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Fair Market Value
Sam Borgese | 10th Street and Bud Emerson | Klish Way

 

Photo Art Olson

 

The proposed Del Mar purchase of the fairgrounds property from the state is a moving target, but we have tried to gather as much information as we can to give readers as accurate a picture as possible.

There are several variables that make the picture cloudy. Much of the fog comes from the antics of the Fair Board members who are frantically protecting their VIP perks and privileges with scurrilous assaults and deliberate misrepresentations. Then there is the tortuous processes of state decision making involving the Governor’s office and the Legislature. The final variable is the understandable need the City Council has for confidential negotiating room when they operate in a public fish bowl.

DEAL PARAMETERS
The proposed $120 million purchase transaction was approved by the outgoing Governor’s office, but was ambushed by our local Assembly Member, Martin Garrick when it went to the legislature. The three elements of that plan are a Del Mar revenue bond of about $50 million, a contribution of about $55 million from a horse owners’ group, and the balance in deferred payments to the state. The viability of this plan was analyzed by Council members with the assistance of outside bond experts looking at audited fairground financial statements. No funds from Del Mar’s general events fund would be required.

FAIR MARKET VALUE
Under the terms of the proposed transaction, the city would be required to keep the property in the public domain and would continue sponsoring the fair, racing, and other agriculture-related activities in accordance with the original mission of the 22nd Agricultural District. The “fair market value” of $120 million was established based on these limitations, not on the erroneous “comps” criteria used by some Fair Board members attempting to undermine the transaction. Comparing this to the state’s sale of the Orange County fairgrounds is also incorrect because that transaction involved private development rights with no similar operational restrictions. The only valid way to determine value is by using a multiplier of cash flow.

GOVERNANCE
Unlike the current Board made up of political contributors with no apparent policy or management qualifications, a new board with representation of regional stakeholders would be established to run the operation as a non profit organization. Criteria for Board appointees would be established including policy, management, financial, and environmental qualifications. Professional staff would operate the fairgrounds under the policy guidance of this board. Most likely, many of the current staff members would be kept on based on their demonstrated competencies. Unlike the current board, this entity would have lines of accountability to the citizenry of the region. Del Mar would have 5 seats on the board of 12 members because most of the fairground is within our city limits. Solana Beach, San Diego, and the County would also have seats on the board. The bottom line is that this change will be transformative--we will go from being victims of irresponsible decision making to accountable trustees of a regional asset including a precious natural environment.

FAIRGROUND REVENUE
All revenue generated by fairground activities would be dedicated to expenses and upkeep of the property. The only monies that would go to Del Mar would be for documented services including such things as clean water payments, road maintenance, and other municipal services. The current Fair Board is already delinquent in paying for many of these services. According to Council Member Carl Hilliard, the fairgrounds will not subsidize the city nor is Del Mar willing to subsidize the fairgrounds any longer.

APPROVAL PROCESS
The transaction requires the approval of both the Governor and both houses of the State Legislature. State Senator Kehoe has submitted a bill for consideration on the legislative agenda. The likely process is that the general terms will be worked out with the new Governor’s office. Those terms will become the content of the bill in the legislature. Probably two committees of the Assembly and two committees of the Senate will hold hearings and vote on the bill. The amended bill will then be voted on by both houses. A simple majority vote will be required for approval. Approval will authorize the Governor to negotiate the details of the transaction within the parameters established by the approved bill. Hilliard says that is the time when Del Mar can engage in its detailed “due diligence...looking under the hood” to see if this purchase makes sense. That is also the time when the exact terms of the transaction will come under the scrutiny of the citizens of Del Mar, probably involving multiple hearings, workshops, review by the finance committee, and perhaps an ad hoc committee of knowledgeable citizens.

POLITICS
All parties are trying to influence the new Governor as well as state legislators. Professional lobbyists have been hired by the Fair Board, the horse community, and the city of Del Mar. Consultations are ongoing with all city government and county officials. Most reactions are favorable to Del Mar’s commitment to regional representation. To the delight of the Fair Board, Solana Beach has taken to the air waves to oppose the transaction. Del Mar and Solana Beach Council members continue to deliberate privately to address their concerns.

The rogue group in the political process is the Fair Board, as well as staff. They are desperately pulling out all the demagogic misrepresentations they can concoct, including the illegal posting of anti-Del Mar signs and loudspeaker scare announcements during all events. These loudspeaker warns ominously that Del Mar’s “grab” for control means this is the last year events such as the antique fair will be allowed. The language used by Fair Board members, state officials, is “as mean as I have ever seen” says Hilliard. At their January meeting board members referred to it as an “earth shatteringly assinine proposal by Del Mar...voodoo economics... Del Mar Council members say something different every time they come....” Hilliard says the Council members have vowed to take the high road in these exchanges, hoping that the uncivil behavior of the Fair Board will work to their disadvantage.

The Sandpiper will continue to do its best to stay on top of this story and we invite readers to weigh in as well. The implications for the future of the fairgrounds, our city, the region, and the environment are huge.

Fairgrounds with the San Diego County Fair in full swing.
Photo courtesy Nancy Strauss

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San Diego Fairgrounds includes sensitive lagoons with Pacific Ocean. Foot traffic and car traffic as well as other events that impact the neighborhood is the concern of Del Mar citizens. Photo courtesy Nancy Strauss

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