October 17, 2001
To: The Honorable Mayor & City Council
Re.: OSF Lease (amendment)

I appeared at the October 16th Council meeting on this issue. My argument was simple:  The lease was flawed from the outset because it violated the requirements of ORS 271.310 et. seq., designed to protect the public's interest in the leasing of publicly owned land.

The amendments proposed do nothing to correct the following: 1) Determination that the public interest would be served by the lease.

2) Consideration - the law requires land and/or cash.

3) Public access/use - which has declined over the course of 3 leases and is approaching the vanishing point.

I am providing a copy of our Oral Argument in support of our Writ of Review. It clearly supports and summarizes our position. We never got a hearing on the merits because the writ was dismissed. I shall forego stating why it was dismissed, but it involves the peremptory decision of a pro tem judge who in our view was more than ready to avoid dealing with the issues. We have written to the presiding judge regarding his behavior and are considering the avenues of appeal open to us.

I hope that you will read the attached and consider what substantive changes are needed to make the lease conform to law and protect the interests of Ashland's working, taxpaying citizens.

Sincerely,

Phillip C. Lang

attachment: Petitioners' Oral Argument

IN THE CIRCUIT COURT OF THE STATE OF OREGON
FOR THE COUNTY OF JACKSON

PHILIP C. LANG 758 B Street Ashland, Oregon 97520 & COLIN W. SWALES 461 Allison Street Ashland, Oregon 97520 Petitioners Pro Se vs. CITY OF ASHLAND 20 East Main Street Ashland, Oregon 97520 Respondent

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Case No: 003952-E-3 PETITIONER'S ORAL ARGUMENT (August 7, 2001)

Our brief filed 12/4/00 & Exhibits
Our Writ filed 5/11/01
Our response to Respondent's ORCP 2lA Motions & Exhibits filed 7/31/01.
Our Memorandum Re.: The Issue Before The Court: "Consideration" & "Public Interest" distributed today and supported by a Memorandum citing the law allowing for submission of additional material

II. THE ISSUE BEFORE THE COURT

The issue before the court has broad significance and scope. It transcends both the City of Ashland and OSF. That issue is the responsibility of governments to exercise prudent stewardship, due diligence, and perform careful assessments and evaluations before giving, leasing, conveying or selling public property to private interests.

III. THE LAW

Our case is based on the requirements of ORS 271.310 et. seq. governing the transfer or lease of real property owned or controlled by a political subdivision.

It states:

(l) Except as provided in subsection (2) of this section, whenever any political subdivision possesses or controls real property not needed for public use, or whenever the public interest may be furthered, a political subdivision may sell, exchange, convey or lease for any period not exceeding 99 years all or any part of their interest in the property to a governmental body or private individual or corporation. The consideration for the transfer or lease may be cash or real property, or both.

(3) Unless the governing body of a political subdivision determines under subsection (I) of this section that the public interest may be furthered, real properly needed for public use by any political subdivision owning or controlling the property shall not be sold, exchanged, leased or conveyed under the authority of ORS 271.300 to 271.360, except that il may be exchanged for property which is of equal or superior useful value for public use. Any such property not immediately needed for public use may be leased if, in, the discretion of the governing body having control of the property, it will not be needed for public use within the period of the lease.

We believe that the lease of public property, commonly known as "the Hargadine street parking lot" made between the City of Ashland and OSF was in violation of law and must therefore be declared null and void.

IV.  1. "Determination that the public interest may be furthered"

       2. "Consideration"

The lease in this case:

1. required that a determination be made that the public interest be furthered, - and -

2. Required consideration.

We contend that neither of these requirements was met.

1. Determination of public interest

We will cover this in 4 parts:

first - formal, legal requirements;

second - the substance of what actually transpired;

third - the broader implications and intent of the law;

fourth - the sequelae.

Formal Legal Requirements

The legislative intent is clearly to require that there be a determination that the public interest would be furthered; to require prudent and equitable analysis and consideration in such transfers to guard against the potential for abuse and "deals".

ORS 271.310 states:

"Unless the governing body of apolitical subdivision determines under subsection (i) of this section that the public interest may be furthered, real property needed for public use by any political subdivision owning or controlling the property shall not be sold, exchanged, leased, or conveyed ...except that it may be exchanged for property which is of equal or superior useful value for public use." (Underlining added for emphasis).

"Determination" is defined (Random House Dictionary of the English Language, unabridged edition) as:

"1. The act of coming to a decision or of fixing or setting a purpose; 2. ascertainment, as after observation or investigation; 3. the information ascertained; solution...8, the fixing or settling of amount, limit, character, etc...; 10. chiefly law - conclusion or termination."

The Substance of What Really Transpired

ORS 271.310(3) requires that a determination that the public interest may be furthered must be made before lease/conveyance/ etc. can be made. The legislation is specific and exclusive: "shall not be sold, exchanged, etc."The legislation requires a determination of furtherance of public interest. No such determination was ever made.

(a) Our original filing points out (p. 4) that at all public meetings at which the lease was discussed, the issue was never raised. It was assumed that a revised lease for more public property constituted, ipso facto, a public benefit.

(b) The intent of the law was to benefit and support public use. In our original filing (12/4/00 - pp. 5-7) was discuss how public use/public benefit in the new lease is curtailed even more. The new lease is even more restrictive of public use and public benefit.

It is clear from the record of City Council meetings and study sessions,cited in our original filing of 12/4/00 that no determination was made that this lease would further the public interest. The formal requirement was never acknowledged. Neither the Council nor the city attorney or city manager indicated any appreciation of this requirement. Nor was there any statement, motion, vote, decision, or concensus that furthering the public interest was either known to be a requirement or even being considered.

Making a determination that the public interest may be furthered requires discussion and a decision within that contect. It does not mean making a decision based upon unspoken assumptions, commonly held beliefs, or conventional wisdom". As we point out in our original filings (p. 4): "(There is) clear evidence that over time the unquestioned giving of public resources (to OSF) has been raised to the level of a public virtue".  In fact no hearing, finding, determination, identification, qualification or quantification of any public benefit was ever made. There was no analysis of what publics or how much of the public's interest would be furthered, if any.

The Broader Implications & Intent of The Law

ORS 271.310(3) speaks to public venefit and public use, with a clear intention to protect the public's interest when a public entity leases public land to a non public entity. Although ORS 271.330 qualifies the relinquishment of title, it conveys the intent of the law, which is to benefit the public and support public use. "Public use" cannot mean the entire public - an unachievable goal, but does mean large segments of the public. The intent is that taking public lands out of the public domain should entail their use for significant "publics". Thus ORS 271.330 provides for relinquishment to a non-profit corporation for use to serve large segments of the public: for low-income housing, socialservices, or child care services (ORS 271.330 (2) (A) (B) (C)). It does not include entertainment complexes.

Under the terms of the lease in question, a public (and free) Parking lot gives way to a parking lot for which fees are charged, and a theater. OSFA is a private corporation, allbeit a tax-exempt 501(c) (3). The facilities it has built and which it is building on the newly leased land are private. Access to the facilities or the "services" is restricted, ahd conditioned upon purchase of a ticket for a performance, tour, or other event. Insofar as OSFA's ticket prices have increased 25% in the past 3 years, and given the demographics of Ashland and Jackson County, it is now demonstrable that "public use" is now restricted Go fewer and fewer members of the (local) pubic who can pay for theater admissions and parking.

The Sequelae

Subsequent to approval of the lease a further public deficit (as opposed to "benefit") was revealed. Not only were the citizens to yield their free public parking lot, but they would have to provide a "reverse consideration" in the form of paying costs of construction of the lot in an amount estimated at over $700,000. Next, the City approved parking fees for this formerly free lot (all other city lots are free and the city has no parking meters).

V. CONSIDERATION

Section (1) or ORS 271.310 states that if furthering the public interest is met:

a political subdivision may sell, exchange, convey or lease for any period not exceeding 99 years all or any part of their intrest in the property to a governmental body or private individual corportation. The consideration for the tranfer or lease may be cash or real property, or both.

Since no cash was tendered by OSF, we move on to examine what consideration, if any, existed in the form of real property.

Introduction

1. A Fable -

If a business entity came to the City and said:

(1) we want to lease your (Hargadine) land;
(2) we want to pay nothing for it;
(3) we want the city to use its resources and good faith to secure a government grant and loan to pay for part of it;
(4) we want the city to pay off the loan section of the grant;
(5) we want the city to pay maintenance costs;
(6) we want to build our business premise on part of the land without giving you our financials, our plans, and without your questioning any part of our track record or the future viability of our project.

What would the City's response be?  "Absolutely not under these conditions!"

Yet that is exactly what transpired in the making of this lease. Indeed, not even the lease conditions requested by City Councilpersons themselves ever found their way into the lease (City Council meetings and study sessions - 11/2/99, 2/12/00, etc.)

2. A Fact From the Record

At the City Council meeting of 6/2/00, at which the lease was voted approval, the official minutes state that just before the vote, when asked by councilperson Don Laws why the proposed lease had no penalties for default, City Attorney Nolte said:

"Nolte explained that usually in a lease if the lessee wants to get out there are penalties, but because the proposed lease with OSF has no consideration between the parties, there is no difference for this wording." (underlining added).

With this introduction, we turn now to "consideration".

3. Value of City Property leased to OSFA

The property conveyed by the lease was the City's largest public parking lot with approximately 150 spaces. The property was also graced by mature landscaping. It provided the public with spectacular ~anoramic views of Ashland and the hills and mountains to the east. For its parking, contribution to the "urban forest" and aesthetic value, it was a very valuable piece of real estate. No finding, hearing, determination, identification, qualification or quantification - or any appraisal of its value was ever made.

4. OSFA's Consideration

What consideration was tendered by 0SFA? Section 5 of our original Exhibit "D" (the new lease) states the consideration:

"5. Consideration. In addition to the convenants of OSF contained in this lease, OSF has provided the following consideration for this lease:

(a) Conveyance of the Original Property to the City;
(b) Contribution by OSF of a portion of the funds for construction of the facilities on the Original Property;
(c) Construction by OSF of the additional improvements to the Original Property as described in Recital C above; and (d) Construction by OSF of the theater and parking facilities on the Additional Property."

We will deal with each of these in turn.

"(.a) Conveyance of the Original Property to the City".

This property was conveyed to the City in the original lease of 8/29/69, and used as consideration again in the lease renewal for another 25 years in 1994.

*This property was used as consideration in two leases, spanning thirty-one years. It cannot now be offered again as a consideration.

*What is its value now vis-a-vis the value of the City land leased? The value of either was never determined.

*Since it was used as consideration for the 1969 lease and the 1994 lease renewal, what residual value, if any does it have for this new lease?  This too was never determined.

"(b) Contribution by OSF of a portion of the funds for construction of the facilities on the Original Property".

It was the City of Ashland that provided a huge consideration in addition to leasing the land to OSFA in 1969. It provided $500,000 - all of its City economic development funds (federal funds) for construction of the facilities (Bowmer theater). OSF's consideration at that time was approximately $500,000 raised as matching funds. This consideration was already offered and spent for the original 1969 lease and 1994 renewal. It cannot be "recycled" and reused again.

"(c) Construction by OSF of the additional improvements to the Original Property as described in Recital C above:"

Recital C references the 1991 Allen Pavilion addition to the Elizabethan theater and the 1994 bathroom additions to the Bowmer. These leasehold improvements were specific to the needs of OSF add enhanced its venues. They may be construed as worthwhile additions for OSF's paying patrons, but they in no way enhanced the value and use to the general public, or the value of the property as a whole. Incidentally, no value as consideration was ever determined for these lease hold improvements in calculating "consideration" for the new lease.

5. Consider The "Consideration" (General Points re: "Consideration")

(1) In evaluating'"consideration', as required by ORS, we must note that the existing and new theater structures are for a specific and specialized use - as theaters. Unlike "low road" buildings, adaptable to a variety of other uses should the lessee default, these structures are themselves virtually uselss as buildings. They only acquire value when in use for their sole intended and limited purpose.

(2) In the most strict economic sense, their value is next to none, absenting occupancy by OSF. There is no marketable use - no waiting and willing bidders for these leasehold improvements. No theater organizations are now or are likely to be "waiting in the wings", let alone one that can use - or wants - an outdoor Elizabethan structure. They therefore do not constitute "valuable consideration" for the future either, should OSFA default - not an inconceivable possibility.

(3) We must note that all the structures, including the new theater, are the sole property of OSF during the 75 year term of the lease. Since they are OSF's property, and use of them is at OSF's sole discretion, it is hard to see how these structures constitute valuable consideration in the present or the next 75 years ~ .or when they revert to City ownershipin 2075!

6. The Degradation of "Consideration"

The OSFA was obliged to offer as a sort of consideration (not technically consideration because it is neither money nor real property) - use of some of its facilities for outside organizations. The lease in question (Exhibit"D" of our original filing) states, under "Recitals - Section 'E'":

E. It is in the interest of this community that during such periods as the Bowmer Theatre and the facility known' as Carpenter Hall located between the Original Property and the Additional Property ("Carpenter Hall") are not required or in use by OSF, use of such facilities be granted to civic groups, conventions and other organizations at such times and for such purposes as the City and OSF may approve.  However, the same lease states further on:

3. .USE OF PROPERTY. Except as otherwise provided in Section 13, OSF shall have sole and exclusive possession and use of the Property and all improvements, facilities and equipment thereon during the term of this Lease, and any renewal of such term, for theatrical productions or such other theater-related or community uses which are generally consistent with its Corporate Charter. The parties understand that except for the Parking Facility, OSF may set policies at its sole discretion regarding use of the Property. It is further understood and agreed that OSF shall grant to civic groups, professional organizations or governmental agencies temporary use of Bowmer Theatre and Ca~enter Hall when the OSF theatres are not in use, if such use, at OSF's sole determination, will not interfere with the operation of the activities of OSF, provided however, that OSF receives payment of a reasonable rental based upon the cost of maintenance, operation and services rendered or incurred by OSF in connection with such use.

Thus any use is:

(1) limited to Caroenter Hall and the Bowmer  theater (The Elizabethan and Black Swan have been withdrawn);
(2) available only at OSF's sole discretion- (viz. according to its criteria);
(3) for a fee established by OSF.

Exhibit "F" of our original filing (12/4/00) is OSF's own report on permitted outside use of the facilities cited in the lease as available to thepublic. It establishes a major, declining availability to and use by the public. Down to only 11 uses (only 1 was the Bowmer) in 1999. This is not surprising considering the constant degradation and dimunition in the allowance of public use~enefit from the facilities.

It can be summarized as follows:

(1) the first lease (3/2/54) requires use (of the Elizabethan -the only theater at that time), when it did not interfere with OSF's use (Exhibit "A" of our Memorandum on Consideration and Public Interest - filed today).

(2)the next lease of 8/29/69 reduces the use requirement to "lessee shall grant to and encourage any civic groups...temporary use provided that the lessee receives payment of a reasonable rental .... " (Exhibit "A" in our original 12/4/00 filing - p. 2)

(3) the 6/20/00 lease challenged here, degrades public accessibility as "consideration" still more. While stating that "OSF shall grant to civic groups...temporary use of the Bowmer Theater and Carpenter Hall..." it adds: "if such use, at OSF's sole discretion will not interfere with the activities of OSF". It also continues the proviso that "OSF receives payment of a reasonable rental .... " (Exhibit "D" in our original filing - underlining added).

VI. CONCLUSIONS

1) No determination of furthering the public interest in leasing the Hargadine lot was ever made.

2) No evaluation of the city's property was made to determine what fair consideration would be.

3) No determ/nation of fair consideration in exchange for the leased land was ever made.

4) No consideration was involved at all (V~d~.statement of City Attorney Nolte on record of 6/20/00 council meeting at which lease was voted approved)

5) The use of OSF facilities as a form of "consideration is:

(a) technically/legally irrelevant;

(b) has been consistently diminished in facilities available and availability over the term of four sequential leases.

6) The City, in signing the lease, has subjected its citizens/taxpayers to costs which were foreseeable, but which Council did not - or chose not - to see, including:

(a) enormous public share of cost;

(b) maintenance/upkeep costs;

(c) imposition of parking fees;

(d) social costs - congestion, degradation of adjacent residential neighborhood, etc.

7) The only conclusion we can come to is that the lease is:

(a) a specific, permanent giving of valuable public land, needed for and in public use;

(b) for a highly specialized and for-profit use ky a private corporation;

(c) without determination of furtherance of public benefit;

(d) and without reasonable consideration in cash or real property from lessee.

Thus it is in violation of ORS 271.310 et. seq.

We request that under the writ of review, and after considering the arguments and evidence, the Court declare the lease between the City of Ashland and OSFA, dated 6/20/00 to be null and void.