The Great Fairgrounds Swindle pt 3: Threats, Bribes, and Videotape.

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First – have you called Solorio and Correa yet, and asked them to stop this rotten deal?

Asm. JOSE SOLORIO 714-939-8469, or 916-319-2069

Sen. LOU CORREA 714-558-4400, or 916-651-4034.

Just to get you back into the mood:

Let the image of that rage-filled tycoon stay in your mind, while we fill in some gaps in our saga.  In our last episode we met (or tried to meet) Facilities Management West, Ken Fait’s mysterious entity that aims to run our Fairgrounds for the next three generations.  In this episode we’ll see Costa Mesa city officials mostly doing their level best (as rough as we’ve been on them, and given their varied abilities and motivations)  while squeezed between a gang of greedy ruthless profiteers and a Governor insisting on both an extortionate $96 million and a preposterously short timeframe;  with the profiteers seemingly in collusion with the Governor’s men.

But first I have a special treat I had promised just for you hardcore Fairgrounds Swindle junkies:  the original American Fairs & Festivals proposal from April, in PDF form.  The reason these hadn’t been up and available earlier is because, in stark contrast to Facilities Management West, AFF actually gave a PUBLIC PRESENTATION.

The AFF proposal:  What woulda, coulda, shoulda been…

You’ll notice that the American Fairs documents truly reflect the values and goals of those of us who were fighting to “derail the sale” and “save the fair.”  This stands to reason, as the man who quickly organized American Fairs, OC Marketplace President Jeff Teller, was one of our leading activists.  In January when the property was put up for auction by the state, Jeff sent in a “protest bid” of a mere one thousand dollars (while the Governor was looking for at least $100 MILLION and hoping for $180 million.)  As he respectfully explained in his “Protest Bid” letter of Jan. 8, he believed the Fairgrounds to be “a public treasure that should be owned by the citizens of Orange County,” supported the then-tentative proposal for the City to partner with the County in buying it, and hoped the protest bid “offered an additional avenue to achieving the community’s goal of keeping the Fairgrounds as it is today and ensuring it remains the permanent home of the OC Fair.”

One unexpected side-effect of this protest bid was that, once the auction fell through and the City of Costa Mesa began searching for a partner to finance/manage the deal/property, Jeff was on the short list of people invited by the City to offer proposals.  Only two groups responded to that invitation – Ken Fait’s Facilities Management West and, to everyone’s surprise, Jeff Teller’s hastily constituted American Fairs and Festivals.  And here, if you’re so inclined, you can read their 20-page proposal of April 12, along with two supplemental letters: one of April 20 detailing acceptable ways in which the Fairgrounds could be made more profitable, and a final one of April 25 announcing the crucial inclusion of Rick Julian and his Advanced Real Estate Services in the partnership, with their “management responsibility of more than $1 BILLION in assets.”

This proposal was exactly what the City and OC residents were hoping for:

• a guarantee of continued local, public control of the property through elected officials
• a promise to keep as much of the current work force as possible
• a generous profit-sharing plan with the City (in stark contrast to the miserly plan FMW would stick us with)
• a varied and distinguished Board drawn from Costa Mesa & OC education, law enforcement, business and culture, known for their local record of philanthropy (in stark contrast to the Scrooge-like, hyper-secretive ciphers running FMW)
• and apparently all the capital and financial security the state required.

So, why did Council switch their preference to FMW between May 10 and 18?

These negotiations were confidential, but this is what I’m told off the record:  It all came down to a multi-million-dollar security deposit, or “financial guarantee,” that the City needed and the State demanded, and at which Rick Julian drew the line.  Considering the very modest profit he was already expecting from this investment, given the public ownership and generous profit-sharing the partnership was already promising, he just couldn’t in good conscience sink any more of his investors’ cash into the project.  (“He’s not Santa Claus!” as Jeff paraphrased him.)

So the City, under constant threats from Sacramento (which we’ll look at in a minute) and a shrinking deadline, turned to FMW.  And FMW, with their plans to squeeze a lot more profit out of the property (and, some suspect, getting constant secret updates on the “confidential” talks) said “Sure!” to the financial guarantee.  On May 18 FMW became the sole negotiating partner.

Then, predictably, once their competitor was out of the game, FMW began making more and more demands, and agreeing to less and less of the City’s requests. As June rolled by, with FMW’s high-priced lawyers treating the City’s harried team with hostility and disrespect, throwing tantrums and papers, they managed to pull off an agreement (Memorandum of Understanding or MOU) that seems to grant FMW disturbing freedom to do what they like with the property for 55 years with no public oversight, while not really offering much revenue to the city at all.

And on June 22 as the Council sat considering whether to approve this rotten deal, they received repeated dire text warnings from the Governor’s office about what would happen if they didn’t;  warnings which worked on all Councilmembers except canny attorney Katrina Foley, the lone dissenter in the 4-1 yes vote.

Empty threats from inscrutable sources

During those last tense June days of negotiations, Councilman Monahan, as well as our esteemed blogging colleague the Potstirrer, darkly warned that if this FMW deal didn’t go through, the DGS (the Governor’s Department of General Services) would go ahead and just lease out the property to some developer for 99 years, and none of the protections we have – General Plan, Measure C, etc – would then apply.  Think condos, malls, casino!

This sounded a little extreme and improbable even to naïve me; you’d think a lease like that would require a whole new, and quite unlikely, act of legislation.  Sure enough, my friend former CM Mayor and land planner Sandy Genis looked through ABx22 which only authorizes an auction and sale, NOT a 99-year lease;  and Asm. Solorio’s office confirmed our suspicion.   And then when the Potstirrer tried to contact his DGS informant to double-check, the guy had vanished from the Department – vanished to wherever political dirty tricksters go to.

So THAT threat, transmitted from inscrutable Sacramento sources, was pure hot air designed to pressure Costa Mesa to hurry up and take whatever they could get from FMW.  Not surprising given the high-powered friends Fait & Co. have in the Capitol.  As the Daily Pilot‘s fine reporter Mona Shadia has informed us, FMW is represented up there by Gary H. Hunt of California Strategies, Gary H. Hunt who also happens to be state finance chairman for Governor Schwarzenegger.

The more common threat we kept hearing was that if the deal weren’t finalized by June 22, the state would put the property back on the auction block the following day. (We still hear that threat when we propose blowing up the FMW deal.)  Our DGS source laughs, and tells us that, sure, the papers were all drawn up for another auction, but it never was really gonna happen.  And what our DGS source tells us makes better sense, given that:

• The highest bid in January’s auction was Craig Realty’s $56.5 million, which was turned down as pathetically insufficient; and
• SINCE then, Costa Mesa voters have passed Measure C, which puts tighter limits on what a buyer could do with the property, so a second auction probably wouldn’t even get close to that $56.5 million.
• It’s getting to be think-of-your-legacy time for Arnold rather than think-of-a-few more measly millions to the state treasury.

On top of all that, speaking of Measure C, that measure would be in effect if the state went through with their auction threat, whereas as things stand now it’s not at all clear that Measure C applies in the new deal with FMW.  SO…  For everything, turn turn turn, there is a season … and now’s the time to call the state’s bluff.

Video break:  Mayor Mansoor gives ’em HELL!  (sarcasm)

Now sit back and watch Mayor (and Assembly candidate) Allan Mansoor haltingly question the men behind Facilities Management West.  (This is the fuller version – the context – of the scene we saw above.)  Remember, he was not on the negotiating team, but he HAD been the only councilmember to support FMW from the beginning, and continued to vote in their favor even after this outburst.  And remember, they had contributed at least $6000 to his Assembly campaign, which he was forced to return before voting in their favor.

But here he tries to regain a little self-respect by timidly broaching the topic of the abusiveness of FMW’s lawyers to the city team, and also questioning why the cap on the city’s profit-sharing percentage on sponsorship revenue had to be so damn low.  In the absence of FMW’s (relatively) honey-tongued spokesman Guy Lemmon, FMW is here represented by the hapless, half-deaf Rich Dick, and his irascible boss Ken Fait.  They show Mansoor as little sympathy as the Devil did to Faust when he plead for a little more time before having to give up his soul.  (Watch at 5:33, the “Oh shit!” look from Mansoor when Dick calls Fait up to the stand.)

I like that last moment, at 8:15 – Mansoor: “Do you have any other comments?”  Dick:  “Huh?”  Fait from the audience:  “NO HE DOESN’T!”  (laughter)

Why do we say that PUBLIC CONTROL has been given away?

“We understand ‘public ownership,’ at first blush, sounds appealing and desirable. But, we believe the proposal we have advanced achieves the goals of public ownership without its risks and obligations.”

– Guy W. Lemmon, Facilities Management West, May 10, 2010

The Potstirrer, and folks in Jose Solorio’s office, claim that we’re exaggerating when we say that the City has given up public control of the Fairgrounds. Other inside sources re-assure me that the MOU is just a start, and all our concerns will be addressed in further negotiations.  Well, I say that’s all speculative. All us civilians have to go by is the MOU, which contains what FMW wanted and what they managed to get, and it would be irresponsible of us to assume it’ll get any better.

And what we see is:

“FMW agrees that it will meet on an annual basis with the JPA [that’s the Joint Powers Authority with the city, basically meaning the Council at this point] to discuss the business plan and allow the JPA to make suggestions or provide input. However, FMW shall not be obligated to make any revisions to its business plan based on any suggestions or input received by the JPA.” [emphasis mine]

How is that giving our elected leaders, let alone the public, any say on what happens to the property?  This is gelded oversight.  (That means castrated, just in case you don’t know.)

And just as we were feeling that we saved the day by overwhelmingly passing Measure C in June, Sandy points out that the “OR” in the following passage implies that Measure C is now OPTIONAL; also the passage means that whoever is in the JPA at the time could opt to override Measure C or the General Plan, rendering them BOTH optional:

“… FMW may also undertake any other uses and events on the Property without the approval of the JPA so long as they are consistent with the City’s General Plan or the June 2010 ballot measure and consistent with the preceding Property Operation provisions.… Any use or event which is not consistent with either the City’s General Plan or the June 10, 2010 ballot measure [Measure C] will require the approval of the JPA.” [emphasis mine]

Again, this is straight out of the MOU, written by FMW’s very smart lawyers, accepted by the City, and it’s all we citizens have to go by now.  If City negotiators still hope to improve the agreement down the road, well, maybe they’ll succeed, or maybe they’ll drive FMW off, but all we know at the moment is that Public Control and Oversight of the Fairgrounds is Looking Moribund.

What the Wise Old Moorlach Says

Supervisor John Moorlach

County Supervisor John Moorlach, an Honest Conservative who’s been following the issue closely for some time, caused a lot of head-scratching with a post at the Red-faced County recently.  Without actually coming out against the deal (well, OK, he does call it “a desperate deal with a desperate governor at a desperate time” and mordantly notes that selling off OC’s prize jewels will only “will address less than 1/2 of 1% of the state’s current $20 billion shortfall”) he details why he worries that the deal does not make good business sense for FMW, unless they “implement a number of interesting ‘business’ maneuevers.”  He then lists some of those “interesting maneuvers,” which he HAS to know will be unpopular and disturbing to the public:

Increase the ticket price to the annual fair;

Find other “rentable” opportunities for the facilities;

Add additional ‘fairs'” on the site during the remaining eleven months of the year;

Provide an ongoing concert venue during the remainder of the year;

Add buildings that would allow for a ‘convention-lite’ opportunity for venues too small for the Anaheim Convention Center and too large for any available hotel in the county;

Decrease the current staffing;

Negotiate a new contract or approach to the ‘swap meet’ venue on the weekends.

What does that all mean, in less dispassionate terms?  How bad could this really get, looking at what’s made possible under the MOU, what we know of the people behind FMW, and what they’ll need to do to make their profit?

They’ve already let slip an admiration for Los Angeles’ gaudy, noisy, all-year venue “LA Live,” and have even begun to dub their vision “OC Fame” (some effin anagram I forget.)  Think how Costa Mesa residents will love having something like that in their neighborhood nonstop!

Residents in the area patiently, stoically put up with the traffic and parking problems once a year (as they are at this moment.)  Picture that – twelve months a year. That’s what FMW will NEED to do to make sense of their $96 million investment.  Per Supervisor Moorlach and any other serious analyst.

FMW is required by the MOU to keep certain “uses,” certain beloved uses, but as Sandy has noted, those uses can not only be re-sized and re-located at will, they are also very loosely defined:

• The “marketplace” (currently the name for the popular swap meet) could become a shopping mall.
• The “equestrian center” could be shrunk to a donkey or pony ride.
• The Centennial Farm could become a vegetable garden and a bunny in a cage.  (With probably no more free bus visits from schoolkids either.)

You get the idea.  With all these very possible scenarios, we not only drive Costa Mesa residents mad for miles around, but we permanently lose OC’s agricultural heritage and history which is what our grandparents bought the land for, and what we fought for throughout late 2009.  Given that the worst the state could conceivably do is auction it off to another entity who WOULD be constrained by Measure C AND the General Plan, and who would be statistically almost certain to be better, more trustworthy people, wouldn’t you say we’ve got nothing to lose?  So let’s just…

BLOW IT UP! —

Jim "Riggy" Righeimer

That’s what the petulant, meddlesome Planning Commissioner (and Council candidate) Jim Righeimer threatened to both Katrina and the Potstirrer back in early May:  If he didn’t have a “seat at the table” in the negotiations with AFF & FMW, he would somehow “blow up the deal!”  How or why he intended to do that is still obscure, but his threats were amazingly rewarded with a seat at the table as an unpaid negotiator;  and he seems to have been decisive in turning the deal to FMW.  And he’s just about the only guy going around now crowing about what a great deal it is.  Well, I’ll be writing a lot more about old Riggy in the coming months.  For now, though, I prefer to steal his phrase:  It’s time for us folks who care about keeping the Fairgrounds as they are, a public trust, to blow this deal up.

The Register's Barbara Venezia

And I have august company in this opinion, in the person of popular Register columnist Barbara Venezia, who in her July 23 column rang the “blow it up” clarion for many of the same reasons as I.

“…Are there loop holes possibly rendering the newly passed Measure C useless? Even if that’s not the case, fairground usage is slated to increase, as will noise and traffic. How will residents react? And then there’s longtime tenant OC Marketplace. They’ll have to renegotiate with Facilities Management West or be out of business with a stroke of a pen, certainly a worry for the hundreds of families depending on the Marketplace for their livelihood.

“Have Costa Mesa leaders gone so far down the rabbit hole on this they can’t find a way out? Maybe not. The deal has to be approved by Sacramento. Now is the time for someone to buy time by bringing issues of concern to these folks.

“If legislators start asking questions stalling the approval process, those who brokered this deal might get nervous. Fait’s group could walk. At this late date, could the property be vulnerable to another auction? Time’s on our side…

“Stalling could be the winning strategy in the end for those truly interested in saving the fairgrounds. After all, in about seven months we’ll have a new governor. “

[PS. Barbara, thanks for the shout-out (“Bloggers like orangejuice.com are having a field day dissecting the hurriedly made agreement and the players involved’) but I wish you had written “Bloggers like Vern Nelson at orangejuiceblog.com” – Not only is orangejuice.com not a “blogger” but it doesn’t even exist on the internets.]

State Senator Lou Correa

And I’ll end with this:  Speaking of the legislature pulling the plug, it sounds like we may have a key ally on our side.  Cigar-chomping courtier-columnist Frank Mickadeit “caught up with” Senator Lou Correa the other day, who regaled him with his own negative thoughts on the deal, none of which have to do with Allan Mansoor’s notorious race-baiting stunts, all of which have to do with concern for the “OC taxpayer.”

His three main gripes, as summarized by the Courtier Columnist:

1. O.C. alone is selling off a jewel to help erase a $19 billion deficit that belongs to all 58 counties;
2. he doesn’t believe citizens of Costa Mesa will ever really own the fairgrounds – that over the life of the 40-year [? 55!] deal, “it will get cut and recut” by future councils and legislators and;
3. the deal is not sufficiently transparent.  [ya think?]

All good points, Lou, and YOU are key to stopping this thing in its tracks!

Gentle reader, I gotta run.  I’ve spent days and days on this.  If I’ve convinced you, the least you can do is – once again – call Solorio and Correa – don’t worry about what district you’re in, they’re quite aware that they’re the only OC legislators that matter – and tell them to BLOW UP THE FAIRGROUNDS DEAL!

Asm. JOSE SOLORIO 714-939-8469, or 916-319-2069

Sen. LOU CORREA 714-558-4400, or 916-651-4034.