Local Spin: Coffer Logic
Lessons, and a lawsuit, in Salinas’ great green hunt.
Thursday, September 1, 2011
Dennis Donohue, Jim Pia, Jeff Weir and Vanessa Vallarta seem unlikely hunting partners, but this week, they threw on their cammies, grabbed their metaphorical rifles and announced they were going on a Moose hunt.
Almost simultaneously, the four – Salinas’ mayor, acting city manager, economic development director and city attorney, respectively – announced that while the hunt was ongoing, they would put rules in place that would obviate the need for such hunting excursions in the future.
The Moose are at the Firestone Business Park, perhaps as few as 10 of them, but maybe as many as 20, and are being kept behind locked doors. The locks were placed there by landlords to keep the Moose owners from getting them. The Mooses were one of three vehicle types being marketed and sold by Green Vehicles Inc., the startup EV company that came to Salinas with promises of manufacturing jobs, a fancy showroom and $700,000 in annual sales tax revenues, but imploded in spectacular fashion after officials couldn’t figure out how to properly fill out grant reimbursement paperwork with the California Energy Commission (“You want us to send hard copies of invoices? Huh?” is the CEC’s description of how those conversations went over the course of many months).
Weir said at Tuesday’s mea culpa-fueled City Council meeting that he attended two local meetings with Green Vehicles’ executives and “people who had the capability to invest.” After the meeting, Weir declined to name any of the qualified investors, but said they were all local and all had the money to invest.
“THE CITY ASKED THE CEC IF IT COULD RECOUP THE GRANT MONEY. THE ANSWER WAS NO.”
In the end, Green Vehicles failed to find any outside investors for their interesting but off-brand cars. The company stopped paying its rent last December and tried to barter a car instead of paying cash for their space. CEO Mike Ryan announced in a July blog post that Green Vehicles was shutting down; the $2 million CEC grant is now in limbo and the city went legal, last Friday filing a lawsuit against Ryan and former CEO Ehab Youssef, alleging fraud and breach of contract. The city wants to recoup the $534,000 – $234,000 in general funds and $300,000 in Community Development Block Grant dollars – given to Green Vehicles to help them secure the CEC grant and get the company running. Seizing whatever property (tangible and intellectual) they can is part of the litigation plan.
The city says it asked the CEC if it could recoup the grant money; the CEC’s answer was an unsurprising and resounding no.
Seizing off-brand cars from a now-defunct business doesn’t make a lot of sense. It’s not clear those Mooses are worth the money it’s going to take to legally gain ownership of them. The cars retailed for about $23,000 each, and while they’re cute, are any local mechanics able to maintain them?
A highlight of Tuesday’s meeting was the report written by Pia and Weir, which outlines the city’s strategy in deciding to grant Green Vehicles that half-million-dollar-plus package – and the lack of understanding the city had in how the CEC grant would work. At the time, the council believed that the money advanced to Green Vehicles would be repaid when the CEC released the grant funding; a more complete review of the terms and conditions of the grant shows that grant payments by the CEC are made in reimbursements for allowable expenditures under the grant. “This was different than staff’s original understanding,” the report says.
At the meeting, most everyone dropped on their swords for not reading the fine print of the CEC grant and not completely understanding how the money was to flow. Donohue, Weir, the council all took their share of the blame. Only Councilwoman Jyl Lutes was slightly defiant, rattling off a list of car makers, from Nissan to Toyota to Tesla, all being driven by EV strategy. Surely, she and Donohue both say, Salinas wasn’t wrong for pursuing the opportunity.
In a general sense, they weren’t. Economic development is fundamental to dragging the city and the county out of the doldrums, and it has to be more than putting in a hotel or home improvement store that offers minimum wage salaries. Had Green Vehicles worked, it would have been great. But it was probably never going to work. It was there, in the fine print.
Within 60 days, the report states, the city plans to release a set of comprehensive guidelines for all future business assistance requests that ask for a financial commitment from the city. And that’s a good first step in the right direction; if Youssef and Ryan were smart and structured their corporation correctly, they protected their personal assets and the city probably won’t see a penny as a result of litigation.
MARY DUAN is the Weekly’s editor. Reach her at firstname.lastname@example.org