Ruling Affirms Sale of KOCE

A Superior Court judge ruled Monday that an Orange County community college district can sell its TV station to a foundation run by civic and business leaders that has pledged to maintain its Public Broadcasting Service affiliation.

The sale to the KOCE-TV Foundation, which for 25 years has been the station’s fundraising arm, had been challenged by the Daystar Television Network, the world’s second-largest religious broadcaster. The Dallas-based company insisted that its bid was the better one, and that political pressures and religious bias prevented the Coast Community College District trustees from accepting its offer.

Marcus Lamb, Daystar’s founder, president and chief executive, said he would appeal the decision. “I don’t like the right thing not being done,” he said.

Daystar attorney Richard Sherman said he was shocked by Judge Corey S. Cramin’s ruling: “I think the decision was wrong, and he misinterpreted the law.”

Foundation leaders said the ruling provides momentum to go forward with plans to remake Channel 50 into a station more focused on Orange County news and events. They also said that because the ruling provided some sense of finality, it would be easier to raise money.

“I’m elated,” said foundation Chairman Bob Brown, retired president of Toshiba America. “This is a hurdle we had to get over, and we got over.”

Brown said the foundation would clear another hurdle when it signed an agreement with a bank -- expected this week -- to secure a $10-million combination loan and line of credit that would provide the down payment it owes the district and $2 million in operating capital.

Despite support from many of Orange County’s rich and famous -- including Conexant Chairman Dwight Decker; former baseball commissioner and Los Angeles Olympics chief Peter Ueberroth; David Pyatt, chief executive of Allergan Inc.; and Henry Samueli, chairman of Broadcom Corp. -- the foundation has struggled to raise the funds needed to buy the station and has had to resort to the loan. It has raised about $4 million, Brown said.

The foundation expects the Federal Communications Commission to approve the station license transfer in 60 to 90 days.

The fate of KOCE has implications for all of Southern California, not just Orange County. Because of FCC rules, the station is carried by cable systems throughout the region.

Moving the station’s analog transmitter to Mt. Wilson in the San Gabriels in about two weeks is expected to increase the station’s viewer reach by 30%, mainly in the Inland Empire and northern Los Angeles County, station President Mel Rogers said. So the station is facing the ironic task of becoming more focused on Orange County at the same time its signal will reach more of Southern California.

Coast Community College trustees voted to sell the station to get out from under the roughly $2 million it provides the station annually and use the proceeds in the classroom to help offset state budget cuts.

The judge wasted little time making his decision Monday, issuing the ruling in a Santa Ana courtroom minutes after attorneys completed their arguments.

Cramin’s decision centered on whether the foundation had met the criteria of “highest responsible bidder.”

He said he would not reverse the sale unless it could be shown that the district’s decision was made in an “arbitrary or capricious manner.” By choosing the foundation, he wrote, the district “secured the best economic result for the public.”

The foundation won negotiating rights in October with an offer of $32 million, including $8 million down, the rest to be paid over time with interest. But when the two sides finished haggling over the price two months later, experts said the deal was worth only about half the $32 million in today’s dollars, and many called it a sweetheart deal.

For starters, the district chopped $4 million off the price, saying that was money it would have to repay if the station were sold to a non-PBS bidder. The deal still includes the $8 million down, but no interest will be charged on the 30 years of payments and no payments are due for five years.

Daystar offered $25.1 million cash. The district rejected Daystar’s sweetened offer of $40 million cash because it arrived a day after the deadline. Lamb said Monday that he didn’t think it made a difference how much Daystar had bid because the trustees were determined not to sell to a religious broadcaster.

Cramin said the highest bidder was not necessarily the one with the most cash value in today’s dollars. “The sale of a television station is not the same as a school district selling surplus desks,” the judge wrote. “These types of transactions are complicated and require a great deal of sophistication.... More cash doesn’t always equate into more value.”

The judge said “a crucial factor” was the threat by the Corporation for Public Broadcasting to sue the district for the nearly $22.6 million in grants it has given KOCE if it sold the station to a non-PBS bidder.

The judge also interpreted a key section of the state education code to mean that the district did not have to sell the station for cash, which bolstered the foundation’s bid.

Lawyers for both sides have said no court had issued a ruling based on this section of the law before.

The judge also rejected Daystar’s contention that the foundation was not financially sound. He pointed to the more than $48 million the foundation had raised for the station in its 25-year history and said there was no evidence it couldn’t pay its debts.

Rogers, the station president, said that under the new ownership, KOCE’s budget will drop at first from $8.3 million to $6 million before climbing again. He said new technology and greater efficiencies will make the station cheaper to run.

Under foundation ownership, he said, the station would complete its conversion to digital and high-definition broadcasts.

Foundation officials in the past have offered big plans for local productions, including more public affairs programming and the purchase of remote-broadcast news trucks, which cost about $250,000 each.

Joel Slutzky, chairman of Odetics, an Anaheim communications and technology company, and head of the foundation’s strategic plan committee, said the new KOCE would cover events such as the Dalai Lama’s appearances at UC Irvine last week.

Daystar’s Lamb said he considers Los Angeles, the nation’s second-largest TV market, a key area for his company. But his first attempt to gain a toehold here appears to have failed.

“District officials are not looking out for the interests of the district and the school,” he said. “Any fair-minded, bottom-line businessperson who cared about college would have said ‘thank you’ for our large cash bid.”