You try to anticipate as many iterations of what could happen when the Department of General Services opens the sealed bids and announces the amounts. One that I did not want to hear was one that was, in my opinion, very high.
That’s how this morning’s bidding process went. Our bid of $6.5 million was the fifth lowest submitted. The highest was $55 million. That, based on the net revenues the fair currently generates, is too high for us.
The second highest sealed bidder, $42.5 million, started the auction with a bid of $55.5 million, to which the fourth highest sealed bidder, $17 million, responded with a bid of $56 million. The second highest responded with $56.5 million and the bidding stopped.
The winning bidder is Craig Realty Group, who operate outlet malls like the Citadel.
We can only hope that the Department of General Services deems a bid of $56.5 million too low. It’s one thing to sell appreciated assets for cash, but not at fire sale prices.
No blue ribbon on sale of fairgrounds
O.C. officials hope to prevent today’s auction but will also submit a bid as a backup plan.
Ashley Lang, 9, rides a pony Wednesday at the Orange County Fairgrounds, which the governor hopes to sell to ease the state’s budget problems. Some local officials originally supported
By Catherine Saillant
Gov. Arnold Schwarzenegger’s much-ballyhooed plan to ease the state budget crisis by selling off landmark properties is facing a surprisingly tough first test in Orange County, a place where public officials regularly talk up free markets and privatization of government.A rare bipartisan wave is rising to block the governor’s proposed sale of the beloved Orange County Fairgrounds, including conservative politicians who at first backed their Republican governor but are now urging him to call off today’s auction and keep the land in public hands. The fairgrounds, in Costa Mesa a few miles from South Coast Plaza, holds a special place in the hearts of Orange County residents, who flock each year to its decidedly old-fashioned fair to hear dated music groups, ride the Ferris wheel and devour deep-fried everything. In the collision between political ideology and nostalgia, nostalgia is winning, said Orange County Supervisor John Moorlach, a conservative Republican. Privatizing public lands makes sense in some situations, he said, but not this one. "In normal circumstances, we’re all for that," he said. "But this is a property that has significance for everybody in Orange County." The opposition to the auction doesn’t bode well for the proposed sale of such high-profile properties as the Los Angeles Memorial Coliseum, Del Mar racetrack and San Quentin State Prison. The Cow Palace in Daly City, fairgrounds in Ventura and San Diego and even the site of the state fair in Sacramento were also listed in the governor’s May budget proposal as properties the state might unload. The sales were supposed to raise $600 million to $1 billion for the general fund. But legislators balked at most of them, agreeing only to sell the Orange County Fairgrounds, a 150-acre parcel that includes a concert amphitheater, exhibition halls, an outdoor swap meet and an equestrian center. Orange County supervisors and city leaders have pushed back aggressively. Both agencies have passed resolutions urging the governor to drop the plan and the city of Costa Mesa is threatening a June ballot measure that would require a public vote before anything is built, potentially reducing the land’s value. Costa Mesa officials personally pleaded with Schwarzenegger to back off. He refused. As the fairgrounds heads to the auction block, government leaders here have adopted a "if you can’t beat ’em, join ’em" stance. "We tried everything to get the governor to rescind the sale," Moorlach said. "Plan B is for the county and Costa Mesa to become co-bidders." Schwarzenegger was successful in winning expanded powers to sell and lease back 11 large state office buildings, including the Ronald Reagan building in downtown Los Angeles, and those sales are expected to begin in a few weeks, administration officials said. But a governor’s spokesman was vague when asked if Schwarzenegger intended to make another attempt at selling off the highest-value properties in this year’s budget session. "The governor has said time and again that the state shouldn’t be in the real estate business," spokesman Mike Naple said. "We should continue to look at opportunities to maximize the value of available real estate assets." The real estate push came as the state was looking to cut $45 billion from the budget. It has completed those painful reductions but is projecting an additional $20-billion shortfall this year. The governor said last year that he was thinking from a business standpoint in pitching the real estate sales. He also asked for broader powers to enter into long-term leases on state-owned property. The Legislature agreed, giving the administration authority to extend leases beyond five years. That gives the state’s Department of General Services more flexibility to enter into decade-long leases at properties where the state holds acreage it’s not using, said Jeffrey Young, a department spokesman. In its first effort, the state will seek long-term partnerships with developers interested in acreage surrounding Chino State Prison, with the state sharing in the profits of any development. General Services is also finalizing plans to market 11 large state complexes, including the Reagan building in downtown Los Angeles, the Franchise Tax Board campus in Sacramento and the Public Utilities Commission building in San Francisco. The plan is to offer to lease the buildings for a set number of years, guaranteeing income for investors, Young said. Those sales could raise up to $660 million, according to state estimates. "Our intention is to lease for up to 20 years," he said. "But the market is going to tell us what buyers want." Proposed sales of the highest-profile properties — the Coliseum and the like — hit a snag in the Legislature, with lawmakers arguing against selling off landmarks in their districts. The Legislature agreed to the Orange County Fairgrounds sale in part because it initially had the backing of some local lawmakers and governments, including the Orange County Board of Supervisors. Moorlach said the board changed its mind because there were too many unanswered questions about what might happen with the fairgrounds property. Now, Orange County and the city of Costa Mesa think their best strategy is to jointly purchase it. The state estimates it could bring in $96 million to $180 million. They are among seven bidders who have put up the required $50,000 deposit. The bids will be unsealed today at the Orange County Fairgrounds. The two governments signed a joint powers agreement to guide the purchase and potential future operation of the fairgrounds, Costa Mesa Mayor Allan Mansoor said. Unless they are outbid, their priority is to keep the land as a place where people will continue to display cattle, attend car shows and show off prized tomatoes, he said. "It’s the only way to guarantee it remains a fairgrounds," said the mayor. Mansoor said the experience has left him disappointed with the governor. "This is not the way to solve our budget crisis," he said.
FIVE-YEAR LOOK BACKS
The toll road saga continued. Meg James of the LA Times covered the Public Finance Advisory Committee results in “Panel Backs Bond Dealers Against Moorlach’s Advice.” Here are the highlights of the article.
Despite warnings by Orange County Treasurer John M. W. Moorlach, a county financial advisory committee Thursday unanimously endorsed two financial firms deeply involved in last month’s failed 91 Express Lanes deal.
"While the 91 deal may stink to the high heavens, I don’t know anything that Orrick might have done that might be out of the usual procedure," said Thomas Hammond, chairman of the committee.
Moorlach had urged the committee to keep from recommending the two firms, citing questions surrounding their lack of disclosure on documents filed with the Internal Revenue Service and Caltrans over a sale of the 91 toll lanes from a private company to a nonprofit corporation. The proposed sale died amid heavy criticism.
In a memo to committee members last month, Moorlach wrote: "I do not condone the stealth tactics that they used to perpetrate a potentially harmful bond financing transaction on the citizens of Orange County."
Orrick senior partner Roger Davis said that while the firm was involved from the inception of the idea to sell the toll lanes to a nonprofit, and even filled out forms the nonprofit sent to the IRS, it represented only the state bank that planned to issue up to $274 million in bonds to finance the deal.
At Thursday’s meeting, Moorlach charged that the county’s recommendation to retain the two firms was reminiscent of the county’s prebankruptcy mind-set when attorneys working for the county were "enamored" of other financial firms.
After the meeting, Moorlach said he was simply doing his job in questioning the financial deal.
"What I’m concerned about is a thorough and accountable disclosure," Moorlach said.
But many times, he said, officials rely on firms they’ve worked with in the past.
"They’ve worked with them, so they feel comfortable with them," Moorlach said. "Those relationships are really important but they can also blind you."
The OC Register’s Chris Reed also covered the story in “Panel backs tollway advisers—The recommendation comes despite their role in the 91 Express Lanes fiasco.”
In a later interview, Moorlach stuck to his guns, saying the bond industry often beguiled government officials [on the eve of the county’s 1994 bankruptcy] into misplacing their loyalties.
(In the next day’s issue of the OC Register the result of their question of the day for January 14 was printed.
The question: Should the county continue doing business with the law firm and financial advisor for the 91 Express Lanes?
The answer: 96% No and 4% Yes.
I guess I had a better read on the issue than the PFAC members did.)
And Andrea Figler of The Bond Buyer provided a plug for our second annual Orange County Treasurer’s Conference in her short piece, titled “Orange County Forum.”
R. Scott Moxley of the OCWeekly wrote an article, titled “Go Time—Ex-toll-road bass had one last project before he left: His own financial windfall,” about Wally Kreutzen, the former CEO of the Transportation Corridor Agencies. I’m providing the first four and last paragraphs.
I don’t believe I attempted to “shame” anyone at the TCA. It’s the consultants and investment bankers that should be ashamed. Especially in light of recent financial calamities that would have devastated the TCA. Attempting to garner excessive fees with an interest swap deal that would have been very embarrassing for the County of Orange during the recent liquidity crisis. I’m sure even Wally would concede that this is one deal we should all be glad that it did not get consummated.
It’s common practice in the New Economy to reward executives who fail. Consider the $110,000 bonus to Wally Kreutzen, until recently the top bureaucrat at the financially troubled Transportation Corridor Agencies (TCA).
Speaking in 1996 to the U.S. Congress, Kreutzen called the San Joaquin Hills toll way the world’s "blueprint" for "successful and innovative" road projects. The TCA’s financial plan was, he asserted, based on "care and intelligence." Today, the cost of running the 16-mile road has exceeded its budget by more than $6 billion. When they haven’t been praying for a miracle to forestall bankruptcy, agency officials have asked Caltrans to slow improvements on nearby freeways in order to force more cars onto the San Joaquin; have raised already-steep tolls; and devised upbeat, misleading PR campaigns.
If the San Joaquin troubles locals, Kreutzen’s "solution" to the transportation problems of urban sprawl delights the Wall Street investment firms that profit from the road—the same firms that helped steer Orange County to its $1.6 billion bankruptcy a decade ago. Last year, with the toll road’s finances wobbling badly, he proposed that the TCA borrow another $4.1 billion for the eight-year-old San Joaquin Hills toll road. The risky plan—which would have given bankers a $250 million upfront fee–was defeated after county Treasurer John Moorlach and Supervisor Chris Norby publicly deemed it insane.
Following that debacle, Kreutzen announced on June 29 he would resign from his perk-laden $161,000 annual post in November.
Kreutzen leaves the TCA in the path of financial catastrophe. The agency said it needed to keep Kreutzen on payroll for an extra eight months to train a new CEO—and then hired 75-year-old William Woollett as the interim replacement. Woollett was the TCA’s original head and Kreutzen’s friend. TCA board members say their top concern is finances, but then raised the CEO’s pay to nearly $195,000. In addition to receiving a salary greater than California’s Supreme Court chief justice, Woollett’s pay (see chart) dwarfs that of most top-ranking local officials—including the man who shamed Kreutzen last summer, County Treasurer-Tax Collector John Moorlach.
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