Huntington Beach releases details of lucrative settlement with Pacific Airshow operator

Details of a settlement agreement between Huntington Beach and the operators of the Pacific Airshow — over the forced cancellation of its event in 2021 — were released this week, revealing concessions that could result in the loss of millions of dollars in public funds.

The agreement was signed in May 2023 but was kept confidential by City Atty. Michael Gates, who brokered the deal. Orange County Superior Court Judge Jonathan Fish ordered the nine-page document be released in response to a lawsuit filed by a member of the public whose request for the information was denied by Gates.

The settlement stems from a 2022 lawsuit filed by Pacific Airshow operator Kevin Elliott against the city, alleging significant financial losses occurred after officials canceled the final day of the event in 2021 due to an oil spill off the city’s coastline.

In lieu of the entire document, Gates last year offered an executive summary of the terms reached, which stipulated the city would pay the Pacific Airshow a total of $4.9 million over the next six years and grant operators an additional $344,145 in event fee waivers, along with $110,000 in waived parking fees for the use of 600 public parking spaces during the three-day event.

The full settlement includes a list of terms that could potentially grant Code Four — the event management company that hosts the annual event — the right to hold the air show, along with a multiday musical festival, at any time of the year it wishes, and to use and monetize up to 3,500 public parking spaces in the city’s Pier Plaza, its beach and lots at Main Street and Sixth Street at no cost to the company.

Of those 3,500 spaces, 600 would also be reserved for the exclusive use of the air show operators for 14 days prior to and 12 days following the event, although they would be manned by city personnel at the city’s expense. All of the city’s RV parking/camping spaces would also be made available to Code Four to use or monetize as the company sees fit.

These rights would be enshrined for a period of 10 years, starting in 2024, once the City Council approved entering a contract with Elliott and would include the option to renew for three additional 10-year periods, at Code Four’s sole discretion.

Those same rights would further be granted to “any affiliate, assignee, transferee, subsidiary or parent of [the company]” pending approval by a council majority. Blocking such a transfer, however, would require a vote of at least five council members.

“In the event [Pacific Airshow] notifies the city in writing with the name of PA’s proposed designee, and the city does not respond to such designation in writing within 30 days of the notification, PA’s proposed designee shall be deemed by the city,” the document specifies.

In addition to allocating $550,000 in the city’s budget to prepare a review under the California Environmental Quality Act for future shows, the agreement would also oblige the city to waive all city fees and costs associated with hosting the shows, including applications, permits and road closures.

Gates said Wednesday discussions between the city and Code Four took place during at least four closed-session council meetings as well as multiple “offline” and in-person meetings that, on more than one occasion, resulted in an impasse.

While he could not recall any of the proposed estimates put forth by the city’s financial team, who reportedly crunched numbers on what the terms would cost, were Code Four to engage the settlement agreement as is, Gates recalled it as not a significant amount.

“Very, very generally speaking, and unreliably, and I’m not sure this is quote-worthy, none of this exceeded $1 million,” he said. “I recall it not being a seven-figure number. It never even reached a million.”

Gates initially refused to release the full settlement because he said it could compromise the city’s success in litigation related to the oil spill. On Wednesday, he said the only real monetary impacts of the agreement were what he included in the executive summary released in 2023.

The rest, including the fee waivers and parking promises, are all just options that Elliott could choose to engage, not actual costs.

“It was an options contract. Since it wasn’t certain at the time, it wasn’t considered to be a cost or burden to the taxpayers,” he said. “It’s all very fluid, really. These are just nuggets that are designed or intended to be a springboard for a future contract.”

Huntington Beach Councilman Dan Kalmick, who opposed the terms of the agreement, expressed skepticism that Elliott would agree to less favorable terms than those spelled out in the agreement.

“No one would ever negotiate below what’s in this document. It contains a 40-year unilateral agreement with Code Four, who can sell it to whomever [Elliott] wants, and you need five City Council members to oppose that,” he said. “There is no protection for the city in this contract.”

In a joint statement with fellow council members Rhonda Bolton and Natalie Moser, Kalmick estimated the parking space allotments and fee waivers would amount to hundreds of thousands of additional taxpayer funds that could go to a for-profit business for possibly decades.

“The city committed (an estimated) tens of millions of dollars without public input for a single day’s event cancellation with NO investigation of actual damages,” the statement read. “We call on the Attorney General to investigate this agreement for a potential gift of public funds.”