Highway Robbery

Yes, as through this world I've wandered

I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.

Pretty Boy Floyd
- Woody Guthrie

DEAL GONE BAD

Well, if you happened to catch last Tuesday's Claremont City Council meeting, you would have seen the council vote 4-1 to approve terminating the operating covenant that Claremont Toyota and the City agreed to back in September 2005. Mayor Corey Calaycay was the lone "No" vote.

As we discussed in our last post, the property in question is a 1.25-acre parcel that once contained a Chili's Restaurant and a small parking lot. It's located on the west side of Indian Hill Blvd. next to the offramp from the eastbound 10 Freeway. Claremont Toyota owner Roger Hogan had originally wanted that property to expand his existing operation.

Back in 2005, Hogan, who exerts a great deal of influence in town thanks to the fact that his dealership provides the City with about half of its annual sales tax revenue, talked the council into giving him $100,000 to help him acquire the property. The City also agreed to put in $200,000 in street and signage improvements and used its eminent domain powers to threaten the previous owner. The "threat" was a paper one only. It allowed the seller a tax advantage, so the City had to engage in a oddly legal, wink-and-nod IRS tax dodge for the seller's benefit.

The payoff for the city was supposed to millions of dollars in tax revenue over the minimum seven years Hogan agreed to use the Chili's property to expand his Toyota dealership. So, some time soon after the city council agreed to the deal on a 3-1 vote (then-councilmember Jackie McHenry voted against it; Calaycay abstained), Hogan took possession of the property, had the restaurant structure torn down and paved over, and started parking cars on the lot.

Unfortunately, the car market, and the economy as a whole, crashed, which caused Hogan to reconsider his need for the Chili's lot. With three years remaining on his agreement, Hogan wanted out of the deal, so last week city staff urged the council to allow Hogan to back out of the 2005 agreement and payback only half of the $100,000 of the City's investment.

You can see the actual discussion here (scroll down to agenda item 13 and click on that link).


NOPE, NO CONFLICT HERE

Of course, the council agreed to the deal Tuesday, but not without some squirming on the part of an uncharacteristically sober councilmember Sam Pedroza (carousing, at left). Pedroza received $1,000 in campaign contributions from the Hogan family.

How much did the Hogans love Sam in 2007? Well, the maximum allowable contribution for a Claremont City Council campaign is $250 per person. Hogan got around that by having his wife, as well as his adult son and daughter, contribute $250 each to the Pedroza campaign. Roger Hogan, Jr., by the way, for his campaign donation listed his occupation fleet manager of Claremont Toyota.

One other interesting thing about the Hogan donations is that none of them - father, mother, daughter, son - live in Claremont. Roger Sr. and his wife live in Newport Beach. For all the talk about how much Roger Sr. gives back to the community, it certainly seems like he takes an awful lot out, and we have to wonder if there isn't sometimes an implicit threat to take his dealership out of Claremont if Roger doesn't get what Roger wants.

Yesterday's Claremont Courier had an article by Tony Krickl (sorry, no link) that quoted Pedroza's rationale for not recusing himself from the vote for his auto dealer patron:

"It just astounds me as we're talking about the challenges to our businesses at this time and people are talking about charging this number one income producer $100,000," Councilmember Sam Pedroza said. "I just think it's the wrong direction."

Mr. Pedroza defended himself at the meeting after Mr. [Dean] McHenry pointed out that some city council members had received campaign contribution money from Mr. Hogan and questioned whether their votes would be swayed due to a conflict of interest.

The other councilmember who received a campaign contribution from Hogan was Mayor Pro Tem Linda Elderkin (pontificating, at right). Elderkin, whom we like to refer to "The Process Queen" for her supposed adherence to rules that enforce orderly, fair government, received $250 from the elder Hogan in her 2007 campaign.

Neither Pedroza nor Elderkin were on the council back in 2005 when the City agreed to operating covenant with Hogan for the Chili's property. But it never hurts to have some allies when a vote is needed, as it was on Tuesday night. Fortunately for the council, it has always reliable city attorney, Sonia Carvalho, standing by. Tuesday, Sonia leaped to the defense of Pedroza and Elderkin. Krickl's article quoted Carvalho:

"Campaign contributions for the purposes of conflicts are not sources of income," City Attorney Sonia Carvalho added. "So you can receive campaign contributions and not have a conflict of interest."

Carvalho also said in her comments that as long as the council can claim a "legitimate public purpose" for any expense, there is no gift of public funds involved.

Thanks for that, Sonia. So, Hogan gets a break, and the city gets back $50,000 of it's $100,000 investment, a 50% loss on the investment. Think of what services that $100,000 might have purchased, or how much interest the city might have earned over the past four years if it had merely invested the money in a long-term bond or CD.

Pedroza was careful to point out that there was no conflict on his part because he hadn't accepted any money from Hogan, et. al., in the last 12 months. It's also good to know that 12 months hence, in his presumptive 2011 campaign, Pedroza will again be cleared to accept even more Hogan money.

Who in 2007 knew the best return on investment might be a Claremont City Council campaign? (Start with $1,250, $50,000 returned = a 4000% gain over about three years.)

Check out these 2007 City Election campaign finance documents:

(Click on images to enlarge)

Pedroza 2007 Campaign Finance Statement

Elderkin 2007 Campaign Finance Statement

POSTSCRIPT

The funniest thought of all occurred to us as we were driving past the Claremont Auto Center last week. What if three years from now Roger Hogan decides to pull up stakes and concentrate on the Orange County car market? Who can guarantee he doesn't anyway? We couldn't help but noticing how his Claremont Toyota ads now say "Claremont/Capistrano." Capistrano is sure a lot closer to Newport Beach than Claremont.


The sight of the Claremont Auto Center last week wasn't exactly a confidence inspiring image. There certainly seemed to be a lot of empty spaces. The Chili's lot appeared empty except for six vehicles:



So, we wonder, how long did Hogan's operation really use the property? The answer is less than three of the agreed upon seven years. As always, Google Earth tells all (the Chili's lot is outlined in red):

4/1/05 - Before the deal

3/15/06 - Restaurant gone

6-17-07 - Cars. Now you see 'em....

6/27/08 - ....Now you don't

6/19/09 - More cars gone