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Tuesday, April 6, 2010 | The city of Costa Mesa has just two weeks to make a deal with Gov. Arnold Schwarzenegger and put an end to the prospect of the Orange County fairgrounds falling into the hands of private developers.
A lot must happen for the city officials to meet that deadline, and right now they aren’t even close.
In fact, City Manager Alan Roeder said he’s not sure what “making it” means in terms of what has to be accomplished this month to satisfy the governor.
“It’s a really tight deadline,” Roeder said. “It’s a difficult position to be in.”
Orange County, which at one point was Costa Mesa’s partner in the deal, has walked away. County leaders are now saying the $100 million price tag for 150 acres between the 405 and 55 freeways is too high and they don’t want to put taxpayers on the hook in a budget-cutting environment.
Meanwhile, Costa Mesa officials are only now beginning to put together a negotiating team. City council members are expected to discuss appointments during a closed session discussion of the fair situation at Tuesday’s regular meeting.
“We’ve told Costa Mesa they’re on their own,” said County Supervisor Bill Campbell. “The deal they’re doing would put taxpayer money at risk…because of the price demanded by the governor. It’s way too high.”
Campbell’s warning: “If the city of Costa Mesa wants to pay a higher amount, they must understand they will have to intensify the use,” he said, referring to the extra revenue the city would need in order to finance the debt it would be taking on.
However, sources close to the Schwarzenegger administration say the governor would be willing to offer Costa Mesa a financing deal that might be too good for the city to pass up.
The framework of the deal being offered to city officials: Several current private-sector vendors and operators already familiar with the site operations would put up the initial down payment, probably of $5 million. Then the state would carry the debt. And the private sector interests would then be on the hook for guaranteeing debt payments.
In essence, the current vendors and operators would finance the property purchase for the city and guarantee the debt service. That would help city officials keep their promise that the city’s general fund would be insulated from any fair impacts.
Ultimately, the city would run the fairgrounds property “as-is” working out debt payments that don’t put too much pressure on the site to generate revenues beyond what profit is currently acknowledged, about $3 million each year.
And the deal also comes with the trademark to the fairgrounds operation, lessening the chance that another venue – such as the Great Park in Irvine – could lure fair operations there. There’s also a threat implicit in the tight negotiating deadline, sources said.
If the city can’t structure a deal, there’s no turning back and a private sale would be the next step. Virtually all of the private bidders for the land, recently turned away by the Schwarzenegger administration, are developers of one sort or another.
Newport Beach-based outlet developer Craig Realty was the winning bidder in January when the last auction for the fairgrounds was completed. That group, which operates outlet malls in Palm Springs and Los Angeles had offered $56.5 million for the property. Officials say that Craig and others are still pushing for the governor to rebid the property after canceling the auction last month.
Private owners would likely seek to intensify usage, further fueling the existing firestorm of controversy with the city and neighbors who are in the midst of placing an item on the ballot to restrict zoning on the fairgrounds.
But the governor also faces his own deadline: November.
That’s when his term runs out.
And some insiders say there’s also a possibility that city and county leaders can stall any deal banking on the chance they can essentially outlast Schwarzenegger.
Roeder said the governor is aware of that possibility and that’s why the tight deadline is serious. “They have said rather consistently they do not want this dragged out past the governor’s term,” Roeder said.
It’s mildly irritating, Roeder acknowledged, because for the past year no one in Sacramento was interested in talking to the city, he said.
And now, in the midst of a reduced staff and budget, Roeder has to do in less than a month what a city would spend as much as six months just studying.
Even if a deal were struck today, there still would be legislative roadblocks to be dealt with, such as constitutional questions about how the profits from a sale can be accounted for, how to transfer the fairgrounds trademark and the fate of the 32nd District Agricultural Association, which administers the fairgrounds in Orange County.