Will history repeat itself in Manhattan Beach?
by Mark McDermott
A curious aspect of the campaign for the March 5 City Council election in Manhattan Beach is that many of the issues at play have roots that go back two councils ago.
That council, which served from 2013 to 2017, appointed a new city manager, Mark Danaj, and then approved his recommendations to create four new administrative positions at City Hall at a cost of $847,000. Danaj also hired a former colleague of his, Nadine Nader, as assistant city manager — another new position, at a cost of $220,000 annually, plus benefits — and successfully proposed to City Council that the city give her a $2.3 million short-term, low interest home loan so she and her family could live in Manhattan Beach.
A new council majority was elected in 2017 that included Nancy Hersman, Richard Montgomery, and Steve Napolitano. Within a year, they’d let go of Danaj and largely undid all his hiring. Montgomery was particularly explicit, and vocal, in his criticisms of the previous council.
“We get things done,” he said at a council meeting in 2018. “We don’t kick things down the road, like the previous council. And we don’t spend money irresponsibly, like the previous council.”
Although no incumbents are running in this year’s race, two of this year’s seven candidates, Mark Burton and Wayne Powell, served on the 2013-2017 council. Powell termed out after serving eight years previously, but is eligible to run again after being out of office two years. Burton lost in his bid for reelection in 2017. And it wasn’t a pretty election.
That election season, a series of “hit piece” mailers targeted the two incumbents up for reelection, Burton and Tony D’Errico, over issues of fiscal responsibility — attacks not only regarding the hiring council had approved, but inaccurate attacks that blamed Burton and D’Errico over a citywide staff raise and a change in City Hall hours each had voted against.
“Worst fiscal management ever!” declared one of the mailers.
The third party expenditure group that funded the attacks, Voters for Good Government, was based in Long Beach and had no apparent local ties. But combined with an email sent by a sitting school board member, Ellen Rosenberg, that also criticized the two councilmen, the attacks were evidently successful. That election had the unusual result of ousting two incumbents.
Two years later and the campaign issues have changed very little. Every candidate stresses fiscal responsibility, and every candidate forum features broadsides against the sins of the 2013 to 2017 council. Two candidates in particular, Joe Franklin and Suzanne Hadley, have taken aim at the former council. Both are political newcomers (except for the fact Hadley is married to former assemblyman David Hadley) and both say they were in part inspired to run because of that council.
“It’s why I started thinking I could do this job. That last council, from ‘13 to ‘17, I thought made some bad financial choices, and I am cheap,” Hadley said. “I am fiscally prudent, and to waste $1 million on the four ill-fated positions and $1.4 million on the Downtown Specific Plan, that makes me cry. I grew up seven kids and two parents with one shower… Two million dollars goes a long ways, and that sort of bummed me out.”
At a Feb. 14 candidate forum at American Martyrs O’Donnell Hall, Hadley derisively referred to “professional politicians” in reference to those who had served before and sought to serve again. It was a curious tack in that councilmembers in Manhattan Beach are paid about $400 a month, but it was echoed by Franklin, who suggested that sitting councilmembers frequently get overly cozy with city staff, and argued that the former council had failed its due diligence in hiring Danaj. Franklin, in closing, dramatically held up a newspaper story that detailed the Danaj administration’s spending and the former city manager’s subsequent short-term, lucrative hiring in the city of Santa Clara by his former assistant city manager, Nader, which was investigated by the California Public Employees’ Retirement System.
“This is your money,” Franklin told the audience. “You work hard to pay your property taxes.”
Franklin and Hadley have something else in common. Both are supported by former mayors Bob Holmes and Russ Lesser, who also supported Montgomery and Napolitano in the last election, and who some observers refer to as “the cabal” behind Manhattan Beach elections. Holmes, who denied having anything to do with the hit pieces in the last election, scoffed at the suggestion he and Lesser are local kingmakers.
“Yes, I know, that old rascal Russ Lesser and that evil Holmes-Lesser machine,” Holmes said. “I’ve got no reason to go after anyone. There’s no money in small town politics… Russ and I do this shit because we love the city and we’ve been here so long. Our lives are really an open book. If there was any dirt on us, it would have been turned up by now. We are somewhat of a machine, though. Russ and I have worked really hard on a lot of elections. We do it because we care about this town.”
Lesser and Holmes ran a full page ad in the Beach Reporter in January called “An Open Letter to the Residents of Manhattan Beach” in which they assailed the former council and particularly Powell and Burton, praised the return to “fiscal sanity” represented by the new council majority, and urged voters to support Franklin and Hadley. What ensued was a political fistfight that played out in Letters to the Editor in local papers for the next month, and even dragged in Holmes’ and Lesser’s political foe from the early 1980s, former mayor Jan Dennis.
“Some of it I thoroughly enjoyed, some of it I thought was disgusting,” Dennis said. “I’m ready to leave this town. It’s sad. It’s been going on for a long, long time now. [Holmes and Lesser] did the same thing to me 30 years ago. They set up candidates and then go out to defeat anyone running against them. To me, it’s really a shame because it’s misleading to the voters and residents — they make it sound like the people they are opposing are committing these great errors or sacrilegious acts. People have to realize it takes three votes to pass anything. No one person can do anything.”
Burton, who worked for the City of Los Angeles for 32 years as a municipal attorney, said he thought he’d seen a lot of dirty politics in that time. But he said Manhattan Beach’s evolving brand of politics was worse, and drew a line between tactics employed in the last election and this one.
“During my first term on Council, I loved serving our residents as mayor and a councilmember… It was the best job I ever had and it was a joy to serve,” he said. “I can’t say that about the last election or this one. In fact, the tone and tenor of this campaign is becoming eerily similar to the anonymous hit piece mailers from the last campaign. We should not tolerate or accept such negative tactics which are designed to deceive our voters with false and misleading information. The open letter authored by two former mayors from long ago was disturbing and troubling to all that read it. I don’t think any of our residents believe it’s appropriate to have a cabal decide what’s best for them or who they should elect.”
Powell, like Burton, takes issue with the premise, which is that the former council was fiscally irresponsible. Both cite the AAA financial rating the city earned at the time and the refinancing of outstanding city bonds that saved taxpayers $4.6 million. Powell takes specific exception with the way the new staff positions created by Danaj have been characterized politically, especially the assistant city manager. That position, he said, was not new, but long standing. And Powell argues that the $2.3 loan given to Nader, which was approved in a 4-1 vote with Councilperson David Lesser opposing on Nov. 17, 2015, has been grossly mischaracterized.
“It wasn’t a home loan,” he said.
The purpose of the loan, Powell said, was to ensure that the assistant city manager lived in Manhattan Beach, just like the city manager, “so they can respond, 24/7.” The idea behind the loan, Powell said, was actually to save money. Nader had a home for sale in Northern California. Rather than pay an expensive housing allowance for her to live in Manhattan Beach while she awaited her former home’s sale, Powell said the city financially benefited from the terms of the loan.
“They needed money for what is known as a temporary bridge loan,” he said.
Powell said the loan was repaid “within months” and was structured so the money would be fully repaid under one of three conditions: when the Naders’ other home closed escrow, or at the termination of her employment, or at the end of one year. Further, he said the loan’s rate was higher than the fund the money came from, which was the General Fund Economic Uncertainty Fund.
“Those monies came from excess idle cash reserves the city has, and those reserves are invested in the state government investment pool,” Powell said. “The city agreed she would be charged a half percentage point above what the city would normally make. So, number one, it did not cost taxpayers a dime; in fact the taxpayers made money. The funds were never at risk, and it was repaid…It was done because it was a good way of saving. It was fiscal responsibility.”
According to city records, Powell is accurate regarding the loan’s rate. The Local Agency Investment Fund’s rate of return was .32, while the loan’s rate was .82. But the staff report, in its title, does indeed describe it as a “temporary short-term home loan,” and while its initial term was one year, the city manager had authority to extend it one year at a time for up to three years, which Danaj did (in fact, the loan was not repaid until June 2018, after Nader was no longer an city employee). Also, bridge loans typically carry an above market rate. And while the loan carried little risk to taxpayers, the fund it came from had a low return for a reason — money in the Uncertainty Fund is intended to remain liquid, in case it is needed for emergencies. The home loan made the money inaccessible for 2.5 years.
Further, the assistant city manager position was indeed new. Previously, the city employed an “assistant to” the city manager, a position vacated in 2012; the person who held that position was paid $102,000, less than half what Nader was paid. The new position was created on July 15, 2014, Danaj’s very first meeting after becoming city manager, in an item buried in the consent calendar. The staff report describes the “newly created assistant city manager classification” as necessary give the city manager “the opportunity to spend more time managing up and out of the organization” and “more energy focusing on City Council needs and actively engaging and interacting with the community.” Councilperson David Lesser pulled the item from consent, expressing misgivings that the pay rate was equal to the police and fire chief, but it was nonetheless unanimously approved. At Danaj’s recommendation, Nader was hired by the city three months later. They’d been management colleagues just previously in Fremont for three years, both arriving in 2011, and had worked together at the City of San Jose eight years prior to that.
Then, in November, the council approved four more new positions: an economic vitality manager, an IT director, an assistant finance director, and a civic engagement manager. The council approved the positions in a 4-1 vote, with Lesser opposing. After public outcry, neither the civic engagement nor the assistant finance director position was never filled. In late 2017, roughly six months after the new council majority arrived and told Danaj that the vitality manager and the assistant city manager positions would not be funded in future budgets, both positions were vacated. Danaj would be ushered out the door shortly thereafter.
Powell stood by his assertion the council he served on was fiscally prudent.
“There are numerous falsehoods being disseminated by an opponent and the candidate’s naysayer political special interest supporters,” he said. “They’re attempting everything imaginable trying to vandalize my exemplary service as a City Councilmember and a longtime community volunteer and civic leader. Our community deserves better than to be subjected to their negative campaigning.”
Councilmember Amy Howorth, who terms out in March, said the council she served on with Powell and Burton made some poor decisions.
“I’ve been an elected official for 16 years, including two terms on the school board, and I am so grateful that Nancy and Richard and Steve were elected,” she said. “Through their combined leadership, they helped us correct mistakes we made previously.”
“People make mistakes. David Lesser was the only one who did not approve of those four positions, and he was the only one who did not approve of the Urban Land Institute study [for the Downtown Specific Plan]. He should be given credit for that.”
Howorth said at the time she’d felt it was important to grant the new city manager what he felt was needed. “I can honestly say this was a mistake. I am not ashamed to say that. And you know what, I wish they would all admit it.”