Fair Board Agenda Report

NOW I UNDERSTAND!
This afternoon the Board of the Orange County Fair and Event Center (Fairgrounds) provided us with a copy of it's agenda report for the meeting tomorrow, Friday, at the Fairgrounds. Yikes! I can see now why they felt this required an emergency meeting!


FINDING TO JUSTIFY THE EMERGENCY MEETING
First, in the finding being used to justify an emergency meeting we get a good idea very quickly what's to come when we find this statement in the middle of the paragraph:

"Upon examination of the RFP II it has come to the attention of legal counsel for the 32nd District Agricultural Association that title to the fairgrounds may remain in the 32nd District Agricultural Association and that special provisions of law govern the disposition of the proceeds of the sale of property belonging to District Agricultural Associations."

So, any bidder for this property under the new RFP may have second thoughts about making an offer under these circumstances. And it gets even more complicated...

LAWYER'S ANALYSIS
The staff report includes a report from the Fair Board's legal counsel, Manatt, Phelps & Phillips, LLP, that first summarizes some of the issues at play. Some of the answers provided make the success of any sale now suspect. If you wish to read the entire staff report, including the legal summary and the deed, click HERE.

NEW BUYER MAY NOT BE ABLE TO OBTAIN TITLE INSURANCE
For example, based on their analysis, there is no clear authority for the 32nd DAA (Fair Board) to transfer the Property to a buyer, which means the buyer may not be able to obtain title insurance.

TITLE TRANSFER COMPLICATIONS
Even if the buyer could obtain title insurance, ambiguity in the statute makes any transfer of the Property in which the Fair Board did not execute a properly authorized deed subject to challenge.


WHO GETS THE MONEY?
Due to conflict in the legislation enacted in 2009 and the previous existing legislation it's not clear whether proceeds from the sale could be deposited in the State's General Fund or whether they must be deposited in the State's Fair and Exposition Fund.

HISTORICAL NEWS CLIPPING
The lawyers for the 32nd DAA (Fair Board) have discovered issues dealing with the actual ownership of the Fairgrounds, including the original title for the property and a contemporaneous news clipping from the Los Angeles Times from July 7, 1949 that shines new light on this transaction. That clipping is part of the staff report.

MY SUSPICIONS CONFIRMED
Confirming my previous entry in which I indicated, based on a comment in the new RFP, that the title of the property is held by the Fair Board, a search by a title company confirmed that fact.

AND, OH, BY THE WAY...
According to the report from the lawyers, the quitclaim deed that transferred the property to the Fair Board back in 1949 includes a stipulation that, in the case of a national emergency, the federal government can take full, unrestricted possession, control and use of the Property as long as the government pays fair rental value. This encumbrance will create a complication in any transaction transferring the title of the Property.

NEW "GHOST" DISTRICT ROLE IN QUESTION
The legislation that was created to sell the Property, Assembly Bill No. 4x22, signed into law July 28, 2009 also created agricultural District 32a, which is described as a "Disposition District" that apparently consists of all the real property in the 32nd DAA. However, no directors have been appointed to this district, nor does it have any officers or employees! Apparently the language in the bill creating the new District doesn't have appropriate language transferring the property, which leads to a problem of subsequently transferring title.

FURTHER APPROVALS NEEDED
So, the issue of who has the authority to actually sell the property exists and, according to the lawyers, if the Fair Board has that authority it still must get approval of two other State departments to complete the sale - the Department of Food and Agriculture and the Department of General Services.


STATE CAN'T INDEMNIFY TITLE COMPANY
Because of the fuzziness of the title transfer and the probable inability to obtain title insurance, discussion of whether or not the State has authority to indemnify the title company leads the lawyers to comment, "The Bill does not grant the Department or any other state institution or agency any such authority."

PERSONAL PROPERTY
The Bill authorizes the sale of the real property only. If a buyer wants the personal property they must negotiate with the Fair Board, as indicated in the RFP. This also requires the approval of the above two departments.

LAWYER'S CONCLUSIONS
The lawyers summarized their findings with this paragraph:

"Due to ambiguities in the Bill and conflicts between the Bill and the existing legislation, the Department’s authority to effectively convey title to the Property through the RFP process is unclear. In addition, even if a title company agrees to insure title, it is unclear as to whether the funds from the sale may be deposited into the state’s General Fund as contemplated by the Bill, whether the funds should properly be deposited into the state’s Fair and Exposition Fund as required by Section 4002 of the Food and Agricultural Code or whether the funds must be deposited in accordance with Section 9 of Article III of the California Constitution."

FAIR BOARD HOLDS THE KEY
It seems clear that, if the lawyer's analysis is correct, the current Fair Board holds the key to making a sale work. Based on the legal analysis, there are specific acts the Board MUST take to make the sale work. The question now is, "Will they?"


HOLD ON A MINUTE!
My take on this mess is that if I was a potential buyer, fully immersed in the process of responding to the RFP with a bid for the Fairgrounds in two weeks, I'd stand up, take a deep breath and have my team STOP what they're doing until some of these new entanglements can be sorted out.

DRAT!
If I'm in the Department of General Services tomorrow when this hits the fan I suspect the language will be loud, angry and comprised of very short, four-letter words.

JUST A TEENY SMILE
And, if I'm the Fair Board, I suspect I'm going to sit back with just the slightest hint of a smile on my face and wait.

EXPIRED BOARD SEATS STILL OCCUPIED
As an aside, the CEO of the Fairgrounds, Steve Beazley, confirmed for me today that there are two Fair Board seats vacant and three have had their terms expire. Interestingly, those expired seats are still occupied - by Chair Kristina Dodge, David Padilla and Joyce Tucker. Beazley tells me has been standard practice with the Fair Board. That's a curious situation, but it seems as though the Governor could immediately place five compliant members on the Board to form a majority and take control of this situation if he chose to do so.

MORE TOMORROW
I'll report more Friday after the Fair Board meeting. I suspect there will be more than a few interested parties in attendance and many questions posed during the meeting. Will the drama never end?