Fair play at fairgrounds an issue.

Byline: RANDI BJORNSTAD The Register-Guard

Get thirsty enough to buy a bottle of water at any of the 600 or so events held at the Lane County Fairgrounds each year and your buck-fifty will buy you one of two brands: Aquafina or EARTH20, both distributed by the Pepsi-Cola Bottling Co. of Eugene.

That's OK with the Lane County Fair Board but it's not OK with Peggy Wright, who, with her husband, Frank, bottles water under the EVA label - Emerald Valley Artesian - on the couple's property a few miles south of Harrisburg.

Wright said EVA could provide water to fairgrounds patrons for a fraction of the price they pay now, but an exclusive long-term beverage contract between the fair board and Pepsi freezes out small businesses such as her family's.

The contract stipulates that only products distributed by the local Pepsi franchise - or any new products added to the Pepsi line - are allowed on the fairgrounds in west Eugene. And all other vendors have to buy "all soft drinks, juice, isotonics and water" from Pepsi.

In addition, all take-out cups used at fairgrounds concession stands must bear the Pepsi logo, and the local Pepsi company must be listed as a fairgrounds sponsor in all advertising.

"Because they `bundle' the products in the contract - giving Pepsi the exclusive right to sell everything from soft drinks to sports drinks to juice drinks to water - no small businesses can ever hope to compete, and I think that's wrong," Wright said.

Only the larger soft-drink companies such as Pepsi-Cola and Coca-Cola have access to the full range of beverages served at large public events, she said, adding, "Water is different from all those other products. It's not a multi-component beverage, and it could easily be treated separately."

But former fairgrounds manager Mike Gleason, who negotiated the six-year contract with Pepsi three years ago, said the contract is simply good business.

It provides the fairgrounds with an efficient concessions operation that maximizes profits for the vendor and for the fair board, Gleason said, and it wouldn't be in the fairgrounds' best interest to split it up among multiple suppliers.

"We have a contract that helps subsidize our operations, and we're not going to jeopardize that," he said.

"Did we negotiate a good deal? I would say, yes, we did. Is it equitable that Pepsi has a contract that a local water person can't get into? Maybe in the future, we'll look at splitting that out. But right now, we've got a contract that doesn't allow it."

Both sides get a break

Gleason, 58, a former Eugene city manager who moved to the fairgrounds job in 1995, retired as fair director June 1 but continues to work nearly full time as a consultant to the board on construction management, fair activities, project development and promotions.

His assistant, Warren Wong, another former city of Eugene administrator, now serves as managing director of the $9.3 million fairgrounds enterprise.

Gleason signed the Pepsi contract in October 1999. Among its provisions are an automatic one-year extension to 2006 and a provision that gives Pepsi the right to match any offer by another soft-drink manufacturer or distributor wanting beverage dispensing rights at the fairgrounds.

In return, Pepsi puts up $10,000 per year toward marketing the county fair and chips in $7,000 for fairgrounds promotional events. The support comes partly in cash and partly in services, such as promotional printing and advertising and providing Pepsi products for events.

The fairgrounds also receives 50 percent of the money taken in from vending machine sales - minus the cost of bottle deposits - and 35 percent of the sales at the Pepsi booth at the county fair.

Last year, the fairgrounds received $10,524 from vending machine sales and $6,599 from Pepsi booth sales.

Pepsi's share that year - 50 percent of the vending sales and 65 percent of its fair booth sales - totaled $22,800, plus the revenue from selling its products to the fair board and other concessions.

Andy Moore, Pepsi vice president in Eugene, said beverage companies generally don't enter into contracts with public agencies for the sake of the bottom line. His family owns the local Pepsi company jointly with the LeFevre family of Roseburg.

"The benefit really goes to the agency, including the fairgrounds, that's trying to minimize its costs and maximize its use of taxpayer dollars," Moore said.

"For us, it's a matter of keeping our name and our (image) in front of a large audience. At the University of Oregon, for example, we lose a ton of money - the more Pepsi they sell, the more money we lose. But it's important to promote our products, be active in the community and have our name in front of the public."

Moore declined to comment on Wright's dispute with fairgrounds officials. "To be honest, what we sell in the way of tea, juice and water is a small part of a beverage contract," he said, "but if any of those categories were removed, it would affect our proposal to the fairgrounds.

"When the contract comes up again, they could ask for separate proposals for each type of beverage, but I think generally they benefit from having one (supplier)."

Samples, not sales

Wright's problem developed earlier this summer when she got an invitation to provide water for the Junction City-based Country Coach International "class reunion rally" at the fairgrounds. The event attracts as many as 200 giant motor coaches for the annual weekend event.

A June 19 Country Coach memo, directed to fairgrounds officials, said the Wrights weren't allowed to sell their product at the rally "because of a stipulation that the fairgrounds (has) with Pepsi about not allowing any other drink of any kind there."

"We would love to have this company join us," the memo continued, "if there is any way around this problem."

That didn't happen and, from Wright's point of view, things got worse after that.

She shelled out $650 for a commercial booth at last month's county fair, hoping to get some exposure for her product, which is marketed as pure artesian water with optimal mineral content. It's bottled as it rises to the surface through a sealed, seamless pipe sunk through bedrock into an aquifer.

"I wanted people to be able to purchase our water at the fair, just as they are able to buy hundreds of other products," Wright said. "But I wasn't allowed to do that."

Because of the fairgrounds' exclusive agreement with Pepsi, EVA and Crystal Springs, the other water vendor who bought booth space at the fair, were allowed to display their water but not sell it, although they could give away 1-ounce samples.

"It was ridiculous - people could barely pick up those tiny paper cups," Wright said. "It looked like we were having communion."

Meanwhile, several other booths did a brisk business in a variety of non-Pepsi-distributed beverages that don't appear on the official Pepsi "Flavor & Price List" and therefore, Wright contends, violate the fairgrounds' rules. They included fresh-squeezed lemonade, iced mochas and, in at least one case, bottled water.

The Eugene Water & Electric Board also had a large "rest area" booth and gave away large cups of city water.

Perhaps most egregious of all, Wright said, thousands of people came through the gates carrying their own bottled water, which ran the gamut from discount store brands to "designer" and fortified waters.

"I had arranged with KEZI-TV to give away - not even sell - my water in bottles with a specially designed, joint KEZI-EVA label and the fairgrounds wouldn't even let us do that because of their contract with Pepsi," Wright said.

"All I can conclude is, it's unfair at the fairgrounds."

Board could face suit

Wright questions whether the fair board violated state law, and its own rules, by accepting the Pepsi contract.

After she learned in mid-June that she wouldn't be allowed to be the water vendor during the Country Coach gathering, she filed a formal complaint with the board.

In a memorandum dated June 25, she charged the board with entering into a "perpetual exclusivity contract" with Pepsi that ignores state requirements for openness, impartiality and competition.

She also alleged that because soft drinks make up the backbone of the beverage business at the fairgrounds - and realistically can be procured through only two or three vendors - "bundling" all other beverages with them automatically eliminates competition from smaller businesses.

At the fair board's July meeting, attorney Barbara Novak from Harrang/Long/Gary/Rudnick, which does legal work for the board, said she believes the Pepsi contract is solid, although her firm had no role in negotiating it.

"I don't know if there was any legal advice for this specific contract," she said. "Not every contract has legal advice."

The board's own contracting rules require it to support competition, Novak said in a memo to board members, but also allow "the discretion to choose the appropriate solicitation process, so long as that process is in compliance with the contracting rules and state law."

It used to be that all public contracts had to be awarded under a sealed bid process, but increasingly government agencies issue "requests for proposals," then negotiate the best deals they can, she said.

State law allows local governments to exempt some contracts from competitive bidding - which the fair board did with its food and beverage concession - if they don't "encourage favoritism" in awarding contracts and if the contracts result "in substantial cost savings to the public contracting agency."

To bypass the competitive bidding process, a public agency must adopt findings that show it satisfies the nonfavoritism and cost-savings requirements.

Wright contends that the the fair board didn't do that before Gleason signed the Pepsi contract in October 1999.

When it adopted its contracting rules in December 1998, the board authorized the fair manager to serve as "contracting agent or purchasing agent," including acting for the board "in matters pertaining to the solicitation, advertisement, procurement, creation, award, execution, management, performance and oversight of fair contracts."

But the board's rules still require it to approve or disapprove the written findings of its agent that support awarding a contract without competitive bidding.

At the fair board's July meeting, Charles Warren, who joined the board in January 1999, said he had no recollection of the board ever dealing with the Pepsi contract. A review of fair board minutes from 1998 through early 2000 revealed no mention of the issue.

Warren said the exclusive nature of the Pepsi contract didn't bother him but the renewal clause did.

"It says, customer grants Pepsi the right of refusal to match any other offer," he said. "I'm concerned maybe we stepped over the border a little bit - who would come along and make a bid now? That's the only part that really bothered me."

Board President Francisca Johnson said the board had been "naive" in many ways in the past, but "since then we have tightened things up. We delegated a lot of things to the manager, but things are changing now - they will be different in the future."

Wright said she still hopes the fair board will reconsider its position regarding the Pepsi contract, although she doesn't expect that to happen. Meanwhile, she said, she's considering taking the board to court.

CAPTION(S):

Peggy and Frank Wright put up several signs at their booth to explain to the public why they could give out samples of Emerald Valley Artesian water but not sell their product at the fair.