Dark Money Impacts Scottsdale Elections

Report likely to shed light on ‘dark money’

By: Beth Duckett

THE REPUBLIC • AZCENTRAL

October 29, 2014

 

Campaign-finance reports due by Friday, Oct. 31, will shed light on spending in Scottsdale’s City Council election, including the cost of recent mailers paid for by a political committee targeting candidate David Smith.

shed-lightSix candidates are seeking three seats on the Scottsdale City Council in Tuesday’s election.

Scottsdale United paid for recent mailers that accuse Smith, Scottsdale’s former city treasurer, of adding new employees and adjusting pay in his department, as well as developing a “pyramid scheme” to increase his salary. Smith retired as treasurer in 2013.

Smith has denounced the allegations, calling them “terribly baseless.” He said the employees were transferred from another department and the “pyramid” was a tiered compensation plan for senior managers prepared at the mayor’s request.

Scottsdale United drew attention in the August primary after pouring more than $80,000 into the council race. The funding came from Scottsdale Strong, a non-profit corporation that is not required to disclose where its money comes from. The term “dark money” refers to the anonymous funding from such groups, which have poured millions of dollars into races across Arizona.

Campaign-finance reports due by 5 p.m. Friday will show the fundraising and spending by candidates’ and political committees between Sept. 16 and Oct. 23. The mailers went out before Oct. 23.

In a written response to The Arizona Republic, Smith said the three employees added to his department already worked for the city. Two of the employees were a part of Scottsdale’s water department organizationally, he said, but as financial employees reported to the treasurer’s office. A supervisor in the water department was transferred back to the treasurer department because, Smith said, “his position was deemed to be more financial than water-company related.”

The mailers claim that salaries and benefits in Smith’s budget at the time increased by almost $300,000. Smith said the $300,000 reflected the salaries of the three transferred employees, “plus an expected increase in fringe benefit costs for all department employees.”

The mailer accuses Smith of creating a “pyramid scheme” to increase his own pay “from about $140,000 to $180,000.” Smith said the pyramid was a compensation program prepared at the mayor’s request “to provide guidance for establishing senior management salaries.”

He said, “There was never discussion with council of whether the newly established salary ranges would lead to pay increases or decreases for any specific individuals.”

Representatives with Scottsdale United have not returned calls. In an e-mail, Scottsdale United Chairman and attorney William Lally declined to weigh in on the group’s campaign strategy and did not comment on Smith’s rebuttal. He has said the committee supports candidates Linda Milhaven, Jennifer Petersen and Dennis Robbins.

Separate mailers paid for by Scottsdale Strong assert that “varied housing choices” improve Scottsdale’s economic vitality. The mailers include positive quotes about multifamily housing from incumbent candidates Milhaven and Robbins, as well as Petersen, Mayor Jim Lane and council members Virginia Korte and Suzanne Klapp. Quotes criticizing or questioning apartments and multifamily housing appear from Smith, Councilman Bob Littlefield and Vice Mayor Guy Phillips.

Other candidates in the Nov. 4 runoff for three seats are Kathy Littlefield and Cindy Hill.

On Oct. 3, Scottsdale resident Sandy Schenkat submitted a letter asking the city clerk and attorney to investigate the spending by Scottsdale Strong. She said such non-profit corporations are required to spend nearly an equal amount of money on social-welfare causes.

“Since its creation, the only ostensible activity of this organization has been to donate large sums of ‘dark money’ to its affiliate organization, Scottsdale United,” Schenkat wrote.

City Attorney Bruce Washburn said in a response that agencies other than the City Attorney’s Office have the authority to investigate and enforce the laws implicated in Schenkat’s inquiry.

A spokesman for the Arizona Secretary of State’s Office said last week that the office will not investigate.

Attorney Timothy La Sota, statutory agent for Scottsdale Strong, said the group is aware of the laws and in compliance.