An Orange County Superior Court judge heard arguments Friday in the state auditor’s lawsuit against Huntington Beach for refusing to cooperate with a review of its controversial settlement with the Pacific Airshow.
The state’s legal challenge, filed last October, sought to subpoena the city for documents related to the settlement and for officials to be interviewed. It also requested the court to declare that the state auditor has the authority to audit a charter city.
Judge Carmen Luege indicated that she would overrule the city’s demurrer — a legal motion filed by a defendant to dismiss the case. The responsibility to ensure that taxpayer funds are not misappropriated or unlawfully used is a “legitimate state concern” that affects residents not just in Huntington Beach but across the state, she said.
“How can I grant your enforcement request and shut the door on the city and say, ‘No, you don’t get to litigate the scope of the categories that have been subpoenaed, you don’t get to litigate whether there has been anything improper that happened at a legislative level?’” Luege asked the state’s attorney.
The legal dispute emerged from a 2023 settlement Huntington Beach struck with the Pacific Airshow, in which the city agreed to pay the operator $4.9 million over losses incurred after the final day of the 2021 event was canceled due to an oil spill. The settlement gave Pacific Airshow the exclusive rights to host an annual air show for up to 40 years , waiving fees and allowing thousands of parking spaces to be temporarily monetized by the operator.
A state committee voted the following May to audit the settlement, allowing state auditor Grant Parks to subpoena then-City Treasurer Alisa Backstrom for an interview, as well as permits and contracts with Pacific Airshow.
Parks sued the city last October over its failure to comply with the investigation. Former City Attorney Michael Gates, according to the lawsuit, told the auditor’s office that the city would not cooperate unless ordered by a court. The audit is estimated to cost the state $342,600.
Luege said she wanted to rule with caution because there are few precedents for cities that have contested state audits.
“If I’m going to dive into issuing a ruling about enforcement, I want to dive and step lightly because I don’t want to drown,” she said.
Luege directed both the state and city to submit supplemental briefs to address the procedural issues she raised, including what the limits to an audit should be and what due process rights the city has. The state will file its brief by Dec 18, while the city has until Jan. 13.
The next hearing is set for Jan. 29.