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The San Francisco Chronicle
Aug 07, 2005 - 01:00 AM

by Carla Marinucci, Chronicle Political Writer

ETHICAL BUMP OR JUST A POTHOLE?;

Governor's photo op raises debate about nonprofit, San Jose paying road-show tab
It was intended as a picturesque public relations triumph: Gov. Arnold Schwarzenegger backed by a blaring soundtrack of "Takin' It to the Streets," striding alongside an army of neon-clad street workers to tackle a "critical" transportation problem -- a San Jose pothole.

But the photo op took more than a little doing, government documents show -- a flurry of anxious e-mails from city officials, dozens of hours of planning on city time and considerable angst over details like location, location, location.

Not to mention ingredients to showcase a superstar governor on a mission: a ton of asphalt, a dump truck, Hollywood-style lighting, sound equipment, vans and transportation for city officials and reporters, news conference materials -- and a really nice shovel.

Critics say the May 26 event, paid in part with money from a tax-exempt committee called the California Recovery Team, illustrates the increasingly blurred lines between Governor Schwarzenegger and Candidate Schwarzenegger: The governor held an event to dramatize a public issue of importance to taxpayers -- the poor condition of California's roads -- but rather than benefiting taxpayers, the event was a moment of political theater that benefited Schwarzenegger.

Yet it doesn't appear that any expenses were paid by the governor's campaign committee. Instead, the cost was underwritten by the nonprofit committee, which doesn't have to report its contributors and which has helped pay for many of the governor's campaign events. In addition, the city of San Jose -- which involved 31 city employees in the event at one time or another -- lumped in its expenses with its daily operating budget.

Ethical questions

Critics say the pothole event raises questions about whether ethical boundaries were crossed by the governor, who has been promoting ballot issues for a Nov. 8 special election he called.

"If the California Recovery Team is getting donations and using (them) with the purpose of promoting Schwarzenegger's political career -- and if what they're funding (is) a press conference in San Jose -- then they are not serving a public interest (as a nonprofit)," said Doug Heller, who runs Arnold Watch, a project of the Foundation for Taxpayer and Consumer Rights.

"What they're doing is promoting the politician... and they should be registered as a (campaign) committee," Heller said. "You can't raise money for a nonprofit and then use that nonprofit to serve your political ends. ... That's a laundry."

Thomas Hiltachk, a lawyer who represents the nonprofit California Recovery Team, said the San Jose event was "an example of the type of event we might do," ones that involve Schwarzenegger and statewide policy issues. He said that the costs are mostly nominal and that the organization has complied with all legal requirements and tax filings.

Hiltachk said the group's lobbying activities are completely within the bounds of the law set up to oversee such corporations.

The governor's legal affairs office recently rejected The Chronicle's public records request for documents on the costs, communications and details associated with planning and carrying out the San Jose event, saying, "We do not maintain those records in the ordinary course of business."

But the governor's spokesman insisted that state taxpayers didn't spend a dime for the event.

"We do not use government funds to pay for the (preparation) of events, even when they have government purposes," said Rob Stutzman, communications director for the governor, explaining why the governor's office has no record of the cost, which he said was paid by the nonprofit committee.

Paul Dobson of the governor's legal affairs department said financial records may exist with "private parties," but said briefing materials on the matter would not be released for "security" reasons.

While state financial records are largely under wraps, San Jose city records released under a public records disclosure request paint a revealing picture of the strategy and sales pitches that go into a typical campaign event by a superstar governor.

City officials were anxious to cooperate with Schwarzenegger, who hoped to use a newly released transit report as a "hook" to show his commitment to transportation funding under voter-approved Proposition 42, according to one e-mail.

But at least one of the local officials saw the event as a "stunt," and another worried the visit to highlight problems in the area would broadcast a message that "San Jose has bad roads."

A tally sheet showed that the hourlong appearance by the governor involved the time of 31 San Jose city staffers -- laborers, officials and administrators -- who clocked a total of 68 hours discussing, planning and preparing the work to be done on Laguna Seca Way.

Among them, a city memo notes: "One of our pavement staff will be giving the governor a lesson on how to operate the equipment."

In addition, there were materials needed: a dump truck, flatbed truck, three-axle dump truck, trailer-paving machine, tandem-axle trailer, rented Bobcat, oil-path truck, tool truck and grinder, and a ton of asphalt. The bill was not broken out, city officials said, because these materials are used for regular road repairs anyway.

The toughest calls came on location, and San Jose officials, the e-mails showed, repeatedly tried to suggest to Schwarzenegger's staff that the event be held on streets in desperate need of repair, "the worst of the worst," so he could better illustrate the importance of transportation funding.

'The governor's people'

But word came down that it wouldn't be the city's call, the documents show.

"The governor's people will vet and select the site," and "the governor will be in the dug-out portion, raking asphalt (his staff's idea)," the documents say.

And the Laguna Seca Way site chosen by "the governor's people" wasn't a project considered a pressing need by city officials.

To nail down the final look of the event, Schwarzenegger's staff hired Richmond-based Hartmann Productions for lighting, sound and setup, said Hiltachk, the California Recovery Team's attorney. According to state records, that firm, which has been used regularly to set up events ranging from the governor's inauguration to his key appearances, has been paid at least $308,000 in connection with Schwarzenegger's events since the beginning of the year.

Garry South, a top adviser to Democratic former Gov. Gray Davis and current adviser to state Controller Steve Westly on his Democratic campaign for governor, rejected the assertion that Schwarzenegger's office didn't keep track of the costs of the pothole event.

"If they're doing it properly, there's always going to be cost accounting in terms of the governor's travel costs, staff costs, costs for lighting and sound systems," he said. "To suggest they don't know... they damn well ought to."

The California Recovery Team, registered with the IRS as a nonprofit "advocacy" or "public benefit" corporation, has helped pay for a number of the governor's campaign events. The organization has spent $500,000 in the last quarter and has $200,000 in the bank, the most recent financial records show. The group is required to file tax returns, but under federal law, it doesn't have to release information on where its funding comes from.

Source of money

However, state records released this week show the nonprofit committee has received checks totaling nearly $800,000 this year from the governor's main campaign fund-raising machine. That separate campaign group, legally known as Governor Schwarzenegger's California Recovery Team, has spent more than $11 million in the first half of the year and still has $1 million in the bank, according to the most recent public records on file.

Democratic critics said they are alarmed by a confusing web of groups to oversee -- and shield, some charge -- the activities of the governor.

"For a guy who came into office saying he would have the most open administration in history, they sure are hiding the ball an awful lot," Democratic strategist Roger Salazar said. "These guys are playing three-card monte with their funds, and with information that the public really wants to know. They move money from one group to another, and they refuse to provide information on his time and activities until they're absolutely required to do so."

Sheldon Rampton, research director of the Center for Media and Democracy, a watchdog organization, said that while the governor's team may be abiding by the letter of the law, "the bottom line is transparency. There's an ethical problem any time people engage in politics to change policy without the public knowing who's funding the effort."

In the end, what began as a full-blown media event to showcase Schwarzenegger and his transportation concerns ended up the target of late-night comedy.

"Isn't personally filling a pothole beneath the governor?" sniffed Samantha Bee of Jon Stewart's "The Daily Show," which recently aired a spoof on the event. "We're talking about the star of 'Jingle All the Way' and 'Kindergarten Cop.'

"A stunt like that might work for ... Gray Davis," she sniffed, "but not the Terminator."
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E-mail Carla Marinucci at cmarinucci@sfchronicle.com




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