Anaheim’s Item 17 is a Blatant Public Land Giveaway to Dr. Howard and Linda Knohl’s Penny-Ante Paper Non-Profit


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The Grove's future dims.

The Grove’s future dims.

The story behind Anaheim’s City Council Agenda Item 17 is — like its beneficiaries Dr. Howard and Linda Knohl — quite rich.

(Before anything else, please read Thy Vo’s excellent story on this topic, which was just published in the Voice of OC.)

The Knohls are my kind of folks, theater-wise: cultured New Yorkers who want to bring high-quality musical theater to North Orange County.  But while I share their taste in theater, I don’t share their taste in setting up a what amounts to little more than a paper corporation with a lawyer behind it; holding big fundraisers for Kris Murray (3/3/14) and Jordan Brandman (4/2/14 and 9/28/16); and in return suddenly getting a last-minute exclusive right (so long as they meet certain targets) for their “foundation” — located at a P.O. Box — to develop the land at the City Grove Theater and turn it into a major Performing Arts Center, and at a minimum to tie up the land for the next four years.  I love Into the Woods, but not “Into the Weeds.”

This is the City’s public land — a significant asset that, among other things, could be the key to hammering out a truly mutually beneficial agreement with the Los Angeles (for now) Angels — and if this really is a good idea (as it might well be) then there is no reason to slide it under the door at the last moment that their agent Jordan Brandman is on the Anaheim City Council.  The only reason for haste here is to effectuate a “smash-and-grab” as Brandman — and more importantly, one may suspect, Paul Emery — prepare to leave City Government.

I don’t know whether the Angels are proper partners for such a deal — but I also don’t know that they, or some other group, aren’t.  I do know that suddenly giving a huge entitlement to a non-profit housed in a P.O. Box, rather than investigating what the best options are, is terrible policymaking.

(And, by the way, the handling of this item ought to be considered front-and-center when it comes to Paul Emery’s performance evaluation in closed session today.  Lucille Kring, who might face re-election in two years, is in an interesting position in that she’s not a major beneficiary of the Knohls, but does stand a huge chance of pissing off the Angels if this puts a wrench in any cooperative plans they might be developing with the new Council majority for the Stadium Grounds.  (The problem has never been with building a parking structure, but with the City getting so massively frozen out of the benefits of such a deal — which is not something that Arte Moreno actually needs to do.)

As usual, Mayor Tait is speaking loads of sense on this sort of “toss-out-the-rules” approach to doling out binding rights to contributors.  Among his comments quoted in the VOC (edits theirs) are:

This is a binding agreement [on] one of our largest assets…without a [request for proposals] and without any disclosure requirements on who we’re selling it to and without any public input. What’s the rush?

There was no process to why they were selected over other groups. I’d like to see their finances made public (…) and how much they’ve raised in the last ten years.

The question is not simply “should Anaheim do this?” but should this seemingly inert non-profit be the one to receive an exclusive contract to do it?  Have we seen their financial statements?  No — but VOC says that they started the year with only $85,000 in the bank.   Anaheim has not asked them for any financial statements — and even the benchmarks the nonprofit has to meet can be met by “bank statements or a letter stating its worth” — which is, to say the least, open to abuse.

And yet, if the Council passes Item 17, doomed (but probably about to have his compensation fluffed) City Manager Paul Emery is entitled to immediately negotiate a contract with this group that will bind the city for years at best.

YOU, Dear Reader, should be coming out to the City Council today to speak against THAT!

Meanwhile, City spokesperson Mike Lyster and ink-cloud-dispensing Councilwoman Kris Murray have some whoppers of disingenuity to offer us.

Murray:

“Under the agreement being considered by the council, there is no financial risk to the city. In fact, there are fundraising milestones the organization must meet to continue the process. I’m proud to support this grass-roots movement to bring a privately financed, world-class performing arts center to Anaheim to benefit our residents and enrich our community.”

First, it’s charming that Kris Murray believes that an effort for some wealthy Anaheim Hills residents to install themselves as a cement block in one corner of the Stadium Grounds counts as a “grass-roots movement.”  No, Councilmember Murray — a true “grassroots movement” is  the sort of thing that placed you in the Council minority for the next two years.  This is an elite movement of cronies.  Not the same thing.

Second, it’s astounding that Murray can discuss the capture of a major city real property asset as “privately financed.”  That’s the intent, supposedly, but if they fall short in their fundraising goals and Disney captures the City Council majority again, as they eventually someday will, then it would not be so difficult for that Council to work out “favorable terms” to the foundation in all but name — such as the sort of “we pay for it and them eventually you get to keep it” agreement with the Mickey and Friends parking garage — which would mean that much of the assets eventually controlled by the Foundation would have been public.  The history of the Museo building shows just how much the City likes to pull this trick, rewarding Councilmembers with resume-burnishing seats on Foundation Boards to help lubricate the process.

Here just one “financial risk” to the city despite those “fundraising milestones”: it’s called “opportunity costs.”  The binding nature of the contract — with a $20 million milestone due March 2018 that can probably be finessed and the really significant milestones occurring in 2019 ($50MM) and June 2020 (100% of project cost) — means that if they can get together $70 million in donations that are presumably refundable if they can’t reach that final benchmark then they can hold up anything else happening with the Stadium Grounds until August 2020.  Or, they could presumably bargain away that right (to the City?  to the Angels?  to Disney, which as I read it could be given control over the nonprofit?) for “valuable consideration.”  Anaheim does not KNOW  whether there is a better way than this to process … because ANAHEIM DIDN’T TRY TO FIND ONE!”

Don’t believe me?  Here’s Mike Lyster:

“The city isn’t looking to build a performing arts center but instead was approached by APACF, which would be given the opportunity to raise money and be considered for a lease should they be successful.”

Oh, it looks to me like the City IS looking to “build a performing arts center,” given that they’re ruling out every other possibility with this lease for the next four years!  And yes — they would have “the opportunity to raise money” — which they have already had — but does Lyster think that they only thing that they’re bargaining for here, “should they be successful” is to “be considered for a lease”?  Like, what — after they raise 100% of their (supposed) costs, the City is going to be able to just say “nah, we’re not going to do this”?

WHO DOES HE THINK HE’S KIDDING?  (Wait, that’s actually an easy question: everyone who isn’t already in on the deal.)

Not only that, but if you look closely … wait for it … we do not even know exactly what the non-profit is proposing!!!  It has 360 days to provide the City with

a proposed development plan, including a site plan, a scope of work and estimated development costs, including construction.

So, again: the hurry here is, what exactly?

Here’s another beaut from Lyster, as told by Thy Vo:

City spokesman Mike Lyster said so far the city has only discussed a long-term ground lease and that the agreement is non-binding, meaning the foundation’s exclusive negotiation rights only hold if they meet major fundraising milestones before the agreement expires in August 2020.

Aha.  You know what you’re saying when you say that an entity’s contractual rights only hold if they perform in certain ways?  You’re saying that THE AGREEMENT IS BINDING — at least upon the city.  If they act in certain ways based on the City’s promises, then the City would be estopped from cancelling the expected benefits of those actions.  A non-binding contract is “either of us can walk away from the agreement any time we’d like without penalty.”  Now, you can have provisions for how much a party would pay to exit a binding agreement — allowing “breach” under some circumstances, to some extent, at some cost — and to that extent the agreement may not be “binding” as in “we can pay our way out of it.”  But there’s one major sort of transaction where the default rule is that you can’t just back out of an agreement — and that is … real property transactions!

I’d really like to know what the City Attorney’s office has to say about this.  I think that these ought to be familiar concepts to them.  Do we think we can get a really good, considered answer from them — including from Anaheim’s brand spanking new City Attorney Arturo Fiero — TODAY?  The Council should be GRILLING HIM on these issues.  If he’s not clear on all of the legalities at hand — then he should ask them to please hit the emergency brake on the deal.

Here’s a letter from the Foundation’s attorney about today’s agenda item:

APAC Foundation Ltr 1

APAC Foundation Ltr 2

Coming up in a few minutes, let’s take a look at the entire agenda packet for Item 17 — including its proposed contract, but the hour is late, so let’s get the above up now.

 

 


About Greg Diamond

Somewhat verbose attorney, semi-retired due to disability, residing in northwest Brea. Occasionally runs for office against bad people who would otherwise go unopposed. Got 45% of the vote against Bob Huff for State Senate in 2012; Josh Newman then won the seat in 2016. In 2014 became the first attorney to challenge OCDA Tony Rackauckas since 2002; Todd Spitzer then won that seat in 2018. Every time he's run against some rotten incumbent, the *next* person to challenge them wins! He's OK with that. Deposed as Northern Vice Chair of DPOC in April 2014 (in violation of Roberts Rules) when his anti-corruption and pro-consumer work in Anaheim infuriated the Building Trades and Teamsters in spring 2014, who then worked with the lawless and power-mad DPOC Chair to eliminate his internal oversight. Expelled from DPOC in October 2018 (in violation of Roberts Rules) for having endorsed Spitzer over Rackauckas -- which needed to be done. None of his pre-putsch writings ever spoke for the Democratic Party at the local, county, state, national, or galactic level, nor do they now. One of his daughters co-owns a business offering campaign treasurer services to Democratic candidates and the odd independent. He is very proud of her. He doesn't directly profit from her work and it doesn't affect his coverage. (He does not always favor her clients, though she might hesitate to take one that he truly hated.) He does advise some local campaigns informally and (so far) without compensation. (If that last bit changes, he will declare the interest.)