Mayor Files for Personal Bankruptcy

Mayor Sandy Smith, still wrestling with more than $200,000 in debt from his involvement in a popular downtown Mexican restaurant, has filed for personal bankruptcy.

Smith is being represented by lawyer and fellow City Council member Donna DePaola, who said the Chapter 7 petition was filed Feb. 8 in U.S. Bankruptcy Court in Santa Barbara. An independent trustee was selected March 27, and a meeting with Smith’s creditors was held the same day.

“Lots of people fail in the restaurant business,” Smith said before Monday night’s council meeting. “At least I managed to keep it open for 13 years.”

Smith’s former business partners continue to operate the Rosarito Beach Cafe on Main Street.

Smith owes nearly $208,000 to investors in Rosarito Beach Cafe, about $30,000 in credit card debt, and $11,000 to the IRS in back taxes, plus lawyers’ fees and miscellaneous debts, according to documents filed with the court. The total he owes is $262,388.

Smith’s petition said he owns no real estate, leases his 1995 Isuzu Trooper and has personal assets totaling $2,300.

Along with the $1,000 a month Smith receives for serving as mayor, DePaola said, he also takes home $2,420 each month as a teacher at a continuation school on the campus of Buena High.

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And though the document also acknowledges a continuing partnership in Downtown Hospitality Group Inc., which operates Rosarito Beach Cafe, he did not list it as an asset because those shares had already been pledged as collateral for a $107,500 loan.

DePaola said that Smith plans to turn over his 25,000 shares as part of the bankruptcy proceedings.

Because Smith is not a city employee and does not do business with the city, DePaola said she does not consider representing him a conflict of interest.

Smith, 49, worked as a chef before he opened his own downtown restaurant in the late 1980s.

Rosarito Beach Cafe, originally near the San Buenaventura Mission and now on the corner of Fir Street, was open for several years before Smith brought in two partners in 1996 to allow him to spend less time with the restaurant’s daily operations.

At that time, Smith took his existing debt of $207,500--money borrowed from friends and investors--and promised to repay it personally.

In the summer of 1998, during a period when revenue at the cafe was dwindling, the partnership wanted to end monthly profit payments to Smith, which he said he couldn’t afford.

On Monday he said the partnership turned Rosarito Beach Cafe from a break-even business to a corporation that went “hundreds of thousands of dollars in debt.”

“It was a bad decision, and I’m paying the consequences for it,” he said.

For the past two years, Smith has been trying to make payments on the debt, he said, but eventually decided to declare bankruptcy, citing the credit card debt as the worst problem.

After he left the restaurant, Smith was unemployed for six months and paid household bills with credit cards, DePaola said. He then worked as a substitute teacher for the Ventura Unified School District until he landed his position teaching ninth and 10th grades at Buena Vista High.

A third-generation Venturan, Smith is a Ventura College graduate who is a past president of the Downtown Ventura Assn. and a former member of the city Planning Commission. He was elected to the City Council in 1997.

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On Dec. 6, Smith was chosen by his colleagues to succeed Jim Friedman as mayor, through 2001.

On Monday, DePaola said that she also plans to file a Chapter 7 bankruptcy petition on behalf of herself later this week, for an event-planning business she has operated since last June. Her company, DePaola Enterprises, lost more than $50,000 from a poorly attended New Year’s Eve bash at Seaside Park, she said.

DePaola, who will represent herself in bankruptcy court, said Y2K fears kept people at home and forced her to liquidate the assets of her sideline business, which she had operated since last June.

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DePaola said she had spent $75,000 of her own money to host the Millennium Masquerade, to benefit Soroptimist International of Ventura.

However, only 700 people bought tickets, which originally cost up to $125. To just break even, DePaola said, she needed to sell 2,000 tickets.

DePaola, 46, paid $35,000 to rent space at the fairgrounds, $25,000 on fireworks, and $10,000 on publicity, including advertising in The Times.

“Everybody has sent me to collections, and the payments are unrealistic,” she said. “One wanted $5,000 one month and $10,000 the next.

“One creditor said, ‘You’re an attorney, you can make this up in six months.’ Well, a family law attorney in Ventura can’t make that.”

Times Community News reporter Holly J. Wolcott contributed to this story.

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See letter to the editor published April 12, 2000 regarding this article.

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