Chairman Tied to Developer Sets SEDC President’s Pay

Friday, July 11, 2008 | The revelation this week that the chairman of a city of San Diego redevelopment department, Artie M. “Chip” Owen, is unilaterally in charge of setting the salary of a top city of San Diego redevelopment official has fueled further concerns regarding Owen’s business ties to a developer and the potential conflicts it creates.

After a voiceofsandiego.org story Tuesday revealed a clandestine system of bonuses and extra compensation for the top officials at the Southeastern Economic Development Corp., Owen and SEDC President Carolyn Y. Smith said in a memo that Owen alone, as board chairman, is responsible for setting Smith’s compensation. The officials said that, in the future, the president’s salary will be discussed by the entire board.

At the same time he has controlled Smith’s salary, Owen has had financial ties to a company that has won several development deals from SEDC and is currently embroiled in a struggle over Valencia Business Park, a troubled project spearheaded by the agency.

That company, Pacific Development Partners, has been paying Owen between $10,000 and $100,000 a year for the last four years that Owen has sat on the SEDC board, according to Owen’s statements of economic interest on file with the City Clerk’s Office.

Although Owen has recused himself from voting on Valencia Business Park, his relationship with the developer has become a point of contention in the long-running struggle over who will build atop the land local government has spent millions of dollars preparing. SEDC President Carolyn Y. Smith has also been sued for fraud in relation to the project.

A local legal expert said Owen’s financial links to the developer raise troubling questions about his power to decide the salary of SEDC’s president, who oversees the agency’s redevelopment projects and whose staff has supported and recommended PDP twice in the last three years for a redevelopment project.

“It’s bad policy for the chair to put himself in this position,” said Robert Fellmeth, professor of public interest law at the University of San Diego. “I think if I was in his position I would be recusing myself from the compensation decisions.”

Smith oversees the entire organization. Because Smith has considerable sway over which developers are chosen for SEDC deals, Owen’s ties to a company that has recently won contracts with SEDC raise concerns about his role in setting her salary without participation from the board, Fellmeth said.

“I think that this board ought to do the opposite. Instead of saying the chair makes the decision, everybody but the chair makes the decision,” he said.

Owen became chairman in February 2007, according to SEDC meeting minutes. The agency says he is responsible for setting the president’s salary but not bonuses or other extra compensation.

In fiscal year 2007-2008, the first year in which Owen served as president, Smith’s salary increased from $158,000 to $172,000, according to records obtained through the state Public Records Act. Smith’s specific annual salary for fiscal year 2008-2009, which began July 1, isn’t listed in the budget.

SEDC is the city of San Diego’s redevelopment wing for southeastern San Diego. It manages and subsidizes development and beautification projects in some of the city’s most blighted neighborhoods.

One of SEDC’s most familiar developers in the last decade has been Pacific Development Partners.

Owen and the two PDP principals, Mark T. Burger and Ronald A. Recht, have strong business ties, a relationship that has gained more attention since questions surfaced about PDP’s involvement in the long-running development struggle at Valencia Business Park.

PDP originally won development rights for the project in 2005, offering $1.5 million to buy the land from the city. Following the awarding of that project, SEDC and Smith were sued by a local business for breach of contract and fraud on claims it was duped into giving up its rights on the land so it could be given to PDP. That case is currently in mediation.

Then, SEDC was forced to put the project back out to bid after PDP altered its plans for the site drastically without renegotiating the purchase price. SEDC re-awarded the project to PDP last month, but for a purchase price of nearly $1 million less than the original deal, despite the possibility that the land could’ve been significantly more valuable for the developer under the new project plans.

St. Stephen’s Cathedral Church of God in Christ, a local ministry that competed with PDP for the development rights of Valencia Business Park, has argued that the deal with PDP is null and void because of Owen’s relationship with the developer.

Marvin Ferrell, project manager for the ministry’s leader, said Owen has a conflict regardless of whether or not he voted on the project.

“If Owen is head of SEDC, every employee knows he’s in charge and he’s going to be conflicted by that,” Ferrell said.

SEDC legal bills, obtained through the California Public Records Act, show that earlier this year, attorneys researched how the state’s conflict-of-interest law, Government Code 1090, affected Owen. The law forbids public officials from participating in decisions in which they have a financial interest. Simply abstaining from voting doesn’t ensure compliance with the law.

Bruce Gridley, an SEDC attorney with the Los Angeles firm Kane Ballmer & Berkman, wouldn’t disclose the results of the 1090 research, saying such information is protected by the attorney-client privilege.

He said he was asked to perform the research by Huston Carlyle, chief deputy city attorney and deputy general counsel to the Redevelopment Agency. “I think it’s understandable when issues are raised that people want there to be an independent investigation and that’s what I was asked to do,” Gridley said.

Interviewed last year, Owen declined to answer questions about his personal finances, but said he had no stake in the Valencia Business Park project. He didn’t respond to repeated calls for comment this week. Burger and Recht have also repeatedly declined to comment.

Owen, who worked in real estate and development in the SEDC-governed area before joining the board, discloses having received the payments from PDP in the statements of economic interest that public officials must file with the City Clerk’s Office. The income is from a deal Owen brokered for PDP in 2002, Owen said, but the commission was deferred and paid out in installments.

Owen brought PDP to SEDC in the late 1990s in a deal that became the Imperial Marketplace Plaza on Imperial Avenue. That development agreement was awarded without the public request for bids that that is typically issued by public agencies.

Since joining the SEDC board in 2003, Owen has abstained from voting on PDP’s projects.

But other Owen-PDP connections wouldn’t be apparent from SEDC board minutes or his statements of economic interest. Upon being pressed, Owen last year revealed that PDP principals Burger and Recht also were involved with two of his SEDC-awarded development projects before he served on the board.

And, as of last year, Owen was partners with Burger and Recht in another development project, the details of which Owen has refused to disclose publicly, saying he’s a private person.

In an interview last year, Smith and Kane Ballmer & Berkman attorney Royce Jones said Owen’s relationship with PDP was unimportant to SEDC as long as he doesn’t vote on PDP issues. Jones said SEDC wasn’t privy to the details of Owen’s relationship with the company.

“He has a relationship with PDP and it has nothing to do with this agency,” Smith said.

Please contact Will Carless directly at will.carless@voiceofsandiego.org or Andrew Donohue directly at andrew.donohue@voiceofsandiego.org with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.