Saturday, July 31, 2010

Fair Board Trying An End-Run?

The staff report for the Fair Board meeting Monday, August 2nd is posted and can be read in total HERE. It's clear from reading that report that the Fair Board is trying an end run on the sale of the Fairgrounds.

Once there you will scroll down a few pages through the agenda to a letter dated today from Board Chair Kristina Dodge to Governor Arnold Schwarzenegger informing him that in it's meeting on the 2nd the Board will discuss a potential revenue sharing plan between the 32nd DAA and the State of California. Following Dodge's letter you will find a lengthy and thorough staff report outlining the proposal being formulated to present to the State as an alternative to the deal that is pending with Costa Mesa.

This is the deal they were told to table last April, apparently because it would interfere with negotiations between the City of Costa Mesa and The State.

As you read down through the report you will find the goals of this plan, which I've reproduced here:

I. Recommended Goals of a Revenue Sharing Model

1) 32nd DAA creates revenue sharing model analogous to a purchase in most of its economic features using the State’s desired purchase price of $96 million dollars.

2) OCFEC is preserved as a fair and event center.

3) Offers reasonable scenario to “pose the best opportunity for the State to achieve the highest and most certain return for the property” as stated by the Department of General Services.

4) No taxpayer dollars assumed in financial analysis. OCFEC has no ability
to levy taxes to support its programs or facilities. User fees will fund 100% of the plan.

5) Contin
uity of fairgrounds operations by an experienced staff.

6) OCFEC moves from being a revenue neutral State Agency to a revenue
contributing State Agency.

7) As such, OCFEC is removed from “underutilized” status.

8) As OCFEC profitability increases, so too does the contribution to the State of California.

9) OCFEC employees’ jobs and benefits are kept whole.

10) Property remains in the State’s real estate holdings.

11) Number and size of public-private partnerships is expanded.

12) 32nd DAA enters into discussions with State of California on the appropriate
application of the Governor's California Performance Review as it relates to governance restructuring of the DAA to permit the DAA more flexibility in the entrepreneurial aspects of its operations while maintaining appropriate governance procedures such as open meeting, financial disclosure and conflict of interest requirements currently applicable to the DAA.

For example, under their Item ll, Price and Terms of Payment Summary, they present a plan that stretches out for 80 years and provide a summary of total payout that exceeds the current City deal. It appears, however, that the State would receive less money up front - the City deal calls for $19.2 million in prepaid interest at the beginning. This deal calls for $5 million up front, then 14% of the gross revenues in years 2-25, with a minimum annual of $2.5 million. They would pay 7.5% of gross revenues in years 26-80 and the State retains title to the property in perpetuity.

I'm not going to attempt to repeat every element of the staff report here, honest. You can read it for yourselves. The staff report goes on and on, with exhibits, floor plan, financial summaries, etc. I'm not going to attempt to interpret all that for you - it makes my head hurt. Some of you who use that side of your brain more often may enjoy that trip through Numbersland, so I'll leave it up to you.

One thing is very clear to me - the Fair Board is pulling out all the stops to quash the sale of the Fairgrounds and are throwing this plan into the mix at what amounts to the last minute to sway the Governor and the folks at the Department of General Services.

If accepted by the The State, this would kill the proposed sale. I asked CEO Steve Beazley a few minutes ago why this was being proposed now. He told me that was a question for the Board Chair, Kristina Dodge.

Well, one can read much into that - like maybe the well-connected Mrs. Dodge and her Vice Chair, political king maker, Dave Ellis, have heard from their pals in Sacramento that the City deal is dead and they're trying to head-off the placement of the Fairgrounds back on the auction block, which is what the DGS leadership said they would do immediately if our deal falls through.

I postulated with Beazley that, at the meeting Monday, the Board would hear this proposal presented and explained, mull it over and perhaps recommend changes, then approve it for presentation to the Governor. Beazley agreed with that scenario, but reminded me that the Governor probably already has this plan in his hands today.

I imagine Monday's Fair Board meeting will draw a pretty large crowd, including many Fairgrounds employees and vendors of the Marketplace and Fair vendors, too, since the Fair is dark on Mondays and Tuesdays. It's going to be a very, very interesting meeting - to say the very least. I'll report back when I know more.

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Anonymous Bootsie said...

Geoff, let me preface this comment by saying I am an ardent fairgoer, and have attended the Orange County fair for well over 50 years. First with my children, and then with my grandchildren. I am in NO way connected to the OCFEC. I am NOT an employee, nor are any of my relatives.

It's way past time for the community to get behind the Orange County Fair and Events Center board, and the OCF employees. The city's current purchase proposal is intended to benefit the city coffers ONLY, not the fair going public, or the taxpayers.

The fair will NOT survive the city's purchase. When you invite developers to your party, you are going to get a whole lot of development, and no fairs. The fair and the swap meet will be in the way of their plans, I can assure you.

I worked for developers for a substantial part of my life, and they have the ability to move mountains. Measure C will quickly be dispensed with. The fair will disappear overnight. That's what we are going to get. Take it or leave it!

The community needs to get behind the Fair Board NOW!!! Stop pointing fingers, and start saving our fairgrounds. This is the last chance we will have to do so.

Needless to say, I am THRILLED to hear the OCFEC board is finally stepping up to the plate. They are the only entity that truly has the community's interests at heart.

7/31/2010 05:46:00 PM  
Blogger The Pot Stirrer said...

OK, Bootsie, I gave you a chance to say your piece and I will assume that you're telling the truth about your lack of affiliation with the Fair Board.

I think you are wrong about this situation and pretty darn arrogant when you say the Fair Board is "the only entity that truly has the community's interests at heart." If that was the case they wouldn't have started this whole mess in the first place.

I've read the staff report and find myself wondering why the Fair Board didn't recommend this kind of "entrepreneurial" approach to managing that property a long time ago. If their current plan is accurate, they could have been sending millions of dollars into the state coffers by simply doing a better job running the Fairgrounds. Would it have been enough to keep the state from sinking into it's current fiscal situation? I don't know, but it certainly would have helped.

Don't you feel just a little bit betrayed by them at this point? Only when it became clear that their jobs are on the line, along with the 80+ state employees, do they finally decide to do something proactive. Instead, they've just rocked along, making only enough profit to not be a drain on the state and enjoyed the fruits of their positions - free concert tickets, etc. Regardless what happens - if the governor decides to abandon Costa Mesa's deal and go with the Fair Board's proposal, some house-cleaning needs to be done over there.

The proposal by Costa Mesa and their vendor will, in fact, save the Fairgrounds and provide some significant cash to the State. It's quite likely that, under the new management of the vendor, a much more "entrepreneurial" atmosphere will exist at 88 Fair Drive, and that that entire venue will be more vital, action-packed and profitable.

7/31/2010 06:30:00 PM  
Anonymous NoFatCats said...

Hate to correct a man on his soap box, Geoff, but a couple of things you seem to willfully ignore in your response to Bootsie, is that the current board 1) didn't get us into this mess, Arnold did; and 2) the board does not have a consistent membership so you cannot blame this board for things that weren't done "a long time ago."

Also, you seem to be criticizing the board for not acting "a long time ago" but are also criticizing them for acting period. You guys criticized them from the beginning of this mess over a year ago.

One thing supporters of the city's plan seem to deny is that fact that a bad deal is a bad deal.

It seems to me that you would rather embrace the city's bad deal instead of embracing the board's good deal simply out of spite.

My family's been going to the Fair for years and this year is wonderful. I can only attribute the success to the current group who run it so I hope they get to keep running it.

8/01/2010 09:25:00 AM  
Blogger The Pot Stirrer said...

NoFatCats, I suspect you really DON'T "hate to correct a man on his soap box". That's OK - that's why we're here.

Actually, the current Fair Board DID get us into this mess when they unleashed Dick Ackerman. That part of the story has been flogged for that year you mentioned, but conveniently managed to forget.

Yes, this iteration of the Fair Board can't take the blame for decades of performance - or lack thereof - by their predecessors, but that can take the blame for what happened, or didn't, on their watch. They could have, and should have, been doing what they are proposing now for their entire tenure. They could have, and should have, been acting "entrepreneurial" for years and generating more cash for the State.

I don't view the current deal, based only on what I know about it, as a "bad deal". IF the Fairgrounds is sold the restrictions imposed by Costa Mesa's zoning and Measure C kick in. The City is negotiating a ground lease right now that will, theoretically, impose further restrictions. I'm not excited about Facilities Management West wanting to run their own show once the deal is signed... the City shouldn't be sticking it's nose into their business unless it violates the terms of the agreements.

And, I'm not so sure the Fair Board's deal is a "good deal", either. Yes, it's longer and some of the numbers appear to be larger, but I have not tried to compare the two deals line by line. That's for others to do. It gives the State less money up front - 2/3 less, which may be quite significant in the Governor's eyes.

Yes, your view of this year's Fair is shared by many. Just can't get enough of that deep-fried butter, I guess. Yes, Beazley and his crew seem to be doing a great job this year.

Thanks for you opinion...

8/01/2010 11:05:00 AM  

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