Monday, June 28, 2010 | It began almost a year ago with “derail the sale.”
Fueled by that slogan, a collection of equestrian, environmentalist, and fair vendor interests, which calls itself the OC Fairgrounds Preservation Society, circulated petition drives, passed City Council resolutions across the county and even led a ballot measure in this month’s primary election that seemed to lock in the future of the OC Fairgrounds.
Their message was clear: The public and Costa Mesa residents didn’t want to see the property — spanning 150 acres in the middle of town, near the 55 and 405 freeways and South Coast Plaza — go into private hands and expanded.
Yet the deal voted on by the Costa Mesa City Council last Tuesday calls for exactly that: an agreement to sell the property to a private investor group that offers no future public participation in the direct governance of the Fairgrounds.
The final deal came together quickly — supposedly sketched out over the previous weekend at a local bar owned by a councilman.
The battle for ownership of the Fairgrounds has been largely characterized by this kind of secrecy. Months-long private negotiations involving the governor’s office, the governor-appointed fair board, the state Department of General Services, city officials and a host of private sector groups.
Then, at the eleventh hour, the public is informed. That was the case last Tuesday night.
In the midst of a marathon City Council session that would end with a 4-1 vote in favor of the final deal, the activists sat around small break room just off the council chambers scrambling to read ad stack of title, lease and regulatory documents. They were dumfounded.
“It’s so bizarre you have to laugh,” said Theresa Sears, an equestrian and environmental activist who has spent the last year working with the Preservation Society and city officials to fight Sacramento’s plans to privatize the Fairgrounds.
“It was supposed to be from the bottom up. Now, it’s not even top down. It’s being dictated from the outside,” said former Costa Mesa Mayor Sandy Genis, another Preservation Society activist.
These negotiations have all taken place during an ongoing, low-profile district attorney investigation and even forced the resignation of the state attorney general from representing the fair board due to potential conflicts of interest.
To date, much official attention has focused protecting the general fund — and therefore the taxpayers’ bottom line — in the negotiations. This deal does that, according to the terms hammered out last week.
However, also apparent is that in order for Facilities Management West to wring the money it needs out of the property, it will have to change the character of the Fairgrounds.
Under the terms of the deal released, the state would receive a down payment of $20 million from the investor and payments over the next 55 years through a joint-powers authority established by the city this month. The city would receive nearly $1 million in rent annually for a period during the lease with Facilities Management West.
But the new joint-powers authority established by the city has no voting rights over the property. In essence, it is simply a shell for payments to the state. There’s nothing in the legal structure to ensure any sort of public participation, much less direct control, over what happens on the fairgrounds under the management of Facilities Management West.
In short, the joint-powers authority has no rights over subleases, which means the company can essentially do what it wants on the property.
That was made perfectly clear at the council meeting by the heads of Facilities Management West, who appeared before the council without the friendly veneer of their public relations representative, Guy Lemon, who was in Phoenix witnessing the birth of his granddaughter.
The company honchos, Ken Fait and Richard Dick, weren’t expecting anything more from council members on the dais than some kudos. And they were blunt when asked questions that probed beyond the surface.
“We’ve offered you the max rent, and I’m not going to offer a cent more,” replied Fait when Mayor Allan Mansoor asked why naming rights revenue couldn’t tip more to the city side. “You’re receiving a lot of money for this property,” Fait said.
Fait ended the conversation by bluntly stating his terms: “It’s pretty simple. I want all the money beyond that.”
“I’m a private entrepenuer,” Fait said. “I hope I make much more than I’m paying you.”
At the public comment section that immediately followed this interchange, OC Fairgrounds Preservation Activist Jill Lloyd (who does public relations for the swap meet at the Fairgrounds), stood at the podium visibly stunned.
“I don’t know how to follow that,” Lloyd remarked before criticizing the lack of public transparency in the newly formed city fairgrounds joint-powers authority.
Deal proponents, such as Planning Commissioner Jim Righeimer, argue that any major changes at the property would have public review as part of the natural planning hearing process as well as City Council review.
But Genis is already concerned that the lack of public participation on the governance of the property will be the real lasting drawback of this partnership. That fact also drew the lone vote against the project, cast by Councilwoman Katrina Foley, who was a lead city negotiator.
Given that the new entity will face considerable debt payments, Genis sees lots of battles with the community as the company seeks to expand uses to maximize profits. One item inside the lease agreement, talking about “LA Live signage” makes her wonder: “So how do you pay $5.5 million each year? You turn it into LA Live.”
During the meeting, Costa Mesa City Manager Alan Roeder, exhausted and tearful, kept repeating the words “we’ll make it work.”
But in an interview days later, Roeder acknowledged that the city negotiators in large degree lost control of the process and let the company and the governor’s office strike a deal that lacked transparency.
“Frankly, I’m asking myself if I didn’t vet expectations too high in terms of governance and transparency as one of the principals we were seeking to achieve,” Roeder said.
“I’m now asking myself, looking at the structure of what we needed to put together, was it possible to think you could have complete transparency in governance and at the same time rely on the private sector to run it?”
Roeder said whole process for preparing the public authorization of the Fairgrounds deal was rushed. He hated “being put in a situation where we’re having to put out documents at the last minute. That’s not how we do business. We know we’re going to be castigated by the public.”
Yet Gov. Arnold Schwarzenegger wasn’t waiting around. And he was threatening to sell the property the next morning if the deal wasn’t signed.
“It’s not by choice,” Roeder said.
“We know how the public feels about having documents passed out the day of the meeting.”
Still Roeder defends the deal saying it’s the best-negotiated settlement of a horrible situation and does protect local taxpayers. It also brings an asset out of state planning control and ushers in City Council jurisdiction.
And basically, Costa Mesa taxpayers get to buy a large urban piece of property from the state, save their fair, and own it outright in 55 years without paying a cent, he said.
“From a financial standpoint, given the uniqueness of the site, the time constraints, it’s a fair financial deal for the city,” Roeder said. “There aren’t many deals where you can have nothing in a deal and generate those kinds of returns.”
Yet Roeder knows that if this deal goes through, it’s the start of a challenging era in terms of what goes on with the site. “It won’t remain the way it is,” he said, except that it will “remain a fairgrounds” once a year, during July and August.
“I have no question that they will probably bring things forward that we won’t like.”
Correction: A previous version of this story incorrectly stated that Jill Lloyd did public relations for the Orange County Fairgrounds.