CSC - Hostilities and Repairing the Damage

Quoting from an editorial about the California Space Center in the Lompoc Record (Sep 21, 2015):

The thing about hostilities is, once they start, it’s hard to repair the damage. Our hope is city officials will try to fix things, or at least offer taxpayers a full explanation of how and why this happened.

I'm sure that city officials can "fix things" - especially if the California Space Center will help to repair the damage.

But we can be much more specific, can't we, about what it means to "fix things"?

Some process observers believe that "things" are already irretrievably broken. They blame the CSC for carelessly - or perhaps defiantly - refusing to meet its deadlines, check its lists, and submit its paperwork. According to the editorial quoted above, the deadlines and requirements "seem fairly straight-forward."

Actually, no.  It's tricky.  The requirements are subject to different interpretations. The CSC and the city staff aren't even using the same language to describe the requirements. (Read that sentence again.)

Here's what happened.

The CSC submitted a package in response to the city's Request For Qualifications (RFQ), which was due October 31, 2014.

On February 3, 2015, city staff reported to the city council that the CSC's submission was incomplete. The staff recommended against any further negotiations. However, the council voted 5-0 to reject the staff's recommendation and proceed with an Exclusive Negotiating Agreement (ENA).  Factors in their decision to proceed (as discussed at the February 3 meeting): public support, the lack of any other responses to the RFQ from other developers, and the lack of any risk or financial impact to the city.

Based on the council's direction, the CSC and the city staff worked together to come up with a draft ENA, which was presented to the city council on May 19. Ostensibly, both sides supported the draft.  Unfortunately, a serious stumbling block was built in, and a disagreement was papered over in order to reach an "agreement."

The CSC requested the inclusion of "Addendum #1,"which began:

See below as to how the CSC can reasonably provide additional information to supplement the RFQ submittal dated 10-31-14.  Note that the necessary Consortium format to enable a project of this type to succeed in both its construction and ultimate profitability, will require appropriate consideration to match the RFQ requirements to the qualifications of the consortium members.... (see ENA, including Addendum #1, here)

In other words, the CSC wanted to go on record with its objection to the RFQ requirements, and wanted to offer alternative ways to address said requirements.

When the draft ENA was submitted to the city council, Addendum #1 was explained in staff's oral presentation as follows:

The California Space Center group asked that we use the addendum instead of the language that we had put in there regarding the RFQ and the documents that we asked for, and to go ahead and move forward and reach an agreement we included the language the city had proposed and the addendum that the group proposed in order to move this forward. So that's why you see the addendum in addition to the language the city requested. (my emphasis, see the video here)

"Straight-forward"? Not so much. Let's take a quick look at the wording of the ENA, regarding the 30- and 60-day deadlines.

Within sixty (60) days after the effective date of this ENA, CSC shall provide to City’s Economic Development Director/Assistant City Administrator the attached list of documents (Addendum #1) supplementing CSC’s response to the RFQ, dated October 31, 2014. Within thirty (30) days after the effective date of this ENA, CSC shall provide to City’s Economic Development Director/Assistant City Administrator all the required information CSC did not provide in response to City’s Request for Qualifications, dated July 2014, (the “RFQ”) and described in the staff report and its attachment provided to the City Council for its meeting of February 3, 2015, regarding CSC’s response to the RFQ, dated October 31, 2014. (staff report is here)

See the problem with this? Different language, different interpretations of how the CSC might be able to meet the RFQ requirements, built right in to the agreement as though compatible. At the 60-day milestone, the CSC would be allowed to respond using the CSC interpretation of the requirements (Addendum #1). But wait - first the CSC would have to get through the 30-day milestone. And for the 30-day milestone, the CSC would need to use the city staff's original RFQ language. (Isn't it weird that, in the above parapraph, the 30-day milestone is explained after the 60-day milestone?)

Recipe for disaster.  Toss in... a lack of communication.  ... a checklist-loving city staff who never wanted the ENA in the first place. ... a maniacally optimistic CSC leader who sees the ENA as a low priority.... a closed city council meeting and a hasty decision with no input from the CSC or the public, an adversarial Notice of Default....

Sigh.

How to repair the damage?

First, resolve to get past the hostilities.  Mistakes were made. Communication between the city staff and the CSC has been completely dysfunctional. The city (staff and council) and the CSC must fully commit to the ENA process, agree to communicate with good will and negotiate in good faith.

Second, the city council needs to get involved and exercise some leadership.  The city staff has been completely fixated on one interpretation of the RFQ requirements, and according to the CSC, that interpretation is unreasonable and unworkable.  The city council will need to decide: what information does it actually need, at this point in the ENA process?  Let's be clear: it is not the staff's job to determine whether the CSC has met the 30- and 60-day milestones.  The staff's job is to advise; it is the council's responsibility to DECIDE. While we're at it, it's clear that the CSC will need additional time to meet the coming milestones.  The CSC and the city council must have a frank conversation about deadlines and reach some agreement that maximizes the CSC's chances for success.

Third, and this probably goes without saying (but perhaps not): all of the city council's discussions and decisions about the ENA should happen in open session and with public participation.

Yes, the city council can fix things.  The CSC must take its share of the responsibility for poor communication and follow through. And we the public? ...we'll be watching very carefully, and handing out lots of free advice.  Ready? Set? Go.

CSC - Cease and Desist, and What Comes Next?

Everybody needs hobbies, right?  Lately, mine has been the California Space Center Project.  Hubby suggests I take up gardening or start knitting again, but the CSC is WAY more entertaining.

The question of the day is: WHY did I send a "cease and desist" letter to the City? By calling attention to the Brown Act violation, aren't I just nit-picking and trying to shift attention from Eva's failures in complying with ENA deadlines?  (More about Eva's failures in a future post!)

I started researching the Brown Act after the September 16 City Council meeting.  The City Council went into closed session, and during that session, "they" "decided" to send a Notice of Default to the CSC.  This was a serious and impactful action, and I have a lot of questions about how their decision was made.  For example:

• Who voted to send the default notice? Who voted against?
• How much communication has occurred between staff and Eva Blaisdell?
• Did staff attempt to resolve discrepancies before default notice? How hard?
• Has the CSC requested any deadline extensions?
• Has the CSC requested any public hearings?
• Has the CSC requested anything else of the city staff?
• Who is the consultant?
• What are the consultant’s qualifications?
• What is the extent of the consultant's involvement, and how much money has the CSC spent on the consultant? 
• Has any attempt been made to narrow or close the discrepancy between the language that the city used in the original RFQ and the language that the CSC requested in Addendum #1 of the ENA? (Teresa Gallavan's discussion of Adendum #1 starts at about 1:32 of the video here. PDF of ENA, including Addendum #1, here.)
• Does each city council member have a solid understanding of every one of the 14 points referenced in the default letter? 
• Have the council members come to agreement, as to whether the information requested is reasonable? Has the city council considered rebuttals as to why the requests might not be reasonable? 

Just for starters!

If the decision had been made during a regular City Council meeting, the public would have been informed via the agenda, that the city council was considering the issue of a Notice of Default.  I, as a member of said public, would have been able to attend the City Council meeting and get some answers.  I would have been able to express my opinion that issuing an NoD was an adversarial and unnecessary move that would complicate future negotiations.  CSC team members would have shown up in force, hopefully apologizing for whatever role they had played in what was obviously a serious failure to communicate, explaining their progress and their challenges, and perhaps requesting an extension.  

But that's what "shoulda', coulda', woulda'" happened.

Instead, the City Council, used the "real property exception" of the Brown Act to justify a complete lack of transparency.

So, another hobby! I became a student of the Brown Act. 

To see the entire text of the "cease and desist" letter I wrote to the mayor, including citations, click here. But for a summary and a bit of a lecture on the Brown Act, stick with me. 

The Brown Act says that meetings must be open to the public, except for a few exceptions.  The exceptions make a lot of sense.  For example - if the City Council is talking about "personnel issues" - like whether to fire someone - they are allowed to meet in closed session. If the City is being sued, they are allowed to discuss strategy with their attorney in closed session.

And then there is the "real property" exception.  Say the city wants to buy a piece of property. The City Council is allowed to meet in a closed session to "grant authority to its negotiator regarding the price and terms of payment for the purchase." So for example, "Let's offer $500,000 for that piece of property, but if you have to go up to $540,000, go ahead.  But let's make sure we get some concessions on terms, like try to get the sellers to agree to repaving the parking lot, or have them pay for a new roof." Because of the real property exception, the City Council is able to negotiate for the best possible deal, without "tipping its hand" in an open session meeting.

Interestingly, the First Amendment Coalition (FAC), in their "primer" about Brown Act exceptions, notes that the real property exception is frequently misused:  

This provision has been the subject of considerable abuse. For example, government agencies involved in enormous, multi-faceted transactions have used a real property portion of the potential transaction to discuss the entire matter in secret. (FAC primer)

 In the case of the CSC, the City Council has no reason to meet in secret, because, for the duration of the ENA, there isn't any chance that the 82 acre parcel under consideration is going to be sold, leased, or otherwise conveyed.  Further, the terms of the ENA are already public. Since the land is not being conveyed, they don't need to negotiate "price or terms of payment," and therefore the use of the real property exception is "inappropriate." (I'd say "illegal," but gosh, that sounds harsh, doesn't it?)

One final clarification about my intent.  I have NO desire to take this to the District Attorney or sue the city. The city doesn't have to spend any money defending itself, and I haven't asked the city to undo anything its already done (you can't squeeze toothpaste back in the tube, and you can't erase the Notice of Default). I have sent a simple "cease and desist" letter, asking them to stop meeting in closed session about the CSC.  If it's illegal, isn't it reasonable to ask them to stop doing it?

After what I've learned about the Brown Act in the past couple of weeks, I am absolutely convinced that the closed session was a violation.  I'm not the District Attorney so I'm not worried about proving "intent" or getting an "official" verdict. I just want the city council to decide: Hey, let's have a public hearing about the CSC! Let's get it all out in the open and hug it out! Let's resolve not to have closed sessions until we're actually talking land transfer and terms!

That would be plenty good enough for me. You're welcome, Lompoc.

Some recent examples are relevant, I think. On October 6, there was a public hearing to review city service fees. The consultant did a presentation - he talked about why he was qualified to do the work that he did and he explained the work carefully.  He referenced the Cost of Service Study (hundreds of pages long), and he taught the City Council how to use it. Why shouldn't the CSC consultant be asked to explain the 14 default points, and how it was decided that the CSC was in default? (See Oct 6 City Council Agenda and associated reports.)

As another example, Mayor Lingl has requested a monthly "Motorsports Park Update," to be presented by Planning Manager Lucille Breese.  Why couldn't there be a monthly CSC Update? (See Oct 20 City Council Agenda.)

In a follow-on post I will ask the question: Does the CSC share the blame for this Notice of Default fiasco? Spoiler alert: Yes, but with good will on both sides, the situation is recoverable.

The City, the Space Center, and the Brown Act

Lots of people are wondering what's going on with the California Space Center.  Some people have made their minds up without knowing what's going on.

I think we the people need MORE information - which is why a wrote a letter to the mayor, asking that the city "cease and desist" from meeting about the CSC in closed sessions.  Text of the letter is below (Lompoc Record article can be found here).

Dear Mayor Lingl,

I am concerned about actions that the Lompoc City Council has taken regarding its Exclusive Negotiating Agreement (ENA) with the California Space Center LLC (CSC).  I have several questions, mainly focused on the larger issue of whether or not the City is actually negotiating in good faith, as the ENA requires. Further, I have been frustrated and discouraged by the secrecy which has lately surrounded the project. 

In particular, I was surprised at the council’s decision of September 15 to send the CSC a letter of default.  I’d like more information about this decision, but because it was made during a closed session of the council, such information has not been made available.

In order to justify meeting about the CSC project in a closed session, the city council has employed the “real property exception” that is allowed by the Brown Act.  (According to Section 54956.8: Notwithstanding any other provision of this chapter, a legislative body of a local agency may hold a closed session with its negotiator prior to the purchase, sale, exchange, or lease of real property by or for the local agency to grant authority to its negotiator regarding the price and terms of payment for the purchase, sale, exchange, or lease.)

However, I believe that the city has used the real property exception improperly.  Thus, it is my contention that the City has violated the Ralph M. Brown Act, by discussing and taking action regarding the ENA during a closed session. By this letter I request that you cease and desist from the use of closed sessions to discuss the California Space Center Project or the ENA, except in very narrow and specific instances when the council’s purpose is “to grant authority to its negotiator regarding the price and terms of payment” (as is allowed by law).

In Opinion No. 07-2012, the California Attorney General quotes several State Supreme Court rulings to explain how the Brown Act should be interpreted:

As the Supreme Court has observed, the Brown Act was “adopted to ensure the public’s right to attend the meetings of public agencies.” To effectuate this purpose, the Brown Act “requires that the legislative bodies of local agencies . . . hold their meetings open to the public except as expressly authorized by the Act.” And, although the Brown Act contains express statutory exceptions that authorize closed sessions to be held with regard to certain matters, these exceptions are construed narrowly, while the Brown Act’s general command “in favor of openness in conducting public business” is construed liberally. This is so because statutory language “must be construed in the context of the statutory framework as a whole, keeping in mind the policies and purposes of the statute, and where possible the language should be read so as to conform to the spirit of the enactment.” These rules of interpretation also implement and further the state constitution’s directive that a statute or other legal authority “shall be broadly construed if it furthers the people’s right of access, and narrowly construed if it limits the right of access.” (The opinion quoted above can be found at http://oag.ca.gov/system/files/opinions/pdfs/07-1202.pdf)

The Attorney General has emphasized that the real property exception is “narrowly crafted” and intended for use only when the purpose of the session is “to inform or develop a negotiating strategy” prior to a real estate transaction (from 93 Ops.Cal.Atty.Gen. 51, ---, 2010 WL 2150433 as quoted in a letter by the League of California Cities, found at https://www.cacities.org/Resources/Open-Government/LCC-Letter-re-AG-Request-10-206.aspx). 

As noted,

The need for executive [closed] sessions in this circumstance is obvious. No purchase would ever be made for less than the maximum amount the public body would pay if the public (including the seller) could attend the session at which that maximum was set, and the same is true for minimum sale prices and lease terms and the like. (Schwing, Open Meeting Laws § 7.76, 416-418, 1994, quoted at http://oag.ca.gov/system/files/opinions/pdfs/07-1202.pdf)

Clearly, the Lompoc City Council’s discussions and decisions regarding the ENA with the CSC do not meet the narrow criteria for the real property exception.  The negotiating terms in this case are already public and available to both sides of the negotiation, and during the entire year of the ENA, there is no chance that the property in question will be sold, leased, or otherwise conveyed.

As provided by Section 54960.2, you have 60 days from the receipt of this letter to respond with “an unconditional commitment to cease, desist from, and not repeat the past action.” If you fail to cease and desist, such inaction may leave me no recourse but to seek a judicial invalidation of the challenged action pursuant to Section 54960.2, in which case I would also ask the court to order you to pay my seek court costs and reasonable attorney fees in this matter, pursuant to Section 54960.5.

Respectfully yours, Jane Behr

CSC - city "Notice of Default" letter and CSC response

Three documents in this post - the City's "Notice of Default" to the California Space Center (CSC); and responses from Ken Switzer and Steve Franck on behalf of the CSC.

(get the PDF file of the above letter here.)

Now, this is the text of CSC response by Ken Switzer:

City of Lompoc
Council Meeting October 6, 2015

Dear Mayor and Council Members:

I am not able to attend this evening’s meeting due to a previous commitment on the East Coast, I was not expecting the need in advance to attend tonight’s meeting. As a Realtor for Berkshire Hathaway advising on real estate matters for the California Space Center, and an early-on advocate for this Lompoc project going back a year and a half, I’d like to both ask some questions and give my comments at this critical juncture of the process. I’ve seen up close every step of the effort, from the initial groundwork led by Eva Blaisdell to the RFQ issuance, to the RFQ response to the ENA negotiation to the first steps on the ENA process.

All along I have sensed a strong desire on the part of the Lompoc community and City Council to get a Space Center built, and also have seen the phenomenal time, effort and expense taken on by a very motivated and focused Ms. Blaisdell to realize her goal to build the California Space Center in Lompoc. Stepping back and considering these very much aligned goals of both the Lompoc community and the California Space Center, one figures somewhere in there is a solution to build the Space Center that doesn’t get derailed by a communication problem between the 2 parties, or by a bureaucratic Catch-22 or chicken-and-egg issue that stops the project in its track over a process detail.

In this regard, I know that dozens of pages of very specific answers were given by the CSC, along with many attached exhibits to answer point-by-point the RFQ items requested in 30-day and 60-day milestones outlined in the ENA. I’ve also seen the list of 14 items that City staff asked to be corrected or completed based on their review of the CSC submittals. A question I have is was there ever a direct communication between Staff and CSC to describe these concerns and have them explained person-to-person? And if that effort hasn’t been done yet, will it be done in the next 4 weeks to allow CSC to understand specifically what will suffice or not suffice to meet the goals?

Issuing a public Notice of Default over a process issue that was not expected by the CSC (as opposed to simply a back-and-forth direct communication as to what was deemed missing in the eyes of staff), seemed perhaps unnecessary, and whether intentional or not, has caused real harm to the project’s image to investors. Certainly any project investors are now spooked to the point of not committing their funds until the NOD is removed. I suspect that if this effort fails or is stopped by the City, any future investors or other development groups will be similarly wary of taking a run up the hill on a future RFQ or Space Center development project in Lompoc, where their investors could be at risk of a rigid process that allows no communication between the parties, and can have the plug pulled at anytime.

I understand certainly the desire of the City not to continue with a development group that will either not be able to get the project off the ground, or run short of funds before completing the project, or even if built, then not be capable of running a new California Space Center properly. Those are legitimate concerns no doubt. But likewise beyond showing the capability of joining with contractors and operators capable of building and operating a Space Center successfully, and then meeting the upcoming ENA milestones for a conceptual plan, financial plan and long-term financing commitments, I’m not sure what else any development group can do at this early stage.

Based on the tricky economics of the project, I don’t sense that either a traditional developer or a theme park company like Disney is going to come here to build a Space Center, or any other large-scale development that benefits the people of Lompoc to a significant degree. This type of project is only feasible as part of a larger brand concept with offsite and non-traditional revenue streams, and may only be possible with the structure of a consortium of qualified partners led by a lead entrepreneur. However, finalizing a commitment to potential contractors or Space Center operators this early in the process doesn’t make any business sense, before having a finalized Space Center plan for which to put out bids to qualified companies in order to achieve the best financial results.

The California Space Center project is “real” to the extent it can be so far. It has contributed non-refundable funds to the City of Lompoc for their costs ($25,000), and it has commitments to build and operate from qualified companies when the ENA process is complete and a DDA agreement in place. The CSC has also spent several hundred thousands of dollars so far, both before and after the beginning of the ENA process, on laying the groundwork with various companies, investor outreach, financial modeling and conceptual planning. Different project layout ideas were presented in the 30-day milestone submittal, as were detailed financial models. Very extensive background was provided on Ms. Blaisdell and the potential contractors and operators of a California Space Center in Lompoc.

It would seem to make sense for all parties involved to do whatever is necessary in terms of direct and continuous communication between the CSC and the City to close the gap and get through this chicken-and-egg Catch-22 and move the project forward. The NOD needs to be removed to return investor confidence to the project. Beyond closing the gap with direct communication now to remove the NOD, I would also urge this communication process be kept in place to avoid any future NOD’s that could be cured simply by communicating. Once again this is necessary to avoid investors taking their money off the project. I urge the City Council to please open up the dialogue to ensure the ENA process can be completed in a mutually beneficial way that meets everyone’s goals. Thank you.

Ken Switzer
Berkshire Hathaway Real Estate

And finally, here is Steve Franck's response:

PDF file of the Franck letter here.