Laguna Home Tour Needs Full Funds Disclosure, Critics Insist

At first blush, the 32nd annual Charm House Tour in Laguna Beach was little more than a genteel tour of the beachside town’s eclectic homes, drawing the curious from across Southern California.

Last month’s event, sponsored by a civic organization called Village Laguna, attracted 800 people and showcased five homes.

The tour raised $29,000 for the organization, which promotes itself as a nonprofit community organization that supports local businesses and culture, historic structures and greenbelts.

But most of all, Village Laguna and its popular home tour is about raising money to aggressively support local slow-growth candidates and issues.

“On the flier they handed out, it said they’re dedicated to preserving the character of Laguna Beach, so everyone gets a warm fuzzy,” said Councilman Wayne Baglin, who served as a home tour guide last month at the request of a friend.

“What it doesn’t say is that the money is going into a PAC [political action committee],” said Baglin, a local real estate broker who has never been supported by the group.

“Most everyone sees [the tour] as being apolitical,” he said, even though it is registered at City Hall as a PAC.

Village Laguna’s agenda is no secret within the town’s political circles, but critics say it is a wolf in sheep’s clothing.

Typically, community-level political groups raise money through more transparent activities such as direct mail appeals or holding clearly marked political events.

A brochure promoting the May 16 tour told of the group’s efforts to preserve and enhance Laguna’s character, and listed seven of its activities.

Mentioned last was its support for City Council and school board candidates.

In 2002, Village Laguna spent nearly $20,000 supporting City Council and school board candidates, including the election of Councilwoman Toni Iseman.

Those political expenditures represented about 30% of the $67,429 the group raised in 2001 and 2002 -- the bulk of it from the home tours. Other expenses for the volunteer group included newsletters, printed endorsements, fundraising and $14,000 for a San Francisco polling firm hired to do voter surveys and opinion research -- an uncommon luxury for small-town political organizations.

Of the total raised those two years, all but $7,000 appears to have been used for campaigning and lobbying. During the same period, Village Laguna, with several hundred members who pay annual dues of $20 or $35 per family, distributed $2,350 in scholarships and charitable giving -- 3.5% of total revenues.

“They need to be honest about why they’re taking people’s money,” said Frank Ricchiazzi, a Republican activist and investor who in 2001 organized the Laguna Beach Taxpayers Assn. political action committee to counter Village Laguna’s financial clout. He has publicly challenged the completeness of the group’s financial reports.

Group leaders insist there’s no subterfuge, and point to the political disclosures in the brochure and on the group’s Web page.

Showcasing the town’s cottages and bungalows, members say, is a most appropriate way to highlight the very community quaintness that the group champions.

“We’re trying to do good things for Laguna Beach,” said former Councilwoman Ann Christoph, a Village Laguna board member who was endorsed by the group in both of her elections and remains on its board of directors.

“We make our brochures available to everyone that says we support candidates. We’re not hiding anything.”

What the brochures only allude to is Village Laguna’s support for local politicians who embrace slow or no growth in this town of 24,000, popular for its beaches, tree-lined downtown and art galleries.

Village Laguna was formed in 1971 to fight plans for beachfront high-rises, and held council sway until 1994.

That year, voters elected a more conservative majority after the devastating 1993 fires that consumed hundreds of homes. Some Village-backed candidates were criticized for opposing a new reservoir that could have boosted water pressure to fight the blaze.

But Village Laguna members remain engaged at City Hall, attending council meetings, organizing letter-writing campaigns and lobbying on issues from large-scale developments to home remodelings.

Last year, Iseman became the group’s most powerful member when she was appointed to the California Coastal Commission, which has authority over most building in the seaside community.

In 1998, former furniture company owner Tony Ciabattoni butted heads with Village Laguna when he asked City Council permission to build a 6,000 square-foot home in South Laguna on the site of Ozzie and Harriet Nelson’s 1950’s-era beach bungalow. After months of delay, he won council approval, despite impassioned opposition from Iseman.

A few years later, Ciabattoni said, he agreed to allow his home to be included in the annual tour because proceeds would go toward scholarships. When he was later told that some of the money would instead go toward candidates -- including Iseman, who had fought against the construction of his home -- he backed out.

“It’s hypocritical,” Ciabattoni said of the organization’s attempts to fight the construction of his home and then to exploit it as part of a political fundraiser.

Questions about the group’s agenda linger because the organization’s financial reports are confusing, said Doug Reilly, Village Laguna’s treasurer since January. The group has been working with an accountant for a year to get its paperwork in order, said Reilly, assistant city manager in nearby Laguna Woods.

He said Village Laguna is a nonprofit social welfare organization, which allows it to engage in political activities. Because of that, contributions to Village Laguna are not tax-exempt.

The federal tax code exemption he cited as applying to Village Laguna -- known as 501(c)(4) -- states that political activity is allowed but cannot be the group’s primary activity. Political expenditures, including direct or indirect participation in political campaigns, are subject to being taxed.

A group is allowed to spend without restriction on advocacy or lobbying, but “when you cross the line into electioneering, then you’ve made the jump,” said Andy Draheim, spokesman for California Common Cause, a government watchdog group.

Reilly said he didn’t know if the group filed its required state and federal tax forms in recent years. State records kept by the attorney general’s Registry of Charitable Trusts are incomplete.

Reports kept by the city characterize the group as a political action committee. Its required financial forms are filed with Laguna’s longtime City Clerk Verna L. Rollinger -- a Village Laguna board member.

The group is gearing up for the November elections, when it will endorse at least one council candidate for the two seats up for election.

Though endorsements haven’t been decided, it won’t be Mayor Cheryl Kinsman, whom group members have repeatedly criticized for being too lenient on development.

Kinsman said she wants Village Laguna to include disclaimers on tickets to the Charm House Tour and other fundraising, saying that a portion of the money will be used for political activity. “People think a nonprofit organization is the same as a charity, and it’s not,” said Kinsman, an accountant.