The association that owns and operates the Del Mar Fairgrounds has agreed to pay $5.5 million to settle allegations that it received funds from a pandemic-related loan program even though it was not eligible. According to federal prosecutors, the 22nd District Agricultural Association, which operates the fairgrounds, took a $4,713,700 loan through the Paycheck Protection Program, or PPP, in May 2020 at a time when the pandemic had shut down most public events. Prosecutors said the program was designed to help businesses that had been hurt financially by the pandemic but was not designed to be given to government-owned entities. The U.S. Attorney’s Office argued the association — which is comprised of a nine-member board, all appointed by the governor of California — is government-owned and therefore not eligible to receive a PPP loan. “These loans were intended to provide critical relief to eligible businesses during a time of global crisis,” said U.S. Attorney Tara McGrath. “This settlement upholds the integrity of the COVID-relief program and holds the DAA accountable for obtaining millions in taxpayer-funded benefits to which they were not entitled.” The repayment includes the original loan principal plus $97,890 in fees and interest to the bank that processed the loan, federal officials said. In a statement, the association’s board of directors said its members believe the program’s definition of a state institution was “ill-defined” but called the repayment an “amicable settlement.” “Our board of directors is confident this decision will allow the 22nd DAA to move forward and get back to doing what we do best: producing and hosting cherished events and activities that bring our diverse communities together,” the statement read. The pandemic halted much of the fairground’s public events, including the annual San Diego County Fair and thoroughbred horse racing. Association officials applied for the loan as a lifeline for the cash-poor organization that depends almost entirely on revenue from things such as tickets, food and beverage sales, parking and a few long-term leases. Unlike cities, counties and states, the agricultural district receives no money from property, gas or sales tax revenue to pay the bills. Numbers provided by the 22nd DAA show that the organization had just north of $1 million on hand in May 2020, in comparison to nearly $40 million it had as of the end of August this year. As a result of the revenue losses, the association laid off approximately 85% of its staff. “To survive during a chaotic and confusing period when revenue sources were cut off, the 22nd DAA — like many other DAAs across the state — applied for federal aid through the newly established PPP after exhausting other possibilities,” officials said. The loan application was approved and then forgiven by the federal government, officials said. The board of directors said the U.S. Attorney’s Office began examining the definition of a state-instituted association several years after the loan was received and contends it was still eligible to receive the loan. The association said it would be working with its partners in the industry and lawmakers to better clarify its status under state law and the federal tax code for the future.