Group files lawsuit over fairgrounds sale

COSTA MESA — A swap meet operator and a group of small-business owners on Tuesday announced that they have sued the state in an effort to stop it from selling the Orange County Fairgrounds to a private developer for $100 million.

American Fairs and Festivals — made up of swap meet operator Tel Phil Enterprises Inc. and many of its sellers — filed suit in Orange County Superior Court to stop the state’s Department of General Services from transferring the 150-acre property to Newport Beach-based Facilities Management West.

The local business owners are asking the court to determine whether the state properly conducted the bidding and whether authorizing the sale was constitutional.

The group alleges that General Services violated the public bidding process required by Food and Agriculture codes when it began private negotiations with interested parties.

The city of Costa Mesa is described in the lawsuit as one of the private entities the state privately negotiated with. Costa Mesa formed a joint-powers authority and began working with Facilities Management to finance the purchase and operate the property.

“The authority was negotiating on behalf of FMW, who was to fund the authority’s purchase of the property, then lease it back from the authority on sweetheart terms,” the suit states.

State officials have repeatedly said the bidding process was fair and legal, and that California owns the property and has control of it.

“DGS has tried to effectuate the private agreement through maneuvers intended to direct the sale of the property to FMW, to the exclusion of other potential buyers and in contravention of California law,” the lawsuit alleges.

Facilities Management has been a consistent player in the sale of the fairgrounds.

When the state first issued a bid last year, the company offered $55 million — an amount that fell short of another bidder’s offer. When the state began negotiating with the city, the real estate group was chosen to lease the property and finance the purchase, should the deal go through. When the state issued a second bid after the deal with Costa Mesa hit a dead end, Facilities Management was picked as the winning bidder.

A hearing will be held at 9 a.m. Wednesday morning at Orange County Superior Court.