Costa Mesa Moves Closer to Fairgrounds Purchase

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Tuesday, May 11, 2010|After weeks of furious private negotiations and reviews of financial proposals, Costa Mesa city council members emerged from closed session Monday and voted 3-1 to move forward with a partner to solidify a $96 million offer to buy the Orange County Fairgrounds from the state.

“It’s been pretty crazy up to the end,” said City Councilman Gary Monahan, describing conference calls with the governor’s office hours before the public vote at Monday’s special meeting. Monahan, along with Councilwoman Katrina Foley, is a city negotiator –

Three councilmember’s — Monahan, Foley and Wendy Leece — voted to authorize the city attorney to move forward with exclusive negotiations with American Fairs and Festivals, which is in the midst of seeking a financing package from the state.

Yet just before the vote, a visibly frustrated Mayor Allan Mansoor let out a rant against Gov. Arnold Schwarzenegger saying, “because of the state’s actions, we’re not left with any choices.”

“We don’t know where the money’s going to come from. We don’t have anything in writing,” he added.

Mansoor told the public he was voting no at this early stage because of “other actions that are questionable that I cannot get into.”

He declined to elaborate after the meeting.

Councilmember Eric Bever — who has written the city a letter citing opposition to the proposed deal — apparently left closed session early at 5:17 p.m. and never reappeared for the council vote, which took place afterwards.

City Manager Alan Roeder was less dramatic and more diplomatic in describing the situation.

This process has been difficult for the city and the city council,” Roeder said. “One of the benefits of the group is that we do not all come to this from the same point of view.”

Another diplomatic note was struck by Foley who publicly thanked Planning Commissioner Chairman Jim Righeimer – one of three council-appointed advisors -less than a week after she publicly accused him of threatening to blow up the deal.

“I wanted to thanked the advisors, Rick Kapko, Jim Righeimer and David Ball, whose insights gave us something to move forward with,” Foley said.

City Manager Roeder told the public on Monday night that staff, city council negotiators and advisors worked intensely throughout the weekend to finish up reviewing two competing financial proposals for a city purchase of the fairgrounds from the state.

In a rare move intended to quell public concerns over violations of the state’s open meeting laws, Roeder released the confidential report given to council members.

“We are making every effort to be transparent,” said Leece noting that the only things being negotiated in private where price and terms of payment. “Everything else is out in the open.”

Yet the process is moving and changing quickly, and the public remains largely out of the loop.

For example, the documents released to the public Monday night disclosed that the state will retain title to the property, even in the event of a deal with Costa Mesa being struck. This means that the city would be entering into something more like a long-term lease-to-own deal than an outright purchase.

Originally, city officials said a local joint powers authority would hold title to the land, and the financing used by private vendors wouldn’t be secured to the land.

They were essentially telling the public that private venders would make payments on the loan to buy the fairgrounds, and the joint powers authority would keep title to the land regardless of whether the venders made good on the payments.

Other interesting tidbits of the financing deal released to the public Monday include:

  • A $19.2 million — or 20 percent down payment — by American Fairs and Festivals to the state.
  • A 5-percent interest-per-year financing deal amortized over 40 years.
  • Four initial years of no-interest payments to allow for a smooth transition.
  • Annual debt payments of $5.5 million.

During the council session, the losing bidder – Facilities Management West – took a shot at critiquing the American Fairs and Festival proposal.

That group’s plan is to purchase the fairgrounds directly from the state and then offer the city chances to buy it back over the next several decades.

The Facilities West proposal argues that the joint powers authority proposed by American Fairs and Festivals would be tough to manage. Also doubtful, they argued, is the possibility that no local tax dollars or city legal liability would be at risk.

Ironically, Facilities West cites a major advantage in their proposal as the participation of two current vendors at the fairgrounds: Comcast-Spectacor and Ovations Fanfare.

However, both those companies are also cooperating with American Fairs and Festivals, essentially placing their bets with whichever operator gets the management contract.

American Fairs and Festivals is largely the creation of Tel Phil Enterprises, which runs the OC Marketplace on the fairgrounds. That company itself pays a rent to the fairgrounds of up to $3 million each year. Its rent was as high as $5 million annually in years past.

City officials are expected in the next several weeks to turn their attention to a full audit of fair operations in order to get a sense of whether it is possible to squeeze additional dollars from fair operations for debt service. Current profit on the site is estimated at a little more than $2 million.

All private sector bidders have stated they expect to trim jobs at the fairgrounds in order to meet debt service putting current workers at the fairgrounds in a precarious situation regarding their job future.

A detailed offer is expected to be delivered to the state by May 21. Several public votes are expected in the near term, according to the city attorney.

Before signing any deal, council members would have to come back to public with details in writing. And any final agreement with the state also would likely be subject to public meeting.

“There’s a lot of hurdles to jump through,” said Councilwoman Leece.

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