Attorney Charges Conflict of Interest in Renewal Project

An attorney representing businesses that are fighting the Redevelopment Agency’s proposal to buy their land for a car dealership urged the City Council this week to halt the project because of alleged conflicts of interest.

Attorney Donald Drew charged that the Redevelopment Agency is seeking his clients’ property instead of a site across the street occupied by Progressive Savings & Loan because of council ties to Progressive. Three council members own stock in the savings and loan firm, whose officials had originally agreed to move but have since changed their minds.

City Manager Kevin Murphy denied the charge, contending that legal entanglements make acquisition of the Progressive site impractical. He said the council has followed legal advice in dealing with the conflicts, and he noted that just this week a Burbank Superior Court judge upheld the procedures the council followed in a similar case.

Many Oppose Plan

Drew raised the conflict-of-interest issue Monday night at a redevelopment board meeting attended by 150 people, most, if not all, opposed to the plan to relocate 10 businesses, a center for the blind, two homes and a church to clear 3.2 acres on the south side of Main Street between Poplar Boulevard and Primrose Avenue for a Pontiac dealership. Drew represents three of the businesses.

The City Council, which sits as the redevelopment board, delayed action on a proposed agreement with the Pontiac dealer until Sept. 28 to give the agency time to discuss relocation with property owners and tenants.

Before the four-hour hearing began, Mayor Mary Louise Bunker and Councilman Talmage V. Burke removed themselves from voting on the project on the advice of Redevelopment Agency attorney Peter Thorson, who cited their ownership of stock in Progressive.

Thorson advised Councilman J. Parker Williams that he could vote on the project even though he, too, owns stock in Progressive. Thorson cited a Fair Political Practices Commission opinion that allows a council member with a conflict to vote on a matter when his participation is required for a quorum.

Owns ‘Minimal Amount’

Thorson said Bunker and Burke each own less than 3% of the corporation’s stock, but their holdings are far greater than those of Williams, who owns only a “minimal amount” of stock.

Drew charged that Councilman Michael Blanco also has a conflict of interest because he owns property in the redevelopment project area.

But Thorson ruled that there is no conflict because there is “no evidence” that the proposed auto dealership would have any financial impact on Blanco’s property, which is a mile and a half away.

Blanco said Drew raised the same conflict-of-interest issues in seeking to block the city’s acquisition of property for a Honda dealership three blocks from the proposed Pontiac site, but a Burbank Superior Court judge this week upheld the city’s actions.

“That’s true,” Drew said, “but we didn’t know as much as we know now.” Drew said he was unaware until this week that Williams held stock in Progressive Savings & Loan, even though Williams’ holdings were disclosed earlier in city documents and news reports.

Drew said Councilwoman Barbara Messina, the Redevelopment Agency chairman, is the only council member who seems to be free of all conflicts in the redevelopment project area. He said the other council members should be replaced on the redevelopment board to avoid conflict-of-interest problems.

Drew told the council: “It is certainly highly suspect at best to have three people on the board with stock in Progressive Savings & Loan and you decide you won’t take their property, but instead you’ll go across the street and wipe out all of these longtime businesses.”

City officials said they originally planned to put the auto dealership on the Progressive property, but the deal collapsed.

The Redevelopment Agency in March approved an agreement with a Riverside auto dealer, who plans to buy Superior Pontiac in Monterey Park and move the agency to Alhambra on land occupied by Progressive Savings & Loan and by 14 apartment units.

Got Court Approval

Michael Martin, deputy director of the Redevelopment Agency, said that because of the council members’ stock ownership in Progressive, the agency went to Los Angeles Superior Court to obtain approval of the auto dealer agreement and the purchase of the Progressive site.

Martin said Progressive, which had agreed earlier to a relocation plan, challenged the city’s right to take the property and the court action was dropped.

Murphy, the city manager, said the savings and loan opposed the project after delving into the terms of a lease-back arrangement it had made with 10 investors on the property. Murphy said Progressive discovered that its option to buy back the property from the investors could not be exercised for 15 years. He said the savings and loan then became concerned that it would not be adequately compensated for its lease and property interests.

In addition to the opposition from Progressive, the Redevelopment Agency was faced with legal complications arising from the fact that two of the 10 investors have died, putting their interests in the property into probate.

Murphy said the legal complications caused delays that led to termination of the agreement with the Riverside auto dealer.

Proposes Agreement

Since then, George B. Frey, general manager of a Long Beach auto dealership, has taken steps to acquire the Superior Pontiac franchise, and with backing of a financing division of General Motors, has proposed an agreement that calls for placing the dealership on the south side of Main Street.

Murphy said Progressive had offered to make its property on the north side of Main Street available to the Frey dealership through a 15-year lease that would precede sale of the property, but the terms were unacceptable to Pontiac.

Acquisition of the Progressive site would require a protracted legal battle, Murphy said. He added that when condemnation must be used to acquire property, there is always a chance that the court will set an exorbitant price for it.

Drew said he believes that the Redevelopment Agency will face a legal battle whether it tries to buy the Progressive Savings & Loan property or the cluster of businesses across the street.

In both cases, the cost to the agency for acquiring the property and assisting the developer would be similar--more than $4 million.

Deal Makes Sense

In the current proposal, the agency would buy the property on the south side of Main Street at an estimated $22 a square foot and resell it to Frey for $12 a square foot. Despite the subsidy for the dealer, Murphy said the deal makes sense for the city financially because the dealership will produce more than $300,000 a year in sales tax revenue, based on sales of $30 million. Frey told the council that the $300,000 figure is conservative because he hopes to do $40 million in business the first year and $60 million in the third year.

Even at $300,000 a year, the dealership, which sells GMC trucks and Suburus as well as Pontiacs, would be the city’s second-highest sales tax producer, trailing only the Price Club.

To make room for the dealership, the Redevelopment Agency would relocate the two families that live in homes that would be acquired. A church, a center for the blind with 41 residents, a pet hospital, four automotive service businesses, a pesticide company, a hair salon, an electrical supply store, a laundry and a dog grooming shop also would be displaced.

The agreement would give Frey the right to negotiate with the city to acquire property occupied by a city fire station at Poplar Boulevard and Main Street by providing a new site for the station.

Owners and patrons of several businesses urged the council to reject the agreement, arguing that the pet clinic and auto service shops are more valuable to the community than another auto dealership.

Councilwoman Messina said the city will try to find new locations for any businesses that are displaced.

“We’re not out to get small businesses,” Messina said. “The agency’s track recod in relocating businesses is good.”

Murphy said the agency has relocated more than 100 businesses, and many have grown at their new locations. He said the agency buys property at fair market value and compensates businesses for moving expenses and for any harm done by relocating.

Messina suggested delaying action on the auto dealership project for two weeks to give the agency time to meet with businesses to discuss relocation opportunities. Other council members agreed to a two-week postponement.

Leo Carroll, who runs a brake shop, said the city has suggested that he might move his business in with a group of auto repair shops. But, he said, he objects to that proposal because he would only be a tenant, not a landowner, in such an arrangement and would have to keep his business open the same hours as the other shops.

Dr. L. A. Frics, who runs the Wilson Veterinary Clinic, said the city suggested a new site for his clinic, but the location is poor and the building is only one-third to one-half the size he has now.

Nevertheless, Frics welcomed the two-week delay in action on the auto dealership project. He said the delay not only extends the time for the existing businesses, but gives the council time to reflect on the opposition to the project shown at this week’s meeting. While dozens spoke against the project, no one except the auto dealer and a General Motors representative defended it.