Sherman’s Family Owns 33 Rental Units in or Near Ocean Beach
By Frank Gormlie / OB Rag
There’s just something sketchy going on about San Diego Councilman Scott Sherman, the allegations that he has a conflict of interest in decisions concerning regulations for short-term vacation rentals (STVRs), and the lack of any genuine investigation by the San Diego Ethics Commission.
And the issue whether Sherman should recuse himself from any decisions about STVRs just won’t go away. Plus there are allegations he or his family own lots of rentals in Ocean Beach.
Okay, let’s take it from the top.
We all know that the City Council has not been able to pass any regulations about the short term rentals – and they have become one of the most contentious issues within San Diego, and particularly at the coast where they’ve had the most negative impact. OBceans know what has happened these last few years. This council inaction has been going on for three years, even though the most recent December “inaction” prevented the enactment of regulations that could have been devastating at the beach.
Now the issue is in Mayor Kevin Faulconer’s office and he is expected to deliver some kind of compromise if he finds the votes of five councilmembers.
Meanwhile, despite the City Attorney’s opinion these rentals are illegal in residential neighborhoods, Airbnb and other short-term rental companies have just been making hay of the situation, and making lots of money (San Diego is one of the top cities for Airbnb profits) and continue to inflict damage in working class and middle class beach communities. They eat up valuable housing stock in the middle of a housing crisis, drive up permanent rents, and destroy neighborhoods.
What’s all this got to do with Scott Sherman?
Well, first of all, don’t forget Sherman was one of four councilmen who came up with the most permissive STVR regulations being considered. (It was this proposal that fell apart in December when Councilman David Alvarez had a change of heart.)
Plus, inewsource researched County property records and found:
… the councilman’s father, George Sherman, his trust or one of his companies own nine residential parcels in the city of San Diego, including apartment complexes and the house where he lives.
The three apartment buildings Sherman’s father has an interest in have 33 rental units. All are in or near Ocean Beach, a prime neighborhood for short-term rentals. (My emphasis.)
So, Sherman’s dad, George, George’s trust or companies own three apartment buildings in or near OB with a total of 33 rental units. Do you think any of them could be short-term rentals? The independent news source couldn’t find any of the Sherman properties in “a recent Airbnb search” however. How about other rental companies? How about a study of Airbnb over a period of time?
For the record, Scott Sherman himself only owns his Allied Gardens residence.
But the questions persist. Our own Blake Herrschaft, chairman of the Ocean Beach Planning Board, was interviewed by inewsource about the potential conflict of interest Sherman has. Blake iterated that the conflict comes from the councilman’s own father owning all that property at the beach, that – hey guess what – could increase in value if short-term rentals are legalized and flood OB and other coastal areas. Scott Sherman could inherit all those properties – as he and his father have been business partners, Herrschaft emphasized.
“I would certainly recuse myself from any kind of policy recommendations which would directly increase the value of our family’s assets. At a bare minimum, I expect full disclosure of a fact like that.”
What does Sherman, the son, say? Would you be surprised if he denied that the father has any short-term vacation rentals? Of course not. And he is not involved in the business of Sherman, the father.
So, what about an investigation? Has there been one?
At the end of last year, San Diego’s Ethics Commission began receiving complaints about Sherman having a conflict of interest. More recently, California’s Fair Political Practices Commission has also been receiving complaints of Sherman of violating California’s conflict of interest law.
For background, the Ethics Commission, formed in 2001 for the purpose of monitoring, administering, and enforcing the City’s governmental ethics laws, is composed of seven members all appointed by the Mayor.
Stacey Fulhorst is the head of the San Diego Ethics Commission, it’s executive director – been there since 2003 and as such works at the pleasure of the Mayor. The first complaint about Sherman came to her agency on December 6, 2017. The very next day, December 7th, Fulhorst sent a letter to Sherman informing him her office had received a complaint with allegations he had violated the city’s Ethics Ordinance by taking part in decisions concerning short-term vacation rentals.
But at the end of that letter, Fulhorst completely exonerates Sherman by telling him whoever complained didn’t provide any evidence, was just speculating and her office doesn’t have “jurisdiction over complaints based on speculation.”
Fulhorst did not do any investigation.
And neither did the state’s Fair Political Practices Commission’s enforcement division – because of “insufficient evidence of a violation.”
Part of their problem is connecting Sherman, the son, business-wise, to Sherman, the father. Even though Scott worked for his father for years, supposedly any business link ended in June 2016. (How long has the council been considering STVRs?)
For years, Scott Sherman worked for and partially owned an insurance company started by his father.
Sherman told KPBS in 2015 he started working at his father’s company, 5th Avenue Insurance, as an independent contractor. He was making more than $100,000 as an insurance agent and owned at least $100,000 in 5th Avenue Insurance stock, according to his publicly filed economic interest disclosure statements.
Then, in June 2016, a local insurance company purchased 5th Avenue Insurance, ending Sherman’s only business connection with his father. Sherman is still an agent for the company that purchased 5th Avenue Insurance.
But the questions persist. Scott could inherit it all – things could change tomorrow.
The group Save San Diego Neighborhoods (SSDN), one of the most persistent organized oppositions to short-term rentals, sees the situation differently. Quite differently.
They believe a cover-up is going on, a concerted effort to hide a dishonest, immoral, or illegal act.
They’ve been urging their supporters to contact Sherman, the mayor, and City Attorney Mara Elliott about Sherman’s conflict of interest. And since early December at least, Sherman, Faulconer, and Elliott respond by pointing to Fulhorst’s Ethics Commission letter to Sherman on December 7th clearing him.
Yet, SSDN is suspicious. The big City Council showdown on STVRs was set for December 12 – this was the day the rentals were to be legalized with 5 council votes. Fulhorst received the complaint alleging Sherman’s conflict of interest on December 6th. And of course, Sherman was a key vote. In perhaps one of the most speedy bureaucratic decisions ever made, Fulhorst takes only 24 hours to make a determination that Sherman is innocent of the complaints.
Here’s how SSDN sees it, on their social media:
… the City Council hearing on the proposed ordinance to legalize short-term vacation rentals was scheduled for December 12, 2017, only four (4) business days from the date of the complaint. If Councilmember Sherman was going to participate in the hearing, Ms. Fulhorst would have to act quickly. She did.
Within 24 hours she read and considered the complaint, drafted the letter and hand delivered it to Councilmember Sherman.
“In light of the foregoing, I have determined that the complaint does not contain sufficient information to support the allegation that you violated the City’s ethics laws. As a result, I have concluded that the allegations in the complaint do not warrant a formal investigation, and that this matter is not appropriate for consideration by the Commission.”
… Without consulting the seven Commissioners, Ms. Fulhorst concluded the complaint did not contain sufficient information to “warrant a formal investigation”.
Now, this is sketchy. And SSDN believes “Scott Sherman has not been cleared of violating the City’s ethics laws, by anyone.”
There is another issue that is involved in finding violations of the Ethics Ordinance regarding the so-called the “public generally” exception. San Diego Municipal Section 27.3561(b) states, in part,
“A City Official has a disqualifying financial interest if that municipal decision will have a reasonably foreseeable material financial effect, distinguishable from the effect of the public generally . . .”
A public official has “a disqualifying financial interest” for a city vote if he or she can specifically benefit financially – other than the benefits the general public receives from the vote. If Scott’s dad has 33 rentals at the beach while his son is making vacation rentals legal, do you think Scott will have some other “foreseeable” benefit that the rest of us don’t get”
So, where does this all leave us?
Scott will still likely be voting on decisions about STVRs that could benefit his family economically.
If we look at his past actions, it seems like he’s always working overtime to increasing property value for landowners (like his family). He coveted and grabbed the position of chair of the Smart Growth Land Use committee – which controls land use ordinances for the city council. He was so bitterly upset recently when he lost that chairmanship. Sherman has also been a strong proponent of increased density/ upzoning – which increases property value. He’s been big on recommending redevelopment – increasing value of underdeveloped parcels.
On top of all this obsession with property values, he proposed one of the most relaxed regulations for short-term rentals on the books.
It’s time Scott Sherman took the high road, took the ethical road, and provide transparency and give us confidence in government. Sherman needs to recuse himself from short-term vacation rental decisions.