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A City in Transition -- again


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The McMurray Factor by Arno Holschuh

Editor & Publisher: So, what are the issues? by Judy Hodgson

[photo of Harvey Rose]HARVEY ROSE'S résumé is 33 years long and it includes administrative positions in Anaheim, Calif., Grand Junction, Colo., North Miami Beach, Fla., two universities, Steamboat Springs, Colo., and Paris, Calif. where, in 1996, he was recruited by a headhunter hired by the city of Eureka. This interview was conducted Monday.

When you were hired, were you concerned about the fact that Eureka had fired its last five city managers?

It didn't bother me. When I went to Steamboat Springs they had a revolving door there and I stopped it. I was there nine years.

Why did they hire you? What was your main charge?

Economic development. The council wasn't very specific, but I understood it to mean industry, retail and tourism.

How has the council changed?

When I was hired, there was Jim Worthen, Jean Warnes, Lance Madsen, Frank Jaeger and Jack McKellar. McKellar didn't support me because I didn't come from here. I think we have a good council. City councils are usually made up of small business people for the most part. It's pretty typical. The current council are people who have the city at heart and are not using the council position as a stepping stone for higher political office.

You have been criticized for focusing economic development narrowly on big box retailers, including the attempt by Wal-Mart last year to locate near the waterfront. There is an ordinance proposed by Councilman Jim Gupton to restrict big box retailers in industrial zones. But the Friends of Humboldt (anti-Wal-Mart group) want a stricter ordinance. How are the two ordinances different?

The Friends of Humboldt County wanted to do away with part of the ordinance that would have allowed retail of 40,000 square feet or larger in certain sized industrial-zoned property. That doesn't go away, but (under Gupton's version) the process (conditional use permit and public hearings) remains and so does the environmental review.

During the Wal-Mart controversy, the city hired a consultant, Bay Area Economics, to study the economic impacts of new retail growth. The BAE report concluded that there was no significant leakage of retail dollars out of the county at this time, meaning Humboldt County residents do not purchase a significant amount of retail items out of county. Do you agree?

I know there is leakage. In addition to Wal-Mart, there are at least 14 to 15 other national retailers over the last two years that have expressed interest in coming to this area that I am aware of. They all do it based on their own particular formula -- what is the sale tax collected, how many people live within a certain radius of the city, yadda, yadda. We are going to have an Office Depot next to Walgreens on Broadway. I understand Office Max is interested. Staples is relatively new to the city, and even Circuit City is interested. I asked, why are you all so interested in coming to little old Eureka? The general response is, "we can tell from catalog sales coming out of this community." They have ways of testing leakage. Look at how many people go to Crescent City to Wal-Mart on the weekend.

How about a major home improvement chain?

Home Depot has been consistently interested. I know of two properties in Eureka that they have recently looked at and rejected due to long-term problems. By lease or purchase, I understand they are acquiring the old Safeway in McKinleyville and are putting in their small-store version.

How are the major retailers who are here doing?

I get (confidential) quarterly reports broken out by retailer. The top 12 are all big box retailers except the two car dealers (Harvey Harper and Gary Barker). Sales are up 12 percent in the latest reporting period.

When I first came here, I spoke to the manager of Costco. One interesting thing she told me, they learned that there was a considerable market here for bulk supplies, not just office supplies but food. Food distributors had been doing a land-office business coming out of other states. She went to corporate headquarters, and they authorized two trucks to deliver (because the demand was there). Costco normally doesn't deliver. That's all a benefit for us; those are taxable sales. That store is doing well.

I know Gottschalks has met and exceeded its (sales) goals. Look at other national retailers -- big boxes. Sears put $1 million into its (Eureka) store.

The BAE report says there is high turnover of stores and small retailers are at risk of failure.

You could use the same words in every community in the United States. There's a high turnover of retailers everywhere. I know Bayshore Mall has done extraordinarily well in the last four years. Last year we issued 13 new building permits; this year so far another eight. When that's complete they will have 96 percent occupancy, the highest ever. They are negotiating with several more which will put them at over 100 percent. How does one do that? One builds more space. Hank Pierson's Eureka Mall has been reborn with totally national retailers. One of the last spaces, Michael's Crafts, is under construction -- 20,000 square feet.

Will the national retailers swarming in kill the local merchants?

I've been through the Wal-Mart trauma twice before. In one case there was more of a (negative) impact with the first shopping center that was built on the fringe of the city than from Wal-Mart. Now the downtown has been reborn. Each situation is unique but in general, sales tax goes up, more business comes into the community.

Do you recruit big box retailers?

An economic development professional recruits industry, he does not recruit retail. It just ain't so. Talk to them. I would hope they would say, when we decided to come to the community, Harvey Rose sat down and told me what the codes were and what we would have to do to work through the development process. I never solicited one retailer.

There is criticism for the council's unanimous vote to give car dealers a break on paying sales tax.

STIF (sales tax increment financing) is just one of many economic development tools. The first one we ever did was a small deal, $60,000 to improve utilities, to Harvey Harper (Harper Motors) so he could expand. That's already done. Gary Barker (Northcoast Auto) got $100,000. According to the latest sales figures, that will be paid back in less than a year. We just did a STIF for Henderson Center Merchants Association -- again, it's a pay as you go -- for some physical improvements and marketing. STIF is very much like redevelopment. It is difficult to understand, but the money comes back and the city benefits due to increased tax revenue.

A number of Eureka business people seem embarrassed -- or angry -- for losing industrial jobs to Arcata, especially O & M Industries.

Dale Warmuth (Leon's Mufflers and past president of the Eureka Chamber of Commerce) hates it when I say this, but

There is very little tax benefit to the city (from industrial jobs within the city). My concern is industry growth in the region ... in Humboldt County. The importance of industrial development is the jobs it provides, the good-paying jobs, hopefully. As long as industry is somewhere in the area where my citizens have their fair share of the jobs and those individuals can come to my city and shop, I'm happy.

I'm being blamed for O & M moving to Arcata. Jim Gupton came to me and said O & M is looking to expand and can't where they are. There was vacant land next door, but the owners were asking too much and it needed cleanup. I went to the City Council and got them to OK $130,000 outright as a grant to bring down the price. It didn't work out. They ended up going to Arcata.

What's the future of industry within the city limits?

Some people say that what we need is good industrial land. It's not true. We've got it. It just happens to be old and tired and contaminated. It's expensive to redevelop. I'm not sure it's such a good idea to go out and take a piece of farmland and overnight turn it into an industrial park and abandon the old land. We don't want to do that. It may attract new industry, it may get old industry to expand. But it leaves us with brownfields (parcels with contaminated soil) within the city.

How do you see your tenure? What marks would you give yourself?

I was brought here to develop and redevelop the community and to develop tourism. Marks? Pretty good. In four years we've seen a number of small industries expand. We've looked at some large industries and we've had problems. We had problems with Chico Produce near the B Dock. My work on the foreign trade zone will have a huge benefit.

When will that come through and how will it help?

It takes about 12 months. We just submitted the paperwork last month. The purpose is to retain jobs and expand jobs in the U.S. by providing a level playing field. It's purely for industry, not retail.

A good example is in Sacramento. A manufacturer of pumps purchased parts from Korea and had to pay a 12 percent tariff, yet Korea could sell pumps here with zero tariffs. They ended up establishing a free-trade zone and parts from Europe. In a trade zone to trade zone exchange, tariffs go away. They can compete and they have added 75 new jobs.

What companies will this benefit here?

We surveyed existing companies and found three who would benefit right away -- Sun Valley Bulb Farm, Humboldt Creamery and Woody Murphy's properties, because shipping and warehousing are part of the benefit.

It's another "economic tool"?

Yes, and there are others. We are a California Enterprise Zone with tax benefits to payrolls. This is unique to Eureka and this region.

Are benefits to some businesses harmful to others?

Redevelopment (based on property taxes) and STIF (sale tax) are increments (increases) that the taxing agencies are not getting now. But if you invest in those companies producing them -- either the properties or the sales tax --will produce more and eventually the taxing agencies will get it back.

Why do we hear that if you want to get property developed in the city of Eureka, you have to hire a consultant? The name we hear most is Tom McMurray.

McMurray (former city councilman and coastal commissioner) is making at least some of his living charging big bucks for things people could do themselves. (See story below) His effectiveness has generally depended on who's on the council who are his friends. At the moment, Jack McKellar, before that (Jim) Worthen. I don't find him to have much influence. He will be in the background in various City Council races and in the background on this city manager issue.

The Times-Standard and the Journal received anonymous faxes about Jack McKellar's son-in-law, David Schneider, of Pacific Affiliates. What is his relation to the city?

David Schneider has an engineering firm that is used by the city from time to time. He has purchased property from the city. He has added to his holdings by A Dock. But he has purchased it at the appraised value. He didn't get any breaks. David is a very aggressive businessman, but we have a lot of aggressive business people in the community.

What about your relationship with the harbor commission?

I was on a committee with John Dalby (Humboldt Bank) and Andy Westfall (Westfall Stevedore) to see if we could help after the harbor tax initiative failed. We reviewed their books and found some things that we felt were out of line. We recommended cuts and we offered to share accounting and legal services to save money, which they didn't accept. The vote was 3-2. We reviewed all possible ways to fund the harbor deepening project, to get it going, and ended up using $1 million in city redevelopment funds. It worked.

Some criticize you for the city's role in the sale of the Daly Building complex to Humboldt State University for a performing arts center when it could have been sold to Humboldt Bank for its planned expansion and consolidation.

We knew the Dalys had other offers. We didn't know what they were. There was some conflict within the Daly family, but that's what they wanted to do, to sell to HSU. We didn't know about Humboldt Bank's interest. If we had, I would have recommended it, to keep those offices in the downtown. I think the majority of the council would have supported it had we known.

Why do some city commissioners, particularly parking and planning, feel their recommendations are ignored?

Those who serve on various boards and commissions often feel that way. The parking commission is ticked because they have had various studies and the studies have not been implemented. I don't blame them.

Why do you think Jim Gupton changed his mind from supporting you in February to calling the meeting to possibly terminate you?

It's a matter of the people who support him, the Bill Piersons (Pierson's Building Center and member of Friends of Humboldt County) and the Dale Warmuths (Leon's Mufflers, past president Eureka Chamber). Gupton is up for reelection (along with Connie Miller) in November.

Gupton is home recuperating. The next Eureka City Council meeting is a budget workshop on May 30 -- and it looks like there may be a majority to terminate your contract.

I've always known when a majority of the council wants me gone, I'm gone. But the reverse is true. If there are three, I'll stay. I've added the city manager situation to the May 30 agenda. I guess I'll have an answer in time for my birthday June 6.

 The McMurray Factor


"If you want to get anything done west of Broadway, you have to hire Tom McMurray."

That's according to Dennis Shaha, owner of the Rosewood Body Shop at 842 W. 14th in Eureka, and he has reason to hope that it's true. Shaha has been trying to fill a small wetland area next to his shop so that he can construct a secure parking lot and storage area.

Shaha purchased the land, secured the fill, and now he says he has only one problem: City officials say his plan is illegal. So he's hired former city councilman and coastal commissioner McMurray as a planning consultant to lobby, convince or cajole the city into approval.

Shaha admits to having bad relations with the city from the beginning. He said planners are "hostile," that the city does "absolutely nothing to help you with a project" and is "just a big hindrance."

[photo of Dennis Shaha]
Dennis Shaha points to the wetland in question.

That notwithstanding, he still needs permits that comply with city and coastal commission regulations.

"As the application stands -- incomplete -- I would have no ability to recommend it," said Sidnie Olson, senior planner with Eureka's Community Development Department.

But the application is more than incomplete. The law states that wetlands in the coastal zone can only be filled for certain purposes -- and parking lots don't qualify. As such, the Shaha application might be "fatally flawed," said Kevin Hamblin, planning director.

Until recently, small "pocket" marshes could be filled if they were mitigated by creating more valuable wetlands somewhere else. Several businesses in the coastal zone took advantage of that loophole. But a recent court case has made it illegal to interpret the law in that way, even if a looser interpretation would result in better wetlands.

The city staff therefore decided it could not recommend approval of the proposed project. The Eureka City Council agreed April 18 when it declined to approve the permit. It stopped short of approving all of the staff recommendations, which would have required that Shaha remove the fill already in place.

The application was tabled to give Shaha more time to try to complete the application and find a way to bring it up to code.

Enter Tom McMurray. Shaha said that he had hired McMurray at the onset of the project, but that McMurray told him, "You guys can probably do this on your own." Later, when Shaha saw that the staff recommended denying the permit, McMurray was brought in again.

(McMurray did not return phone calls for this report.)

Shaha said he is hopeful his project will be approved. After all, McMurray has helped him get a project through city regulations before --building that houses his shop.

The city staff had questions about the prefabricated structure when Shaha first proposed putting it up in early 1998. He said the out-of-state manufacturers are certified in the State of California, but planners wanted precise information about the the strength of the steel used in the building. McMurray coordinated the information flow between planner and manufacturer and a year later Shaha had the green light.

Just how does Shaha think McMurray achieves his successes?

"Intimidation," he said. "He's got $100 million and they're scared of him, that's basically what it is."

City Attorney Brad Fuller disgrees. He said he has "never found him to be intimidating." Fuller said that he thinks McMurray's effectiveness is due to the fact that he is "very knowledgeable of the city's municipal code and zoning law, as well as the coastal act requirements."

City Planner Hamblin admits that the regulations governing the use of land in the coastal zone can be difficult.

"There are hoops, I understand that," he said. "I don't know of a single regulatory agency in the state of California that doesn't have some sort of jurisdiction on our coastal lands here in our city. It is a very difficult place to do things, no doubt about that.

"McMurray has a level of expertise and understanding that I think people hire... I think that's what a consultant adds is just expertise in shepherding and designing a project such that it can be approved," Hamblin said.

"McMurray's been on the council before, he's been on the Coastal Commission before, and anytime he speaks or lobbies, I'm sure that they [current council members] listen."

Editor & Publisher

So, what are the issues?
 by Judy Hodgson

This column is an opinion piece. It didn't start out that way. It was supposed to be a story.

I was out of town when Eureka City Councilman Jim Gupton asked the city clerk to poll his fellow council members to see if they were in favor of holding a special session May 11. The purpose? The performance and likely termination of City Manager Harvey Rose.

I returned Sunday night, three days after the tense -- and, I understand, raucous -- open meeting. The next morning I had half a dozen messages on my desk on the subject. Ironically, the first call I received was from Gupton himself. We had a long phone interview and I promised I would look into some of the issues. I made calls all day and late in the afternoon one caller informed me of Gupton's hospitalization. (The grapevine is always faster than any radio or TV report.) I continued to make calls throughout the week and ended with an interview with Rose Monday.

The reason this column is not a regular news report is because of the number of people interviewed who simply would not talk on the record. Those who know me as a reporter know I do not like off-the-record interviews. They often serve to spread gossip and misinformation or to attack a foe. The person giving the interview does not have to own up to their own words. Generally a reporter can't use the information. But mainly it encourages cowards when we need a few more brave people.

Make no mistake, this is a story about power --money, a common root of power -- who has it, who uses it and how, who wants it and why, who's losing it. It is also a story about vision, as in creativity, a sense of where we are going and why. And this is a story about misinformation, exaggeration, innuendo, jealousy, egos, manipulation, suspicion and anger. It's not pretty.

The fact is that sometime between February -- when the contract of City Manager Harvey Rose was automatically renewed -- and early May, Councilman Jim Gupton changed his mind. The independent (and obdurate) Councilman Jack McKellar was opposed to Rose from the beginning (because he wasn't a local boy) and their relationship hasn't improved. Councilwoman Maxine Hunter Meeks has yet to publicly announce her position, but she told the Journal last week she lost confidence in Rose "many months ago." It is unlikely she had voted to retain him in February.

That left Councilwomen Cherie Arkley and Connie Miller, unabashed fans of Rose, and Gupton as the swing vote. As any old pol knows, it only takes one skill to serve on a five-member city council -- the ability to count to three.

Both Gupton and Miller are up for re-election this year. Miller said if the issue of how Eureka changes city managers -- the last five were run out of town -- is not resolved in a civilized manner she has no intention of running for the seat she was appointed to fill. ("I have better things to do.") Critics say Gupton flip-flopped on the Rose issue because he wants to be re-elected and he was under increasing pressure from business interests to do something.

Little has been said publicly about the issues that the community at large and the business community in particular may have with Rose. What are the issues and what forces are behind the near-ouster of the city manager?

Let's dispense of a few side issues first that quickly spun out of control:

1. Gupton says he did not intend to ram anything through while Miller, Cherie Arkley and Mayor Nancy Flemming were out of town. Let's move on.

2. Businessman Rob Arkley, husband of Cherie, has a right to resign from an organization (which happens to employ Gupton) if he wants and to support -- or not --present or future candidate. We all do.

3. Other family ties? Yes, David Schneider is McKellar's son-in-law (see Rose interview above) and Harbor Commissioner Dennis Hunter is the son of Maxine Hunter Meeks. Most people know it.

4. The meeting should have been closed? No, every public employee has the right to an open meeting. It's the law.

5. Flemming's less-than-gracious performance as a chair? That was a lot of pressure she was under -- and she was mad as heck.

6. The Daly building? Another nonissue. Ultimately, the Daly family made the decision of who the buyer would be.

One businessman I spoke to said it was truly unfortunate that there is the perception -- paranoia -- that powerful business interests are really running the show, people no one has the opportunity to vote for, and the council dances to their tune, just like in the old days, which, in Eureka, wasn't that long ago.

"It's an old theme. By reporting on it, it somehow validates it," he said. And it also robs business people of their right as ordinary citizens to pick up the phone to call a council member to say, "Thanks for supporting that issue. It's important to the community."

Yes, but to ignore the fact that business interests were at work behind the scenes is naive.

"A lot of those guys are my friends, but the `Wal-Mart residue' was the No. 1 thing that got Harvey Rose," a friend told me.

We hope the interview above helps shed light on some issues raised and will prompt vigorous and open discussion in the following weeks in letters to the editor. (Signed letters, please.)

I am one of those who believes that Harvey Rose isn't the issue, the City Council is the issue. He has very good credentials and experience, is very bright and displays some of that vision thing we need to continue to move forward. He is perfectly capable of carrying out the wishes of the council.

When Gupton returns (we wish him a speedy recovery), the council can put the item back on the agenda and in closed session give Rose a list of things to work on, including, presumably, improving communications with the two council members who feel disenfranchised.

If things don't improve, the time to switch horses is at contract renewal time.

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