Legislature Barely Passes Bill to Allow Disputed KOCE Sale

State lawmakers approved a bill late Thursday allowing an Orange County community college district to sell a public television station to a foundation backed by wealthy, influential figures for $18 million less than what it would fetch on the open market.

The bill cleared the state Assembly and Senate with the minimum votes necessary for passage and now heads to the desk of Gov. Arnold Schwarzenegger.

The foundation’s backers include some of Schwarzenegger’s biggest financial donors, who have given nearly $950,000 to his campaign accounts since 2002.

The bill was opposed by all of the Republicans in the Legislature, and virtually all of the lawmakers from Orange County. A Republican staff analysis of the bill in the Legislature deemed it a “gift of public funds.”

The measure is the latest effort to essentially preserve the Coast Community College District’s troubled 2004 sale of KOCE-TV to a foundation bearing its name, rather than to Daystar Television Network of Dallas, a televangelist broadcaster. An attorney for Daystar called the legislation unconstitutional and said it would be challenged in court.

The district decided to sell the station, which has a fraction of the audience of Los Angeles-based KCET and carries many of the same programs, after subsidizing it for years at an annual cost of $2 million.

Before the district put the station up for sale, it was warned by a consultant that televangelists would bid heavily for the property because of its revenue potential.

The station foundation, which hoped to buy the station and maintain it as a PBS affiliate, failed to raise substantial cash for its bid, even though it was backed by some of Orange County’s captains of industry -- including Broadcom Chairman Henry Samueli, Conexant Chairman Dwight Decker and Allergan Chairman David Pyott, all of whom have been generous donors to Schwarzenegger.

Daystar offered $25.1 million in cash in 2003 and raised its bid to $40 million after the sale deadline. The foundation made an offer it valued at $32 million, but only $8 million of it in cash up front. The rest of the payments were to be made without interest over 30 years, with no payments in the first five years, and the district cut an additional $4 million off the asking price.

Although the original terms of the district’s sale of the station required the purchase price to be “payable all cash at closing,” the district chose to sell the station to the foundation instead of Daystar.

Daystar subsequently sued and ultimately won on appeal. A judge valued the foundation’s bid at $19.5 million to $23.5 million, far less than the $32 million it contended its offer was worth.

The appeals court has voided the sale and ordered the district to either re-bid it or not sell it.

The legislation, if signed by Schwarzenegger, would create an exception to a state law requiring the property to be sold to the highest bidder.

A spokesman for Schwarzenegger said Friday that the governor had not yet taken a position on the bill.

Lawyers for Daystar said Friday that they would probably sue to overturn the law if signed by the governor, contending it is an unconstitutional gift of public funds.

“It is essentially a public gift being made, and taken away from education, where the money could be used for a much greater good than to satisfy the interests of a few very wealthy, influential people in Orange County,” said Cameron Totten, one of the lawyers for Daystar.

Assemblyman Tom Umberg (D-Anaheim) introduced the bill in late June after the appeals court decision. It was passed by the Senate after 10 p.m. Wednesday and passed by the Assembly about 10:45 p.m. Thursday.

The language of the bill permits a community college district to sell nonprofit television stations “for less than fair market value.”

A subsequent amendment to the bill made the law applicable only in Orange County.

Umberg said Friday that he thought district officials should be able to factor the station’s public service value in deciding which operator to sell it to, even if that meant it would generate less money for the school in the deal.

“If they choose to sell an asset such as the FCC license for the only public television station in Orange County to an entity that wants to preserve it as a public asset, that would be a legitimate decision on their part,” he said.

In comments on the Assembly floor Thursday night, Assemblyman Ray Haynes (R-Murietta) likened the deal to “stealing” money from college students.

“The community college district didn’t follow the law, and now they’re asking us to change the law to authorize this sale and steal $20 million from these community college students,” Haynes said. “It’s wrong. It ought not happen, and it particularly shouldn’t happen this way.”

Jo Ellen Allen, chairwoman of the KOCE-TV Foundation, defended the intent of the legislation.

“We feel the public broadcasting station is for educational, nonpartisan, nonpolitical educational-type programming, and we think it’s a very important asset for Orange County,” she said.

“It’s the only real electronic media our county has, and we want to continue the educational and public policy mission of it.”

Times staff writers Nancy Vogel and Dan Morain contributed to this report.

christian.berthelsen@latimes .com