Should San Diego Councilman Scott Sherman Recuse Himself from Decisions on Short Term Vacation Rentals?

by on April 27, 2018 · 19 comments

in Ocean Beach

Sherman’s Family Owns 33 Rental Units in or Near Ocean Beach

There’s just something sketchy going on about San Diego Councilman Scott Sherman, the allegations that he has a conflict of interest in decisions concerning regulations for short term vacation rentals, and the lack of any genuine investigation by the San Diego Ethics Commission.

And the issue whether Sherman should recuse himself from any decisions about STVRs just won’t go away. Plus there are allegations he or his family own lots of rentals in Ocean Beach.

Okay, let’s take it from the top.

We all know that the City Council has not been able to pass any regulations about the short term rentals – and they have become one of the most contentious issues within San Diego, and particularly at the coast where they’ve had the most negative impact. OBceans know what has happened these last few years. This council inaction has been going on for 3 years, even though the most recent December “inaction” prevented the enactment of regulations that could have been devastating at the beach.

Now the issue is in Mayor Kevin Faulconer’s office and he is expected to deliver some kind of compromise if he finds the votes of 5 councilmembers.

Meanwhile, despite the City Attorney’s opinion these rentals are illegal within residential neighborhoods, Airbnb and other short term rental companies have just been making hay of the situation, and making lots of money (San Diego is one of the top cities for Airbnb profits) and continue to inflict damage in working class and middle class beach communities. They eat up valuable housing stock in the middle of a housing crisis, drive up permanent rents, and destroy neighborhoods.

What’s all this got to do with Scott Sherman?

Well, first of all, don’t forget Sherman was one of 4 councilmen who came up with the most permissive STVR regulations being considered. (It was this proposal that fell apart in December when Councilman David Alvarez had a change of heart.)

Plus, an independent news source researched County property records and found:

… the councilman’s father, George Sherman, his trust or one of his companies own nine residential parcels in the city of San Diego, including apartment complexes and the house where he lives.

The three apartment buildings Sherman’s father has an interest in have 33 rental units. All are in or near Ocean Beach, a prime neighborhood for short-term rentals. (My emphais.)

So, Sherman’s dad, George, George’s trust or companies own 3 apartment buildings in or near OB with a total of 33 rental units. Do you think any of them could be short term rentals? The independent news source couldn’t find any of the Sherman properties in “a recent Airbnb search” however. How about other rental companies? How about a study of Airbnb over a period of time?

For the record, Scott Sherman himself only owns his Allied Gardens residence.

But the questions persist. Our own Blake Herrschaft, chairman of the Ocean Beach Planning Board, was interviewed by inewsource about the potential conflict of interest Sherman has. Blake iterated that the conflict comes from the councilman’s own father owning all that property at the beach, that – hey guess what – could increase in value if short term rentals are legalized and flood OB and other coastal areas. Scott Sherman could inherit all those properties – as he and his father have been business partners, Herrschaft emphasized.

He said:

“I would certainly recuse myself from any kind of policy recommendations which would directly increase the value of our family’s assets. At a bare minimum, I expect full disclosure of a fact like that.”

What does Sherman, the son, say? Would you be surprised if he denied that the father has any short term vacation rentals? Of course not. And he is not involved in the business of Sherman, the father.

So, what about an investigation? Has there been one?

At the end of last year, San Diego’s Ethics Commission began receiving complaints about Sherman having a conflict of interest. More recently, California’s Fair Political Practices Commission has also been receiving complaints of Sherman of violating California’s conflict of interest law.

For background, the Ethics Commission, formed in 2001 for the purpose of monitoring, administering, and enforcing the City’s governmental ethics laws, is composed of 7 members all appointed by the Mayor.

Stacey Fulhorst is the head of the San Diego Ethics Commission, it’s executive director – been there since 2003 and as such works at the pleasure of the Mayor. The first complaint about Sherman came to her agency on December 6, 2017. The very next day, December 7th, Fulhorst sent a letter to Sherman informing him her office had received a complaint with allegations he had violated the city’s Ethics Ordinance by taking part in decisions concerning short term vacation rentals.

But at the end of that letter, Fulhorst completely exonerates Sherman by telling him whomever complained didn’t provide any evidence, was just speculating and her office doesn’t have “jurisdiction over complaints based on speculation.”

Fulhorst did not do any investigation.

And neither did the state’s Fair Political Practices Commission’s enforcement division – because of “insufficient evidence of a violation.”

Part of their problem is connecting Sherman, the son, business-wise, to Sherman, the father. Even though Scott worked for his father for years,  supposedly any business link ended in June 2016. (How long has the council been considering STVRs?) inewsource reported:

For years, Scott Sherman worked for and partially owned an insurance company started by his father.

Sherman told KPBS in 2015 he started working at his father’s company, 5th Avenue Insurance, as an independent contractor. He was making more than $100,000 as an insurance agent and owned at least $100,000 in 5th Avenue Insurance stock, according to his publicly filed economic interest disclosure statements.

Then, in June 2016, a local insurance company purchased 5th Avenue Insurance, ending Sherman’s only business connection with his father. Sherman is still an agent for the company that purchased 5th Avenue Insurance.

But the questions persist. Scott could inherit it all – things could change tomorrow.

The group Save San Diego Neighborhoods (SSDN), one of the most persistent organized oppositions to short term rentals, sees the situation differently. Quite differently.

They believe a cover-up is going on, a concerted effort to hide a dishonest, immoral, or illegal act.

They’ve been urging their supporters to contact Sherman, the mayor, and City Attorney Mara Elliott about Sherman’s conflict of interest. And since early December at least, Sherman, Faulconer and Elliott respond by pointing to Fulhorst’s Ethics Commission letter to Sherman on December 7th clearing him.

Yet, SSDN is suspicious. The big City Council showdown on STVRs was set for December 12th – this was the day the rentals were to be legalized with 5 council votes. Fulhorst received the complaint alleging Sherman’s conflict of interest on December 6th. And of course Sherman was a key vote. In perhaps one of the most speedy bureaucratic decisions ever made, Fulhorst takes only 24 hours to make a determination that Sherman is innocent of the complaints.

Here’s how SSDN sees it, on their social media:

… the City Council hearing on the proposed ordinance to legalize short term vacation rentals was scheduled for December 12, 2017, only four (4) business days from the date of the complaint. If Councilmember Sherman was going to participate in the hearing, Ms. Fulhorst would have to act quickly. She did.

Within 24 hours she read and considered the complaint, drafted the letter and hand delivered it to Councilmember Sherman.

Her conclusion?

“In light of the foregoing, I have determined that the complaint does not contain sufficient information to support the allegation that you violated the City’s ethics laws. As a result, I have concluded that the allegations in the complaint do not warrant a formal investigation, and that this matter is not appropriate for consideration by the Commission.”

… Without consulting the seven Commissioners, Ms. Fulhorst concluded the complaint did not contain sufficient information to “warrant a formal investigation”.

Now this is sketchy. And SSDN believes “Scott Sherman has not been cleared of violating the City’s ethics laws, by anyone.”

There is another issue that is involved in finding violations of the Ethics Ordinance regarding the so-called the “public generally” exception. San Diego Municipal Section 27.3561(b) states, in part,

“A City Official has a disqualifying financial interest if that municipal decision will have a reasonably foreseeable material financial effect, distinguishable from the effect of the public generally . . .”

A public official has “a disqualifying financial interest” for a city vote if he or she can specifically benefit financially – other than the benefits the general public receives from the vote. If Scott’s dad has 33 rentals at the beach while his son is making vacation rentals legal, do you think Scott will have some other “foreseeable” benefit that the rest of us don’t get”

So, where does this all leave us?

Scott will still likely be voting on decisions about STVRs that could benefit his family economically.

If we look at his past actions, it seems like he’s always working overtime to increasing property value for landowners (like his family).  He coveted and grabbed the position of chair of the Smart Growth Land Use committee – which controls land use ordinances for the city council. He was so bitterly upset recently when he lost that chairmanship. Sherman has also been a strong proponent of increased density/ upzoning – which increases property value. He’s been big on recommending redevelopment – increasing value of underdeveloped parcels.

On top of all this obsession with property values, he proposed one of the most relaxed regulations for short term rentals on the books.

It’s time, it is time Scott Sherman took the high road, took the ethical road, and provide transparency and give us confidence in government. Sherman needs to recuse himself from short term vacation rental decisions.

inewsource.org

 

 

 

 

{ 19 comments… read them below or add one }

RB April 27, 2018 at 5:56 pm

Wow, good investigative reporting……..

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WMM April 28, 2018 at 12:02 pm

Kudos to OB Rag and Mr. Gormlie. Shameful that the rest of the San Diego Media is too beholden to politicians and vested interests to call out Boss Faulkner and the rest of our incompetent City Government. The STVR crisis in our city is just another case of the City ignoring a known problem until it is crisis. Why do our representatives insist on trying to find a “compromise” that will only benefit a few ( half aren’t even SD residents) at the expense of the many. That is not how Government is supposed to work! There is something rotten in our City Government. Who benefits? Certainly not the overwhelming majority of tax paying voting residents of this city. The Mayor must do the right thing— enforce the existing Code. It is there to protect us all, not just a chosen few.

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John Thickstun April 28, 2018 at 12:31 pm

Thanks, Frank. To answer your question, of course Scott Sherman should recuse himself.
Here are just a few additional facts.
First, it should be noted, Scott refused to comment for Leo’s inewsource article. One would think that if someone had nothing to hide . . .
Second, how title is held is not necessarily indicative – and is not determinative – of ownership. One cannot conclude that, “Scott Sherman himself only owns his Allied Gardens residence.”, based solely on title documents filed with the County Recorder.
And likewise, to conclude the properties held in trust are “owned by” Scott’s father or that the trust is controlled by his father or even that it is “his father’s trust” is simply speculation. This is exactly why an investigation is necessary. And, this is exactly the charge of the Ethics Commission. https://www.sandiego.gov/ethics/about
Again, the fact that the trust is named after Scott’s father – does not mean Scott doesn’t have an ownership interest in the trust assets – including the real estate.
Is Scott a trustee? Is Scott, his spouse and/or his children beneficiaries? are just a couple of questions that need to be answered.
As I pointed out to Leo, Scott’s father is “no spring chicken”. Transferring ownership interest and authority -including power of attorney – to one’s assets, as they age, is very common.
So, in an attempt to get to the bottom of what Save San Diego Neighborhoods believes is a cover up, the first step would be for Scott to produce a copy of the trust instrument and any documents related to the trust.
In the end, this is about citizens, San Diego residents, believing – knowing – their elected officials are acting with integrity on their behalf and not in self interest – in this case – financial self interest.
Scott should do the right thing. He should follow the recommendation of the California League of Cities and the FPPC, “When in doubt, sit it out.”.
But we’re not holding our breath. It’s highly unlikely Scott will break his track history and do the ethical and moral thing here.
So, in the meantime, we all need to be vigilant – and demand transparency from Scott – and all our elected officials.

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John Thickstun April 28, 2018 at 12:33 pm

Thanks, Frank. To answer your question, of course Scott Sherman should recuse himself.
Here are just a few additional facts.
First, it should be noted, Scott refused to comment for Leo’s inewsource article. One would think that if someone had nothing to hide . . .
Second, how title is held is not necessarily indicative – and is not determinative – of ownership. One cannot conclude that, “Scott Sherman himself only owns his Allied Gardens residence.”, based solely on title documents filed with the County Recorder.
And likewise, to conclude the properties held in trust are “owned by” Scott’s father or that the trust is controlled by his father or even that it is “his father’s trust” is simply speculation. This is exactly why an investigation is necessary. And, this is exactly the charge of the Ethics Commission. https://www.sandiego.gov/ethics/about
Again, the fact that the trust is named after Scott’s father – does not mean Scott doesn’t have an ownership interest in the trust assets – including the real estate.
Is Scott a trustee? Is Scott, his spouse and/or his children beneficiaries? are just a couple of questions that need to be answered.
As I pointed out to Leo, Scott’s father is “no spring chicken”. Transferring ownership interest and authority -including power of attorney – to one’s assets, as they age, is very common.
So, in an attempt to get to the bottom of what Save San Diego Neighborhoods believes is a cover up, the first step would be for Scott to produce a copy of the trust instrument and any documents related to the trust.
In the end, this is about citizens, San Diego residents, believing – knowing – their elected officials are acting with integrity on their behalf and not in self interest – in this case – financial self interest.
Scott should do the right thing. He should follow the recommendation of the California League of Cities and the FPPC, “When in doubt, sit it out.”.
But we’re not holding our breath. It’s highly unlikely Scott will break his track history and do the ethical and moral thing here.
So, in the meantime, we all need to be vigilant – and demand transparency from Scott – and all our elected officials.

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retired botanist April 28, 2018 at 4:54 pm

San Diego reflects Washington…the conflict of interest is obvious, but proving it is another matter. And nowadays, its all about the proving. “Prove it” is the banner cry, waste more of the taxpayers’ dollars and time hiring lawyers, establishing committees to investigate the ethics, debating the ‘partisan” nature of it… is there anything these days that doesn’t end up in courts?
Once again, this is an issue of “Can you, Scott?” Probably, since no one can ‘prove’ what the Dad might do with his estate, or whether “previous” real estate interests have any bearing on “current” real estate issues. But “Should you, Scott?” is the appropriate, and national, moral question.
So do the right thing, Scott,and recuse yourself from these issues. Save us all from the tiresome and tedious ethical reminders that seemingly come only from the voters and not the elected. :(

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ZZ April 29, 2018 at 9:22 am

People don’t like how their democratically-elected officials vote, so they troll through property records to concoct a story about how a relative’s business will be indirectly affected by a vote. And they failed to find that AirBNB listing they just knew would be there! There can’t be another reason other than corruption people support basic property rights and tourism in San Diego!

That isn’t the standard for recusal. Every single important vote will indirectly affect property values.

Funny how people who oppose just about all major developments with one pretext after another suddenly are concerned people might be acting in a way that helps property values.

Meanwhile the anti-AirBNB people refuse to say what tax they want to raise or what part of the City budget they want to cut to make up for the tens of millions of lost hotel tax revenue and tourist sales tax revenue and higher property tax collections.

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retired botanist April 29, 2018 at 3:53 pm

Whaaat? Your “concoction” is a stew in which all anti-AirBnB people are against tourism in San Diego and believe anyone who “supports basic property rights” is corrupt?! Oh come on- don’t you want to add a dash of NIMBY flavor to that as well? All nimbys hate tourism and property rights, too?!

But the crowning glory to your ‘recipe’ is that its the anti-AirBnB folks who should, therefore, be responsible for balancing the City’s budget, and compensating tourism profiteers for their “loss” of what is basically “neighborhood rape potential”!!

Its really quite simple: Anti-AirBnB people are against AirBnBs in residential neighborhoods, and believe that those engaged in the industry are breaking the existing laws that are designed to protect communities from this encroachment. They don’t want exemptions, new arrangements, or half-baked measures that allow residential property owners to run tourist trade from their homes. No different than not being able to run other businesses from private homes- grocery stores, beauty parlors, restaurants, or any business that involves customer trade. Last time I checked, residential means “for residents”. People who LIVE there, not visit there, vacation there, or engage in profit making from the living room. If you want to jump into the tourism market, great, feel free and good luck- just don’t do it in a RESIDENTIAL neighborhood.

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ZZ April 30, 2018 at 1:45 pm

I don’t know if you “hate” tourism and property rights.

I do know you want to destroy the jobs of people who work in tourism. For example, I know of one person whose disabilities prevent her from doing a 9-5 type job, but who makes a living managing a few AirBNBs and has done so for about 7 years.

I also know you want to restrict people’s property rights. The analogy to running a beauty salon, restaurant or grocery store from home fails because there is little difference in a 30-day rental versus a 10 day rental. In both cases, the house is used for living and sleeping. And if this supposedly is already illegal, why has the city been collecting hotel taxes from AirBNB for years now? Why does the entire city council feel the need to pass a new law restricting AirBNB if it is already illegal?

I do know that you are proposing to destroy a major source of city revenue without saying what taxes should be raised in their place, or what parts of the city budget you want to cut.

“anti-AirBnB folks who should, therefore, be responsible for balancing the City’s budget”

Yes, if you want to unbalance it, you should at least admit what you are doing and propose a solution. I suppose Trump and Bush have gotten away with cutting taxes without proposing offsetting spending cuts. But I hope our city government will not follow that bad example.

We really do have a lot of reactionaries around OB who oppose new technology, new ways of making a living, and almost all new development. There is very little concern for destroying jobs, wrecking the city budget, or creating affordable housing. Meanwhile these individuals sit in their houses they paid $50,000 for and pay $800 a year in property taxes when their neighbors pay five to ten times those taxes for the same size house. Nor for the tourists who support a large number of jobs, and work hard themselves so they can afford a vacation here. Let’s mow the lawn in a speedo at 5am, that will show them!

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Frank Gormlie Frank Gormlie April 30, 2018 at 7:38 pm

I don’t have time to respond to every point you try to make. Have you not been reading / experiencing the loss of housing stock by STVRs and in the middle of a housing crisis? Talk about destroying jobs – the more STVRs there are, the less work for hotel workers.

You equate “reactionaries” with those who oppose “almost all new development” who have “very little concern” for creating affordable housing.

Yet your unequivocal defense of short term rentals is blind to loss of that very affordable housing is the loss of long-term rental housing and you are also blind to criticism of over-development especially when there is no new infrastructure to accompany the development.

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ZZ May 1, 2018 at 11:41 am

“Yet your unequivocal defense of short term rentals”

I don’t mind a limit on the number of STVR one person can own. I also think the anecdotes people share about noise should be addressed, but under the same methods we address long-term resident noise complaints. I lived next to an OB vacation rental way back in 2006-2009, well before AirBNB existed, and I never had a problem with anyone. And my rental cottage then was extremely close to the vacation rental, and the walls in the 1920’s construction had no insulation.

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ZZ May 1, 2018 at 11:54 am

There are no shortage of jobs for hotel workers. Hotels, as you can see from prices as well as vacancy statistics, are nearly fully booked. And a lot of the really big hotels bring in seasonal guest-worker labor during peak season since they can’t find enough locals.

But some people, and I gave a specific example, are not cut out for working at a big hotel due to metal/physical disabilities, but can work taking care for a few AirBNBs, which is a mix of light physical labor, interacting with people online, keeping records, etc.

“you are also blind to criticism of over-development”

OB is a prime location in the middle of a top-10 city with excellent infrastructure and amenities, but is full of lots that are not even built to 50% of what they were zoned for, zoning which is itself quite restrictive. I would like to see us evolve into a place where people don’t own cars, walk and bike to work and errands, and use a combination of transit, Car2Go type car rentals and Uber when they absolutely need to drive. The single best thing you can do for the environment in terms of lifestyle change is stop commuting by car. The first step in letting more OB residents do that is to bring actual jobs here by lifting restrictions on commercial development on Newport/Voltaire. That means relaxing parking and height restrictions.

In the end I am OK either way. Our current path of freezing OB in time and letting property values soar makes me money no different than other long-term homeowners. But my heart says to make OB affordable by increasing development substantially, which also will allow more people to live here and fewer people to live in new environmentally destructive suburban developments.

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Frank J April 29, 2018 at 10:36 am

The answer is ‘YES’. Economics 101- Supply and Demand. Even if the family trust is not using any apartments as STVR’s, as others convert with little or no regulations, supply of residential rentals goes down, demand goes up, and rents go up. The Sherman family benefits. Could there be a more obvious conflict of interest?
Maybe Stacey Fulhorst was able to skip Eco 101 in college.

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ZZ April 30, 2018 at 1:06 pm

“Even if the family trust is not using any apartments as STVR’s, as others convert with little or no regulations, supply of residential rentals goes down, demand goes up, and rents go up.”

Anyone who owns property would be affected by the hit to property values from this. I assume all city council members own their homes. So everyone would be conflicted out of a vote here. Or even if some of the members rent, more rental units will reduce rents, so they are conflicted too. Or their relatives rent or own.

Are they also prohibited from voting on anything to do with schools if they have a relative enrolled in the schools? Are they “conflicted” by voting on more police funding if that would lead to higher property values?

The point is you can also make some speculative claim of conflict, but we have specific definitions for conflicts of interest for this reason. This is not even close to such a conflict. This article does not even try to show there is conflict under the legal definition, instead it smears an elected representative who votes in way the author doesn’t like as “sketchy” and unethical.

The letter from the Ethics Commission explains why this is not even close to a conflict: there is no personal financial interest, and further there is an exception for voting on general laws that influence property values.

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Frank Gormlie Frank Gormlie April 30, 2018 at 7:31 pm

“No personal financial interest”??? What planet would that be true on? His dad owns at least 33 rental units in or near OB.

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Brian Brady April 30, 2018 at 9:56 am

“So, Sherman’s dad, George, George’s trust or companies own 3 apartment buildings in or near OB with a total of 33 rental units. Do you think any of them could be short term rentals? The independent news source couldn’t find any of the Sherman properties in “a recent Airbnb search” however. How about other rental companies? How about a study of Airbnb over a period of time?”

Oh, Frank. What a disappointment that you are dealing in speculation and conjecture. You’re better than this

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triggerfinger April 30, 2018 at 5:01 pm

In fact there’s more properties than that.

But hey, definitely not reasonably foreseeable that Scott somehow has any financial interest in these. Theres no way his 80+ yr old father has him as a beneficiary on any of these. Nah. Not a chance. Not worth investigating.

More than likely his father plans on donating all those properties to people displaced by vacation rentals.

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John April 30, 2018 at 6:12 pm
Frank Gormlie Frank Gormlie April 30, 2018 at 7:28 pm

In 2011, George Sherman sold the 16-unit Casa Del Monte Apartment complex in Ocean Beach at 4812 Del Monte Ave., for $2.95 million. https://obrag.org/2011/08/casa-del-monte-apartments-in-ocean-beach-sold-for-3-million/

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John April 30, 2018 at 9:02 pm

“It is worth repeating a concept that is frequently and appropriately identified in publications by the League of California Cities® and the Institute for Local Government when discussing public ethics. Namely, conflict of interest laws are only the minimum standards to which public servants are required to comply. On the other hand, public ethics are a set of core values that are not defined or enforced by law. They are expectations imposed by members of the public that public servants will go above and beyond the requirements of the law and act in a manner that is in the best interests of the local agency, and not in the service of narrow personal interests.
It is an accepted tenet of our democratic tradition that while public servants wield the power of local government, they must only do so as stewards of public resources and holders of the public trust. For this reason, public servants are held to high standards of ethical conduct. The Institute for Local Government has identified some of these “universal ethical values” as including trustworthiness, responsibility, respect, loyalty, compassion, and fairness. The Institute has also pointed out the particular importance of ethics in public service, since ‘[t]he public’s trust and confidence in its leaders and institutions is vital to success in public service.'” https://www.cacities.org/Resources-Documents/Resources-Section/Open-Government/Providing-Conflict-of-Interest-Advice

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