Following the Money on San Diego's 101 Ash Street
Incredible investigative work1 by Dorian Hargrove and the NBC7 investigative team laid out how City of San Diego officials allowed a questionable land deal to go through that generated significant profits for politically connected and influential special interests while causing taxpayers to waste hundreds of millions of dollars. The lack of scrutiny of the deal by the mayor’s office, members of the City Council and the city attorney’s office raises a lot of big questions. While NBC’s very detailed coverage (and the myriad other articles) make reference to big political donors2 who benefited, we thought it would be good to dig a little deeper on the players to show how entrenched corporate interests (and particularly the real estate and development industry) are in local politics. When campaigns are involved, obtaining influence via campaign donations, lobbying and fundraisers is a sure way to get elected officials to give corporate interests special treatment, sometimes at the expense of the public good. Now is as good a time as ever to consider measures to increase transparency and limit the influence of corporate interests on our elected officials.
How it Unfolded
If you have a solid understanding for what went down on 101 Ash Street you can scroll down to the section titled “Money and Politics.” For those who somehow haven’t been inundated with news about this debacle: in late 2016, the City of San Diego City Council was presented an offer by city staff to approve a $127 million lease-to-buy deal for a 21 story building formerly occupied by Sempra Energy, 101 Ash Street. According to an independent report commissioned by the City to look into the matter, the City overpaid for this building by at least $30 million and in a deal described as overwhelmingly favorable to the owners of the building (Doug Manchester, Mayor Faulconer’s largest donor, and Sandor Shapery). The contract was described by the City’s Office of the Independent Budget Analyst report as “horribly one-sided (in favor of the landlord) lease to purchase agreement that significantly constrains the City’s options.”3
This was particularly important because, the building turned out to have significant asbestos abatement issues that would have turned up in a standard inspection. It would be like overpaying for a house you are purchasing, not getting inspected and taking the seller’s word that the house does not have major problems. The previous tenant’s own consultants testified three years earlier that the building was “functionally obsolete” due to the need for tens of millions of dollars of work and the likelihood it would require asbestos abatement4. When city staff presented their own report to the City Council, they did not disclose these issues (and were, apparently, unaware of them). They noted only that the building would need a “$10,000 power wash”5. Clearly, the city did not perform even the most minimal due diligence (such as a standard building inspection) prior to recommending the building’s purchase.
Good local reporting turned up documents and emails which showed that City staff knew that the owner’s desired selling price ($72 million) was well above the appraised value (originally $62 million). Chief Operating Officer, Ron Villa, acknowledged in an email uncovered by NBC7 Investigates6, that the City Council would never approve it. And, City staff even got the appraiser to increase its valuation to $65 million.
In theory, City staff should be negotiating lower prices, not trying to get a higher appraisal. The lease-to-buy offer proposed to City Council was pitched as a good deal by City staff which valued it at $72 million. However, even the original appraisal, performed by the seller, was overinflated for a building in downtown San Diego. Recent, similar buildings were selling in the $45 to $55 million range, including the City’s recent purchase of Civic Center Plaza 7.
Why would the City be essential negotiating against themselves for a bad deal? According to reporting by La Prensa San Diego8, multiple staffers who attended a meeting9 with Mayor Faulconer reported that the mayor insisted on the more costly lease-to-own deal through third party Cisterra because he did not want Manchester’s name (his largest donor) being associated with such a large transaction. The Mayor’s office has yet to dispute that reporting. And further complicating matters, the City never ordered a legitimate inspection of the building which would have revealed many issues that have surfaced since. City Councilmember Todd Gloria met with City staff prior to his full public support of the purchase so he should have been aware of the nuances of this purchase. City staff either kept him in the dark or he largely agreed with their assessments that this would be good for the city despite the overvalued purchase price.
After the city took possession of the building, it turned out it was riddled with significant maintenance issues10 including considerable asbestos problems that, according to an independent report11, was not taken into account when workers began to work on the building. The building sits empty to this day, costing the city approximately $18,000 per day and is currently subject to numerous lawsuits12 including one from 22 contractors who claim they were unnecessarily exposed to asbestos as well as a lawsuit filed by former City Attorney Mike Aguirre for waste of public funds and fraud13. Voice of San Diego learned that the city has decided to stop making payments to the owner in an attempt to rectify the issue14. The scandal is widely considered an example of what should be the avoidable government waste of taxpayer money.
The deal had been orchestrated by the city’s Real Estate Assets Department (READ), led by Cybele Thompson, who was appointed by Faulconer in October 2014. Ms. Thompson was a former director at Cushman and Wakefield, a commercial real estate firm / brokerage with extensive experience in commercial deals downtown15. Her team was instrumental in securing a similar lease-to-own deal for the Civic Center Plaza16 building which was criticized at the time by the Independent Budget Analyst17 (IBA) for being too hasty and not allowing sufficient review by Council. Here’s what the IBA said about the Civic Center deal:
"We remain concerned that Council has only had a short period to evaluate the proposed lease-to-own agreement for the Civic Center Plaza and King Chavez buildings, and has not had the opportunity to publicly request additional information or suggest potential amendments to the proposed agreement." - Andrea Telvin, Independent Budget Analyst, January 23, 2015 (link)
That hasty deal ended up with a lawsuit filed by the previous owner of the building, which the City of San Diego settled for $1.2 million18. One would think that hasty deals that resulted in expensive lawsuits would temper the City Council’s enthusiasm for unscrutinized deals, particularly those brokered by the same entity, Cisterra Development.
According to NBC 7’s detailed timeline19, the city’s interest in 101 Ash Street began in February of 2015 (shortly after the approval of the hasty Civic Center purchase). After SEMPRA declared it would seek a new building, owner Sandy Shapery entered into negotiations with the City of San Diego (led by Ms. Thompson with assistance from Jason Hughes, the CEO of Hughes Marino, a commercial developer who the previous mayor had relied on for real estate advice) to lease the building for office space. Ms. Thompson tried unsuccessfully to negotiate a lease with Mr. Shapery. Later that year, developer and hotelier, Doug Manchester, a major donor to the Republican party and to Mayor Faulconer’s campaigns20, purchased a 49% stake in the building for $20 million21. It is not entirely clear why Shapery, the owner, chose to bring Manchester into the deal.
Less than a year later, Cisterra Development, who had been involved in the earlier Civic Center deal, was brought in and made an offer to buy the building from Shapery (and his minority partner, Doug Manchester) contingent on getting City Council approval for a subsequent lease-to-buy deal. In essence, Cisterra would be the middle man. Shapery later told NBC 7 Investigates that he believed that the Manchester/Faulconer ties played a role in bringing in a third party (Cisterra) to the negotiations.
“Manchester is Mayor Faulconer’s largest contributor. My feeling is the city wanted a way around it, after all, how does it look to have the mayor enter into a major land deal with his largest contributor? I am not sure if it was ever spoken but I could see the mayor being reticent to do a deal, just the appearance of impropriety would be enough to make them want to avoid it.” - Sandor “Sandy” ShaperyNBC 7 Investigates: City Officials Knew 101 Ash St. Was Riddled With Asbestos — So Why Were Hazards Ignored?
Eighteen months later, upon closing with the city, Shapery writes Manchester a check for $25 million, netting “Papa” Doug a cool $5 million. For a more detailed dive into the history of the 101 Ash Street fiasco, check out Voice of San Diego’s excellent write up.
According to numerous media outlets, the deal was the second of two deals made hastily with Cisterra and with little22 scrutiny by city officials including the City Attorney, Mara Elliott, whose name was on on the lease agreement that was signed shortly after she was elected to office. Ms. Elliott’s office, in July 2020, threatened23 NBC reporter, Dorian Hargrove, whose coverage was partially based on leaked reports by outside consultants detailing the 101 Ash Street debacle. Ms. Elliott, currently running for reelection, rescinded the order after getting heat for it24 on social media.
In August, Ms. Elliott responded to inquiries25 made by the City Council as to her role in the agreement. Her name is on the lease agreement, though she states she had nothing to do it. Unfortunately, as the duly elected City Attorney, she does have the final word and without her approval, the deal can not go through, according to the city charter. The City Attorney is the last bulwark against bad deals.
101 Ash Street sits unoccupied to this day amid whistleblower complaints that workers and employees’ concerns over asbestos26 were ignored “to save costs.” The mounting costs for repairs (estimated at $115 million27 and 4 years to complete) could have been avoided if the mayor’s staff, the City Council and the city attorney’s office had given the deal more than just a cursory review, especially given the issues with the previous lease-to-own deal orchestrated by Cisterra (which also resulted in a lawsuit). In fact, it appears that the City bent over backwards to sign a highly unfavorable deal for a building that was already overvalued by $30 million by some estimates. The city is facing multiple lawsuits and has been paying approximately half a million dollars per month for an unoccupied building. For an interactive timeline of the events, lobbying and fundraising surrounding the 101 AshStreet deal, click here.
Money and Politics: Nothing to See Here?
The scandal surrounding 101 Ash Street has reverberated through City Hall. Many are asking how could such a terrible financial decision have been made that was clearly not in the best interests of the city’s residents? Was there corruption involved? Or mere incompetence? It is not entirely clear, though the council president28 and other councilmembers29 are suggesting the former. One thing is clear though: special interests, wealthy individuals and lobbyists have way too much sway at City Hall.
To many among the City’s political punditry, this is just the way the system works. There is no evidence that any criminal acts are being committed (that we know of) and lobbyists and corporate interests will always attempt to influence our politicians. “Following the money” is mocked in podcasts and on social media as self-righteous naïveté of those who are outside the political establishment. This cynicism, unfortunately, frustrates sincere efforts at reform and transparency; we need to do more to rein in conflicts of interest and the overarching influence of corporate interests on our elected officials.
The parties who stood to gain the most from this deal, Shapery, Manchester and Cisterra Development, had been actively lobbying, fundraising and donating to campaigns of councilmembers, Mayor Faulconer and the city attorney (and continue to do so). The evidence shows that hundreds of thousands of dollars have flowed to these elected officials or PACs that support them and the timing of some of these donations appear to be remarkably consistent with milestones in the negotiations. Anyone who follows city politics is aware of Manchester’s close relationship with the mayor, but the other players pulled the levers of San Diego politics as well.
On October 17, 2016, all nine members of the City Council voted unanimously to approve the 101 Ash Street lease-to-own agreement orchestrated by Faulconer’s office. The motion, by Councilmember Todd Gloria, was seconded by Councilmember Scott Sherman. And, ultimately, an extremely one-sided lease agreement was presumably reviewed and approved by City Attorney, Mara Elliott who had been sworn just 7 days earlier.
The seller-landlord, Cisterra, played an outsized role in the City’s acquisition of the Property. Cisterra provided all or nearly all the documents the City relied upon for its due diligence. Cisterra also insisted that the City accept the property “AS-IS, WHERE-IS, WITH ALL FAULTS” and included strong exculpatory language in the Lease Agreement precluding any liability of Cisterra. - Forensic Review Ordered by City Council, Preliminary Report on 101 Ash Street 30 James Parker, Hugo Parker, LLP
After reviewing City of San Diego and Secretary of State campaign disclosures, we’ve identified a web of contacts, lobbying, fundraising and donations going to the mayor, members of the City Council and the city attorney flowing from the various entities who would benefit from this deal. Some are obvious and some are not. The timing of quite a few of the donations raises questions as well, but the bigger picture is, can the general public’s best interests be preserved when the influence of corporate interests is so heavy handed? And can we do anything about it?
The Strong Mayor and His Maker
Doug “Papa” Manchester has thrown his significant financial heft around City Hall for many years. A billionaire, developer and financial guru, he has been dubbed “kingmaker”31 by local pols and pundits. Manchester had numerous projects in various stages of approval when he decided to throw his influence32 and $427,85033 in support of Kevin Faulconer from 2013 to 2016.34. The San Diego County Republican Party spent $581,000 supporting Faulconer. It received $257,000 directly from Manchester Financial. Manchester also contributed $150,000 to the California Republican Party which then contributed to the local parties efforts to elect Faulconer’s. It is safe to say that without Manchester, we would likely not have a Mayor Faulconer.
The biggest and most significant project Manchester was working on was the Pacific Gateway Project, a $1.5 billion redevelopment approved in December of 201535 by Civic San Diego, a now disbanded, city-owned non-profit tasked with approving projects downtown and with a history of unethical relationships with developers36.
To say that Faulconer has a special relationship with Manchester, is an understatement. Manchester’s $20 million stake in 101 Ash St. may be small potatoes in the grand scheme of things, but the $5 million he profited on that transaction was certainly facilitated by his relationship with the Mayor whose appointees and staff were directly responsible for negotiating the deal which, as has been well-established, placed too much trust in the seller at the expense of the due diligence deals of this size should be subject to. When Papa Manchester purchased the 49% stake in the building (in July of 2015, about a year after Faulconer took office), he had already contributed hundreds of thousands of dollars to help Faulconer win his various elections. In the months following the purchase, he contributed another $37,000 to the various PACs supporting Faulconer, while the negotiations with the city were taking place. It is not a stretch to believe that Faulconer’s staff downplayed risks or at the very least placed too much trust in the seller on account of this relationship. Again, there is no evidence of any wrongdoing, but it raises the possibility that there are conflicts of interest whenever someone who is seeking approval for projects or deals has been so instrumental in helping get those same people elected.
Councilmembers and the City Attorney Also Benefiting
Corporate donations to candidates for city offices are prohibited by city ordinance (for the very reason that it creates the appearance of conflict of interest). And donations by individuals are limited to $600 per election for councilmembers and $1,150 per election for citywide offices (such as city attorney or mayor). This limits how much can be directly donated to candidates by any one individual. Nonetheless, when employees, spouses and lobbyists employed by a firm are marshaled to donate, the sums can be significant. The principals and employees of Cisterra Development, for example, recently made $3,800 in donations to the mayoral campaign of Todd Gloria and they’ve made over $14K in donations to city councilmembers involved in this debacle. Shapery, Manchester and Cisterra employees donated approximately $28,000 to these elected officials as well. Aside from individual donations, which are a drop in the bucket, lobbyists seeking to influence these decision makers hold fundraisers that can raise in excess of $100,000 in one event. In some jurisdictions, lobbyist fundraisers are prohibited as are even personal donations to officials they are lobbying. San Diego has no such policies.
The lobbyists who had disclosed client relationships with Cisterra Development, Shapery and Manchester held fundraisers and in many cases contributed the maximum allowed to the various campaigns for mayor, city council and the city attorney. The lobbyists include:
California Strategies lobbied the city on behalf of the owner of Civic Center Plaza (SD Lowe)37 and had client agreements with Cisterra Development, the subsequent dealmaker on both the Civic Center Plaza and 101 Ash Street deals.
In addition to personal contributions from principles, spouses and other employees, which added up to $12,200, they also organized numerous fundraisers for Mayor Faulconer raising a total of $166,429 for his 2013 and 2016 campaigns. The first fundraisers, which raised $117,230, were held in late 2013 and January of 2014, just as California Strategies was negotiating a deal with the city on behalf of their client, the owners of Civic Center Plaza, NY-based Lowe SD Properties. Having a friendly mayor in office could be very helpful to getting a good deal for their client. Faulconer took office in March of 2014, and hired a new real estate assets director (Cybele Thompson) in October after which Cisterra entered into the picture to propose a lease-to-buy deal for Civic Center Plaza that would need to be approved quickly (and was later subject to a lawsuit). Cisterra, incidentally, was also a client of California Strategies going as far back as 2014. In June of 2015, for Faulconer’s reelection campaign, California Strategies held another reception at the home of partner Benjamin Haddad, that raised $28,425. This was a month before Manchester purchased a 49% stake in 101 Ash Street. Cisterra reappears shortly thereafter with an offer similar to the Civic Center Plaza deal. And then in May of 2016, California Strategies held another fundraiser for Faulconer at Evans Garage exactly one month before Cisterra executed a Purchase and Sale Agreement with Shapery (and his partner Manchester) contingent on City Council approval of the deal.
And it was not just Faulconer who benefited from their largesse. Owners, directors and employees of California Strategies and their spouses directly contributed a total of $38,760 to the campaigns of the city councilmembers, the mayor and the city attorney, Mara Elliott. In addition, they held fundraisers for these elected officials raising a total of $471,440, according to the City of San Diego lobbying disclosures. Many of these donations occurred within 12 months of those elected officials voting on and approving 101 Ash Street (as well as Civic Center). In some jurisdictions, these officials would have had to recuse themselves from voting on the deal on account of having received contributions from those who would benefit from their decision. A few weeks after the City Council approved the purchase and took possession of the building, the firm held “retire the debt” fundraisers for Mara Elliott, who signed off on the deal.
A firm whose headquarters, not coincidentally, shares a lobby with SANDAG, where public officials from all over the county meet regularly for regional planning, Southwest Strategies has a thriving business representing real estate and development industry firms. They were famously involved in undermining Barrio Logan’s Community Plan38 which would have protected disadvantaged communities from industrial pollution by separating housing from industrial uses. Industry groups opposed the plan, hired Southwest Strategies and spent millions to put it to a citywide vote and defeated it. In late 2015, Southwest was hired by Sandor Shapery (the owner of 101 Ash Street) to “help secure an office space lease with the City of San Diego” for his Ash Street property.
According to disclosures, principal, Chris Wahl, met numerous times with Cybele Thompson (Faulconer’s appointee at READ), Stephen Puetz (the mayor’s chief of staff), Ron Villa (the city’s chief operations officer), Robert Vacchi (from Development Services) and Mayor Faulconer himself, while negotiations were taking place and shortly after Manchester purchased a 49% stake in the building. Thompson39 and Villa40 both resigned recently due to their involvement in the 101 Ash St. debacle. Vacchi also resigned shortly thereafter, though without explanation, according to Voice of San Diego41. The fact his name was on lobbying disclosures for 101 Ash, makes it quite clear why.
Puetz left the mayor’s office in 2017 to work for public affairs firm, Axiom Strategies42 (who was hired by Soccer City’s Measure E in 2018). The Mayor has been criticized for granting preferential treatment to the investors behind Soccer City43 and his chief of staff subsequently went to work on behalf of Soccer City. The lobbying by Southwest on 101 Ash Street occurred shortly after Manchester purchased 49% of the building. And in the month preceding the announcement of Manchester’s investment in the building, Southwest Strategies hosted a fundraiser44 for Mayor Faulconer at the Rancho Santa Fe home of Dario DeLuca, CEO of Pacifica Properties who had recently secured (with the help of Southwest) an unprecedented, very favorable 55 year lease extension45 on land the city owned in Mission Beach. The June 2015 fundraiser raised $61,875 for Faulconer’s reelection campaign adding to a total of $94,499 raised by Southwest Strategies for Faulconer’s campaigns.
And, in total, they raised $354,662 for the campaigns of the councilmembers, mayor and city attorney. Approximately $73,110 of this money came as individual donations from the directors, spouses, children and other staff members of Southwest Strategies.
Total Lobbyist Contributions
Other lobbyists associated with Manchester, Cisterra and Shapery held fundraisers and contributed large amounts to city council, mayoral and city attorney campaigns. These included Ledford Enterprises who actively lobbied the mayor’s office on behalf of Shapery46 for a total of $83,421 going to Chris Cate and Lori Zapf’s campaigns. Also Cooley LLC (who represents Manchester ) and Sheppard Mullin (who listed Cisterra as a client going back as early as 2016) also contributed and have thrown fundraisers for 4 councilmembers (Cate, Zapf, Gloria, Sherman and Lightner), Mayor Faulconer and the city attorney Mara Elliott in the amount of $85,571.
In total, the 5 lobbying firms associated with the three entities who profited from the sale of 101 Ash St. have raised and contributed over a million dollars that went directly to the campaigns of the eight city councilmembers, the mayor and the city attorney all of whom played varying roles in approving this purchase and allowed it to go through with little to no scrutiny.
The above donations are reported on the City of San Diego’s campaign finance disclosure website, but may not represent all donations made to the various candidates as these only represent electronically-filed donations available as spreadsheets through the city’s portal. Those filed via paper are not reflected. In addition, independent expenditure committees have not been included in this chart, but they have also raised hundreds of thousands in support of candidates, particularly Faulconer as previously mentioned. In total, Faulconer has received three quarters of a million dollars from the three entities associated with this scandal.
In addition to independent expenditures, political party contributions, lobbyist fundraisers and direct donations, candidates can also receive payments to their favorite charities “at their behest.” In fact, Mayor Faulconer has received over $2.6 million of contributions47 at his behest from corporate entities seeking favor with the city, most of which have gone to a non-profit foundation founded by Faulconer whose mission is to “support the organization of the Mayor’s office” called “One San Diego.” He was recently fined48 for violating disclosure laws when he accepted a $10,000 behest payment from Campland LLC49 and waited 16 months to disclose it while the company was seeking (and received) a contract extension for another 5 years on their Mission Bay property. State disclosure laws specify a 30 day deadline.
The non-profit lists many developers among its corporate sponsors, including Cisterra Partners, the architects of the Civic Center Plaza and the 101 Ash Street deals. In fact, One San Diego received contributions from Cisterra as “behest” payments50 right around the time the negotiations were taking place. The non-profit also lists among its sponsors the aforementioned lobbyist firms, Southwest Strategies and California Strategies that represent Cisterra and Shapery Developers. In addition, the non-profit board’s four members also include a lobbyist, Lani Lutar of Responsible Solutions, who has lobbied or advocated on behalf of Rancho Guejito, Sempra, the Building Industry Association and other real estate concerns and who has organized large fundraisers for Mayor Faulkner and other city council candidates as well as for City Attorney Mara Elliott. Ms. Lutar was an important player in the move to create a “strong mayor” system in San Diego51 which the downtown establishment (mostly developers and hospitality firms) favored as it gave them more influence. This concentration of power in one individual made it easier to influence municipal decisions.
Cisterra made its donation of $5000 to One San Diego on Febuary 9th, 2015, exactly two weeks following the Council’s approval of the hastily conceived Civic Center Plaza lease-to-buy deal, also brokered by Cisterra. Shortly thereafter, the city began negotiations on the fated 101 Ash Street building.
At the end of the day, three individuals and entities stood to gain millions from this deal, Sandy Shapery, Doug Manchester and Cisterra Developer. All three have lobbied, fundraised and influenced elected officials extensively particularly during the time frame of these deals and contributing significant amounts of money both directly or through their lobbyists. When the mayor’s own staff is responsible for massive real estate deals and the mayor and councilmembers receive significant campaign funding, behest payments and lobbying from those entities, it is no wonder that deals favorable to those contributors are being put forth with little scrutiny. Unfortunately, this debacle is only the tip of the iceberg when it comes to the massive influence corporate interests have on politics in our region; this is just one deal. And seldom is that influence for the benefit of the public.
What Can We Do Moving Forward?
First and foremost, the city needs to find ways to extricate itself from this terrible deal. I don’t doubt that they are looking for ways to be made whole again. The recent announcement by the city to suspend payments52 on this building is encouraging. But more importantly, the city needs to take more steps to increase transparency and remove even the appearance of impropriety. While there is no actual evidence of fraud or malfeasance, the appearance of it undermines the public’s trust in its decision-makers. This debacle has created a confidence crisis in our elected officials. Politicians defensively argue that donations, lobbying and fundraising don’t change their decision-making process. But clearly, these efforts do influence public decision-making, otherwise it is unlikely that corporate interests would spend millions upon millions of dollars flowing directly or indirectly to our public officials. Money always corrupts even the most noble of professions whether subconsciously or otherwise. And the worst part of it is that it reinforces the institutional power structure that has marginalized segments of our society for decades.
Studies have shown that even physicians, who are bound by the Hippocratic oath, make treatment recommendations based on reimbursement and other financial incentives, including disproportionately ordering unnecessary surgery when safer, lower cost treatments were available and more effective53. If doctors can be influenced by financial incentives, gifts and monetary contributions that can enhance their careers and financial well-being, certainly politicians can be as well, no matter how upstanding they appear to be.
We clearly need to do better. Here are some recommendations to renew the trust in our public institutions at the city level:
Limit contributions, behests or gifts by those who will financially benefit from council decisions
In some jurisdictions (such as the City of San Marcos and the City of Los Angeles) ethics laws prohibit, within a certain timeframe, city councilmembers or other elected officials from accepting contributions of any kind from a person or entity who will benefit from a vote made by the city council. The San Marcos ordinance is quite severe. A contribution of more than $200 in the 12 months prior to or following a vote that will benefit in any way the contributor elicits a $10,000 penalty and the loss of the seat. Mayor Jim Desmond was accused by local residents of violating this ordinance during his 2018 race for Board of Supervisors. He had accepted donations from a local developer and then voted to approve that developer’s project shortly thereafter.
The Los Angeles City Council recently passed a similar prohibition, though not as stringent as San Marcos’ ordinance. The City of Los Angeles had suffered from a scandal that involved FBI raids on city councilmembers’ offices involving developers seeking to approve high-rise buildings. One councilmember was arrested on federal racketeering charges and faces prison time. This scandal prompted the City Council to put forth new reforms to try to avoid this from happening again.
And of course, San Diego is not immune to this type of scandal. “Strippergate” involved lobbyists promising campaign contributions in exchange for a favorable vote on a strip-club ordinance that would repeal the “no touch” rule. Three San Diego city councilmembers were convicted of felonies for accepting campaign contributions from lobbyists hired by a strip club owner, in exchange for promises to repeal the rule. These were not actual payments to the councilmembers (which would be arguably worse), just mere campaign contributions. The law prohibits an explicit quid pro quo behind donations. Corporate interests make donations to the campaigns of candidates because there is an implicit understanding that the candidate will pay it forward when it comes time to vote on an item that will impact that donor. But if they say it out loud, it is considered a crime.
Policies that prohibit donations like this are typically limited to a certain timeframe in advance of a vote or following a vote that will materially benefit the contributor.
The City of San Diego should propose an ordinance which would ban ANY contribution, whether through a gift, campaign contribution, behest payment or a fundraiser held for the benefit of the candidate by any entity that would benefit from that vote. It should cover a period of 24 months prior to and following the vote.
Rein in the “Strong Mayor” Power of Mayoral Appointments
While the residents of the City of San Diego twice approved a strong mayor amendment to the City Charter, it is not always clear that these changes have been all for the better. A study by UNC Chapel Hill54 showed that council-manager forms of government were 57% less likely to have corruption convictions than so-called “strong mayor” forms. The City of San Diego’s transition to a “strong mayor” form of government was orchestrated and funded by developer and hospitality interests. No doubt, the ability to focus fundraising and lobbying efforts on one all-powerful elected official instead of nine made their ability to influence City Hall that much easier.
While that ship has sailed for the City of San Diego, there are things that can be done to mitigate some of the power afforded the mayor and thus his susceptibility to outside influence. There need to be more checks and balances within the system.
One important “strong mayor” power is the ability to appoint department heads including the director of the Real Estate Asset Department (READ). The director of READ wields an inordinate amount of power as they direct many millions of dollars of real estate purchases being made by the City. That official holds tremendous power and is beholden to one politician who could be influenced to make decisions that are not necessarily in the public’s best interest. Selecting the director of this department requires the utmost transparency and leaving it to the mayor, creates opportunities for corruption and influence (or at least the appearance of it). Again, there is no evidence that Mayor Faulconer’s appointee, Ms. Thompson, did anything illegal, but the very one-sided deal she arranged, at the direction of Mayor Faulconer, was clearly to the benefit of the developer and owners (who made significant contributions to the mayor) much to the detriment of the public. If this person is appointed by the City Council, that person is accountable to the entire council and less likely be subject to the political pressures of one decision-maker.
Institute a More Restrictive Lobbyist Revolving Door Prohibition for City Ctaffers
Given the staggering amounts of money that lobbyists raise for our elected officials, it is particularly unseemly to see these same officials hire employees of these lobbyists to work on matters that are of critical importance to the public. Mayor Faulconer recently hired a former lobbyist from Southwest Strategies, among whose many clients include Cisterra Development. This lobbyist, Rebecca Rybczyk55, replaced former communications staffer, Greg Block, who left the mayor’s office to work for another lobbying firm run by his wife, another former mayoral staffer, Rachel Laing. The many special interests that Southwest represents will now have a friendly face in the mayor’s office. Southwest lobbied the mayor’s office on behalf of Cisterra for another controversial project, the preserve at Torry Highlands which is now in litigation from environmental groups. They now have someone “on the inside” which puts a finger on the scale for Southwest and the clients it represents. As mentioned earlier, Faulconer’s former Chief of Staff, Stephen Puetz, also took a job at the public affairs firm lobbying for Soccer City, an initiative he worked on while working for the Mayor. Many of the local lobbying and public affairs firms are staffed and run by former public officials and there is a veritable revolving door of lobbyists and former officials who cycle in and out of city and county elected offices.
When a former staffer for a decision-maker is now charged with lobbying that same decision-maker on behalf of a special interest, it creates serious conflicts of interest both prior to leaving and after. And when a lobbyist who was previously on the payroll of special interests finds themselves on the staff of an elected official, that lobbyist’s former employer has unprecedented access via an “embedded” former employee. It should be noted that Mayor Faulconer himself, worked for over a decade at lobbying and public affairs firm, Porter Novelli, prior to entering elected office.
There are “revolving door prohibitions” in many jurisdictions and in fact, the City of San Diego has one56, though it is fairly watered down and contains significant loopholes. Generally, these types of regulations prohibit public officials57 or employees from engaging in lobbying activities as soon as they leave public office and for a certain time frame, known as a “cooling off” period. In 2022, the State of Florida will have the most restrictive “cooling off” period in the nation: six years. The premise behind these prohibitions is that public officials, who are supposed to be working for the public good, may be influenced by the implicit or explicit promise of a lucrative job in the private sector and may bring confidential or special inside knowledge to the private sector. Many of the lobbyists in San Diego are, in fact, former officials or staffers. Famously, former San Diego Mayor Jerry Sanders, was hired within three months of leaving office to lead the San Diego Regional Chamber of Commerce. He makes over $300,000 per year according to media reports.
San Diego’s prohibition requires a short 1 year “cooling off period” which prohibits direct lobbying activity but doesn’t prohibit former elected officials from being hired by the lobbying firms and consulting on campaigns to influence public officials. This is often referred to as the “strategic consulting loophole”58 which allows former officials to consult on behalf of clients seeking access, but they may not directly pick up the phone to talk to them (at least during the cooling off period). In Maryland, the law prohibits “both direct lobbying and [being] compensated ‘behind the scenes’ assistance to others doing advocacy work on matters before the General Assembly.” 59 A 1 year ban with this loophole serves little purpose and does not stop undue influence by well heeled clients. Many legislatures and jurisdictions have implemented two, four and six year bans and some even as much as a lifetime ban.
The City of San Diego should revamp its “revolving door” policies to close the loopholes that allow special interests to influence decision-makers by increasing the cooling-off period to one full term (four years) and closing the “strategic consulting” loophole.
Prohibit Lobbyist Fundraising and Bundling
Individual donations to candidates are limited to a certain amount in virtually every jurisdiction for a reason: the more money an individual contributes the more likely it is they will be rewarded in ways that undermine public trust and accountability. Lobbyists already have unprecedented access to decision-makers in their day-to-day employment. They spend a large portion of their working days in the offices of decision-makers and their staffs to help craft, influence or defeat legislation to benefit the clients that hire them. Fundraising for these decision-makers goes a step too far as it allows them to marginalize the common citizen and underprivileged communities who do not have as much of a voice as the corporate entities that hire lobbyists to get their way.
In 2000, George W. Bush circumvented the individual donation limitations by recruiting a network of bundlers who each raised over $100,000 by getting their own social networks to contribute the maximum allowed by law. One analysis, by the Washington Post60, identified 246 such fundraisers and determined that 40% of them were rewarded with appointments in the administration. And a fifth of these fundraisers were lobbyists. It shows that, in politics, there is no free lunch.
When San Diego lobbyists regularly hold fundraisers for candidates (raising as much as $100K a pop), it affords them special access and influence that is not available to the common citizen. It is not unreasonable to ask that lobbyists abide by the same rules that the rest of us have to follow and keep their donations (and fundraising) within the limits afforded to regular citizens. Candidates should likewise be prohibited from receiving proceeds from lobbyist fundraisers. As noted above, lobbying firms raised over $1 million for San Diego city council, city attorney and mayoral candidates, all of whom are implicated in the debacle at 101 Ash Street. Their clients may have been rewarded with preferential treatment because of this monetary influence. The State of California actually bans state lobbyists from making ANY contributions to state lawmakers that they are registered to lobby.
Importantly, fundraising for non-profits (via behest payments) should also be prohibited by lobbyists. When the mayor’s non-profit, One San Diego, has received close to $3 million from developers, hospitality firms and others who seek influence, it is not out of the kindness of their own hearts. It is to obtain influence.
Lest some complain: limiting lobbyist fundraising is not unconstitutional. It is the law of the land in numerous jurisdictions, including North Carolina 61 which prohibits even personal donations from lobbyists as well as bundling and any form of fundraising. Restrictions on gifts and contributions from lobbyists has been upheld regularly in the court of law. The U.S. Court of Appeals for the 4th Circuit even noted: “Any payment made by a lobbyist to a public official, whether a campaign contribution or simply a gift, calls into question the propriety of the relationship.” 62 We can and should put an end to this now.
The City of San Diego (and the County as well) have an extraordinarily robust culture of lobbying and corporate influence. It is clear through our history that this has not ultimately provided a benefit to the general public and has created a reputation of a City who is for sale to the highest bidder. And importantly, the leverage obtained by lobbyists and wealthy donors undermines real progress for regular citizens and less advantaged communities at the expense of perpetuating the existing power structure that has not served the taxpayer or the citizen well. While the dust has not cleared on the 101 Ash Street debacle, the cozy relationship with corporate interests and the lobbyists who pull the strings at City Hall should not leave a good taste in anyone’s mouth not to mention the millions of dollars of taxpayer money wasted.
We can and should do better.
This story was republished with permission from Grow the San Diego Way.