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February 29, 2012

All is fair

Kentucky State Fair Board CEO survives attempted ouster amid budget woes

It’s been a dramatic week at the Kentucky State Fair Board, culminating in the attempted ouster of longtime CEO and president Harold Workman.

The tension started mounting after Fair Board chairman Ron Carmicle reportedly contacted a fellow board member to say Gov. Steve Beshear wanted Workman out and that the board would fire him at the next meeting, according to a Feb. 21 Courier-Journal article.

But following aggressive pushback from Workman’s allies in the agricultural community, the coup was unsuccessful, and last week’s board meeting adjourned with Workman still at the helm. Meanwhile, speculation over why the CEO’s job is in jeopardy is running rampant.

Sources close to the Fair Board point to the opening of the KFC Yum! Center, which the Fair Board operates for a $150,000 annual management fee from the Louisville Arena Authority. Since the arena opened in October 2010, the Fair Board has suffered financially due to the loss of University of Louisville basketball games and big name concert acts at Freedom Hall.

Additionally, the Yum! Center has produced underwhelming revenues, as they recently escaped a downgraded bond rating due to lower-than-expected sales taxes in the surrounding Tax Increment Financing district.

One popular theory espoused by Fair Board insiders is that the move to oust Workman was first instigated by now-retired Arena Authority chairman Jim Host — who isn’t talking to the media.

Whatever the motive, within days of the meeting, Workman and his allies appeared ready to strike back against what some have described as a failed coup attempt. Workman abruptly fired Yum! Center general manager Ted Nicholson, without revealing the cause, and a bill is rapidly advancing through the legislature that limits Beshear’s ability to appoint members to the Fair Board.

While the main players in the saga have so far refrained from publicly trading barbs, tempers and accusations are beginning to flare and might soon consume both Louisville and Frankfort.

As word spread about the attempt to force out Workman, Sen. Joey Pendleton, D-Hopkinsville, an avid supporter of Workman’s performance and his importance to the agricultural community, defended him and openly challenged Beshear’s legislative agenda.

Pendleton not only filed a bill requiring the Senate to approve all of Beshear’s appointments to the Fair Board, but threatened to attend the board meeting where it was rumored that Workman would be fired. The meeting was scheduled for the same time that the state Senate would be voting on Beshear’s most prized goal: a constitutional amendment for expanded gaming. With the vote count perilously close, Pendleton’s absence would mean the bill’s demise. (The expanded gambling bill was ultimately defeated 16-21, despite Pendleton’s support.)

Pendleton tells LEO Weekly that an agreement was reached where Workman, whose contract expires June 30, would stay on board until at least the end of the year.

At the Fair Board meeting, Tourism Cabinet Sec. Marcheta Sparrow — Beshear’s representative on the board — made a motion to go into executive session to discuss a personnel matter. After two hours in a closed session, the board passed a motion to hire a chief financial officer to report directly to the board, and then adjourned. For now, Workman is safe.

Despite prodding by reporters after the meeting, Fair Board chairman Ron Carmicle refused to level any specific criticism on Workman.

“There’s no critical comment that will come out of this from me,” he said. “I’m satisfied with the staff and with Harold. There’s no criticism, just disagreement on what our future direction is going to be.”

However, Carmicle repeatedly called for the Fair Board to go forward with a new long-term plan for the future and called for a succession plan to be discussed for Workman. He also said the move to hire a CFO to report directly to the board instead of Workman was needed to improve the Fair Board’s “financial accountability.”

“Our reason that we want a CFO reporting to us is that there’s a financial and administrative staff that’s in place, and we’re operating in the red right now,” Carmicle said. “And we want somebody reporting to us that may not be an existing employee.

“We cannot just continue to do business as usual.”

Carmicle concedes that Beshear supported the move to oust Workman, but didn’t “pressure” anyone on the board.

The financial situation of the Kentucky State Fair Board is, in fact, bleak. While the Fair Board has for many years been able to pay for staff and operations expenses with revenue at the fairgrounds, a confluence of events has put a significant strain on its budget.

Not only has the Fair Board lost income from basketball games, but they were also hit by Six Flags’ bankruptcy, which has left the Kentucky Kingdom park vacant for two years. The inability to come to an agreement with former park operator Ed Hart, whom the Fair Board still owes millions of dollars, is compounded by the razing of the Executive Inn nearby, which accounts for the loss of over half a million dollars in rent.

Income statements obtained from the Fair Board through an open records request show just how dire the financial situation has become. In the 2002-2003 fiscal year, the Fair Board’s total income from operations exceeded their net expenses by $4.48 million. Their net funds steadily declined every year after that, until they went slightly into the red in June 2009.

In 2010, net funds plummeted to a loss of more than $900,000. Then last year — the first fiscal year in which the Yum! Center was open — the Fair Board took a financial nosedive, with a net loss of $6.47 million. This was a loss of $6 million more than what the Fair Board budgeted for in 2010-2011, the fourth straight year in which net funds were at least $1 million below their target.

However, net income doesn’t account for all of this decline. While income from operations has hovered between $42-$44 million over the last five years, net expenses have risen $7 million, with administrative salary and benefits accounting for well over $1 million.

Harold Workman’s current contract with the Fair Board gives him a salary of $249,260, with annual benefits totaling almost $49,000, along with $15,000 in “expenses.” Eight Fair Board employees have six-figure salaries, and unlike many government agencies in recent years, there have been no pay freezes or layoffs. After a reorganization in late 2008, the Fair Board gained 48 employees, most of those working for the arena.

In Beshear’s most recent budget proposal, the Fair Board would receive an $8.5 million bailout from the state to make up for their current financial difficulties, with $5.5 million for the current fiscal year and $1.5 million for the next two years. Most state agencies had to face an 8.4 percent cut in their budget.

While those who supported the effort to remove Workman have been evasive in publicly expressing their reasoning, those who support him have been quite vocal and are fighting back.

Sen. Pendleton — who says Workman is the scapegoat for the financial difficulties of the Fair Board and Yum! Center — laments that Beshear has not given a reason for wanting him gone and sees his actions as politically motivated.

“Evidentially there is someone they’re wanting to put in that place,” Pendleton says. “They’re going to have a CFO be put in place immediately, so I guess we’ll see who the political hack is going to be that they put in there.”

Pendleton expects his legislation requiring Senate approval of Fair Board appointments to pass the full Senate easily — it has 23 co-sponsors — and soon pass the House, perhaps with an amendment requiring the board’s CFO to be approved by the Senate, as well. Oddly enough, Carmicle’s term as Fair Board chairman expires June 30, the same day as Workman’s current contract, meaning he could face an unfriendly crowd in the Senate if Beshear seeks to reappoint him.

“I don’t think Carmicle is guaranteed that his name will be one that’ll be sent to us,” Pendleton says. “I think we can send a message to the governor about who he needs to send to us.”

On Monday, Workman fired his own shot when he unexpectedly (and without explanation) axed Ted Nicholson as general manager of the Yum! Center, which is less than two weeks away from hosting the first two rounds of the NCAA Men’s Basketball Tournament. In response, Carmicle reportedly told Workman to reinstate Nicholson, though as of press time Tuesday he remained out of a job.

Given that Workman has previously praised both Nicholson and the performance of the Yum! Center, the firing came as a surprise.

In a November Business First story, Workman praised Nicholson’s ability to form a cohesive team of employees that excelled at customer service and hospitality. In an October op-ed in the C-J, he praised the success of the Yum! Center and how much it has enhanced downtown. 

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