Festival of Arts Files Federal Suit Against Laguna Beach Over Rent

The Festival of the Arts filed a federal lawsuit Monday against Laguna Beach, contending that the high rent charged by the city is discriminatory and a violation of the nonprofit group’s 1st Amendment rights.

The city offered last week to reduce the festival’s rent by about $11,000 annually, but organizers weren’t satisfied. The suit asks the court to order the city to charge fair market rent and seeks unspecified damages.

The lawsuit is the latest twist in three years of contentious lease negotiations. Under the current lease, which expires in September 2001, the festival pays 8.75% of the gross ticket, merchandise and restaurant sales, which amounts to about $600,000.

The group’s attorney, Stephen R. Thames, said the suit is based on two premises: that the city charges more than fair market rent and that the festival pays far more than any other renter for use of similar property. For example, the neighboring Laguna Playhouse leases one acre of land for about $10,000 a year. Last year, the festival rented its 5.6-acre site for about $102,074 per acre.

“Under our Constitution, every single speaker, artist and other person expressing their 1st Amendment freedoms is at least entitled to being treated equally,” Thames said. “That’s just fundamental.”

Festival of the Arts President Sherri Butterfield said if the city continues to charge the group nearly $600,000 in rent, organizers could be forced to cancel or move the prestigious Pageant of the Masters.

Butterfield said festival organizers are also unhappy with how the city plans to spend the rent money. City officials said last week they will use the majority of the payment on capital improvements and repairs on the festival grounds.

Festival organizers agree the repairs and improvements are needed, but they do not want the city to have control of how the funds are spent.

“My fiduciary responsibility is to take care of the money that we raise,” Butterfield said. “It would be irresponsible to turn over the decision-making to members we didn’t elect to the board.”

City Manager Kenneth C. Frank said both sides recognize the need to make improvements to the site; the real question is who will control the funds.

“I don’t think the lawsuit has any merit,” Frank said. “People don’t have to pay the rent. They have an escape clause and they could leave.”

Frank said he thinks a new lease can be worked out to ensure the festival doesn’t leave Laguna Beach. “It’s sad that we have to get attorneys involved, but maybe this is what they had to do,” he said. “I think the lawsuit indicates that they want to stay here, and I think that’s positive.”

Butterfield said festival organizers have considered leaving but would prefer to stay in Laguna Beach.

“We have felt very much a part of this community and very much that this is our home,” she said. “We are reluctant to leave, but more than that, we really want to protect our rights.”