FAIRS ‑- FUNDS DERIVED FROM PARI-MUTUEL [[PARIMUTUEL]]BETTING.
The director of agriculture may not distribute grants-in-aid from the pari-mutuel fund to a private non-profit [[nonprofit]]corporation conducting a fair. Exception: premiums and awards may be distributed to participants.
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July 19, 1954
Honorable John N. Leavitt
Okanogan, Washington Cite as: AGO 53-55 No. 286
Dear Mr. Leavitt:
We have your request for opinion of this office as to the validity of the payment of monies from the pari-mutuel [[parimutuel]]fund to the Okanogan County Fair Association for use in the management, operation and promotion of an annual fair. We also have examined a photostatic copy of an agreement between the Okanogan Boots and Saddle Club, Inc. and the Okanogan County Fair Association which appears to be a working arrangement for joint use of real property owned by the parties as tenants in common. In addition, we have examined the by-laws [[bylaws]]of the Okanogan County Fair Association as submitted. We conclude from an examination of the instruments enclosed by you that the Okanogan County Fair Association is a private non-profit [[nonprofit]]corporation created in accordance with the statutes for the principal purpose of conducting an annual fair and that said association is not a political subdivision of the State of Washington.
It is our opinion that the Director of Agriculture may not legally pay to a private corporation public monies derived from the pari-mutuel [[parimutuel]]fund even though said private corporation conducts an annual fair.
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In reaching the foregoing conclusion we have referred to RCW 15.76.011, which provides as follows:
"For the purpose of this chapter all agricultural fairs held in the state of Washington wherein 4-H clubs or Smith-Hughes students participate and which may become eligible for state financial aid, shall be divided into classes, to-wit:
"Special youth shows, A, B and C fairs."
The subsequent provisions of the same code title provide for the classification of various fairs and for the purpose of this discussion, we set forth RCW 15.76.070 as follows:
"For the purpose of encouraging 4-H club and Smith-Hughes work in county, community and other fairs or youth shows where such competition is permitted, the board of trustees of any fair or youth show that qualifies hereunder may apply to the director of agriculture of the state of Washington for an amount of money as hereinafter set out. It shall be the duty of the director of agriculture to allot annually to participating fairs and to issue vouchers to be paid by the state treasurer out of the state fair fund the following amounts: Fifteen percent of such fund to be paid pro rata to the special youth shows; thirty-five percent of the amount of such fund to be paid pro rata to class A fairs; thirty-five percent of said fund to be paid pro rata to class B fairs; ten percent of said amount to be available for class C fairs, but no allocation to class C fairs shall exceed fifty percent of the total value of premiums or prizes awarded by any such class C fair. Five percent of such fair fund is to be available for administrative costs, including expenditures incurred by the fair commission and approved by the director of agriculture. Any money remaining in such fund shall be [[Orig. Op. Page 3]] disbursed by the director of agriculture by making an additional payment to the special or class A, B and C fairs as he may deem necessary and appropriate for continued development and operation of said fairs. The division and payment of said fund shall occur at such times as the director of agriculture shall fix. Any class A, B or C fairs, before being able to qualify and participate in any allocation herein provided must be able to match the amount of such allocation from its own local fair resources, derived either from general admission or otherwise."
The state fair fund and source of revenue for the grants-in-aid to the various fairs are derived from the receipts of pari-mutuel [[parimutel]]machines. The code provision creating this fair fund is RCW 67.16.100, and is quoted as follows:
"In addition to the license fees required by this chapter the licensee shall pay to the commission five percent of the gross receipts of all parimutuel machines at each race meet, which sums shall be paid daily to the commission.
"All sums paid to the commission, together with all sums collected for license fees under the provisions of this chapter, shall be disposed of by the commission as follows: Twenty percent thereof shall be retained by the commission for the payment of the salaries of its members, secretary, clerical, office, and other help and all expenses incurred in carrying out the provisions of this chapter. No salary, wages, expenses, or compensation of any kind shall be paid by the state in connection with the work of the commission. Of the remaining eighty percent, fifty percent shall, on the next business day following the receipt thereof, be paid to the state treasurer to be deposited in the general fund. The remaining thirty percent shall be paid to the state treasurer, who is hereby made ex officio treasurer [[Orig. Op. Page 4]] of a fund to be known as the 'fair fund,' which shall be maintained as a separate and independent fund outside of the state treasury, and made available to the director of agriculture for the sole purpose of assisting fairs in the manner provided in Title 15. Any moneys collected or paid to the Commission under the terms of this chapter and not expended at the time of making its report to the legislature, shall be paid to the state treasurer and be placed in the general fund."
The only direct authority for holding county fairs and agricultural exhibits is to be found in RCW 36.37.010, which is quoted as follows:
"The holding of county fairs and agricultural exhibitions of stock, cereals, and agricultural produce of all kinds, including dairy produce, as well as arts and manufactures, by any county in the state, and the participation by any county in a district fair or agricultural exhibition, is declared to be in the interest of public good and a strictly county purpose."
The subsequent provisions of the same quoted title provide that the county commissioners of any county may acquire property to conduct fairs and may employ persons to assist in the management of fairs and may expend public funds of the county for the capital improvement of fairgrounds.
From the foregoing statutes it is clear that the legislature has declared the conduct and operation of fairs to be a public purpose and the legislature may appropriate funds for the support of such fairs or may authorize governmental subdivisions of the state to expend public funds for the promotion of agricultural fairs. The authority of the legislature to create special funds for designated purposes in the office of the treasurer of the State of Washington and the authority to designate a public official, in this case the Director of Agriculture, to disburse such a fund is to be found in State ex rel. State Retirement Board v. Yelle, 31 Wn. (2d) 87; State ex rel. Sherman v. Pape, 103 Wash. 319 andState ex rel. Toll Bridge Authority v. Yelle, 195 Wash. 636. Thus, it is apparent in accordance with the foregoing statutes and the cited case law that the Director of Agriculture has authority to disburse the fair fund as established by the legislature to a governmental agency for the purpose of promoting and conducting [[Orig. Op. Page 5]] agricultural fairs in the various counties of the state. But the Director of Agriculture is not authorized to disburse public monies to a private corporation although engaged in conducting a fair.
This conclusion is based in part upon constitutional prohibition of the State of Washington and of the United States. Article 8, Section 7 of the State Constitution provides:
"No county, city, town or other municipal corporation shall hereafter give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm, or become directly or indirectly the owner of any stock in or bonds of any association, company or corporation."
Our court has interpreted the foregoing provision strictly and held in the case ofJohns v. Wadsworth, 80 Wash. 352, that the county commissioners of Pierce County were not authorized to donate public funds to the Western Washington Fair Association, a private corporation organized for the purpose of holding a county fair and giving an exhibition of stock, agriculture and dairy products. We quote from page 355 of said case:
"* * * Here the appropriation is to a private corporation organized for a worthy purpose, educational in its nature. There is no room, however, for construction. Unless plain, simple, direct words have lost their meaning, the legislature was without power to authorize the gift. * * *"
An additional case noted isMoses v. Summersett, 58 Wash. 403. The county commissioners of Lewis County by resolution appropriated $5,000.00 out of the current expense fund of the county in aid of and for the use of the Southwest Washington Fair Association in accordance with Chapter 237, Laws of 1909 and Chapter 174, Laws of 1903. The latter was an act to encourage county agricultural associations and fairs and provide that an association may apply to the board of county commissioners for grant to pay expenses and premiums awarded. The Supreme Court, noting that the Southwest Washington Fair [[Orig. Op. Page 6]] Association had a corporate existence, reversed the decision of the trial court and found that the county commissioners were without authority to appropriate county funds in aid of a state institution. The court further pointed out that laws granting aid to agricultural societies have been generally upheld, but have always been strictly construed.
The foregoing constitutional provision and the cases cited refer to limitations upon the authority of a county to appropriate public funds in aid of agricultural fairs. However, Section 5, Article 8 of the State Constitution provides that:
"The credit of the state shall not, in any manner be given or loaned to, or in aid of, any individual, association, company or corporation."
We interpret credit of the State of Washington to be the equivalent of money raised by taxation. In the case ofClark v. Des Moines, 19 Iowa 199, 224, 87 Am. Dec. 423, 116 A.L.R. 888, it is said:
"'No instance occurs to us in which it would be competent for (a municipal corporation) to loan its credit to or make its accommodation paper for the benefit of citizens, to enable them to execute private enterprises;' and where it cannot loan its credit to private undertakings, it is equally without power to appropriate the moneys in its treasury for such purposes, or by the conduct of its officers to subject itself to implied obligations. . . ." (Quotation from A.L.R.)
Additional objection to the grants of money paid to private corporations conducting a fair is found within the provision of the 14th Amendment of the Federal Constitution. InGreen v. Fraser, 253 U.S. 233, the Supreme Court of the United States said:
"The due process of law clause contains no specific limitation upon the right of taxation in the states, but it has come to be settled that the authority of the states to tax does not include the right to impose taxes for merely private purposes." (Quotation from 116 A.L.R. 887).
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FromMinneapolis v. Janney, 86 Minn. 111, 90 N.W. 312:
"A gift of land or other property to a private enterprise conducting a fair or exposition amounts to the same thing as levying a tax directly for the benefit of such enterprise, since the value of property given away by the municipality must sooner or later be made up through taxation." (Quotation from 116 A.L.R. 891)
FromHarrington v. Atteberry, 21 N.M. 50, 153 P. 1041 as quoted in 116 A.L.R. 892:
"Admit that the Fair Association of the County of San Juan exercises powers for the benefit of the general public, for a purpose entirely public in its nature, without contemplation of one cent of pecuniary profit to themselves or to the corporation, and still it is not established that, because of the exercise of powers for a purpose purely public in its nature, the County Fair Association is a part of the government of the state. The act did not create them such, and their functions are not governmental."
While the holding of a county fair at which agricultural, horticultural products of the county are exhibited and premiums awarded is educational and serves a public purpose, there is no authority for the appropriation of state funds to a private corporation or private individuals engaged in conducting such an activity. If payment of state fair funds is limited to the payment of awards and premiums, the expenditure would be valid.
The final objection we find to the payment of public funds to and in aid of a private corporation conducting a fair is that the auditor of the State of Washington has no authority to audit the accounts of a private corporation involving the expenditure of public funds in accordance with RCW 43.09.260 and RCW 43.09.290.
Therefore, in conclusion we are of the opinion that the Director of Agriculture has no authority to give grants-in-aid to private corporations engaged in the [[Orig. Op. Page 8]] business of conducting fairs.
Very truly yours,
DONALD E. WATSON
Assistant Attorney General