Friends in Deed
Connections with City Hall, through lobbyists or political contributions, can be a boon to leaseholders
For the people who have deals to use city-owned land, it's just good business. For the politicians they favor, lobbyists they employ and the former City Hall insiders able to work the system, it can be a bonanza.
Nearly one-third of the companies and individuals who have agreements to run resorts, shops and farms on public land have hired local lobbyists or contributed to the campaigns of mayors and council members.
Among politically connected leaseholders is former City Manager Jack McGrory, who left City Hall in 1997 before it began teetering toward bankruptcy. He joined Price Entities, a company created by the founder of the Price Club warehouse chain.
As top executive in the city for six years, McGrory was
responsible for approving some leases, lease transfers and
subleases on city property.
In 2001, McGrory and his colleagues at Price partnered in a
firm for the sole purpose of leasing city property in the
Midway District area, where eight of the 13 investment
firms and retail businesses that lease city land have hired
lobbyists or contributed to the campaigns of city
officials.
McGrory and the other executives in his firm called TPG Sherman LLC invested $12.7 million to acquire a 55-year lease on 6 1/2 acres where Sherman Street dead-ends near Interstate 8. The city's files indicate McGrory's company collects about $2 million a year in rent from a company that subleases the property.
The acquisition was a private transaction between his company and the former lessee, McGrory said.
He didn't recall any conversations about it with city officials. He also didn't remember a letter to him complaining about the possibility that the leaseholder might get increased rent from its tenant but the city wouldn't share the extra money. That letter is in the city's file.
The San Diego Union-Tribune discovered McGrory's involvement in the lease as part of a six-month investigation into the city's real estate practices. He is not alone.
Other former city employees also have connections to land deals. The same names popped up repeatedly in lease files, registers of lobbyists and campaign contribution lists.
Raphael Bostic, professor of real estate at the University of Southern California, said the high value of land in San Diego makes the city's real estate big business.
“It's going to make those properties very valuable,†he said. “If you can tie them down and get control of (them), you can get a competitive advantage.â€
To get an advantage, some companies have hired lobbyists and contributed to political campaigns.
In its investigation, the Union-Tribune matched the names of companies and people who hold land deals against two lists: one of locally registered lobbyists and one of donations to the successful campaigns of mayors and City Council members for the past 12 years and candidates of the two most recent mayoral campaigns.
That showed that owners and executives of at least 115 companies with land deals have contributed at least $338,691 to local campaigns.
It also showed that more than 50 city-lease holders have spent thousands of dollars on at least 68 local lobbyists in the last six years. At least 19 of those lobbyists once worked at City Hall in key positions, such as chief of staff to City Council members. Three-quarters of them have given money to the campaigns of city officials.
Nine firms like McGrory's act as middlemen between the city and companies that use its property. Seven have hired local lobbyists or contributed to the campaigns of city officials.
Fred Collignon, professor of city and regional planning at the University of California Berkeley, said lobbyists help companies to weave through the policies â€" and people at City Hall.
“Smart lobbyists know the latest in the bureaucracy and know the latest in the law,†he said. “They also have the contacts; they're old colleagues, friends, and they're probably going to get a more friendly smile.â€
Collignon, who has served on the Berkeley City Council, said campaign contributions are another way companies connect with policy-makers.
“Some might be more likely to take your phone calls and meet with you,†he said.
Companies often give a little money to every candidate, he said, and extra to those who appear to have more power or who have been friendly in the past.
“If you don't give them at all, they wonder why,†he said.
35 deals on Mission Bay
In Mission Bay Park, one of the city's most distinctive landmarks, half of the leaseholders have hired lobbyists or contributed to the campaigns of elected officials. They range from SeaWorld to the Mission Bay Boat & Ski Club and the Wave House at Belmont Park.
The city has 35 agreements involving Mission Bay property. Collectively, they produced $23.3 million last fiscal year â€" more than one-third of the city's total revenue from land agreements.
Among these leaseholders is Anne Ledford Evans, a longtime hotel owner who has seven agreements â€" an unusually large number of leases for a company or individual â€" for land and water on Mission Bay and in Torrey Pines.
One is a 66-year lease for the Lodge at Torrey Pines. The grand, Craftsman-style hotel has 170 rooms and 43 fireplaces, and is the staging site for some of the world's premier professional golf tournaments held at the adjacent Torrey Pines Golf Course.
Evans was at one time the city's chief of protocol, the official responsible for coordinating dignitaries' visits, and served on the boards of the Greater San Diego Chamber of Commerce and the San Diego Economic Development Corp.
Her son, Bill Evans, who is executive vice president of the hotel company, served on the board of the San Diego Convention Center Corp. Her nephew, Richard Ledford, is a City Hall lobbyist who worked in city government.
Evans Hotels' chief financial officer, Robert Gleason, served on the city's Salary Setting Commission in 2004 when it recommended raises for the mayor and council members. One of the company's attorneys, Brian Seltzer, is a City Hall lobbyist who served on the board of the San Diego Convention Center Corp.
The Evans family, along with Gleason, have made at least
235 contributions to city campaigns totaling about $54,000
during the past 12 years. This is more than any other
leaseholder. City law caps individual campaign donations at
$300 for a citywide office. Anne Evans said the
contributions weren't related to city leases and noted that
she also gives to county and federal campaigns.
“I am just machine-gun fodder for
political campaigns,†she said.
“You name it, we are there trying to
figure out what will make it better for us
all.â€
Executives of the Evans family businesses â€" among others who lease property â€" have given gifts to City Council members, including flowers and tickets to events, according to disclosure forms filed with the city clerk.
Although Anne Evans said Evans Hotels does not need help lobbying, attorney Seltzer registered as a lobbyist with the city clerk to be above reproach.
“We tend to know the people downtown, and we can explain our product better than anyone,†Evans said.
In the San Pasqual Valley, which is within the city limits, at least 13 leaseholders have contributed to the election campaigns of city leaders. Five also hired City Hall lobbyists.
Several farmers in the valley hold multiple long-term leases.
Bill Witman and his son, Matt, have 10 deals with the city to use more than 1,000 acres. One dates to 1969. The Witmans grow a variety of crops on the land, including avocado and grapefruit.
Matt Witman said the $2,600 he and his father have given to local campaigns has helped them to connect with elected officials regarding their leases.
“If you call up the council member's office, you may get a little bit of name recognition,†he said.
The Witmans are one of 60 leaseholders who have had multiple deals on city property. More than half of the companies with multiple deals have hired lobbyists or contributed to local politicians' campaigns.
For example, Willis M. Allen Sr., a San Diego real estate giant and well-known philanthropist who died in 2004, had two long-term leases with the city about two decades ago.
He and his family members made at least 60 contributions totaling more than $15,000 to local political campaigns during the past 12 years.
Under one lease, Allen and his son-in-law, Harry Collins, developed the Rancho Santa Fe Polo Club, now called the San Diego Polo Club, on 120 acres on El Camino Real.
City audits show the club grossed $3.7 million and paid the city about 10 percent of that, $372,981, in rent between January 2002 and December 2004. The lease expires in 2012.
Under another agreement, Allen, his son and his son-in-law operated the Crystal Pier Hotel and Cottages, Cape Cod-style accommodations on the historic pier in Pacific Beach.
The hotel pays the city 10 percent of its revenue, which amounted to $117,106 last fiscal year. Between November 2001 and July 2004, city audits show the hotel grossed about $3 million. The lease expires in 2024.
Interference
Lobbying is a common practice among those who have land deals with the city, from big companies to nonprofit organizations, such as the YMCA and the Girls Club of San Diego.
In the city's Real Estate Assets Department, property agents said lobbyists frequently call or show up on behalf of leaseholders â€" especially those who have agreements in the desirable Mission Bay area.
Dave Martens, a city property agent for five years, said lobbyists sometimes interfere with what otherwise could be a straightforward discussion between the city and a leaseholder.
“If anything, it has slowed the process down,†he said.
Michael McDade, who has registered to lobby on behalf of at least seven city-lease holders, said they have hired him to obtain, negotiate and extend leases.
Occasionally, on big or controversial leases that could affect the city as a whole, McDade said he will contact the City Council for clients. McDade was chief of staff to former Mayor Roger Hedgecock and has served on the boards of the San Diego Port Commission and the San Diego Economic Development Corp. He specializes in government contracts, including those involving real estate, and has given thousands of dollars to the campaigns of local politicians.
It is difficult to determine exactly how many leaseholders have hired lobbyists because not everyone who contacts city officials on behalf of leaseholders registers as a lobbyist.
The city's rules require anyone who directly communicates with a city official in order to influence a decision and who is paid more than $2,542 per quarter to register as a lobbyist.
But it exempts those whose sole activity is to negotiate terms of a contract with the city.
McDade said he thinks the real estate department recently has negotiated deals that are fair for the city and taxpayers. And he has praise for former director William Griffith's management team.
“The city, contrary to popular opinion, isn't totally stupid,†he said. “I haven't seen instances where it was a purely political decision.â€
McGrory has registered as a lobbyist on behalf of Price Entities in past years but not in 2006.
As a former city manager, McGrory knows the city bureaucracy and the decision-makers.
McGrory said his company, which was folded into a larger Price company in January, acquired the leasehold on the Sherman Street property “as it was†and didn't negotiate with the city.
That leasehold dates to 1981 when the city hoped to see a commerce center built there. It was never built, though three buildings were constructed.
Since then, the lease has changed hands five times. The city didn't get a cut as the leasehold was reassigned. That wasn't part of the original contract.
The company that now occupies the land and pays rent to McGrory's company is Electrical Data Systems, a Navy contractor. McGrory said the leasehold was attractive because it had EDS as a tenant and the property is close to the Naval Space and Warfare Systems Center. City files show EDS pays TPG Sherman about $2.1 million a year in rent. TPG Sherman, in turn, pays the city about $400,000 a year in rent.
At this rate, it appears TPG Sherman could recover what it spent on the leasehold in about six years. But McGrory said it's not that simple because the value of the leasehold diminishes every year as it moves closer to the expiration date, when the leasehold could revert to the city.
Gary London, president of The London Group, a San Diego real estate consulting firm, said he could understand why the city might have signed the lease it did on the property originally. In the 1980s, the Midway District was transitioning from a railroad location and was not as desirable as it is now.
“Obviously, as a taxpayer, I'm not pleased by this,†he said about the gap between what the company makes and what it pays in rent. “But it may be that it was a great deal at the time for the city to just lease the land at all.â€
See the article on San Diego Union-Tribune website
(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)