Palo Alto City Councilwoman Karen Holman, who has spent more than a decade advocating for more transparency in city government, found herself fending off criticism this week for failing to disclose funding she had received from a real-estate company that proposed to rezone an Arastradero Road site to accommodate more housing.
Holman, whose first council term is expiring this year and who has not yet declared whether she will run again, expressed support in April and May meetings of the council's Regional Housing Mandate Committee for the concept of "workforce housing" on four parcels on the 600 block of Arastradero Road. The proposal would require the sites to be rezoned from single-family residential (or R-1) to RM-30, which would allow 30 housing units per acre.
The concept, which would yield about 57 housing units, was pitched by Steve Pierce, a realtor with local firm Zane MacGregor, which has contributed tens of thousands of dollars to Holman in consulting fees over the past decade and a half. Pierce owns one of the four parcels in question.
While Holman lists the firm on her statement of economic interests (also known as Form 700) and maintains that she had no legal conflict of interest, she said at the June 4 City Council meeting that she will recuse herself from further discussions of the Arastradero sites. This prompted questions and innuendos from her colleagues, who wondered why she didn't similarly recuse herself from prior discussion of Pierce's workforce-housing concept. In an interview, Holman said she did not recuse for a simple reason: She felt she had no conflict, and it didn't occur to her to recuse herself.
"I was looking at this as a consideration that had to do with the Housing Element and a planning concept that I found intriguing," Holman told the Weekly.
At the April 10 meeting of the housing committee, Pierce emphasized the sites' proximity to major employers, including the VA Hospital and Stanford Research Park, and to local schools, including Gunn High.
"I just see these as good sites for denser housing," Pierce said.
Later in the meeting, when the committee discussed possible housing sites, Holman said she was interested in the idea of putting housing near employers on Arastradero. She said she was interested in the sites' "proximity to employers" and wondered how the city can "provide synergy" between employers and housing.
She did not mention at that meeting that she has had a financial relationship with Pierce, one that resulted in her getting about four "finder's fee" payments since 2000. The payments are based on real-estate transactions prompted by her referrals to Pierce, Holman told the Weekly.
"If I should identify someone who wants to buy or sell a house and I refer them to Steve and they end up working together, I get a referral fee, should that transaction be successful."
Holman's financial ties to Pierce first came to public light June 4, when she disclosed them during the council's discussion of the Housing Element, a state-mandated document that requires the city to list sites that could accommodate new housing units. At that meeting, she recused herself from discussion of the Arastradero sites even as she maintained that she "does not have a conflict of interest." Holman stated she had spoken with City Attorney Molly Stump, and "We have concluded that in the best interest of appearance I would recuse myself from conversations having to do with the Arastradero sites."
The Arastradero proposal didn't get anywhere either at the committee or the council level, with members ultimately agreeing to list only sites that don't require rezoning and that would not stir up controversy. But her disclosure raised questions from her colleagues.
Councilman Greg Scharff recapped the May 8 committee meeting and said Holman made a motion to include the Arastradero sites in the element, though she didn't get a second and the proposal fizzled. Holman said she merely asked staff to "look at them."
Neither statement was entirely accurate, according to a review of that meeting. Holman suggested including 57 units on Arastradero in the Housing Element but declined to make a formal motion to that effect after seeing she had no support from her colleagues. She did, however, ask staff to return with more information on June 2 about how other cities have dealt with designating housing for employees. She said she was interested in the "company town" concept (in which employees live close to their places of work) both at the Arastradero site and at the Fry's site on Portage Avenue. She did not push for any particular development because none had been proposed.
Scharff told the Weekly that at the May meeting he alerted Holman that he thought she had a conflict because of her financial relationship with Zane MacGregor (Scharff said he wrote his concerns on a note; Holman said she doesn't recall seeing a note but confirmed that they spoke about the issue).
"It seemed to have an appearance of conflict," Scharff told the Weekly this week.
The issue of conflicts of interests re-emerged during this past Monday's discussion of the city's budget. Councilman Larry Klein, whose wife is part of the Stanford faculty, routinely recuses himself from conversations involving Stanford and announces his reason for recusal. This time, before he made his disclosure, Vice Mayor Liz Kniss asked City Attorney Molly Stump to confirm that her office doesn't actually decide whether council members should recuse themselves.
"You stand as a sounding-board, not as a decision maker as to what we can be involved in?" Kniss asked.
Stump responded that her office trains and advises council members "on the general requirements of the law" and said that "council members are required and obligated, as are other city officials and employees, to watch for decision coming before them that may impact those sources of income."
Klein then recused himself but not before emphasizing that the decision to recuse is one that is made by individual council members, not the city attorney.
Stump declined to discuss with the Weekly her conversations with Holman, saying she has no authority to waive the confidentiality of the council members she advises. When asked whether she has found anything improper in Holman's participation, Stump also declined to comment.
Holman, meanwhile, said she believes she had no conflict of interest. She said she has not received any funds from Zane MacGregor since May 2012. The firm has given her finder's fees on four or five occasions, she said. The payments ranged from less than $10,000 to a little under $50,000, she said. On her Form 700, she lists her payments from the firm in the $10,001-$100,000 range and describes her business position as "consultant." At the June 8 council meeting, she said she lists the firm on her form "regularly," whether or not she has income from the source.
"I do that as a means of transparency, so people know there is a potential and there is a relationship," Holman said.
She said she did not recuse herself from the committee discussions because her comments pertained to the concept of workforce housing and she wanted to see options the city has in exploring this concept.
"I could be no more honest than to say, I truly felt I had no conflict and I have no conflict," Holman said. "If my participation in those meetings has caused anyone to have doubts about me and my commitments, for that I'm sorry. But my commitment to high standards is intact and ongoing."
Holman also suggested that the pushback she has experienced from her colleagues may be motivated by politics.
"It's the political season," she said. "I'm part of a council minority, and it's campaign season. My political views are not mainstream with this council."
When asked whether she regrets not having recused herself from the committee discussions of the Arastradero sites, she thought for a minute before offering an answer: "Do I wish I had recused myself? In this political environment, yes."