P.G. mishandled Project Bella hotel development and lost $100,000, grand jury says.

Pacific Grove officials made a $100,000 mistake in their handling of the failed luxury hotel development known as Project Bella, according to the Monterey County Civil Grand Jury.

That’s the Cliff’s Notes version of the jury’s report released June 12, which details the results of a months-long investigation into events surrounding the controversial proposed 160-room hotel to replace the American Tin Cannery outlets. The investigation was prompted by an unnamed citizen’s complaint.

“Inspired by the prospect of significant revenue for the city, Project Bella was pursued without due diligence,” the report’s summary states.

The siren call of transient occupancy tax revenue and upscale tourists pumping cash into the town’s economy was behind the city’s big push to convince voters in April 2016 to approve a zoning change that would make way for the hotel.

Measure X was approved by 59 percent of P.G. voters, and the grand jury said it was the only positive result of whole Project Bella episode in the city’s history.

The 18-page report, supported by 29 pages of documents, paints an unflattering portrait of a small town city staff unprepared to handle a large, complex project, as well as of City Manager Ben Harvey, who was chastised for poor judgement in entering into a group membership for private air charter travel with two of the developers.

Mistakes were made even before the special election, the report states, as the city failed to collect a deposit from developer Domaine Pacific Grove, which had promised to reimburse the city for the cost of the special election.

After the election the city delved into preliminary permitting work without collecting additional deposits from Domaine, and wrote and re-wrote contracts many times, some of which were never signed.

“As a result, there never was a legal ‘Project Bella,'” the jurors assert. “Unfortunately, the lack of careful preparation proved fatal, and the project stalled and failed, resulting in a loss of more than $100,000 to the city.”

P.G. officials had no system in place to keep track of various versions of contracts between the city and Domaine, nor a way to determine the cost of staff time.

The jury also knocked the city for a lack of transparency, responding slowly to questions from citizens and media, sometimes giving incomplete answers.

Some of the most scathing parts of the report focused on the bungled reimbursement agreements and the determination that the city lost money, which became the subject of intense public debate in 2017.

On Feb. 1, 2017, the City Council admitted mistakes were made in the handling of the reimbursement agreements, but said there was no way to find out exactly what happened and how much money—if any—Domaine owed the city. It voted to drop all efforts to recoup monies from the developer.

Three months later two residents, Jane Haines and Mary Flaig, requested the city formally investigate the matter, after spending hours pouring over city documents. (The two say they did not complain to the Civil Grand Jury.)

Based on their complaints, the council hired an outside law firm to conduct an independent investigation. An investigator from San Francisco-based law firm Jackson Lewis chalked it up to human error, and stated there was no basis for collecting more money from Domaine. The City Council took no action.

The grand jury’s opinion sharply contrasts that Jackson Lewis' findings.

The jury’s opinion was that the many versions of reimbursement agreements and the one ultimately signed in June 2016 were not valid. The final agreement was never approved by the City Council and was not signed by all parties.

Based on the grand jury’s accounting of the project, the total cost of Project Bella was $249,815, and with the $31,575 cost of the investigation, minus the $179,987 Domaine reimbursed, the cost to the city was “at least” $101,402.

The report also takes to task City Manager Ben Harvey for entering into a group membership into a private airline with his friend and a sub-contractor of Domaine, Jared Ficker. Domaine’s President and CEO Ronald Meer was also part of the membership.

The city reimbursed Harvey for a $1,000 initiation fee, as well as other travel expenses related to him flying to Southern California on weekends to visit his children.

Harvey told the grand jury he paid for his monthly membership out of his own funds. When asked why he received several months free, he said he complained to the company about problems with the service, and did not have to pay for those months, according to documents attached to the report.

In the grand jury’s opinion, Tthe decision to join this air service showed a remarkable lack of sensitivity to ethical standards expected of all members of public employment.”

The acceptance of several months of free flights could be perceived as an effort to indirectly influence Harvey’s treatment of Project Bella, the grand jury found.

“Further, in the jury’s opinion, the appearance of a conflict of interest because of his friendship with Jared Ficker and his shared flights with Ronald Meer would have prevented a prudent man from joining this travel group.”

The grand jury recommended that P.G. officials hold “lessons learned” sessions with a facilitator experienced in municipal operations.

Jurors also suggested the city put an end to Harvey’s travel reimbursements for personal trips to Southern California.

Other recommendations include developing tracking procedures for documents and employee time and improving transparency in communication with citizens.

As is standard procedure for the Monterey County Civil Grand Jury, which does not have enforcement powers, they've requested written responses from the Pacific Grove City Council and Harvey to many of the findings and recommendations.

Harvey says by email that the City Council has directed that the grand jury's findings and recommendations be referred back to the independent investigator to determine whether they provide a basis to modify the investigator’s own findings last year.

“Until the response of the city’s special counsel is received, there is no basis for further comment,” he writes.

Haines and Flaig also respond by email with a joint statement, saying they believe they reached the same conclusions as the grand jury.

They criticized the independent investigator for being “studiously incurious about key issues” of the matter.

“Hopefully, one of the lessons learned is to use greater scrutiny in selection of the person hired to investigate citizens’ concerns,” they write.