COSTA MESA — An appellate court ruling Tuesday blocked the sale of the Orange County Fairgrounds to a private investment group.
The decision all but kills the state’s deal to sell its 150-acre property to Newport Beach-based Facilities Management West (FMW).
Only a successful appeal to the state Supreme Court can revive the deal that’s been a source of intense debate in Costa Mesa, home to the fairgrounds.
“The court’s decision today is a great victory for the residents of Orange County,” said Assemblyman Jose Solorio (D-Anaheim), a sale opponent who introduced legislation seeking to keep in public hands the storied site of the popular Orange County Fair. “I hope the governor lets us keep our fairgrounds public and does not put the fair out to bid again.”
The buyers said they may challenge the three-judge ruling by the state Court of Appeal, 4th District.
“We disagree with the appellate court’s decision,” said Guy Lemmon, FMW’s spokesman. “We are weighing our options and considering an appeal. The sales process was open, fair and in full compliance with the law."
The state Department of General Services cannot sell the property to a private developer without restarting the entire sale and bidding process, the justices ruled.
In the 21-page opinion, Presiding Justice William Rylaarsdam wrote that General Services erred last year by not having an outside appraisal of the property done before striking a deal with FMW.
“The Legislature reserved for itself the opportunity to veto the sale if it was not satisfied with the terms of the sale in comparison with the fair market value of the fairgrounds,” Rylaarsdam wrote. “It never got that opportunity … any future sale must begin at square one.”
In October, the state agreed to sell the fairgrounds to FMW for $100 million, with a $20-million down payment and a 35-year note, after rejecting earlier bids that priced the fairgrounds at about half that amount. In 2009, former Gov. Arnold Schwarzenegger put the Orange County complex and other state properties up for sale to help reduce the state’s budget deficit.
His successor, Gov. Jerry Brown, hasn’t issued a public opinion on the sale.
“I think what this does is the inevitable — it puts it in the hands of the governor,” said O.C. Fair President and Chief Executive Steve Beazley. “There’s many who thought this was going to be his final decision the whole time.”
“The ball’s in the governor’s court,” said Orange County Fair Board Chairman David Ellis.
When California first put the fairgrounds up for auction, the bids topped out at $56.5 million — well below lawmakers’ expectations. General Services started the process again after a failed private-partnership deal between the city of Costa Mesa and FMW.
The state Assembly last week approved Solorio’s Assembly Bill 35, which is on its way to the state Senate. The bill would put the fairgrounds in the hands of the Orange County Fair Board and funnel a portion of the property’s revenue to the state.
The Senate will clarify details of how that would work, an aide to Solorio said.
Solorio was one of the challengers of the state’s sale to FMW, which would have benefitted Costa Mesa through potentially more than $1 million in property-tax revenue but left the state out of the equation.
Costa Mesa Mayor Gary Monahan recently came out against Solorio’s bill, calling it vague, short-sighted legislation that leaves open the possibility of development on the property.
A measure passed by Costa Mesa voters in November would preserve the fairgrounds, as is in a private sale, but has no effect if the property remains in public hands.
If the state eventually decides to try and sell of the property again, it should put in a process for losing bidders to appeal the state’s decision, the court decided in its ruling.
Over the last two years, the state never gave competitive bidders a way to appeal its decisions. One company in particular, Advanced Real Estate, actually had a higher bid and claimed that the state sale was tilted in FMW’s favor. Advanced Real Estate had nowhere to make its case outside of the courtroom.
“Our point is that there was no opportunity at all to present such a claim administratively, and there should have been,” Rylaarsdam wrote.