The California State Auditor’s office will review the settlement agreement between the city and the operator of the air show held annually in Huntington Beach, looking to reveal what went into the decision-making process that led to the city paying out nearly $5 million.
The legislature’s Joint Legislative Audit Committee approved the audit request made by one of the committee members at a hearing Tuesday afternoon in Sacramento.
“Our focus will be to understand how the city calculated the amounts that it paid to Pacific Airshow,” California State Auditor Grant Parks said at the hearing. “I don’t envision us making any conclusion about whether that was an appropriate or inappropriate decision. This is purely about the decision-making process that went into that payment.”
The final day of the 2021 Pacific Airshow was canceled due to an oil spill that ended up closing beaches for weeks along the coast. Pacific Airshow operators sued the city over losses incurred and the two parties agreed to a settlement last year, which drew protest from some councilmembers and residents.
“What we are trying to get here is some transparency as to why was this lawsuit settled when it looked frankly like a meritless lawsuit from the outside,” said State Sen. Dave Min, D-Irvine, who requested the audit.
Min, who represents a portion of Huntington Beach and often speaks out against the current City Council’s conservative majority, said it is important to prove that tax dollars weren’t used inappropriately.
The city has refused to release the entire settlement agreement and is fighting a legal battle to keep it from becoming public, arguing it could impact the city in future litigation as it tries to recoup money lost during the oil spill.
A summary of the settlement terms says Huntington Beach could pay an additional $2 million more to the Pacific Airshow from any money it recovers from the company that owns the pipeline that leaked 25,000 gallons of oil in 2021.
Parks said the ongoing lawsuit over the city’s refusal to release the complete settlement agreement may impact how specific the agency can be in its report.
Though the audit could include recommendations, the city wouldn’t be required to implement them, Parks said.
Interim City Manager Eric Parra said during the hearing that the air show is vitally important to the city. He said the city contends that the settlement was appropriate.
City Attorney Michael Gates said the audit “is not justified or proper.”
“The record shows that the 2023 settlement with Pacific Airshow was justified … by the City Council as a prudent decision to ensure future air shows and the related vast economic benefits to the city and as importantly to avoid any risks associated with proceeding to trial,” he said.
In a later interview, Gates said the audit is a waste of state resources. He said the state auditors won’t be able to look at closed session communications of the City Council, limiting their ability to conduct a review.
When asked if the city would challenge the audit, Gates said it was premature to answer, but he would consult with the City Council.
One recent OC city the state auditor looked into was Anaheim, releasing a report detailing how the city hadn’t properly managed its tourism contracts and millions in related funding.
State Sen. Kelly Seyarto, a Republican, voted against proceeding with the audit.
“I feel like the state (has) got their eye on Huntington Beach for whatever reason, and we’re going to keep piling on,” Seyarto said. “I don’t see this as a legitimate audit for the state to be doing, especially in the fiscal environment that we are operating in now — to use our resources to go get in between a lawsuit that was settled between a city and a private entity.”
There’s no timeline for when the air show audit might start. During the hearing, Parks stressed that statutory audits his office must complete affect its ability to start work on requests from the Joint Legislative Audit Committee.
