State Auditors will be taking a deep dive into Huntington Beach’s multi-million dollar settlement with Code Four, the operators of the Pacific Air Show that takes place every year in Surf City.
The settlement stems from an October 2021 oil spill off the coast of Huntington Beach that forced an early closure of the air show that year.
On Tuesday, State Senator Dave Min (D-Irvine) successfully pushed the state’s Joint Legislative Audit Committee for the probe to be conducted to determine if the $5.4 million settlement exceeded the appropriate compensation for lost revenue.
Or if it constitutes a gift of public dollars.
[Read: Huntington Beach Reinstates Pacific Airshow, Settles Lawsuit with Operator]
“Like hundreds of businesses along the Huntington Beach coastline, there is no doubt the Pacific Airshow lost revenue during the beach closures that followed the 2021 oil spill but it is unclear that they were owed any damages from the city for its decision, made in conjunction with the State and the County of Orange, to shut down its beach, and it is also unclear whether their lost revenues were close to the amount provided by the City’s settlement,” Min said in a Tuesday news release.
In an emailed statement Tuesday, City Attorney Michael Gates said the settlement isn’t a state concern.
“The State has no clear legal authority to inspect or investigate what the California Supreme Court has repeatedly described as a ‘quintessential municipal affair,’ that is, the spending of local monies and the local decision-making that goes with it, by a Charter City,” Gates said.
Members of the city’s Democratic council minority like Councilman Dan Kalmick have voiced opposition to the settlement.
Kalmick welcomed the probe in Min’s Tuesday news release.
“As an elected city council member who was on council during the oil spill and the settlement ‘negotiation’ by the new council majority, I have serious questions about this settlement. ‘Why was this case settled and why for so much money?’ Kalmick said in the release.
“It’s high time that a respected third party audit what is going on in Huntington Beach.”
Gates said the settlement is the result of months of negotiations.
“City Council finally reached a $5 million deal in early 2023 (to be paid over 6 years), which guaranteed the return of the Airshow in the fall of 2023, guaranteed the millions in economic benefit the Airshow brings with it to the City of Huntington Beach and the region, and City Council avoided the risk of trial,” he said.
In addition, if the city wins any money from lawsuits involving the oil spill for reparations, they’ll give up to $2 million to Code Four as well – bringing the total to over $7 million.
The relationship between the Republican city council majority and the operators of the Pacific Airshow has been a question since the day they were elected after they paid Code Four, the airshhow’s operator, for one of their campaign events.
Mayor Gracey Van Der Mark, a member of the council majority, did not respond to requests for comment Tuesday.
Secret Settlement Raises Questions, Lawsuits
One of the majority’s first big moves in office was to announce the settlement deal with the airshow, promising they planned to keep the planes in Surf City for the foreseeable future.
Since then, Gates has argued the city doesn’t need to release the details of the settlement, saying it could interfere with any future litigation the city pursues to try and get money from the oil company behind the spill, Amplify Energy.
[Read: Surf City’s Settlement With Air Show Operator Raises Transparency, Ethics Concerns]
Ocean View School District Board member and Huntington Beach resident Gina Clayton-Tarvin sued the city, arguing they needed to turn the settlement over to the public, but that case is still in litigation.
Two residents also sued the city last year to try and stop the settlement from moving forward, but a judge ruled they didn’t have standing to intervene in the case.
[Read: Judge Blocks Attempt to Kill Huntington Beach’s Pacific Airshow Settlement]
There have also been questions over how much money the airshow actually brings in for the city government after a Voice of OC investigation found the authors of a report claiming it brought in $120 million in spending couldn’t explain where those figures came from.
[Read: How Much Money Does the Pacific Airshow Bring to Huntington Beach?]
The audit comes months after state auditors released a report at the end of January accusing the Anaheim Chamber of Commerce of improperly using tourism tax dollars to lobby dozens of elected officials and support the campaigns of resort friendly candidates for more than a decade.
The chamber received the money from the city’s tourism promotion bureau, Visit Anaheim, the entity that the self-assessed hotel taxes were originally meant to fund.
[Read: CA Auditors Lambast Anaheim’s Tourism Bureau, Find Improper Tax Dollar Spending]
Min, in his news release, said the audit could help restore public trust.
“At a time when public trust in the integrity of our governments is at an all time low, it is more critical than ever that we provide transparency and assure the public that their tax dollars were not used in inappropriate or illegal ways.”
Hosam Elattar is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at helattar@voiceofoc.org or on Twitter @ElattarHosam.
Noah Biesiada is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada.
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