Mark McDermott

Former Manhattan Beach city manager Mark Danaj and his longtime municipal colleagues blaze a lucrative trail, together

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Mark Danaj during his tenure as Manhattan Beach city manager, a position from which he was fired after falling under criticism for alleged overspending. Photo by Caroline Anderson

by Mark McDermott

Since Mark Danaj was fired as Manhattan Beach city manager less than a year ago, he has notably landed on his feet twice. First, he landed a temporary job with the City of Santa Clara in time to avoid a reduction in his premium-level state pension. Next, he settled into a permanent job as city manager of Fremont, which is six times larger than the city from which he was fired.

In his nearly four year tenure in Manhattan, Danaj drew criticism for $10.5 million spent on outside consultants, nearly $1 million added to the city budget annually for newly created management positions, and a low-interest $2.3 million home loan given to his assistant city manager, Nadine Nader. Public officials have described such a loan for an assistant city manager as rare; the position itself had never before existed in Manhattan Beach.

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Ousted at least in part for perceived unnecessary spending, Danaj moved on to Northern California, where he obtained a position as an assistant to the city manager for the City of Santa Clara. That hiring came a little more than a month before his premium-level pension would have shrunk to a lower level. (Under state law, an extended streak of public sector unemployment would have triggered the lower retirement package.)

The details of his hiring —  its timing and allegations that he may not have actually performed work for Santa Clara —  sparked a complaint to the California Public Employees Retirement System (CalPERS) and a subsequent investigation.

Moving on from Santa Clara after only two months, Danaj went 20 miles north to Fremont, a city of 220,000 people across the bay from San Francisco.

Danaj’s career in municipal government is marked by his intersection with a handful of colleagues who have worked in various combinations in the same California cities, at times hiring each other. There is nothing improper about working side-by-side with colleagues who are known quantities, in government or the private sector. But following Danaj’s career is a bit like watching a modern professional sport, as teammates split up and rejoin each other as municipal free agents. Three of those teammates came together briefly in Santa Clara.

Danaj was terminated by the City of Manhattan Beach on Jan. 3 after serving three years and eight months as its city manager. He was officially hired as an assistant to the city manager by Santa Clara on June 12, although city records were later amended to show that he began work on behalf of the city on May 30. His employment records show he worked eight weeks for Santa Clara, until July 28.

Following his Manhattan Beach termination, Danaj had until July 3 to find employment with another California city to retain his status in a “classic” CalPERS retirement plan, which is more remunerative than the CalPERS plan enacted to scale back cities’ pension costs. That plan, the California Public Employees’ Pension Reform Act (PEPRA), went into effect January 2013.

CalPERS spokesperson Amy Morgan said an investigation was completed and found that Danaj was properly enrolled in terms of the agency’s requirements. He retained his full benefits.

“We did determine he was enrolled correctly. We did not find any issues,” Morgan said.

Among the aspects of Danaj’s hiring that raised suspicions were the fact that he was never issued a city identification badge, keys, an employee manual, or subjected to a background check, all standard practices in municipal employment. Morgan said those aspects of his employment are beyond the purview of CalPERS.

“We were just not able to substantiate the claim that he didn’t perform any service for the city,” Morgan said. “The issue of pay and how he got the job —  the city determines that, not CalPERS.”

City records show that Danaj was offered the Santa Clara job via email on May 30, two hours after the position was created by city staff and declared “ready for recruitment.” The job was a part-time position that included an annual salary of $180,000, or $86 per hour, a $200 monthly car allowance, an $80 monthly cell phone allowance, and full CalPERS benefits. He was also emailed a “live scan” form that allowed him to take fingerprints remotely, from his home in Manhattan Beach, rather than at Santa Clara City Hall.

The job was offered to Danaj by City Manager Deanna Santana, while the hiring was handled by Assistant City Manager Nadine Nader. It doesn’t appear the position was authorized specifically by the Santa Clara City Council. A records search doesn’t show his hiring ever came before the City Council (the audit he was hired to assist with was, however, authorized by the council).

Danaj worked with Santana at the City of San Jose from 2003 to 2011, where he was human resources director and she was initially an assistant to the city manager and subsequently deputy city manager.

Nader also worked at San Jose, from 1999 to 2011, first as a policy analyst and eventually as assistant to the city manager.

Nader followed Danaj to the City of Fremont in 2011, where he was hired that January as assistant city manager. She joined him as assistant to the city manager in June. Danaj was hired as Manhattan Beach’s city manager in June 2014. He hired Nader as his assistant city manager in October 2014; the new position was authorized by the City Council at Danaj’s recommendation. Her hiring and the creation of three other management positions —  all with compensation packages well over $200,000 annually — lead to Danaj’s downfall in Manhattan Beach.

The Manhattan Beach City Council is legally constrained from talking about the decision to let Danaj go because it is a personnel matter. But the council majority elected last March —  Nancy Hersman, Richard Montgomery, and Steve Napolitano — made clear in their campaigns that they were displeased with city management, particularly regarding fiscal matters. Napolitano and Montgomery specifically campaigned on the issue.

“We study a lot, we delay a lot, and we spend money on things we don’t necessarily need. It’s time to get things done,” Napolitano said during his campaign.

A second target of the new council’s ire was the fact that the new assistant city manager’s hiring was accompanied by a low-interest home loan. Such loans are not uncommon for city managers and are intended to allow them to live in the cities in which they work; Danaj was given a $1.7 million low-interest home loan along with his $260,000 salary in Manhattan Beach. But few if any other cities in California have given an assistant city manager a home loan, even a temporary one. According to a city staff report, the loan came with an interest rate of .83 percent and was for a one year term with two one-year options.

Montgomery specifically targeted the loan in his campaign literature.

“They voted Yes to approve a home loan to the assistant city manager for $2.3 million out of the city contingency fund, an unprecedented move,” said an advertisement Montgomery ran at the time, criticizing the fiscal management of the City Council. (The only member of the former council to vote against the loan was David Lesser, who is still on the council.)

In an interview, Montgomery said he is still rankled the former city council made such a loan, particularly since it came from the city’s economic uncertainty reserves, which are intended for times of emergency.

“I was unable to find any cities in California that had provided a home loan for an assistant city manager, especially one for $2.3 million that included $345,000 in allowance for renovations,” Montgomery said, noting he’d both checked a city database and asked the former council for the example of a city that had made such a loan.

“To make matters worse, they borrowed the home loan funds for the assistant city manager from our city cash reserves,” Montgomery said. “In case of an earthquake or other emergencies, that $2.3 million would not be available for the city to use.”

The new council made it clear that at least three of the new positions, including Nader’s, would be eliminated. Nader resigned in December 2017, a month before Danaj was terminated. She was hired by Santa Clara in January as assistant city manager.

Napolitano and Montgomery each declined to comment on the CalPERS investigation of Danaj.

“All I can say is I am shocked and disappointed to hear about the investigation and hope it turns out well for Mr. Danaj,” Montgomery said.

Danaj was fired “without cause under the terms of his contract” by the city, meaning he’s not been found in violation of any of the terms of his employment. His separation with the City of Manhattan Beach included up to a year’s salary, $260,000, with stipulations that he pays back his home loan within a year, that he seek employment elsewhere, and that new employment earnings would offset the city’s obligations to him. According to a records inquiry with the City of Manhattan Beach, Danaj’s earnings have been deducted from his severance, and his house must be sold by year’s end.

Multiple sources within City Hall indicated that Danaj’s tenure as city manager was problematic, beyond finances. Both he and Nader, the sources said, kept erratic office hours and were often difficult to find. Neither kept public calendars. Danaj reportedly often didn’t know employees’ names.

“Nobody knew where he was or what he was doing,” said one source, speaking on the condition of anonymity. “Morale went up here a thousandfold after he left. This was a city manager who didn’t show up for work.”

In addition to Danaj, other employees from Manhattan Beach followed Nader to Santa Clara. Management analyst Kendra Davis, who was hired by Nader and Danaj in Manhattan Beach in 2015, left for the same position in Santa Clara in June. Human Resources Director Teresia Zadroga-Haase, who was also hired in Manhattan Beach in 2015, left for the same position in Santa Clara in August.

In a statement, Santa Clara City Manager Deanne Santana defended Danaj’s brief employment in Santa Clara. She also explained why his original hiring date of June 12 was backdated on subsequent paperwork to May 30.

“A conditional employment offer was made to Mark Danaj on May 30, 2018,” Santana said. “Mr. Danaj was allowed to work upon signing his conditional employment offer in a part-time appointment and on a special assignment. I determined that allowing Mr. Danaj to begin work before receiving formal notification of his passing the City’s background check process presented a low risk to the City since Mr. Danaj had successfully been appointed to City Manager in another California city, which itself requires a thorough background check. In fact, Mr. Danaj was recently appointed as City Manager for the City of Fremont and underwent the rigorous backgrounding process required to become a City Manager.”

Danaj earned $17,928 during his eight weeks working for Santa Clara, $3,461 of which was paid management leave. Included in his benefits paid was $5,872 in employer contributions to his CalPERS plan. He worked 153 hours, part-time, Mondays through Wednesdays, according to city documents.

The Silicon Valley Voice, which first reported the CalPERS investigation into Danaj’s employment at Santa Clara, said city employees contacted by reporter Carolyn Schuk did not see Danaj at City Hall, although he did meet with the Chamber of Commerce. He was hired to assist on an audit of the city’s convention center. Schuk obtained records of City Manager Deanna Santana’s calendar, which did show four meetings scheduled with Danaj —  including a meeting at 1 p.m. on May 30, the same day he was offered the job and sent the paperwork intended to allow him to submit his fingerprints remotely from his home in Southern California. Also scheduled to be at that meeting was a consultant named Dan Fenton, who had worked with both Danaj and Santana during their time together in San Jose. Fenton, who’d earned a $362,000 salary, resigned as the manager of the San Jose Convention Center in 2010 after a Grand Jury investigation showed the facility cost city taxpayers $20 million during his five years at its helm.

Santana’s hiring at Santa Clara in 2017 also drew scrutiny, largely due to her compensation package, which is worth over $700,000 annually. According to the San Jose Mercury News, her compensation includes a $374,000 salary, 200 hours administrative leave annually, and a monthly housing stipend of $3,750. San Jose Inside has described Santana, who previously served as city manager in Sunnyvale and city administrator in Oakland, as “the South Bay’s most prolific public mercenary.”

“We’re giving her a housing allowance when she’s already a homeowner,”
said Santa Clara Vice Mayor Dominic Caserta at the meeting at which Santana was officially hired, according to the San Jose Mercury News. “What does that say to a lineman making $65,000 a year commuting from Tracy? Why don’t we put that money in employees’ pockets to alleviate their housing concerns?”

Danaj did not reply to inquiries regarding this story. According to City of Fremont records, his new position pays $299,000 annually, with moving expenses of $15,000, deferred compensation of $18,500 per year, and a monthly housing allowance of $4,000 for up to ten months. He also retains his classic CalPERS status.

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