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Reservoir Keepers Get Sweet Deals

In houses only minutes from their jobs, reservoir keepers remain on call 24 hours a day. Who would begrudge them the low rents they pay the city? I ask keeper Diane Dine what it's like to be stuck day and night at Sutherland Reservoir, northeast of Ramona. She has a daytime office at the reservoir's public-access docks, and her city-owned house sits on Sutherland Dam Road, west of the lake and several hundred yards above the dam. "I wouldn't say I'm stuck," says Dine, who has worked at the lake for nine years. "I like it out here."

After another keeper, Joe Hughes, vacated the Lake Hodges city-owned house in early summer 2004, San Diego Water Department acting director Charles Yackly received a recommendation to almost double its rent. In a June 22, 2005, e-mail to Yackly, the Real Estate Assets Department's Diana Drake wrote: "If the new reservoir keeper wants to rent it, or if the water department has another employee for that property, please let me know, so that I can start preparing the lease. I haven't seen the house yet, but the current rent is $255 and if we rent it to another reservoir keeper, we should increase the rent to at least $495 per month.... This is still substantially below market."

Yackly returned Drake's e-mail after two days, referring to an existing Water Department plan to charge the reservoir keepers 50 percent of market value for their rents. He asked, "Does the $495 per month reflect 50 percent of the market?" The department soon realized, however, that all its reservoir houses were priced well below 50 percent of market value. Apparently to correct the situation, the department several months later, on October 5, produced a proposal to raise rents at seven of the houses. It recommended raising two Barrett Lake houses from $204 and $210 to $425, two Sutherland Dam houses from $208 and $300 to $450 and $550 respectively, and the Lakeside Pump Station house from $344 to $450. It also proposed pricing the San Vicente Dam house at $450 and the Lake Hodges house at $500. No one occupied the latter two houses at the time.

In December of last year the Water Department sought to put reservoir keeper Conway Bowman into the Lake Hodges house. Craig Gibson, supervising property agent at the Real Estate Assets Department, assigned employee Brett Maxfield to write up a lease for Bowman. Maxfield is an attorney and licensed real estate broker. The Real Estate Assets Department would fire Maxfield three months later.

E-mails and Water Department documents reveal that as property agent Maxfield began his assignment, he immediately clashed with his boss, Craig Gibson. The Water Department, despite its own internal recommendation, had yet to raise the house's rent to $500.

But to Maxfield there were more serious problems. In an early morning message on December 22 to acting real estate assets director Jack Farris, Maxfield wrote: "I spoke to Craig about this assignment yesterday after reviewing what is being asked of me. I brought up the issue that though this lease may have merit as compensation for exchange of services, the lease...on its face has an appearance of being a gift of public funds. The market rent on this house as of 2003...states that rent should be between $900 and $1,100, but I am asked to make it $255, about one fourth of market rent. This was the rate given in 1992. Nothing in the lease makes reference to this lease being in compensation for services of being a dam keeper and, according to Craig, this is done on purpose and that is why it is a month to month lease. I am not saying the substance of this transaction is wrong or illegal but it is not being done in a proper form in my opinion and I am not comfortable proceeding as I have been directed. I brought this up to Craig. He got mad and told me it is not my policy call and just do it, so I bring it to your attention and ask for direction as to how to proceed."

In the meantime, Maxfield sought an outside perspective. "Haven't seen you in some time," he wrote to Greg Levin in the city auditor's office. "Are you free for lunch today? I have something I would like to ask you about."

In the afternoon, the two exchanged e-mails discussing the previous Lake Hodges house lease of $255 between 1992 and 2004. Maxfield added that Jack Farris "spoke to me after lunch and told me to write up the lease so that it accounts for the rent being discounted in exchange for services rendered. I will assign a value to the difference. However, it is the water department that will have to sign the lease and make sure that the reduced rent is accounted for as to the employee's payroll. I will make sure that those in Water are made aware of this change...."

The following day, December 23, Maxfield sent a message to Craig Gibson and Jack Farris in his own department, to Water Department acting director Charles Yackly, and to several others. "Gentlemen," it began, "I have been asked to write up a lease for Conway Bowman for the house at Lake Hodges. It is my understanding that he will be a reservoir keeper and that the house will be part of his salary for exchange of services and that he will pay the other half of the rent from an automatic deduction from his paycheck.... I will include language in the lease which reflects this in the new lease agreement. The old lease agreement did not make any mention of this. I trust that Water will make sure the proper accounting takes place as to Bowman's salary since the property seems to be given him partly in exchange for services. I just want to make sure all parties understand. I don't want to be part of income tax fraud. Income tax fraud is a felony. I am going to ask Craig to authorize a request to get the property valued as to fair market rent by our assets acquisition people. The lease will be very clear as to what is being given to Bowman for his exchange of services."

Fewer than 15 minutes later Maxfield wrote to Farris separately, "About our short talk yesterday afternoon, I was glad that you came by and told me not to do the transaction the way Craig wanted me to do it. However, when you asked me to destroy the e-mail I sent you, I don't think that was proper."

Later in the morning Maxfield got back to his confidant Levin. "Just wanted to let you know," he wrote, "that my last e-mail to all the parties caused quite a conversation. Jack is now aware of the fact that I had lunch with you yesterday and that I have sent you the e-mails. He wants to make sure the right thing is done."

"Brett, we are doing some fact finding on this," replied Levin 30 minutes later. "At this time it does not appear that [the Water Department employees] are being 1099'd or W2'd for these [housing] agreements. However, I haven't chatted with my payroll manager about it yet. The gift of public funds is another issue all together."

But Brett Maxfield tells me by phone that if the City refuses to do the proper tax reporting because it sees only the reservoir keepers' salaries as a return for services, then "the discounts they receive in rent are gifts of public funds." (Levin does not return my voice mail message asking whether the payroll manager confirmed his suspicions concerning taxes.)

That afternoon, December 23, the Water Department's Yackly replied to Maxfield's message, copying the e-mail to Gibson and Farris. "All," he addresses them, "the intent here is to continue with the past practice as it relates to the rental of these dwellings by the reservoir keepers. We would like eventually to firm up the duties and expectations of the employees that come with living in these dwellings, but that I expect will take some time and would include the appropriate involvement of Labor Relations. In any event, past, present or future rental arrangements should reflect the proper handling of any tax implications."

On December 27 Maxfield confided further in the auditor's Greg Levin. He starts by inquiring "who I should talk to in Personnel about the events of last week. Although Jack told me not to fear retribution from Craig, I don't believe it. This morning I got a memo from Craig taking me to task on my Verizon accounts. I am confident that my Verizon accounts are being handled correctly and that Craig has acted quickly to find something to point the finger at me for. Nevertheless, I told Jack that I should not have to work under Craig after having to go around him twice in matters involving moral turpitude. However, as of now, Craig is still my supervisor, and I believe he has it out for me. I was warned by another property agent who works under him to watch out Friday after the lively talk Craig, Jack, and I had in Jack's office in response to the e-mail I had sent.... I also recounted that Craig had told me about how many times he has compromised while working for the City because it was politically expedient and that I should follow in his steps. Any advice? Do I need to involve the City Attorney? I went down to Personnel, but it is closed all week."

The next day Maxfield contacted Conway Bowman, the employee who wanted to rent the Lake Hodges house. "Please read the attached from Charles Yackly. Is it your understanding," wrote the property agent, "that the difference between fair market rent and the $255 you are going to pay is not to be included as part of your salary? From our conversation just now, it seems like there has been an agreement made which makes the house a duty for you to live there. I agree it should not be included in your salary, but I need to work with auditors to make sure we account for things correctly."

Twenty minutes later Maxfield addressed Levin to explain what he had learned. "I have attached some pictures of the dwelling and the dam which it is near," he wrote. "According to Conway, the labor union negotiated a deal where he is only to pay $255 to live there. I guess they expect the rest of the value is to be attributed to it being a public facility that it is his duty to be stationed at, just like my desk space on the seventeenth floor. I am getting an appraisal of the fair market value for rent of the property. I am guessing $255 is about 20 percent of this. I could write up the lease stating that 80 percent of his time at the house is considered a duty of his job as a dam keeper and thus not part of his salary, which is what seems to be his understanding of the arrangement. Thus, he only pays for the 20 percent of the time he spends there for personal use. Does this make sense? Is it a valid arrangement from your office's point of view?"

Then Bowman wanted to know about another detail. "I read the attached from Charles [Yackly]. Is he saying that the rents will stay the same, but I'll be responsible for the taxes?" Bowman also took the opportunity to make his case further. "Living on station is a part of my duties as a reservoir keeper," he wrote. "I'm responsible for the protection of the resource on a daily basis. I'm in essence on call 24 hours per day. Because of this responsibility, the keepers have always paid a greatly reduced rent on all the reservoir houses. Hence the $255 per month at Lake Hodges. I believe this issue was taken up with labor relations and it was determined that the rents were not going to be raised."

"I understand," Maxfield replied. "I just need to work with auditors to write up the lease in a way which reflects this arrangement correctly." That was December 28. On January 19 Bowman asked, "Any progress on the house lease at Lake Hodges?" Maxfield replied that he was waiting for the appraisal. He didn't get it until February 8, when he wrote Bowman, "The appraisal is $1300. I will write up the lease to attribute $250 to your personal use and the remainder to facility use. You mentioned that this is what was negotiated between labor relations and water management, correct? Is there any writing concerning this I can reference in the lease? If not, can you tell me when this agreement was reached and who the key decision makers were? I want to reference the agreement in the lease."

In response Bowman named lakes program manager Joe Weber, who right away sent Maxfield "Reservoir and Pump Station Tenant Expectations." Among the eight expectations are carrying and responding to a city pager and conducting one random patrol of the recreation and dam areas on days off.

By February 24 Maxfield had written the Lake Hodges house lease. It stated $255 as the rent amount, noting it as approximately 20 percent of $1300. That was in anticipation, wrote Maxfield, "that Conway Bowman shall only be using this property for personal purposes for 20 percent of the time." Bowman would not have to pay the other 80 percent of fair market rental value due to his work responsibilities. Maxfield also included the following proviso: "This arrangement was negotiated by and agreed to by the Water Department, not by Real Estate Assets. Real Estate Assets leave the validity of the assignment of value in proportion to services rendered and facility overhead to be evaluated and validated by the City Auditor."

When Joe Hughes (the tenant before Bowman) rented the property, Maxfield tells me later, the lease failed to mention not only exchange of services but also what the fair market value was. "It specified only $255 for renting the house," he says. "So the City couldn't have been taking taxes out for the rest of its fair market value."

Still not comfortable with what he had done, Maxfield on March 7 sent an e-mail to the Water Department's Charles Yackly stating, "I want to make you aware of this arrangement. I think we should meet with Auditors, the City Attorney, and get the wrinkles worked out."

When I ask Yackly later by phone whether the City is properly reporting the reservoir keepers' tax obligations, he tells me he is "not familiar with that aspect of the matter. I hope so."

In explaining his own firing by the Real Estate Assets Department later in the month, Brett Maxfield cites "rooting out too many skeletons in the City's closet," including cooperating with a Reader Public Records Act request in the recent Carlton Oaks Golf Course lease case. The City ended up not renewing the lease on its old terms largely due to Maxfield's insistence that it gave the City a low return.

In a March 27 "Notice of Probationary Failure" to Maxfield, Real Estate Assets Department acting director Mike Boyle did not mention the skeletons in the City's closet. Instead, among other things, he cited Maxfield's "dubious charges of tax fraud and unilateral involvement of City Auditors, outside the chain of command."

Reached later by phone, Boyle and Craig Gibson decline to comment on details of the Maxfield case, both characterizing them as confidential personnel matters. Gibson resigned from the City in late March. It was his own decision, he says.

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