Friday, May 7, 2010 |Costa Mesa city officials have cobbled together a plan to purchase the Orange County Fairgrounds. But in order to pull it off, they will have to work under a tight deadline and overcome a drama among the players involved that is worthy of Masterpiece Theater.
The plan presented at this week’s council meeting by City Manager Allan Roeder is in some ways straightforward.
The city will pay the state $96 million for the 150-acre tract near the 55 and 405 freeways and finance the purchase through a partnership with one of two investor groups: Facilities Management West or a partnership between Advanced Real Estate Services and American Fairs and Festivals, which is a group of current operators at the site.
City officials are also working to establish a joint powers authority to administer the site and may be seeking partners such as the county or the nearby community college district.
There are, however, many details left to iron out and Gov. Arnold Schwarzenegger wants an offer on his desk by May 21. And so far officials have shown more of a penchant for dysfunction and Brown Act violations than they have for shrewd deal making.
At the center of a brewing controversy involving the city’s negotiating team is Planning Commission Chairman Jim Righeimer, who has been accused by fair activists of threatening them. Last month Righeimer also inadvertently admitted to Voice of OC that he had knowledge of illegal discussions about the fairgrounds negotiations.
And this week, Councilwoman Katrina Foley said from the dais that Righeimer had threatened her, saying that if he was not appointed as an advisor to the negotiating team, he would blow up the deal altogether.
During an interview this week, the city’s main consultant on the purchase — former fairgrounds CEO Becky Bailey-Findley — outlined what broad strokes the city has authorized for public dissemination about the proposals and future negotiations.
On Monday, council members are meeting in private session to rank the proposals before them, Bailey-Findley said.
In order to move negotiations forward in a fashion that complies with the state’s open records laws, council members would likely have to announce a negotiating partner on Monday.
Meanwhile, both private sector partners are working to secure their financing, Bailey-Findley said.
Yet there’s an interesting twist, which likely means that the group with the pole position for negotiations is the partnership of Advanced Real Estate Service and American Fairs and Festivals, which is called “The Legacy Project.”
Council members have consistently said they want the fairgrounds to stay in public hands. And American Fairs and Festivals is the only proposer that meets the standard. The other bidder, Facilities West, has sent the city a letter advising them that they would seek to own the land in order to accomplish financing.
So that offer is just a basic sale and would not end up with public ownership of the fairgrounds.
The biggest challenge facing The Legacy Project is financing and taxpayer safeguards. Questions have already arisen regarding how the group can secure $96 million in financing for a deal where they don’t own the fairgrounds property.
“Even though an operator may come in and guarantee the debt service, they would not have any tie to the land, and couldn’t use it for financing,” Bailey-Findley said.
Yet who, except the state, would finance such a purchase without having title to the land?
“The state is one option as possibly serving as the financier,” she said. “But that has to be negotiated between the partner, the city and the state. That hasn’t happened yet but it’s an option that’s being looked at.”
Bailey-Findley acknowledged that such a deal would normally take as much as a year to put together.
The challenge for deal negotiators, according to those familiar with fair operations, is making annual debt service payments for the enterprise, which are estimated around $6 million annually based on a $96 million purchase price.
Currently, OC fair operations net a profit of about $2 million each year. That means the private sector partners would have to figure out a way to either cut costs significantly or hike revenues in ways which are compatible with the zoning restrictions expected with a June ballot initiative.
Bailey-Findley said city-hired consultants also would turn their attention over the next month to audit current fair operations so both the city and private sector partners understand cash flow and infrastructure needs.
That kind of review will come not only in the midst of current fair preparations but also in the midst of an employee lawsuit that alleges in part that fair officials have not kept proper accounting of monies.
And, judging from this week’ city council meeting, there’s plenty of drama that the public hasn’t seen among the various groups secretly jockeying to influence negotiations.
Tuesday night, Councilwoman Katrina Foley publicly accused Planning Commission Chairman Jim Righeimer of threatening her, saying that if he was not appointed as an advisor to the negotiating team, he would blow up the deal altogether.
Reached Wednesday for comment, Righeimer declined only saying, “I don’t comment about personal conversations.”
City Manager Roeder did not return a call seeking official comment from the city about the allegations.
The controversy surrounding behind-the-scenes attempts by some council members to appoint Righeimer became apparent last month.
After a March closed city council session, members emerged and announced that two council members — Foley and Gary Monahan — had been appointed as negotiators along with Roeder. Several consultants, including Bailey-Findley, were retained to advise negotiators.
State open records and First Amendment activists say the meeting was illegal because council members told the public they were only discussing “price and terms of payment.” There was no mention of subcommittee appointments.
Days after the meeting, Righeimer mistakenly left a voice mail message for a Voice of OC reporter where his own comments confirmed that illegal discussions were taking place.
Righeimer relayed to someone – probably a council member who attended the closed session – that the appointment of Costa Mesa real estate consultant Rick Kapko was moving forward.
City Attorney Kimberly Hall Barlow has declined numerous requests for comment about the closed sessions and subsequent disclosures.
Toward the end of Tuesday night’s council meeting, Councilman Gary Monahan motioned to have Righeimer, Kapko and David Ball appointed as advisors to the council negotiating team on the fairgrounds.
That was approved on a narrow vote with Mayor Allan Mansoor and Councilman Eric Bever joining Monahan. Councilwomen Katrina Foley and Wendy Leece voted against the idea.
During a brief and terse interview Wednsday, Righeimer would only say, “I’m glad to see the city put some more eyes on this thing.”
Regarding his role in the negotiations, Righeimer would only say, “we’re there to advise Katrina and Gary.”
It’s unclear how, or if, Righeimer, Kapko and Ball will work together with the city-hired financial consultants from Keyser Marston and Associates along with Bailey-Findley.
“It’s complex but they’re not shying away from that,” Bailey-Findley said. “I’m not sure other fairs in the state would have the same relationship with their city the way the fair and the city are now engaged. Some cities might say go ahead and sell it. This community has certainly not said that. It’s a very emotional decision.”
City Manager Roeder did not respond to a question about when open session reviews of deal specifics would begin. In essence, there’s no idea of whether such a discussion will occur in public at all before the next offer is submitted to Gov. Arnold Schwarzenegger by the May 21 deadline imposed.
Correction: Jim Righeimer indavertently left a voice mail for a Voice of OC reporter in which he admits knowledge of a closed-session discussion among Costa Mesa City Council members that open records advocates have determined was illegal. A previous version of this story stated that Righeimer had admitted taking part in those discussions. He did not. We regret the error.