Palo Alto City Councilwoman Karen Holman did not violate state law when she urged city staff to explore rezoning sites on Arastradero Road despite her financial relationship with the owner of one of the sites, the Fair Political Practices Commission has concluded.
The FPPC's investigation was prompted by an anonymous complaint, which was filed with the agency on July 16. When asked about the allegations earlier this month, FPPC spokesman Jay Wierenga said the agency was planning to review the complaint to determine whether it was worth further investigation.
Last week, the commission determined that Holman did not violate the "conflict of interest" provision of the Political Reform Act and that the commission will not spend any more time investigating Holman, who is now running for her second term on the City Council. Holman is well-known for her resistance to dense new developments and advocacy of increased government transparency.
The commission informed Holman of its decision in an Aug. 22 letter from Gary Winuk, chief of the commission's enforcement division.
"After review of the documents received in our initial assessment, we determined there was no violation of the Act, and therefore, no further enforcement action will be taken at this time," the letter reads.
The anonymous complaint alleged that Holman's advocacy of rezoning these housing sites from R-1 (single-family residential) to R-30 (which would allow more density at 30 housing units per acre) "seems to be motivated by an expectation of future business, and monetary payments from Steve Pierce." Pierce is a Realtor with Zane MacGregor who owns one of the Arastradero parcels.
In April and May, Holman suggested during meetings of the council's Regional Housing Mandate Committee that the city explore the idea of adding workforce housing on the 600 block of Arastradero. Pierce had urged the committee to consider rezoning these parcels, characterizing them at the April 10 committee meeting as "good sites for denser housing."
The idea of rezoning the sites quickly fizzled, with only Holman proposing further exploration. Her advocacy, however, prompted allegations from her colleagues about Holman's potential conflict of interest. While she listed Zane MacGregor on her Form 700 as a source of income, she did not mention her financial relationship with Pierce at either of the committee meetings where the sites were discussed. The issue didn't emerge until June 4, when the full council was taking up the subject of the Housing Element, a state-mandated document in which the city lists sites that could be rezoned to accommodate more housing. The complaint claimed that Holman is using the Housing Element process to rezone the sites, a move that would financially benefit Zane MacGregor.
"Holman is using her considerable powers as a City Council member to attempt to effectuate an 'up zoning' from R-1 to RM-30 through the back door of the Housing Element," the complaint states. "Placing a site in the Housing Element requires the City to rezone that site to make it consistent with the Housing Element within one year; therefore placing a site in the Housing Element effectively rezones it without public scrutiny."
While she publicly disclosed her financial arrangement with Pierce and recused herself from the council's discussion of the Arastradero sites on June 4, her prior advocacy of the "workforce housing" concept prompted concerns from her colleagues. Councilman Greg Scharff, who also sits on the housing committee and is seeking re-election this year, said her failure to recuse herself from discussing the sites during April and May meetings constituted a conflict of interest. Scharff said he had mentioned his concern to Holman during the May meeting.
On June 9, council member Larry Klein made a similar point while recusing himself from a discussion involving Stanford University (where his wife is on the faculty). Klein emphasized the decision to recuse is one that each council member has to make and not one made by the city attorney. Vice Mayor Liz Kniss also asked City Attorney Molly Stump to clarify the rules for recusing. Kniss subsequently told the Weekly that her call for a clarification was prompted by media reports about Holman's prior failure to recuse herself from the discussions involving the Arastradero sites.
Holman has maintained that the criticism she has been receiving for her financial relationship with Pierce has been purely political. After learning about FPPC's finding, she reiterated that "there was never any factual basis for these false accusations" and said she was "delighted the FPPC has definitively confirmed this fact."
"The FPPC typically sees a spike in these kinds of politically motivated claims during election times, and I chalk it up to what's begun as a rather nasty political campaign season," Holman said in a statement.
She called it "unfortunate that my detractors stooped to false innuendos and anonymous accusations to contrive the appearance of a conflict of interest."
"My business relationship with Mr. Pierce is based on our common interest and my training and expertise in the preservation of historic properties," she said.
Holman told the Weekly that her consulting arrangement with Pierce goes back more than a decade and includes numerous payments ranging from a few thousands dollars to one a little under $50,000. On her Form 700 for 2013, the payments from the firm are listed in the $10,000-$100,000 range, though she told the Weekly that she had not received any payments from Pierce since May 2012. This disparity was highlighted in the anonymous complaint, which alleges that it would be perjury for Holman to list the firm as a source of income in 2013 if she in fact has not received any money from the firm.
Holman said she wanted to list the firm as an income source in order to "identify for the public any potential conflicts of interest."
"Because I may or may not be getting any future income from that source, it seemed to me that the transparent thing was to list them as a source of income," she told the Weekly.
Holman said she had changed her form to clarify that she did not receive any income from Zane MacGregor in 2013. She also said she hopes that her exoneration by the FPPC will put an end to the accusations and allow her to focus on local issues such as "over-development, parking, retail retention, and preservation of our neighborhoods." She is one of 12 candidates running for five council seats in November, a field that also includes Scharff and Mayor Nancy Shepherd.
"I'm hoping this will be put to rest and put aside so we can talk about real issues that are facing Palo Alto," Holman told the Weekly.