Handshake deals, or gentleman’s agreements, may have been respected years ago, but they have not done the city of Banning any favors as of late.
Such a verbal agreement will now cost the Banning Chamber of Commerce more than $25,000, once the city formulates a letter of demand requesting money that a grand jury investigation brought on by city councilman Don Peterson back in February 2015 is brought back in a couple of weeks for the city to act upon.
Former councilman Don Smith, a current dues-paying member of the chamber who once served as its treasurer for a few years, offered some historical perspective to the council that the grand jury did not uncover.
More than four decades ago, the city relied upon the chamber to assist with “work” around the city, Smith said. Agreements called for the chamber to build its headquarters on city-owned land now occupied by the Police Department, which the chamber did so, at its own expense. In return, the city gave them a 100-year lease for $1 a year.
When the city wanted to build its police station on the spot where the chamber was, the chamber still had 70 years left on its lease, and it could have told the city “no,” according to Smith.
As part of an exchange, the chamber got a “lesser” city-owned building across the street, where it is situated now, adjacent to the Southern California Gas Company, which pays the chamber rent.
According to Smith, the city got the chamber to advocate for the successfully passed transient occupancy tax, usually referred to as the TOT, with a verbal promise to provide half of the income raised from the TOT back to the chamber.
“It was a handshake deal the council chose not to honor,” Smith said.
A year or so later, the council decided it no longer was interested in giving that public money to the chamber.
“The chamber has not done well with handshake deals,” Smith said, suggesting that, every step along the way, after the chamber assisted the city with business, the city in turn spurned the chamber.
Fast-forward to 2016, and years in between, when the grand jury released a report to Mayor Art Welch on April 25 damning the chamber’s director and its declared delinquencies with the city.
Welch was legally bound to keep the findings to himself for two business days, at which time the grand jury would release its findings publicly.
Four people were interviewed for that report: Welch, Peterson, current chamber director Jim Smith (no relation to Don Smith), and chamber president Ron Duncan.
The grand jury also scoured e-mails from past and current city and chamber officials, documents, and lease agreements dating back to 2006.
Among the investigation’s findings: in January 2006, the chamber was given a 50-year lease by the former city redevelopment agency, with rent of $1 a year for 50 more years. As part of the lease, the chamber was required to name the city of Banning as a “second insured,” meaning that, while the Chamber of Commerce is responsible for its liabilities, the city, with its deeper pockets, is liable if something happens in the event that the chamber is unable to fulfill liability obligations.
According to current chamber director Smith, the chamber has had the city named as a second insured “for some time.”
An amendment to the lease agreement, signed by the chamber and the Southern California Gas Company, transferred an existing lease for the city-owned building to the chamber, and required the chamber to establish a $10,000 maintenance fund, which the grand jury noted has not been done.
The report also stated that the city had not required the fund to be set up, nor had it forced the chamber to modify its insurance coverage.
The grand jury report shows that, between 2006 and 2013, utility bills incurred by the chamber were not paid; further investigation demonstrates that those bills were waived, based on a handshake agreement between the council and the chamber.
According to the report, once the waiver had been aired in public, Banning’s legal counsel determined that only the past three years could be collected, which amounted to $15,795.25.
According to councilman Peterson, the statute of limitations was based on “antiquated” water and utility rules.
Though the chamber offered to pay it off over 41 years on its limited income as a nonprofit, at $32.10 per month, the council rebuffed the offer, and no other negotiated amounts have come to light.
While there are those who would argue that the chamber does not have significant funds, the grand jury report shows that the chamber was set to receive $319,410 over 13 years from remaining lease payments from Southern California Gas Company. A prorated check for $212,616 was made payable to the chamber on June 6, 2006.
The grand jury concluded with its finding that chamber director Jim Smith has a judgment against him in the amount of $74,434.37, dated May 12, 2012, incurred after he and former business partner David Dysart, Jr. sued former councilwoman Barbara Hanna and lost.
The grand jury made four recommendations: the council was to take action on the lease as part of its first available council meeting, which it did Tuesday night; and essentially wagged its finger at the city, scolding them about doing any further handshake agreements, and to come up with written policies and procedures that would ensure such compliance.
The grand jury suggested that the city reach an agreement with the chamber to collect $15,795.25 in unpaid utility bills.
It also suggested that the city seek repayment from the chamber for the prorated $212,616 Southern California Gas Company lease funds.
It recommended the city take legal action against chamber director Smith to collect on payments owed due to the judgment against him, within 90 days.
Further, it recommended that the city request the chamber to dismiss its director, since it felt that his involvement there was a conflict of interest.
Director Jim Smith, who was not in attendance at the May 10 city council meeting, said in an interview, “The way the grand jury is portraying the chamber as participating in wrongdoing is inaccurate.”
He rehashed the history of how the chamber was never given utility bills while it was in its old building, and that the chamber’s electric meter was on the same meter as the Police Department.
He confirmed what former city manager Randy Anstine had previously told the Record Gazette: that there was a handshake deal, and the city did not require — nor did it even bill — the chamber to pay utilities.
Smith attributed the mess regarding the chamber’s current woes to a dispute between former chamber director Don Robinson, who was previously the city’s mayor, and Peterson.
“Robinson and Peterson didn’t get along,” Smith said. “It led to backstabbing, and created the chamber’s now estranged relationship with the council, which existed before I came aboard” nearly a year ago.
“There’s never going to be a relationship between the council and the chamber as long as Don Peterson is on the council. I know the majority of the council would like to work with the chamber and move on, but Peterson doesn’t want to move on,” Smith said. “It’s a personal grudge he has that has nothing to do with the chamber.”
As for addressing the grand jury’s recommendation that the city suggests his disassociation with the chamber, he said, “There wasn’t a relationship with the council” by the chamber “before I got there, and I don’t see one if I leave, but I may clear the way” for a relationship to evolve, if it means Smith steps aside.
“I believe I have helped rejuvenate the chamber” by initiating golf tournament fundraisers, car shows, stepped up chamber mixers and business events. “The chamber did nothing wrong,” Smith said. “There’s always a negative campaign. Now we owe $15,000. I wonder how much the city has spent trying to collect it.”
The question was raised at Tuesday’s council meeting, but city manager Michael Rock did not have a figure offhand.
Director Smith says that he has few assets, and that former business partner Dysart filed bankruptcy, avoiding having to pay his share of money owed to the city. Dysart has since moved out of state.
“I could have filed bankruptcy,” Smith said. “I have no assets. I closed my business. I’m being deposed May 16 to discuss my finances” with the city, which will determine its collection procedures prior to the May 24 council meeting. And since the $40,000 or so owed in the joint judgment would also include money that Dysart should have paid, Smith is not equipped to pay up what is owed by both of them, and declared, “I simply won’t. I have no way of doing that.”
Councilman Peterson wanted to know whether or not the council can request to have Smith removed from the chamber.
Councilman George Moyer said that the Banning Chamber of Commerce is its own business, and that the city can’t tell a private entity what to do with its employees.
Peterson countered that the city could discontinue dealing with “this” chamber if it disagreed with how it was run, evict it, and let the existing chamber flounder on its own elsewhere.
He also found it incredulous that the chamber doesn’t seem to have money, suggesting all their funds go into “the black abyss” that is protected by “the same old cronies” and a web of well-connected politicians whose organizations that they are involved in, allegedly benefit from city funding.
At the council meeting, Councilman Ed Miller declared, “This has been going on for several years,” referring to the chamber’s not having paid utilities, and the city’s inability so far to collect on past due bills. When it comes to any other business or individual, Miller said, “If someone owes money or has not paid it, they get evicted.” Further, Miller added, “Handshake deals done over and over shows how sloppily the city has been run. There’s no such thing as a handshake deal. It means nothing. There has to be a legal contract.”
Miller motioned to have city attorney Anthony Taylor come back with a proposed demand letter for the chamber by the council’s May 24 meeting, that would outline its requirement for the chamber to set up a $10,000 maintenance fund, pay the $15,000 or so owed in utilities, and add a second insured on its policy if it hadn’t already been done; and that if demands are not met, the chamber has 60 days before the city is to begin eviction proceedings.
Councilman Peterson seconded Miller’s motion, which passed 5-0.
May 12, 2016
Record Gazette
By David James Heiss
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