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Path of Progress

Mark Langer
Robert Scheer

See No Evil: Santa Cruz Auto Body owner Mark Langer (seen here with son Brandon) says he was not notified of relocation rights and benefits when developer Jay deBenedetti needed the land where his shop sat.

Tenants in the path of Jay deBenedetti's Gateway Plaza wonder if the developer is getting the gold mine while they get the shaft

By Kelly Luker

TO MAKE THE River Street shopping center that will eventually be known as Gateway Plaza a reality, developer Jay deBenedetti needed to do something about the businesses that occupied the 10 acres on the corner of Highway 1 and River Street.

Part of the solution was provided by the Santa Cruz Redevelopment Agency, which deemed the area blighted, thereby subjecting existing landowners to eviction under eminent domain laws. Although that may sound faintly Orwellian, it's a time-honored tradition in cities and counties throughout the nation. There are stacks of state and federal laws designed to protect the rights of property owners and tenants by providing financial compensation to those who bear the hardship of being relocated due to the pursuit of economic progress. But those rights don't do folks much good if they're kept a secret.

The biggest chunk of property needed by deBenedetti belonged to Charles "Chuck" Scherer, whose tenants included Santa Cruz Auto Body, Santa Cruz Truck and Tractor Repair, Reber Construction and American Leisure. With eminent domain breathing down his neck, Scherer saw the wisdom of entering into an Owner Participant Agreement--or partnership--with deBenedetti in developing Gateway Plaza.

RDA gave deBenedetti and Scherer the responsibility of informing Scherer's tenants of their relocation rights and benefits--the cost of which would be borne by Scherer and deBenedetti.

Of the four tenants, three say that relocation rights and benefits were never explained to them. Owners of the fourth business, S.C. Truck and Tractor, would not comment for this article.

DeBenedetti says he had an "understanding" with Chuck Scherer that the tenants would go "peaceably." Apparently, says Redevelopment Agency Executive Director Ceil Cirillo, Scherer did not understand that even tenants who rent month-to-month were entitled to relocation benefits.

His tenants, some of whom have been there for 20 years, say they had a close relationship with Scherer and his family. As Reber Construction co-owner Margie Reber says, "We all had respect for the Scherers." But Chuck Scherer died unexpectedly on Jan. 20.

Soon after, deBenedetti offered sums ranging from $10,000 to $20,000 while demanding that the businesses sign a waiver of their relocation rights and benefits. None would sign. On March 19, the four businesses found an eviction notice tacked to their front door, giving them five days to vacate.

Reid Schantz, an attorney who was retained by S.C. Auto Body, American Leisure and Reber Construction, says this isn't enough.

"Whenever there is a taking of property due to eminent domain, the person is entitled to just compensation. If that [amount deBenedetti offered] is one-tenth, I'd be surprised," Schantz says.

The RDA has copies of letters dated Nov. 18 notifying three of the businesses that they may be eligible for relocation assistance. American Leisure owner Frederick Freiberg does not remember seeing it, nor does S.C. Auto Body owner Mark Langer, who says he first saw the letter when the RDA faxed him a copy in late February.

"If I had gotten it, it would have made life easier," Langer says.

The Rebers, who were operating their business without a use permit, waived their rights to relocation benefits at an October zoning board meeting.

"We were under the impression we would have a year [to vacate], but it was months," Margie Reber says.

Wolves Guarding the Henhouse?

CEIL CIRILLO says that transferring the responsibility of notifying tenants about their relocation rights and benefits from the redevelopment agency to the developer is a "not uncommon" arrangement. Kevin Mukri, director of communications for the California Redevelopment Association, would not comment on how common this arrangement is, but says, "Redevelopment law allows far more flexibility to the RDA than to the city in negotiations with the developer."

"The developer said he would pay for relocation," Cirillo recalls. "I assumed the developer was working with the tenants on relocation." Asked if she or her office followed up, Cirillo declined comment on the advice of city counsel.

Attempts to get deBenedetti's side of the story were difficult at best.

"All reporters want is sensationalism," the developer said in a telephone interview. When asked to clarify certain points, deBenedetti responded with, "How many times do I have to say this?" or "What did I just say?" or "Read my statement."

When angry tenants brought in attorneys, RDA took over responsibility of relocation costs. Unfortunately, they were a bit short of funds, so the city has agreed to borrow an additional $260,000 from deBenedetti--at 9.5 percent interest.

"Redevelopment had their foot in both worlds," attorney Schantz says. "They played with the idea of giving benefits, but actually never did." His criticism of deBenedetti's conduct is even harsher. "I've never seen a developer come in and treat people so poorly. He put this waiver under their noses before he ever explained what relocation benefits are."

DeBenedetti responds tersely to Schantz's accusations: "Self-serving. Completely self-serving, and besides, he wasn't there."

Another property that has been a bone of contention is that of Irma Hanset, a 75-year-old widow. Hanset, who says the developer offered to buy the property in 1989 and then again in 1994, did not want to sell.

Her attorney, Dennis Kehoe, questions the wisdom of the City Council wearing two hats--theirs and the Redevelopment Agency's. As is common in many smaller cities, the governing board of the RDA is entirely made up of all the members of the council. When asked why the same people fill both positions, Mayor Cynthia Matthews replies, "So the two agencies can work in the same direction."

Kehoe says there's a built-in conflict of interest.

"The boards are identical; therefore, there can be no independent decision by the directors of the RDA whether the public interest requires the taking of the Hanset property."

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From the April 17-23, 1997 issue of Metro Santa Cruz

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