Monterey’s Negotiator Gets Bonus for Driving Out Tenants

Monterey’s Negotiator Gets Bonus for Driving Out Tenants

The City of Monterey’s contract with Mahoney & Associates to negotiate leases on city-owned properties actually rewards the commercial Realtor for driving out established, long-time tenants and replacing them with new businesses.

New documents acquired this week through a FOIA request by montereybayareanews.com include the fee agreement between the city and Mahoney & Associates, hired a little more than a year ago to negotiate rents for Monterey instead of city staff. The move was initiated by Councilwoman Libby Downey.

According to the agreement, Mahoney & Associates is to be paid a maximum of $250,000 per year while John Mahoney is paid $400 per hour for “lease renewal, lease expansion and lease consultation work on existing tenants.” His associate, Patrick Stafford, is to make $250 per hour.

Should those negotiations fail and a new tenant needs to be found, Mahoney stands to make considerably more money. When a new tenant is procured, Mahoney receives 7 percent of the base rent in the first year, 6 percent the second year, 5 percent the third year, 4 percent the fourth year and 3 percent for the remaining length of the initial lease.

The bonuses are applicable to just the initial lease, so if a lease is renewed, Mahoney would stand to lose a substantial amount of money. In the current budget, city rents are budgeted to bring in nearly $3.9 million in revenue — just the Old Fisherman’s Wharf leases totaled nearly $1.5 million.

It’s obviously unlikely and maybe impossible, but if Mahoney were able to bring in all new tenants and raise the rent just 5 percent, he would easily exceed the $250,000 the contract is capped at in the first year. In a more plausible scenario, if a third or more of the wharf leases were renewed and a similar pattern occurred throughout the city, the bonus could exceed $100,000.

This policy, of rewarding the replacement of established tenants with new businesses, would appear to contradict what the City Council has been claiming are its aims regarding city leases. The City Council adopted new leasing policies more than a year ago that were meant to increase revenues to the city, but the decision has been controversial. It has since been discovered that Monterey has been misusing rents from Old Fisherman’s Wharf for decades, using the income for General Fund purposes rather than depositing it in the city’s Tidelands Fund, as required by California law. The city is currently being audited by the State Lands Commission for the misuse of funds and the process has been ongoing for more than a year.

The city’s new leasing policy would even appear to conflict with the paid advice the city received from Best Best & Krieger. The attorneys were hired by the city to review its leasing policies. Among the law firm’s recommendations is to attract strong tenants with long-term leases and allow ground leases wherein the city does not own the building and can “avoid sinking city funds into specialized investments.” Owning the building also limits the potential and marketability of a ground lease, as national tenants will want to build their own building, according to BB&K.

The City Council is considering a revision to its new leasing policies on Tuesday and a march is being planned to City Hall from the Custom House Plaza in support. City Councilman Timothy Barrett asked for the review after noting that, although the new leasing policy officially calls for local, established merchants to be given preference, he had yet to witness it. Of course, if the contract with Mahoney actually rewards the opposite approach, it would explain why.

The City Council meeting will begin at 4 p.m. and marchers will gather at 3 p.m. at the Custom House Plaza and begin walking at 3:30 p.m. For more information on the walk, go to www.saveourhwarf.com.

The Fee Agreement between Monterey and Mahoney & Associates.

The Fee Agreement between Monterey and Mahoney & Associates.

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8 Comments

  1. Jerry Duncan 2016-09-19 at 2:10 pm

    What is also disgusting is Mahoney was paid to help develop the new policies that he will financially benefit from. That takes the concept of a conflict of interest to a new level. This could very well be illegal.

  2. Allison 2016-09-19 at 4:45 pm

    Disgusting!

  3. Steve Marshall 2016-09-19 at 6:27 pm

    This is corruption! Libby Downey should be held accountable for Hiring Mahoney and Associates. These kickbacks sounds illegal to me. I’m no attorney, but it will all come out in the wash. How can the City of Monterey treat these local business owners like this? They contribute thousands and thousands of dollars to the community. They made Fishermans Wharf famous with all their generosity and hard work. This is a sad day in Monterey history!

  4. Wayne Adams 2016-09-19 at 10:37 pm

    The root of all evil? The love of money!

  5. Terry Chioino 2016-09-20 at 12:26 am

    First they need to get rid of Libby Downey. How in the world does this old lady have so much power and say so. How long has she been on the city council for Monterey? One day is to long for her to be on this council and cause so much havoc. She has no empathy for these businesses and the people they employ. There’s gotta to be more to this for her to be so hateful. I don’t know if this could be done but how about collecting signatures to kick her off the council and let Haffa follow her right out the door. If this does pass I’d make sure about looking into everybody’s money trail that’s in on destroying the wharf.

  6. Charles Mendez 2016-09-20 at 9:37 am

    disgusting. sounds like a conflict of interest to me. i live in del rey oaks and our city manager is on the board of the pot shop. he say’s no conflict of interest. i don’t think so. when will the elected/hired people actually represent the residents of the city they are supposed to represent?

  7. Marcia 2016-09-21 at 1:45 pm

    City of Monterey needs to be investigated for ALL of their underhanded and crappy negotiations over the years. This is your tax dollars at work people.

  8. Carolyn 2016-10-04 at 1:26 pm

    Absolutely ridiculous, and if I’m not mistaken…illegal…I hope the Wharf Association has an attorney looking into all this B.S. and that Libby Downey and her cohorts get the boot. I totally agree with what everyone is saying, investigation needs to be made. Downey and Haffa need off the council, and the City needs to leave the wharf as it has been. Quite possibly with all the corruption that has been exposed, perhaps the wharf tenants have a law suit against the City, now that would be great, turn the tables around.

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