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Home / Articles / News / Features /  Sold Out
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Anson Stevens-Bollen

Sold Out

Santa Fe senator faces ethical questions after brokering a historic property he voted to sell

July 22, 2014, 12:00 am

Take a stroll through the Barrio de Analco and it doesn’t take long to recognize the neighborhood’s historic legacy. Close your eyes and you can smell gun smoke from ancient battles, hear the beat of Tlaxcalan drums and feel the frustration of Spanish governors pushing to remove non-Christian Natives from the area centuries ago.

Across from Upper Crust Pizza on Old Santa Fe Trail, tourists flow in and out of the country’s oldest church. San Miguel Chapel—rebuilt in 1710 after it was destroyed during the Pueblo Revolt—marks the barrio’s eastern border. The state’s highest court building still guards the western barrio edge. Plaques mounted on 3-foot-thick adobe building walls are symbolic reminders of the area’s National Historic Landmarks designation in 1968.

Eight years before the National Park Service recognized the district, New Mexico’s own State Parks Division, which operates under the Energy, Minerals and Natural Resources Department, purchased a 5,200-square-foot building in the middle of the barrio—just a stone’s throw from the Roundhouse.

But now the East De Vargas Street building is in private ownership, and some lawmakers are having second thoughts about the deals that led to its sale.

For more than five decades, state employees had offices in the building that merged two century-old family homes. Nearly three years ago, New Mexico Youth Conservation Corps staff still had to scramble to find parking on the narrow one-way street. That morning chore ended in late 2011.

Shortly after Gov. Susana Martinez was sworn in, she set a goal for government agencies to become more efficient, and when natural resources department managers decided to consolidate operations at the Wendell Chino government complex, the workers were ordered to move to South St. Francis Drive.

The old building remained vacant for nearly a year while department officials weighed their options. No other agencies requested to move in, and eventually, citing a decline in State Parks revenue, executives decided to lease the building in the hopes that it would generate needed funds.

Up the street in the barrio, 31-year-old Sharif Seret and his family of designers, craftsmen, and business developers had been quietly expanding their luxurious The Inn of the Five Graces since 1993. Its turquoise trim and manicured flowers dot both sides of the short block.

When the lease opportunity was published, Seret recognized a chance to expand his property holdings again. He envisioned retrofitting the space and building a fitness center for his guests. The native Santa Fean and his father, Ira Seret, decided to negotiate a 25-year commercial lease with the state as long as their company, Galisteo Street Inc., would have an option to renew it for another 25 years. They also insisted on a clause giving them the first right to purchase the property at fair market value if it was ever put up for sale.

Signed in September 2012, the lease was a win for both sides. Over time, it could have generated more than $1.3 million dollars in rental income and $250,000 in property improvements for State Parks. But during the last legislative session, lawmakers voted to allow the natural resources department to change course and instead sell the building to the Serets for $570,000.

Months later, some of those same lawmakers question whether taxpayers got the best deal for the state’s property. Others are scratching their heads about why Sen. Phil A Griego, D-Santa Fe, a licensed real estate agent, brokered the deal a month after he cast a vote that allowed the transaction. And some leaders want want to know if they were deliberately misled about the reasons for selling the building.

With less than 24 hours before declaring sine die to signal the adjournment of the 2014 New Mexico Legislature in February and with lawmakers still debating scores of proposals, state senators spent fewer than seven minutes to consider a measure on what many originally thought was the sale of surplus land. By then, House Joint Resolution 8 had already passed four legislative committees and been unanimously adopted by House members without a floor discussion.

Sen. Carlos Cisneros, D-Questa, who had agreed to carry Rep. Jim Trujillo’s, D-Santa Fe, legislation in the upper chamber, told colleagues the property was a contributing building in Santa Fe’s historic district but required expensive repairs. Maintenance costs, he said, were more than the value of the lease.

Once Sen. Pete Wirth, D-Santa Fe, was assured the building wouldn’t be demolished and that the New Mexico Taxation & Revenue Department would approve a certified appraiser to determine the building’s fair market value, the resolution easily won majority approval in the Senate with just three dissenting votes.

Cisneros recalls that public discussion was predicated on information in a fiscal impact report prepared by a Legislative Finance Committee contract analyst.

The Inn of the Five Graces comprises a number of historic buildings in the Barrio de Anclo.
Peter St. Cyr

“We were told that the building was old and expensive to maintain,” says Cisneros. “Selling the property seemed like a reasonable proposition rather than provide additional monies for maintenance.”

What Cisneros and other lawmakers could not have known without a careful reading of the lease, which was not included in their packet, was that the building’s maintenance costs and all structural repairs were the contractual duty of the young hotelier. Seret had agreed to fix the roof and sidewalks and to secure additional parking for the business. He had also pledged to spend a quarter million dollars improving the building.

“It’s not the first time we’ve been misled,” says Cisneros.

He and Trujillo claim they took the information they received from the agency at face value. Trujillo said he’d only agreed to carry the resolution for Griego after the Senate Corporations Committee chairman approached him last fall.

“He told me he didn’t have time to spend on it himself,” says Trujillo. When Griego asked Trujillo to help the natural resources department Deputy Secretary Brett Woods get the legislative process going by sponsoring the resolution, “I told him that I would.”

Meanwhile, Griego readily admits he’d been monitoring the potential sale for his friend Ira Seret, the father of Sharif, for more than a year.

During a follow-up meeting with Woods, Trujillo tells SFR he was told the building was in such bad shape that it was costing them more money than what the agency was getting out of it, and “they need to get out from under it.”

“I took Woods’ word that they didn’t have enough income coming in,” says Trujillo.

Following that discussion, Trujillo asked Legislative Counsel Service to draft the resolution.

“I got the bill and read it thoroughly,” says Trujillo. “I don’t go for underhanded stuff, and this resolution had all the safeguards in it.”

One of those safeguards required the Capitol Buildings Planning Commission to review the sale before it became final.

But that review would prove to be meaningless. Documents on file with the state appear to show the sale was in motion before the commission review even began. Someone had updated the “King’s Map” in the Santa Fe County Clerk’s office on April 4—five days before the first review meeting. A warranty deed was already prepared and awaiting a notary public’s signature.

The commission convened on April 9, and meeting minutes indicate that Woods once again stated the building had structural issues and was in need of significant repair work, although the department’s previous written memos to a Legislative Finance Committee analyst didn’t mention those problems. Woods claimed the “property should be sold due to the expense of repair and maintenance and because the building is unsuitable for the needs of EMNRD,” despite Woods’ knowledge that Seret, not the natural resources department, was ultimately responsible for repair and maintenance costs.

When the committee deferred its vote, sources tell SFR that Griego was livid and pushed to schedule a new meeting date. The senator denies that. He may have known there was really nothing to worry about.

Just 12 days after the commission’s first meeting, Woods signed a purchasing agreement with the Serets. A week later, it was amended with a firm sales price of $570,000, exceeding the appraised value by $70,000.

On May 2, natural resources department Secretary David Martin, who had designated Woods to facilitate the building for the department, sent a two-page letter to notify Legislative Council Service Director Raúl Burciaga that his department was “preparing to close the sale” with Seret. Final documents were recorded on June 26, three days after the review committee’s next meeting.

At the beginning of summer, after greeting a guest, and with the mission’s church bells tolling in the background, Seret invited SFR to join him in one of the inn’s courtyards to discuss the sale. He doesn’t know why the natural resources department opted to unload the building so quickly after signing the lease.

Seret, whose previous focus has been on private market deals, isn’t shy about having asked the five-term senator to be his agent.

“We could have put the deal together ourselves, but I didn’t necessarily want to because I wanted to make sure that it was done right. That’s why we brought him in to represent us,” says Seret. “He had a real estate license, so we decided it was fine, because that’s what you would do in a normal commercial deal. I assumed that if we can work with him that he’s done what he needs to do it in an ethical way.”

Griego is also unapologetic about the deal. He says as a citizen legislator he needs to earn a living, “unless you want to pass a constitutional amendment to pay lawmakers.”

Griego, a state senator since 1997

But the natural resources department-Galisteo Street deal, some say, is one Griego should have passed to another agent. He disputes their insinuations.

“There was no personal financial benefit to me until after the vote,” says Griego. “I signed the contract with the Serets in March.”

The timing still isn’t right. The state constitution prohibits elected officials from “directly or indirectly benefiting from any contract with the state” during their entire term and for an additional 12 months after leaving office.

After swearing to uphold the constitution, Griego, like all New Mexico senators, is also required to sign an Oath of Ethical Conduct. It obligates them to “not use my office for personal gain” and to “scrupulously avoid any act of impropriety or any act that gives the appearance of impropriety.”

Critics of Griego’s work on the transaction suggest he should have heeded the governor’s 2012 State of the State reminder: Public service should be about serving the public—not setting up a future payday.

If he was in Griego’s position, Senate Minority Floor Leader Stuart Ingle, R-Portales, says he would have abstained from voting on the resolution. Ingle, who serves on the Capitol Buildings Planning Commission with delegates from the executive branch, courts and other legislative leaders, tells SFR he heard scuttlebutt at the Roundhouse about Griego’s reaction to the committee’s April deferral.

“I didn’t know about his vote,” says Ingle. “All I heard was that he was upset the issue wasn’t passed during our first review.”

A farmer, Ingle doesn’t like the current property sale review process because it doesn’t give the panel the authority to stop a purchase. He thinks legislators should be taking a harder look at real estate transactions before “the cow’s out of the barn.”

Lawyers even argued that the committee’s power to “review” in the enabling resolution didn’t extend to approval or veto of the sale.

Speaker of the House Kenny Martinez, D-Grants, who co-chaired the committee with General Services Department Secretary Ed Burckle, was the only reviewer to vote no on a final motion, amended to reflect that other members had “concerns and objections.” He’s still uncertain why the natural resources department considered its property surplus land since it sits in the shadow of the capitol.

“That’s very troubling to me,” he says.

He’s not alone. Senate President Pro Tem Mary Kay Papen, D-Las Cruces, didn’t talk directly to SFR about Griego’s ethical choice, but asks whether taxpayers were getting the best value for the property.

“Someone could have offered a million dollars,” Papen said during the June meeting, adding the lessee would have had to match a bigger deal if the lease was a right of refusal instead of right to first purchase.

But that wouldn’t have worked for Seret, who has already put $200,000 into the building and plans to invest more.

“We’re not going to invest in something that we don’t know we’re going to have the ability to capitalize from,” says Seret. “We’ve made a substantial investment in the property because we knew it could be brought up to a quality that’s similar to the rest of the hotel.”

Since acquiring the building, Seret has hired additional staff and says with increased occupancy, he’s already adding money to city and county coffers.

“We pay a 7 percent lodgers’ tax and 8 percent gross receipts,” he says, adding the property had been tax exempt when it was owned by the state. “We’re also paying property taxes, and our guests spend their money in Santa Fe during their visits.”

All that can add up. During the peak tourism season, guests pay $425 to $2,500 per night. Request an in-room Ayurvedic massage and you’ll spend another $250.

There’s no doubt the Serets’ stewardship has benefited the community and protected the historic structure, but there’s also the question of whether it was in the state’s best interest to sell the building now, just a few years after risky subprime mortgages crashed the real estate market. Prices are too low, some say, to unload a building which has the potential to gain value.

In fact, an appraisal by Santa Fe-based Hippauf & Associates shows comparable real estate values ranging from $228 to $246 a square foot in 2013. A year later, the natural resources department’s building sold for less than half—$110 a square foot.

SFR asked to interview Woods, but our request was ignored. Instead, after a 90-minute interview with the department’s general counsel, Communications Director Jim Winchester sent the paper a “final response” stating the department stands by its decision to sell the property.

“The proceeds of that sale are being reinvested into public parks programs,” Winchester writes, “including an upgrade of equipment used to maintain public restrooms at state parks, bringing immediate value to the taxpaying public.”

That rationale doesn’t work for some lawmakers. “We should not sell buildings just because an agency needs additional money,” says Cisneros. “I don’t mind selling an asset that has no value or little value, but an asset that has value, whether it’s intrinsic or financial, then that’s concerning to me.”

Capital outlays for the department have been declining, and a second-quarter Performance Report Card issued by the Legislative Finance Committee shows revenues for state park visitation and self-generated revenue “do not appear to be on pace to meet annual targets.”

Parks have taken a hit, according to the finance committee, as a result of the state’s drought, wildfires, floods, high fuel prices, low water levels and lake closures.

While the finance committee has recommended the department look for new revenue opportunities, Cisneros says, “We don’t need to start selling buildings.”

“There is substantial money available for projects,” he says.

Interior renovation at the former state-owned building on East De Vargas Street is ongoing.
Peter St. Cyr

 With the deal done, it is not clear if anyone has filed an ethics complaint against Griego. The legislature’s ethics committee isn’t required to reveal whether it’s investigating allegations against any lawmaker until they’ve determined if a violation has occurred. If they do, it would be referred to the entire body to vote on some type of sanction including censure.

But Griego says any allegations around this deal are unfounded because he wasn’t looking for a payday when he first started to monitor the legislation.

“He’s a friend of mine. He needed help. He needs guidance through this process. I offered to do it,” says Griego, who voluntarily added, “[Seret] said, ‘OK, then we’ll pay you a fee.’ I said, ‘OK, fine.’”

He’s confident he did nothing wrong but won’t reveal how much he earned on his commission.

“That’s private,” says Griego. “Listen, the decision to sell the building was not mine. They had people vetting this transaction from top to bottom. Even the Board of Finance signed off on the deal.”

Griego also points to the Senate’s 33-3 vote.

“Had I not voted on it, it would have been 32-3. My vote would have made no difference at all,” says Griego.

But Griego, who was more familiar with Seret’s lease terms, remained silent during the Senate floor debate and never thought that correcting the information about who was responsible for maintenance costs could have changed some votes.

Instead, Griego tells SFR that he’s not alone casting votes on measures that ultimately benefit lawmakers and says teachers ”vote on their budget and their retirement plans.”

“Had I not voted on it, it would have been 32-3. My vote would have made no difference at all”

All things considered, Senate Majority Leader Michael Sanchez says he thinks Griego should have excused himself from the vote.

“As elected officials we have to hold ourselves to a higher standard,” says Sanchez. “At the beginning of each session we remind our members about the rules.”

Confer with former Sen. Dede Feldman and Common Cause New Mexico’s Executive Director Viki Harrison, and it’s clear those rules don’t seem to be working.

In her book about the inner working of the Senate, Feldman argues that resistance to an independent ethics commission “contributes to the impression that senators hold themselves above the law.”

“It is not a great message for restoring public trust,” writes Feldman. “Clearly, legislators would benefit from some bright lines drawn in these gray areas. An independent ethics commission could educate public officials on the legalities, enforce existing laws, and hold them accountable.”

Longtime New Mexico journalist Heath Haussamen agrees with Feldman. He’s spent years advocating for an independent commission.

“We need an independent body with the mission of creating ethical standards and educating public officials on how to follow them, and with the teeth to investigate and publicly slap the wrists of those who violate those ethical standards,” Haussamen blogged in August 2009.

Four years later, in 2013, Rep. Brian Egolf’s measure to create an 11-member independent commission sailed through the house on a 64-1 vote. But the Senate decided not to consider it, and the measure died.

Harrison’s disappointed that New Mexico remains one of only eight states without an independent commission. But she, Feldman and Haussamen won’t give up. Lawmakers, they hope, will approve one soon.

Mañana?

Peter St. Cyr is an independent reporter based in Albuquerque. Email him at Peter@sfreporter.com
Editor's note: An earlier version of this story gave the wrong committee chairman position for Griego.

 

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