Published: June 7, 2011
Updated: June 8, 2011 7:33 a.m.

SANTA ANA – The sale of the Orange County fairgrounds to a private company is dead, unless the state Supreme Court resurrects the deal.

The Fourth District Court of Appeal struck down the sale of the 150-acre property, finding that the bidding process was fatally flawed.

The sale of the Orange County fairgrounds was rejected by a three-judge panel Tuesday.

“Any future sale must begin again at square one,” the court wrote.

In October, the state agreed to sell the fairgrounds to Facilities Management West for $100 million, after a year in which another bidding process and negotiations to sell the property to Costa Mesa both fell apart.

After losing bidders filed a lawsuit, a local court put the sale on hold in November.

The Court of Appeal heard arguments May 14 on whether to continue that hold.

The three-judge panel based its decision Tuesday on two reasons: the lack of an appraisal and the lack of a procedure for losing bidders to protest.

The law authorizing the sale of the property required that the agency handling the sale provide the Legislature with a comparison of fair market value and the terms of the sale in its notice of the sale.

However, it didn’t set up a protest procedure by which losing bidders could ask the agency handling the sale to reverse its decision.

The court ruled that it should have, citing a textbook and the North American Free Trade Agreement as authorities.

The focus of its ruling, though, was the question of fair market value.

The court found that the state Department of General Services, which handled the bidding process, failed to provide the Legislature with a comparison between the $100 million sale price and “fair market value.”

The department reported that the sale price was fair market value, citing state law, which provides that a “transaction based on … a public bidding process shall be deemed to be the fair market value.”

It should have sent the Legislature an appraisal, the court ruled. “(F)or the Department to give the Legislature a comparison of the fair market value of a given property so as to be able to compare it with a proposed sale necessarily entails some sort of estimate.”

The high bid and the real value are two different things, and the state acknowledged as much, the court wrote.

In March 2010, the state rejected the high bid of $56.5 million cash submitted in its first bidding process.

“One should bookmark that fact,” the court wrote. “The Department at the time obviously had a good idea of the Fairground’s fair market value independent of whatever bid happened to be the highest.”

Justice Kathleen O’Leary hit on that point during the May 14 hearing, asking why the state got a high bid of $56.5 million in the first auction, but $100 million in the second.

Deputy Attorney General Michael Witmer, representing the state, said then that it was because the first auction required all cash up front, while the second allowed for financing.

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