,457
Cash and cash equivalents 1,481,889 1,421,990
Investments
Accounts receivable, net 16,025,666 15,829,585
Other current assets
95,950,746 101,323,526
Total Current Assets
9,803 11,124
Property and Equipment, Net $ 111,986,215 $ 117,164,235

NONCURRENT ASSETS $ 3,927,225 $ 4,526,319
Other noncurrent assets 5,471,681 5,350,058
940,000 885,000
TOTAL ASSETS 340,000 325,000
3,319,070 2,532,431
LIABILITIES AND UNRESTRICTED NET ASSETS
13,997,976 13,618,808
CURRENT LIABILITIES
Accounts payable 41,907,600 42,806,088
Accrued expenses and other liabilities 1,525,000 1,865,000
Current portion of bonds payable 599,965 835,325
Current portion of other long-term debt
Deferred revenue 10,305,563 11,311,473

Total Current Liabilities 54,338,128 56,817,886

NONCURRENT LIABILITIES 68,336,104 70,436,694

Bonds payable, less current maturities 43,650,111 46,727,541
Other long-term debt, less current maturities
Other noncurrent liabilities $ 111,986,215 $ 117,164,235
Liability for interest rate swap

Total Noncurrent Liabilities

TOTAL LIABILITIES

UNRESTRICTED NET ASSETS

TOTAL LIABILITIES AND
UNRESTRICTED NET ASSETS

See the accompanying notes to consolidated financial statements.
3

LOS ANGELES COUNTY FAIR ASSOCIATION

CONSOLIDATED STATEMENTS OF ACTIVITIES AND NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,

REVENUES 2017 2016
Fair
Year-round events $ 31,467,498 $ 30,768,705
Hotel 11,374,421 10,057,553
Barretts 20,509,441 17,710,094
Cornucopia 2,185,829 2,529,866
Related enterprises 190,665 9,405,296
3,793,521 3,734,373
Total Revenues
69,521,375 74,205,887
EXPENSES
Fair and other 13,021,636 13,715,705
Salaries and employee benefits 9,210,594 7,914,960
General and administrative 1,990,699 2,091,511
Utilities 10,218,920 8,306,499
Operating 4,686,560 5,600,198
Professional services 3,510,000 3,361,958
Premiums, entertainment, and other related expenses
Hotel operating expenses 17,691,310 15,955,779
Barretts operating expenses 2,275,060 3,021,437
Cornucopia operating expenses 5,045,791
Related enterprises 4,765 1,472,346
1,733,838
Total Expenses 66,486,184
64,343,382
NET OPERATING INCOME 7,719,703
5,177,993
OTHER INCOME (EXPENSE)
Investment income 101,810 15,377
Interest expense (2,771,564) (2,811,582)
Depreciation and amortization (6,598,052) (6,188,597)
Gain (loss) on disposal of assets
Net gain on bonds interest rate swap 6,474 (181,142)
1,005,909 1,282,108
Total Other Income (Expense)
(8,255,423) (7,883,836)
DECREASE IN UNRESTRICTED NET ASSETS
(3,077,430) (164,130)
UNRESTRICTED NET ASSETS, BEGINNING OF YEAR
46,727,541 46,891,671
UNRESTRICTED NET ASSETS, END OF YEAR
$ 43,650,111 $ 46,727,541

See the accompanying notes to consolidated financial statements.
4

LOS ANGELES COUNTY FAIR ASSOCIATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

2017 2016

Cash Flows From Operating Activities: $ (3,077,430) $ (164,130)
Decrease in unrestricted net assets
(1,005,909) (1,282,108)
Adjustments to reconcile decrease in unrestricted net 41,512 41,512
assets to net cash flows from operating activities:
6,596,731 6,158,207
Net gain on interest rate swap (6,474) 181,142
Amortization of bond issuance costs
Depreciation (211,390) (1,004,571)
Loss (gain) on disposal of assets (58,578) 370,110
Change in operating assets and liabilities: (2,585)
(599,094)
Accounts receivable, net 121,622 (1,459,814)
Other current and noncurrent assets 786,639 1,689,828
Accounts payable (235,360) (278,448)
Accrued expenses and other liabilities
Deferred revenue 2,352,269 4,249,143
Other noncurrent liabilities
(15,326,571) (17,978,216)
Net Cash Flows Provided by Operating Activities 18,967,483 15,979,443
(1,217,477) (4,154,017)
Cash Flows From Investing Activities:
Purchase of investments 2,423,435 (6,152,790)
Proceeds from sale and maturity of investments
Purchase of property and equipment (885,000) (825,000)
(325,000) (310,000)
Net Cash Flows Provided by (Used in) Investing Activities
(1,210,000) (1,135,000)
Cash Flows From Financing Activities:
Repayment of notes and bonds payable 3,565,704 (3,038,647)
Payments on notes payable
4,464,626 7,503,273
Net Cash Flows Used in Financing Activities
$ 8,030,330 $ 4,464,626
Net Increase (Decrease) in Cash and Cash Equivalents
$ 2,771,564 $ 2,811,582
Cash and Cash Equivalents at Beginning of Year

Cash and Cash Equivalents at End of Year

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:

Cash Paid for Interest

See the accompanying notes to consolidated financial statements.
5

LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Los Angeles County Fair Association (the Association) is organized as a nonprofit organization and is tax
exempt under the provisions of the Internal Revenue Code. The Association conducts the annual Los Angeles
County Fair (the Fair) and numerous events during the year. Fairplex Racing, Inc. was organized in 1986 as a
for-profit corporation for the purpose of conducting harness racing and is subject to income taxes under the
Internal Revenue Code. During 1998, Fairplex Racing, Inc. was renamed Fairplex Enterprises, Inc (FEI).

The Sheraton Fairplex Hotel and Conference Center (the Hotel) is owned by the Association and provides
lodging, food, and banquet facilities for guests at the property. The Hotel operates under a franchise license
support, service, and management agreement with Sheraton, expiring in 2024, which can be extended upon
mutual agreement for two additional five-year periods.

In July 2002, Fairplex Equine Sales, LLC (FES) was formed to purchase the general partner interest in Barretts
Equine Limited (Barretts). FES is owned 99.99 percent by the Association and 0.01 percent by FEI. Barretts
conducts equestrian auctions and other activities at facilities leased from the Association and others.

In April 2004, Cornucopia Foods, LLC (Cornucopia) was formed as a for-profit corporation for the purpose of
providing food and beverage as the master concessionaire for the Fair and other events during the year. In
September 2016, the Association entered into a ten year Food Service Management Agreement with a third party
to provide management of food and beverage sales and operations at the Fairplex. The Agreement includes both a
percentage rent and a capital grant contribution to be paid by the new vendor for the rights to operate the food
service business.

In February 2010, Event Production Solutions, LLC (EPS) was formed for the purpose of renting out event and party
equipment. In February 2010, Fairplex RV and Boat Storage, LLC (RV and Boat Storage) was formed for the
purpose of providing storage space for RVs and boats. The Association is the sole member of both EPS and RV and
Boat Storage.

Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America and include the accounts of the Association and its
subsidiaries, the Hotel, FEI, FES, Barretts, Cornucopia, EPS, and RV and Boat Storage. All significant
intercompany balances and transactions have been eliminated.

The Association reports on a fiscal year reflecting 4-4-5 week calendar quarters with the period ending on the
Sunday closest to December 31st. The Association's 2017 and 2016 fiscal years represented the 53 week period
ended December 31, 2017 and a 52 week period ended January 1, 2017, respectively.

Cash and Cash Equivalents

The Association considers all highly liquid investments with original maturities of three months or less to be cash
equivalents.

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LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Investments

Investments consist of mutual funds, government obligations, and commercial paper with original maturities between
3 and 12 months. Investment securities are classified in three categories and accounted for as follows: debt securities
that the Association has the positive intent and ability to hold to maturity are classified as held-to-maturity and are
measured at amortized cost; debt and equity securities bought and held principally for the purpose of selling in the
near term are classified as trading securities and are measured at fair value, with unrealized gains and losses included
in earnings; debt and equity securities not classified as either held-to-maturity or trading securities are deemed as
available-for-sale and are measured at fair value, with unrealized gains and losses, net applicable taxes, reported in a
separate component of stockholders' equity. All gains and losses are included in the consolidated statements of
activities and net assets. Investment income consists principally of interest and dividend income.

Accounts Receivable

Accounts receivable are stated at amounts due from customers and agencies net of an allowance for doubtful
accounts. The Association determines its allowance by considering a number of factors, including the length of
time receivables are past due, the Association's previous loss history, and the customer's current ability to pay
their obligations. Receivables are written off when they become uncollectible.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization are calculated using the straight-line
method over the estimated useful lives of the assets as follows:

Buildings and improvements Estimated
Equipment Useful Lives
8 - 50 years
3 - 20 years

Capital projects are capitalized at cost and will be depreciated over the estimated life upon completion of the
project. The costs of repairs and maintenance are charged to expense.

Impairment of Long-Lived Assets

The Association regularly reviews long-lived assets and intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the
expected future cash flows is less than the carrying amount of the asset, the Association recognizes an impairment
loss. For the years ended December 31, 2017 and 2016, no provision for impairment losses was recorded.

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LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Bond Issuance Costs

Bond issuance costs are amortized using the straight-line method over the life of the Bonds. Bond issuance costs
of $922,400 and $963,912 are presented net of accumulated amortization of $290,656 and $249,144 at
December 31, 2017 and 2016, respectively. Bond issuance costs are presented as a reduction in the balance of the
related long-term debt.

Concentration of Credit Risk

Financial instruments that subject the Association to credit risk consist primarily of accounts receivable.
Concentrations of credit risk with respect to accounts receivable are generally diversified due to the large number
of entities composing the Association's customer base. The Association performs ongoing credit evaluations of
its customers and maintains an allowance for potential credit losses. Additionally, the Association maintains cash
balances at banks in excess of Federal Deposit of Insurance Corporation (FDIC) limits. There were
approximately $8,436,954 in cash balances at December 31, 2017, that exceeded federally insured limits.
Management believes credit risk is limited.

Accounts Payable and Deferred Revenue

Accounts payable represents current amounts due to the Association's vendors at December 31, 2017. The
deferred revenue balances primarily relate to prepayments and deposits at December 31, 2017, by customers for
rental of the Association's facilities.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States
of America, management is required to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.

Derivative Instruments

At the inception of a derivative contract, the Association designates the derivative as one of three types based on
the Association's intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of
the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), (2) a
hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized
asset or liability (cash flow hedge), or (3) an instrument with no hedging designation (stand-alone derivative). For
a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are
recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is
reported in other comprehensive income and is reclassified into earnings in the same periods during which the
hedged transaction affects earnings. For both types of hedges, changes in the fair value of derivatives that are not
highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized
immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting
are reported currently in earnings, as noninterest income.

8

LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest
expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge
accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the
same as the cash flows of the items being hedged.

The Association formally documents the relationship between derivatives and hedged items, as well as the
risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging
relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities
on the balance sheet or to specific firm commitments or forecasted transactions. The Association also formally
assesses, both at the hedge's inception and on an ongoing basis, whether the derivative instruments that are used
are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Association
discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes
in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted
transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a
hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as
noninterest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted
for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the
asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions
are still expected to occur, gains or losses that were accumulated in other comprehensive income are amortized
into earnings over the same periods which the hedged transactions will affect earnings.

Revenue Recognition

Fair and year round events revenue is recognized upon admission, provision of services, or when products are
delivered to the customer. Hotel revenue consists primarily of room rentals, food and beverage sales, and other
activities. Revenue is recognized when rooms are occupied and as services are performed. Barretts revenue
mainly consists of commissions and entry fees. Revenues are recognized upon provision of service. Cornucopia
revenue is recognized when food and beverage is sold to the customer. Grants and contracts revenue is
recognized as required expenses are incurred in accordance with the contract terms.

Advertising

Advertising costs are expensed as incurred. For the year ended December 31, 2017 and 2016, there were
approximately $2,942,000 and $3,127,000, respectively, in advertising costs.

9

LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Income Taxes

The Association is exempt from Federal income and California franchise taxes under Section 501(c)(5) of the
Internal Revenue Code and corresponding California provisions. Accordingly, no provision for income taxes has
been recorded in the financial statements. The Association annually files Forms 990, 199, and RRF-1 with the
appropriate agencies, as well as Forms 990T and 199T when applicable. The Association has also been classified
as an entity that is not a private foundation within the meaning of Section 509(a).

FEI is a for-profit entity. Income taxes are provided for under the liability method and, as such, deferred income
taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement carrying amounts and the tax bases of
existing assets and liabilities. A valuation allowance reduces deferred income tax assets when it is more likely
than not that some portion or all of the deferred income tax assets will not be realized.

The Association has adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic 740 that clarifies the accounting for uncertainty in tax positions taken or expected to be taken on a
tax return and provides that the tax effects from an uncertain tax position can be recognized in the financial
statements only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing
authorities. Management believes that all tax positions taken to date are highly certain and, accordingly, no
accounting adjustment has been made to the financial statements.

Certain entities consolidated within the Association are subject to Federal income tax and franchise tax of the
State of California. Federal tax returns for all entities for the years ended December 31, 2014, 2015, and 2016,
are open to audit by the Federal authorities. California State returns for all entities for the years ended
December 31, 2013, 2014, 2015, and 2016, are open to audit by State authorities.

Fair Value

Fair values is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. Current accounting guidance establishes a fair value hierarchy, which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the
ability to access as of the measurement date.

Level 2: Significant other observable inputs (other than Level 1 prices) such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect an entity's own assumptions about the factors that market
participants would use in pricing an asset or liability.

All of the Association's investments as disclosed in Note B are considered to be Level 1 and Level 2 investments,
while the Association's interest rate swap agreement associated with its Bonds as disclosed in Note D is
considered to be a Level 3 transaction.

10

LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Reclassifications

Certain reclassifications have been made to the 2016 financial statements to conform with the 2017 presentation,
with no effect on previously reported increase in net assets or the unrestricted net asset balance.

NOTE B - INVESTMENTS

Fair Value Measurements

The following table presents the balances of the assets measured at fair value on a recurring basis as of
December 31, 2017.

Money market accounts Level 1 Level 2 Total
Mutual funds $ 305,137 $- $ 305,137
Commercial paper
1,928,552 - 1,928,552
- 1,985,911 1,985,911
$ 1,985,911 $ 4,219,600
$ 2,233,689

The following table presents the balances of the assets measured at fair value on a recurring basis as of
December 31, 2016.

Money market accounts Level 1 Level 2 Total
Mutual funds $ 1,279,858 $- $ 1,279,858
Commercial paper
1,585,916 - 1,585,916
- 4,994,738 4,994,738
$ 4,994,738 $ 7,860,512
$ 2,865,774

The Association did not have any liabilities subject to fair value measurements on a recurring basis as of
December 31, 2017.

Investments held by the Association for purposes of funding the 457(b) deferred compensation plan were
$1,928,552 and $1,585,916 at December 31, 2017 and 2016, respectively. See further information about the
457(b) deferred compensation plan in Note E.

11

LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE C - PROPERTY AND EQUIPMENT, NET 2017 2016

Property and equipment consist of the following at December 31,: $ 368,808 $ 368,808
2,448,855 2,080,380
Non Depreciable Assets 2,817,663 2,449,188
Land
Capital projects in process 158,439,315 158,072,958
Subtotal Non Depreciable Assets 31,677,769 31,195,104
190,117,084
Depreciable Assets (96,984,001) 189,268,062
Buildings and improvements owned by the 93,133,083 (90,393,724)
Association on County land 98,874,338
Equipment, tools, and implements $ 95,950,746 $ 101,323,526

Accumulated Depreciation
Subtotal Depreciable Assets

Property and Equipment, Net

Certain buildings have had a lien in the amount of $1.75 million placed on them for 15 years as a condition of
receiving $1.75 million in EDA grant monies. Depreciation expense was $6,596,731 and $6,158,207 for the years
ended December 31, 2017 and 2016, respectively.

NOTE D - LONG-TERM DEBT 2017 2016

Long-term debt consists of the following at December 31,: $ 19,515,000 $ 20,400,000

Bonds payable, Taxable Variable Rate Demand Revenue Bonds 24,255,000 24,255,000
Series 2009, due in varying installments through November 2039,
at a fixed rate of 4.805 percent at December 31, 2017. (922,400) (963,912)
42,847,600 43,691,088
Bonds payable, Tax Exempt Series 2010 Recovery Zone Bonds, due
in varying installments through November 2039, at a fixed rate of 1,865,000 2,190,000
3.430 percent at December 31, 2017. 44,712,600 45,881,088
(1,280,000) (1,210,000)
Less: Bond issuance costs, net of accumulated amortization
Total bonds payable $ 43,432,600 $ 44,671,088

Term note payable with financial institution due in various annual
installments with a maturity date of November 1, 2019, at an
interest rate of 2.650 percent above LIBOR, or 4.214 percent at
December 31, 2017.

Less: Current Portion

Long-Term Debt

12

LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE D - LONG-TERM DEBT - Continued

During the year ended December 31, 2009, the Association issued $49,650,000 of Taxable Variable Rate Demand
Revenue Bonds Series 2009 (the 2009 Bonds). Proceeds from the issuance of the 2009 Bonds were used to retire
the Taxable Variable Rate Demand Revenue Bonds Series 2000 (the 2000 Bonds) and the non-revolving lines of
credit in the amount of approximately $26,364,000 and $2,738,000, respectively. The Association's Board of
Directors designated the remaining proceeds to be used for the construction of the new Conference center. The
Bonds were secured by an irrevocable direct-pay letter of credit (the Letter of Credit) issued by banks, in favor of
the trustee, in the amount of $50,482,488, $49,650,000 to be drawn upon to pay the unpaid principal amount of
the Bonds outstanding, and up to $832,488 to be drawn upon to pay accrued and unpaid interest on the Bonds.
The Letter of Credit was set to terminate at the earliest of events described in the Letter of Credit agreement or
November 2, 2015.

Concurrently with the issuance of the Letter of Credit, the Association executed a Reimbursement Agreement
with the banks, which, among other things, set the terms and conditions whereby the Association is required to
repay the banks any amounts drawn by the trustee under the Letter of Credit and grant the banks certain security
interests in certain collateral of the Association. Under the Reimbursement Agreement, the Association agreed to
comply with various covenants as defined in the Reimbursement Agreement. These Bonds were secured by the
gross revenues of the Association.

During the year ended December 31, 2010, the Los Angeles County Regional Financing Authority (Authority)
issued $24,255,000 of Tax Exempt Series 2010 Recovery Zone Bonds (the 2010 Bonds) on behalf of the
Association. Proceeds from the issuance of the 2010 Bonds were used to retire $24,255,000 of the Taxable 2009
Bonds. Upon retirement of the portion of the 2009 Bonds retired, a portion of the swap agreement relating to the
retired portion was terminated, as described below. In connection with the 2010 Bonds, the Association entered
into a Loan Agreement with the Authority and a Continuing Covenant Agreement with the financial institution
purchasing the 2010 Bonds. The Loan Agreement provides for the payment to the Authority of loan payments
equal to debt service on the 2010 Bonds. The Continuing Covenant Agreement contains various covenants and
agreements of the Association, and also provides for the amendment of certain covenants found in the 2009
Bonds such that the 2010 Bond covenants and 2009 Bond covenants are the same. All covenants relating to these
bonds under the Loan Agreement and the Continuing Covenant Agreement were met at December 31, 2017. The
existing Letter of Credit related to the remaining 2009 Bonds was extended to November 2, 2015. All bonds are
secured by the gross revenues of the Association.

In conjunction with the Association's 2010 and 2009 issuance of variable rate debt, the Association entered into
interest rate swap agreements with a financial institution counter party. Pursuant to the swap agreement relating
to the 2009 Bonds, the Association pays a fixed rate of 4.805 percent, and the counterparty pays a rate equal to the
variable rate on the 2009 Bonds. Pursuant to the swap agreement relating to the 2010 Bonds, the Association
pays a fixed rate of 3.43 percent, and the counterparty pays a rate equal to the variable rate on the 2010 Bonds. At
December 31, 2017, the notional amount of the interest rate swap agreements was $43,770,000. The Association
entered into these agreements to lock in a fixed interest rate on the variable rate debt and is not using this
agreement for speculative purposes. The value of the swap instrument represents the estimated cost to the
Association to cancel the agreement at the reporting date, which is based on pricing models that consider risks and
market factors. The liability for the interest rate swap at December 31, 2017 and 2016, was $10,305,563 and
$11,311,473, respectively.

The amount recorded in the consolidated statements of activities and net assets represent the effect on net assets for
changes in the swap's fair value is a gain of $1,005,909 and $1,282,108 for the years ended December 31, 2017 and
2016, respectively.

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LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE D - LONG-TERM DEBT - Continued

During 2015, the Association entered into a note agreement with a financial institution in the amount of
$2,500,000 for the remodel of the Finish Line Sports Grill. Terms of the note include annual installments due in
various amounts with a maturity date of November 2019, at an interest rate of 2.650 percent above LIBOR. The
interest rate was 4.214 percent and 3.256 percent at December 31, 2017 and 2016, respectively.

The Association has $2,000,000 available under other lines of credit. No amounts were outstanding under these
lines of credit at December 31, 2017 and 2016.

Future principal maturities of long-term debt are as follows:

Year Ending Taxable Recovery Term Total
2018 Variable Rate Zone Note Payable $ 1,280,000
2019 $ 340,000
2020 Demand Facility 2,530,000
2021 Revenue Bonds 1,525,000 1,065,000
2022 Bonds Series 2010 - 1,140,000
Series 2009 $- - 1,215,000
2023-2027 $ 940,000 - 7,375,000
2028-2032 - - 10,140,000
2033-2037 1,005,000 - - 13,945,000
2038-2039 1,065,000 - - 6,945,000
1,140,000 - - $ 45,635,000
Less: Bond Issuance Costs 1,215,000 -
Total 7,375,000 3,365,000 $ 1,865,000 (922,400)
6,775,000 13,945,000 $ 44,712,600
6,945,000
- $ 24,255,000
-
$ 19,515,000

NOTE E - EMPLOYEE BENEFIT PLANS

The Association has a defined contribution savings plan in effect under Section 401(k) of the Internal Revenue
Code (IRC), a Profit Sharing Plan and a deferred compensation plan under Section 457(b) of the IRC. Under the
401(k) plan, each participant is able to defer the maximum amount of compensation allowed by law. The
Association contributed three percent to each eligible employee's account in 2017 and 2016. Each employee is
eligible after 1,000 hours of employment.

Under the Profit Sharing Plan, each participant is granted a percentage of compensation before deduction. Each
employee who has completed 1,000 hours of service each year, and is employed at year end, is eligible to
participate. For the years ending December 31, 2017 and 2016, the Association did not make any discretionary
contribution to the plan, as determined by the Board of Directors of the Association.

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LOS ANGELES COUNTY FAIR ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016

NOTE E - EMPLOYEE BENEFIT PLANS - Continued

Under the 457(b) plan, eligible executives are able to participate in the plan up to the maximum allowed by law.
Each executive who has completed 1,000 hours of service is eligible to participate. The Association will
contribute 50 percent of the amount contributed by the executive up to the amount allowed by law. In December
2017 and 2016, the Association contributed $27,750 and $42,000 respectively.

The Association contributed to various pension plans under union and industry-wide agreements. Contributions
are based on the hours worked by or gross wages paid to covered employees. The Association similarly makes
payments to various union and industry-wide health and welfare plans.

The Association's total expense for the aforementioned plans was $818,571 and $1,154,822 for the years ended
December 31, 2017 and 2016, respectively.

In 2010, the Association implemented The Value Creation Sharing Plan, also referred to as the Executive
Long-Term Incentive Program (the ELTI Plan). The ELTI Plan is designed to provide a long-term incentive
opportunity to key executives who are in a position to effect the long-term, sustainable financial and operation
growth of the Association. The effective date of the ELTI Plan is January 1, 2010. During 2016, the Association
elected to terminate the ELTI Plan with any deferred awards earned under the plan scheduled to be paid out on
March 15, 2018 in accordance with the original plan agreement. As of December 31, 2017, there was $69,400
accrued for the ELTI Plan.

NOTE F - LEASE AGREEMENT

The Association leases the majority of its property from the County of Los Angeles (the County). A lease with
the County was executed in 1988 to enable the Association to complete the Hotel Project, Equestrian Center, and
Pavilion Project. The term of the lease is for 56 years commencing January 1, 1988. The Association also has the
option to renew for two five-year terms. During the term of the lease, the Association pays as rent to the County a
percentage of the gross revenues derived from the use of the property and received by the Association. The
percentage of gross revenues payable as rent is divided among Fair Revenues (1.5 percent of gross revenues),
Interim Revenues (5.0 percent), and Parcel 1 Revenue (75 percent). Certain adjustments to these percentages will
be made during the term of the lease.

Lease expense included in general and administrative expense in the accompanying consolidated statements of
activities and net assets for the years ended December 31, 2017 and 2016, was $1,005,486 and $943,066,
respectively.

NOTE G - CONTINGENCIES

The Association is involved in various lawsuits arising in the ordinary course of business. In the opinion of
management, based on the advice of legal counsel, the resolution of these lawsuits will not have a material effect
on the consolidated financial statements of the Association.

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LOS ANGELES COUNTY FAIR ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2017 AND 2016
NOTE H - SUBSEQUENT EVENTS
The Association has evaluated subsequent events for recognition and disclosure through March 16, 2018, which is the
date the financial statements were available to be issued. Management has determined that there were no subsequent
events or transactions that would have a material impact on the current year financial statements.

16