Coronado City Manager flips house financed by taxpayers, pockets $230,000
Used 2nd low-interest mortgage to buy 2nd house
Allison Ash, Team 10 Investigator
6:35 PM, Mar 1, 2017
6:37 PM, Mar 1, 2017
CORONADO, Calif. (KGTV) -- He's City Manager of one of California's priciest and most exclusive enclaves, but Blair King says he couldn't afford to live there without financial help.
The Coronado City Council was happy to oblige. Twice.
Team 10 first exposed the deal in 2013: Coronado's City Council wanted the new City Manager to live within the city limits, but with homes well in excess of a million dollars apiece, home-ownership could have been a deal-breaker. The council members decided to offer help in the form of a low-interest mortgage, financed with city reserves. They offered Blair King up to $1.5-million to help pay the mortgage.
King bought a home on Pomona Avenue for $1.2-million, and paid interest as low as 2.5%, a bargain, even during a time when interest rates hit record lows.
Five years later, King sold the house at a profit of $230,000 and bought a second home, this one on the Coronado Cays, for $1.135,000. The second home was also financed by the city of Coronado. City Council approved the second loan as part of King's contract.
King kept the profits. Coronado leaders knew it, and were fine with it, explained the city's Mayor.
"I think the deal really makes sense for the taxpayers," said Mayor Richard Bailey.
Bailey, who didn't make the deal, but said he supports it, claimed taxpayers get a better return on their dollar with King's loan because he pays it back at more than 1% of what the money earns in "traditional" investments, and the loan is secured by the home.
The second reason why Bailey said the loan is good for taxpayers is because King became one of them by living in the community where he works. "That way our City Manager experiences the same day-to-day issues that everyday Coronadans experience."
Open government Advocate Donna Frye strongly disagreed. "When those types of transactions occur, the first thing that happens is the public trust is busted," the former San Diego City Council Member opined.
"When you have a City Manager who is making upwards of $200-$300,000 on an annual basis and then in addition to that salary and benefits that they're getting also gets low-interest loans at taxpayers’ expense, that for me, from just a moral and ethical standpoint stinks to high heaven," Frye said.
Frye said if making low-interest loans is such a good deal for taxpayers, why not make the same offer to other city employees and regular citizens?
King told Team 10 the city did make such an offer to Coronado's Police Chief, but he passed on the deal and decided to live off the island.
The City Manager Fires Back
"I reject the premise that I am benefiting on the back of the taxpayer," said King. " That’s absolutely wrong in any way that you look at it.” King explained that the deal was made in the open at city council meetings. ”There wasn’t anything that was hidden," he said. "That is what the terms of my employment are. That is what the agreement is that was offered to me, and that’s the agreement I’ve accepted.”
According to the website Transparent California, King earned a salary of $215,000 in 2015. His total pay and benefits package fell just short of $300.000. The mortgage loan is not included in that amount.
When asked about pocketing the profits from the sale of his first house, King bristled. "You know the implication of the question is why don’t you finance your house in some other way? Why don’t you... I have a couple of timeshares, ask me why don’t I sell my timeshares to finance my house? Why don’t I liquidate my daughter’s college fund to finance my house? Why don’t I liquidate a CD and finance my house? I, like any other homeowner that wants benefit from home ownership selected a house with an eye on perhaps appreciation. I mowed the yard. I trimmed the bushes. I bought new appliances. I painted the house, and I benefited from appreciation. What I do with my investment is what I do with my investment. Someone can pick and say you have other assets you could have used. That wasn’t the deal that was offered to me in 2010 or 2015 by the city council.”
King said there's "absolutely nothing" to keep him from flipping the second house and financing a third, using taxpayer funds. "I am paying a mortgage. I am paying property tax. I am doing what any other homeowner would do. It just happens to be the lien holder is the city of Coronado...The City of Coronado chose to be the lein holder because they are making a profit on the loan.”
King explained the cost of living in Coronado is "prohibitive" and he wouldn't have come to work in the city if he couldn't afford a home there.
"Coronado is doing very well," he said. "We have a cash reserve of about $60-million. We have cash and investments of $130-million…To assert that somehow Coronado taxpayers have been hurt by this agreement, I think, is totally false and an unfair representation,” King added.
City Manager Tasks
Implement legislation enacted by elected officials and advise elected officials during the development of policies and ordinances.
Supervise city department heads and administrative personnel.
Oversee the preparation and administration of the annual city budget.
Manage and coordinate the daily operation of city departments and services.
Team 10 checked with the International City/County Management Association to find out if they have a position on the use of low-interest loans. The association's Director of Ethics, Martha Perego sent this response:
"The ICMA Model Employment Agreement provides several options for managers to consider when moving to a city where the cost of housing is very high and disproportionate to the compensation package. Having the organization provide or underwrite the home loan is one of those options. ICMA's advice is that the loan arrangement be reasonable, fully transparent, included in the employee's employment agreement, and properly secured.
Not all cities have to provide housing assistance for their managers. But for cities that have really exorbitant housing costs, providing some type of housing assistance is needed if they want to attract a qualified, experienced manager."
An online search showed several California cities and even a school district have used low-interest loans as incentives to get managers to work for them. Some have resulted in problems and criticism, but many more have not.
Team 10 contacted the San Diego County Taxpayers Association to see how they feel about this kind of deal. A spokesman for a public relations firm emailed "SDCTA is going to pass on this for now."