Redevelopment money helped build a cardroom but little else
When he was mayor of Salinas, Dennis Donohue was a big-picture guy, a politician with big ideas and a vision of his city as a leader in agriculture-related technology, a peaceful city with a reinvigorated downtown.
He swung for the fences. In tough economic times, he helped lead two successful tax measures to maintain and even expand city services before and after holding office. But he also swung and missed. His best-known strikeouts included the ill-fated Renaissance Partners plan for downtown, which spun itself into a web of expensive litigation, and the Green Vehicles investment fiasco of 2009, which cost the city at least $500,000.
It turns out, however, that an obscure East Salinas redevelopment venture supported if not orchestrated by Donohue cost the city significantly more money, as much as $4.5 million, while helping finance a controversial downtown cardroom and leaving the city holding a vacant swath of problematic property and a boarded-up church.
Nearly nine years after the first properties were purchased by the city, they all sit idle while city officials contemplate what they might do with them.
“I love Dennis, I do,” said veteran City Councilwoman Jyl Lutes, “but we’re still cleaning up the messes of Dennis and we will be cleaning up those messes for a long time.”
Former City Councilman Steve Villegas said Donohue “always maintained the philosophy of spend, spend, and spend, and worry later about how to pay for everything. He handled the city budget like an open checkbook.”
“Remember, we were just entering into a recession and we had to be careful on how the city was spending money,” said Villegas, who served on the council with Donohue for four years. “Dennis didn’t care how much we spent on the assumption that we would borrow from Paul to pay Peter. It would drive the rest of the council nuts.”
Dan Ortega, who was police chief at the time, told others as it happened that he suspected Donohue and others supported the redevelopment plan partly as a way to provide city money to help start the Bankers Casino cardroom venture downtown, which Ortega strenuously opposed.
City officials had been considering the redevelopment purchase as early as 2005 but the effort didn’t become serious until Donohue was elected. Months after he took office in 2007, the city redevelopment agency bought three parcels along Division Street from restaurant owner Hector Campos, who would help open Bankers Casino a year later. Campos had purchased the undeveloped 1.3 acres seven years earlier for $150,000 and sold it to the city in the same shape for $850,000.
Campos’ nephew and partner in the Bankers Casino venture, Sal Jimenez, acknowledged this week that the profit provided a significant portion of the cardroom financing, but he insisted Donohue was not key to the deal.
“Hell no, Dennis didn’t put that together. It was all the redevelopment guy, Alan Stumpf,” said Jimenez. Jimenez said Campos was approached by Stumpf, the city redevelopment director at the time, who made an offer he couldn’t refuse.
“We put two and two together and said we can sell this and put it into the casino,” said Jimenez.
Stumpf, now retired, said it didn’t happen that way, though his predecessor as redevelopment chief, Larry Bussard, might have approached Campos. Bussard noted Thursday, however, that he had retired in 2004 and had nothing to do with the Division Street transactions.
Stumpf said he didn’t know how involved Donohue might have been in initiating the process, but he said the purchase and related expenditures were part of a sincere redevelopment effort that could make a major difference in East Salinas eventually. He said the plan received significant early support from several council members in addition to Donohue.
Donohue did not respond to an email and call earlier this week seeking comment on the subject. After a campaign forum Thursday night in Salinas, he told the Partisan he had received the messages but did not wish to comment.
“I have no idea what you’re talking about,” he said three times before walking away.
Donahue’s six-year tenure as mayor ended in 2012 and he is now a candidate to represent the 4th District on the Monterey County Board of Supervisors. Running against the board’s leading environmentalist, Marina resident Jane Parker, Donohue is campaigning on a platform of progress, growth and commerce. He has built a campaign treasury of more than a half million dollars, mostly from Salinas Valley ag interests and the Peninsula hotel industry. Throughout his campaign, he has argued that redevelopment of the former Fort Ord Army base should be expanded and accelerated.
(A constant theme of Donohue’s campaign has been that Parker has not worked closely enough with the cities in District 4 — Seaside, Marina, Sand City, Del Rey Oaks and Salinas — to promote development at Fort Ord. At campaign forums and in his biography on his website, he does not mention that he served four years on the board of the Fort Ord Reuse Authority.)
When Donohue became mayor, the city administration was led by veteran City Manager Dave Mora, but he retired a year into Donohue’s tenure. His replacement, Artie Fields, had significantly less experience and Donohue stepped into the vacuum to operate almost as though the city had a strong-mayor system.
“Dennis oftentimes said ‘trust me’ and we didn’t know what he was doing,” said Lutes. “Everything was done behind closed doors and it was a real problem. We had no idea what was going on. We were often duped.”
Donohue soon became a highly visible figure in Salinas, showing up regularly at everything from neighborhood meetings to high school banquets to crime scenes. Despite a regular job as a produce executive, he worked tirelessly on city business, seldom turning down any opportunity to share his goals for the city. Lutes recalled recently that former City Attorney Vanessa Vallarta once remarked “that Dennis’ biggest problem is that he loves Salinas too much.”
Technically part of the Sunset Avenue Redevelopment Plan, the Division Street effort began in earnest just months after he took office in 2007. It mostly involves property along Division Street, a stub of an unpaved roadway near the busy intersection of Market Street and Sanborn Avenue in East Salinas.
According to city documents, the redevelopment effort was pursued and promoted by the Salinas United Business Association while Jimenez the cardroom operator was its president and an active board member. According to city redevelopment documents, the association, best known as SUBA, urged the city and its redevelopment agency to buy the property from Campos as part of an effort to revitalize the larger blighted neighborhood, a mix of houses, apartments, storefronts, a juvenile detention facility, a mortuary and health clinics. Donohue and Jimenez had served together on the Planning Commission before Donohue was elected mayor.
Over the years, the cardroom operators have contributed modestly to Donohue political campaigns. They gave $500 during his last year as mayor and $1,000 to his supervisorial campaign this spring. Jimenez contributed $110 in 2010. (Incidentally, the Parker campaign contributed $1,500 to Donohue’s first re-election campaign in 2008.)
A 2005 appraisal by a third party put the value of Campos’ land at $670,00 and noted, incorrectly, that the property had not been subject to a sale in the previous decade. Another appraisal by the same firm in 2007 put the value at $850,000, which was to be the purchase price. It said it would have been worth more but has no utilities and is in a flood plain that would require fill before any construction. It also noted that a potential obstacle to development is the adjoining Monterey County Youth Center, a juvenile hall for relatively low-risk offenders, and the towering lights that surround that property.
County property records show that Campos had purchased the property for $150,000 from O’Neil and Lois Eastin in 2000. Jimenez said his uncle saw the potential for developing the property and bought it largely because he got a good price and Eastin was willing to finance the purchase.
The next year, in the summer of 2008, Jimenez and Campos succeeded in opening their Bankers Casino in the former Moose Lodge building on Monterey Street near the Steinbeck Center downtown. News reports at the time said that partners invested more than $2 million to renovate the building, which has since expanded as the operation has grown to include off-track betting and entertainment space.
Ortega, while he was police chief, unsuccessfully lobbied against the operation for fear it would attract a criminal element and require a significant investment of time from his department. Ortega had been involved in several cardroom-related investigations while he was with the San Jose Police Department before coming to Salinas. City officials say that, for the most part, the casino has been less problematic than Ortega feared.
The cardroom did add a sizable business to the downtown, contributing to the continuing revival of the central business district. It has provided the city with around $10,000 in property taxes annually along with a confidential amount of sales tax revenue. Unlike cardrooms in other California cities that pay taxes of 10 percent and more on gaming income, the Bankers operation pays only about $5,000 in gaming fees annually because Donohoe and the City Council agreed to levy only a token gaming tax.
Following the purchase of the Campos property, the city bought three adjacent parcels from other sellers, including a ramshackle building at 923 E. Market. The city paid former Salinas schools Superintendent Jim Earhart $520,000 for that 16,835-square-foot parcel, which has potential commercial uses, and $335,000 and $300,000 for two similarly sized but undeveloped properties nearby on Division. No use has been found for any of it.
According to city redevelopment documents, the city at one point hoped to work with the non-profit housing developer CHISPA to put affordable housing on the properties and at other times intended to seek some other non-profit organization that would be willing to develop the land, possibly tying it into the nearby Cesar Chavez Park, two Clinica de Salud health centers or possibly a Boys and Girls Club to be created at the former Nazarene Church property at 331 N. Sanborn, one parcel removed from the Campos property.
As part of the redevelopment effort, the city bought the church in August 2008 for $2.6 million and later offered to lease it to the Boys and Girls Club for a token amount. Club officials decided, however, that the structure was unusable and opted to build a facility elsewhere. The church structure remains in place, windows and doors boarded. Signs warn visitors that it is city property, that it is unstable and that they should “Keep Out.”
“To purchase the additional adjoining property and the Nazerene Church was a crazy thing to do,” said Villegas, the former councilman and retired sheriff’s lieutenant. “Yes, the intent of what we wanted to refurbish the property into was good, but we had no money to complete the projects. Money was very tight but Dennis felt redevelopment would pay for the project itself. Purchasing these properties, the city got itself in a no-win situation. Dennis didn’t look down the long road and had no plan on how these properties were going to be redeveloped. Now the city is still stuck with these go-nowhere properties. This is what he will do to the county if elected supervisor.”
Salinas officials have been in discussion with Monterey County officials for months or longer about a possible land swap that could result in the church property becoming a county health clinic.
Lutes, the city councilwoman, says she supported the Campos land purchase and the cardroom venture but finds it troublesome in retrospect.
“It does look funny and now I feel culpable,” said Lutes. She says she finds it “ridiculous” that property that cost the city so much is still sitting vacant nine years later. “I feel sick about this.”
Lutes also mentioned the Renaissance Partners deal for a downtown makeover, which led to expensive litigation, and the Green Vehicles venture in 2009. Under Donohue’s leadership, the city invested $540,000 in a plan to manufacture electric cars in the city. The operation folded before any cars were produced.
“He (Donohue) promised us, guaranteed us, that we would never lose any money,” said Lutes.
At the campaign forum Thursday, Donohue said the city’s pursuit of an electric-car plant had been a worthy effort and he emphasized that the city’s investment had received the council’s unanimous blessing.
City Councilwoman Kimbley Craig, who endorsed Donohue’s bid for supervisor, said Donohue has shown the ability to get things done despite setbacks.
“Local politics is about building consensus with your colleagues to get things done, she said. “You might have the greatest idea in the world, but if you can’t get a majority of votes, it’s difficult to get things done for your district. I know Dennis has the capability of ‘getting to three votes’ for the needs of his constituency on the Board of Supervisors. And that’s single-handedly the most important factor in policymaking.”
Lutes, the five-term councilwoman, said she does not suspect Donohue of evil intent. She said he was sincere in his efforts to address the city’s issues, “but it’s also true that for Dennis, the ends always justified the means.”
Former Councilwoman Janet Barnes said last week that she had supported the redevelopment plan but now feels that she was misled.
Villegas called the Green Vehicles project “a joke.”
“This was a six-figure loan to his Palma (High School) friends to help establish a dream of theirs that was not realistic at that time. Dennis was turning the city into a business loan company that had no business lending out money. No collateral provided by the green vehicles in case the business went belly up, which it did, and then the city had to sue to get their money back. Another mess that Donahue got the city into.”
The Partisan has endorsed Parker for supervisor along with District 5 challenger Mary Adams.