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Can’t Get Any Worse: Fairgrounds Deal with Facilities Management West

The MOU allowing Facilities Management West to manage the Orange County Fairgrounds firmly delivers the property into the hands of Facilities Management West, who are contributors to Allan Mansoor’s Assembly campaign, while cutting out the public and oversight.   The MOU is available here.  Download

 Revised_Discussion_Topics_for_MOU_clean_Adopted   (This is the copy of the MOU obtained from Costa Mesa’s website – if this is not the most current copy, please let me know.  There have been so many backroom and Skosh Monahan deals going on it can be hard to keep things straight.)

Bottom line: There is no local control and no public oversight of what will go on at the Fairgrounds under this agreement with Facilities Management West.  This deal needs to be rejected, plain and simple.

One of the mistakes beginners make when negotiating a contract is they are fixated on price – how much they will pay or be paid.  Money is just one of many negotiating points – often the more important points are in the terms and conditions.  Beginning negotiators often neglect the terms and conditions, and as a result, get a very bad deal overall even though they got the price they wanted.

In exchange for money (and not a lot of it!), Costa Mesa City Council has agreed to give Facilities Management West carte blanche to do what they want with the Fairgrounds property for 55 years.  There is no public input on decisions, no voting, no public oversight, no financial accountability as long as the checks don’t bounce.

There are many things wrong with this agreement.  In the interest of keeping things easy to follow, the contract will be dissected starting at the beginning.  Keep reading to find out how bad it gets!

1.  Property Being Leased – D  – All transferable billboard rights are being transferred to Facilities Management West (FMW) and the JPA needs to ask for permission to use the billboards they own.  In an earlier draft, FMW wanted the “the right to implement a sponsor sign program and site naming similar to the LA Live concept.”  (Any clues here what FMW might want to do with the property?)

In Section E, all trademark rights are given to FMW.  Yeah!! We lost any rights to the names Pacific Amphitheater, Pac Amp, OC Fair, and more!  Licensing professionals would have, at most, granted FMW a worldwide, fully paid perpetual license to use with clauses to allow the trademarks to be taken back. That way, the JPA would retain valuable intellectual property instead of giving it away.

3.  Ground Rent – The rent is payable to the JPA.  What is the mechanism for the JPA to transfer money to the city of Costa Mesa?  The JPA and Costa Mesa are two separate legal entities.

5.  Property Operations – The JPA only has the right to review the business plans and make comments. There is no approval authority or right to refuse to allow activities on the property as long as a short list of activities are maintained on the property.  “Lessee required to provide 1 year and 5 year business plans to JPA for review and capital improvement program/plan – 5 year plan updated annually.  No budgets, cost or revenue projections or other financial information shall be provided by FMW with the business plans submitted to JPA, except those required in connection with the Required Operations.”   And there is more: “FMW shall not be obligated to make any revisions to its business plan based on any suggestions or input received by the JPA.”  Under the MOU, the only reason for the JPA to reject a business plan is if the numbers don’t pencil.  There is no public input on what is going on and no way to stop what will be going on at the Fairgrounds.

Under Property Operations is a list of required activities to be held at the Fairgrounds.  As long as these happen, the JPA’s hands are tied.  The Fair has to be a minimum of 24 days (although it is not specified if this is 24 calendar days or 24 open days, which are different.)  Also, the Fair is constrained to be in July/August.

Also in this section, FMW agrees to abide by either the City’s General plan OR the June 2010 ballot measure. The General Plan is much less restrictive than the June 2010 ballot measure and could allow retail, casinos, medical buildings, residential buildings, self storage facilities, hotels or motels, and athletic uses.  In other words, the property could be turned into “Costa Mesa Live” with sports, live music with heavy retail and restaurant uses.

9.  Alterations/Improvements – Intentions become very clear in this section. “FMW shall have the right, without the JPA’s consent, to make alterations to the existing improvements and make new improvements to the Property, provided, that, in the case of the alteration of the existing improvements, the new and remaining improvements must be sufficient to provide for the Required Operations. Any demolition of structures larges than 5000 square feet must be approved by JPA.”

What this means is that as long as the Fair, Centennial Farm, Youth Expo, Equestrian Center, reciprocal uses and marketplace/swap meet exist in some form, FMW can make any alterations to the property.  The demolition clause is meaningless as anyone who has heavily remodeled a house knows the game – knock down the entire house and you need to go thru the permitting process to build a new house.  Leave the bathroom standing and knock down the rest, and you only need to get the permits for a remodel.  So, leave a few walls of the existing buildings standing while you remodel into Costa Mesa Live and there is not one thing the JPA can do about it.

So much for local control!

10.  Subleases, License and Operating Contracts – If you haven’t gotten the message yet that FMW wants no public oversight, accountability or input as long as the check doesn’t bounce, then this paragraph should make the case for you:

” The JPA shall not have any approval rights over any subleases, license agreements, operating agreements or any other contracts….. except for those which may be for terms which extend beyond the termination date of the ground lease..”  In other word, once the MOU is finalized and the property transferred, FMW can transfer their rights to anyone and the JPA cannot do anything about it.  If FMW strikes a great lease with AEG to come in and enlarge the Pac Amp while increasing usage significantly, there is nothing the JPA can do about it.

The subleases has already begun – in the deed of trust included in the purchase and sale agreement, the tenant is O. C. Fair Amphitheater Market and Expo, LLC, not FMW.   We already don’t know anything significant about FMW, so who is the O. C. Fair Amphitheater Market and Expo, LLC?  Are there Fair Board members involved?  What about Costa Mesa City Council or Planning Commission members?  We don’t know and probably will never know.

Download PURCHASE_AND_SALE_AGREEMENT  See pages 40, 69, 78, 81, 86, 107, 110.

11. Confirmation of Entitlements – Under the terms of the MOU, FMW is not subject to any future changes in laws which may impact their use of the property, unless the changes are health and safety related or come from federal or state law.  In other words, FMW can not be restricted in their use by any future City Council which, responding to complaints from residents about what is going on at the property, wants to limit uses to those more compatible with the surrounding neighborhoods.

The Costa Mesa City Council sold out the neighborhoods around the property in this clause.  If you think the annual Fair can be bad, just wait until the use of the Fairgrounds is intensified year round. And there will be nothing the City Council can do about it unless they want to write a check to FMW.  What do the realtors of Costa Mesa have to say about this?

19.  Miscellaneous Ground Lease Issues – This is often the most important section for hiding things that you don’t want to be found.  Item D – Easements says, “JPA agrees to execute any utility easements and access easements which FMW may reasonably acquire for the operations on the Property,l as well as any parcel maps or any other subdivision for the Property.”

Costa Mesa City Council gave FMW the right to subdivide and lease out parcels without any approval from the JPA.  So, if FMW wants to break off pieces for apartments, retail or other uses, they can. And, once the parcels are broken off, they may not be subject to the terms of the agreement with the JPA if the agreement is well written. So, expect the Fairgrounds to be divided into pieces and redeveloped into who knows what over the 55 year lease granted to FMW.

Anyone up for a recall of the Costa Mesa City Council?

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