Lack of Transparency in KOCE-TV Sale

One of the most important factors in running any public agency or governmental body is transparency.

Without transparency, you have corruption. The framers of our Constitution knew it was so important that they included in the First Amendment, "Congress shall make no law … abridging the freedom of speech, or of the press." Journalists are needed to make sure government is transparent so that we the citizens understand what is happening with our public institutions.

This last week we saw the final chapter in an embarrassing and bizarre example of the lack of transparency. I am talking about the so-called sale of Coast Community College District's television station KOCE to the KOCE-TV Foundation.

Just getting the facts of this actual sale was a feat in itself. What I found was that the terms of the sale were different depending on which source you went to. Neither of the two major papers in Orange County had the same terms of sale, and the college district's website added an additional fact that nobody had ever reported: That the KOCE-TV Foundation was given credit from previous donations it had given to KOCE as part of the purchase price. I decided to use the facts from the actual Asset and Purchase Agreement between KOCE-TV Foundation and Coast Community College District, and the opinion from the 4th District Court of Appeal. The opinion, filed June 23 2005, involves the interpretation of a statute governing the sale of property, other than real property, belonging to a community college district.

The facts laid out by the justices were simple. The district put KOCE up for bid, the trustees rejected an all-cash bid for $40 million and accepted a bid of $8 million in cash (later to be reduced by previous contributions) and a 30-year note with no interest and no payments for five years for $17.5 million from the KOCE-TV Foundation.

Now we all know that money tomorrow is worth a lot less than money today. That is why we have to calculate the present value of the future payments to figure out how much the offer from the KOCE-TV Foundation was really worth. You would assume the payments would be $700,000 per year, which over 25 years equals $17.5 million. The net present value of those payments are approximately $5.5 million. If you add it to the supposed down payment of $8 million, the total purchase price would be $13.5 million. That offer is $26.5 million less than the $40 million all-cash offer. Last time I checked, the college district, like all school districts, was in need of money. But money from a religious group would be heresy in the world of public education.

The court concluded that the district refused taking the additional $26.5 million because it came from " … a group of televangelists." The justices correctly invalidated the sale and said the district could keep KOCE or sell it, but if they sold it, it would have to go to the highest all-cash bidder.

But there is a twist here that no one reported; a twist that only the world of insulated college trustees could get away with: Upon examination of the Asset and Purchase Agreement, we find that the payment to the district is not the $700,000 per year you would expect. No, in fact, the payments are zero for the first five years, $125,000 for the next five years and $187,500 for the remaining 25 years, for a present value of $1.47 million. If you add the supposed $8 million down payment, the total purchase price comes out to $9.47 million. That is more than $30 million less than those "slimy" evangelists offered. And why were the payments lower than expected? You won't believe it. The college district has to pay the KCET-TV Foundation $357,000 per year for programming (telecourses) and advertisements. That was not reported anywhere.

The main argument for selling the station to the foundation was it would air the telecourses for free. Nobody expected the college would have to pay $357,000 for the privilege.

This last week the foundation settled with those "slimy" evangelists. The district, which was a defendant in the lawsuit, refused to disclose the settlement saying, "that they did not have a copy of the agreement and did not know the terms…. " Next week we will look at the settlement and how much more money the college trustees left on the table.