Is Aberdeen Mayor Courting Conflict of Interest in Tesla Deal?

January 7, 2017 by Eowyn 5 Comments

He was young. Ambitious. Gifted. One of the greatest players to ever set foot on a professional baseball diamond, “Shoeless” Joe Jackson’s career ended in tatters for his alleged role in the infamous Chicago “Black Sox scandal” of 1919.

Call it a “conflict of interest.” It involved money. Lots of it.

Something else that involves money – lots of it – is afoot in Aberdeen: A Tesla supercharging station for electric vehicles and a “Gateway Center.” Aberdeen Mayor Erik Larson is a staunch proponent of both. The Tesla station is on a city-owned lot. Mayor Larson is making the rounds looking for funding to help cover the costs of Gateway Center construction. It could cost upwards of $8M to complete. The supercharger station will be incorporated into the design of the Gateway Center.

Questions are swirling around what appears to be a conflict of interest regarding the mayor’s involvement in the Tesla deal. Documents have surfaced showing that the mayor has or had a financial interest in the motor company that’s building the station, apparently while he was negotiating with the company to bring the project to a city-owned lot. Why the station is being built on publicly owned land rather than on a private site is also in question.

Background

Mayor Larson negotiated the original agreement with Tesla for the charging station, which could have cost the city up to $2,000 a month in utility bills. The lease agreement came before the Aberdeen City Council for approval last summer. Originally, the City of Aberdeen was on the hook for paying  electricity costs. As noted in the Aberdeen City Council meeting agenda dated July 13, 2016, the lease language at that time included (see page three):

“The Mayor has negotiated with Tesla Motors, Inc. for the construction of a Tesla supercharger station in Aberdeen on the city of the former Chevron station. The supercharger will be incorporated into the design of the Gateway Center. …  the city will also be responsible for… paying the utility bills for Tesla vehicles that use the charging station, up to monthly cap of $2,000 per month.” (Emphasis added.)

Reading further, Item 8 of that actual lease agreement specifies that:

“Tesla agrees to arrange for all Tesla-related utility services provided or used in or at the Premises… Tesla shall pay directly to the utility company the cost of installation of any all such Tesla-related utility services and shall arrange to have the utility service separately metered. (Counterparty) shall be responsible for paying all utility bills related to such meter after installation, including payment for electricity consumed at the Premises during the Term, up to two thousand dollars ($2,000) per month.” (Emphasis added.)

Aberdeen City Council Agenda -_07.13.16

Other Cities, Other Charging Stations

Tesla lease agreements with city governments aren’t new. Similar charging stations exist in five other Washington cities: Centralia, Burlington, Ellensburg, Kennewick, and Ritzville. There are eleven supercharger stations in Oregon. All are located on either hotel/resort type private property or some other type of retail/outlet center. But the Aberdeen location is on a city-owned lot.

WA Charging Stations

In California, two supercharging stations on publicly owned property exist in Ukiah and Crescent City. But the terms negotiated by those cities for the stations are jarringly different from those negotiated for the Aberdeen site:

In Ukiah:

– “Tesla pays for the entire project, including staff time and utility costs.” (Ukiah Daily Journal, August 8, 2015.)

In Crescent City:

• The city is being paid by the tenant for use of its property. A proposal by Recargo, Inc. to build and operate a universal electric vehicle charging station in Crescent City included a $4,800 annual payment from Recargo to the district for use of the property. (Del Norte Triplicate, October 11, 2016.)
• “Essential components” of the city’s lease agreement with Tesla includes: “(1) the term, which is five years with two five-year options to renew, (2) Tesla will build and maintain the facility, and (3) the lease amount is one dollar per month.” (City of Crescent City Council Agenda Report, April 6, 2015.)
• Tenant “agrees to arrange for and pay for all Tenant-related utility services provided or used in or at the Premises during the term of the Lease.” (#10 – Utilities – City of Crescent City Ground Lease for Tesla Supercharging Station, April 6, 2015.)
• “Tenant shall pay directly to the utility company the cost of installation of any and all such Tenant-related utility services and shall arrange to have the utility service separately metered.” (#10, Utilities – City of Crescent City Ground Lease for Tesla Supercharging Station, April 6, 2015.)

Crescent City-Agreement – 04.06.15

In Aberdeen:

• The city (re: taxpayers) could get stuck with “up to 30,000 for the costs of installing the new infrastructure for the city” per the re-negotiated August agreement.

Key items in the re-negotiated agreement between the city and Tesla include (Aberdeen City Council Meeting Agenda, August 24, 2016. See page 3):

• The provision requiring the city to pay for electricity used by Tesla vehicles was removed.
• The proposed new lease requires Tesla to pay for all costs of charging Tesla vehicles.
• The lease also requires Tesla to install infrastructure “that would allow the city to add charging stations for other electric vehicles at some point in the future.”
• The city “will reimburse Tesla up to $30,000 for the costs of installing the new infrastructure for the city.” (Emphasis added.)

Aberdeen City Council Agenda – 08.24.16

According to the Minutes from the August 24, 2016 Aberdeen City Council Meeting, a motion to adopt the re-negotiated lease agreement carried.

Aberdeen City Council Minutes – 08.24.16

An interesting wrinkle, as reported by the Los Angeles Times on November 7, 2016, is that Tesla “has decided to stop offering unlimited free use of its 734 fast-charging stations worldwide.”

So, other than hopes of helping “attract potential tenants to the center as the first project participant” and providing “nearby restaurants and retailers with additional business” per Mayor Larson, just how, exactly, does the supercharging station tangibly benefit Aberdeen taxpayers or offset “up to $30,000” in reimbursements to Tesla “for the costs of installing the new infrastructure for the city”?

The Daily World reports that “A $30,000 grant will help Aberdeen reimburse Tesla for installing the station.” (Emphasis added.) In light of the agreements hammered out with other cities for charging stations on public land, however, why is Aberdeen on the hook for reimbursing Tesla for any installation costs?

Another wrinkle: According to an October 28, 2016 story in The Daily World, five Aberdeen sites were in the running as possible locations for the new supercharger station, including the parking area for the Center. Larson explains:

“They (Tesla) could have easily worked with Gateway Mall or sought out private ownership, but they were interested in the Gateway Center parking lot.”

Why was a publicly owned site selected instead of a privately owned one? Is city government using public funds to compete with private business?

Additional questions swirl around Mayor Larson’s financial interest in Tesla Motor Company:

PDC – Larson, Erik – 2015-2016

Some questions:

1. Did Mayor Larson disclose his financial interest/common stock in Tesla Motor Company anywhere other than on his 2015 and 2016 PDC F-1 forms?
2. As a candidate, Mayor Larson reported his stock value as $4.5K – $23.9K. After he was elected, he reported the value as $24K – 47.9K. What’s up with that?
3. The mayor apparently handled all negotiations with Tesla, even though he had/has a financial interest in the motor company (See PDC F-1 forms, above). Did the city know about his financial interest in this company? If so, did it okay the mayor as negotiator of the Tesla lease agreement anyway? Why?

Perhaps a contract negotiator sans an apparent financial interest in the project under negotiation might be a good idea?

While we’re raising questions, what of Shoeless Joe? After the Black Sox scandal, Jackson never set foot on a professional baseball diamond again. He was banned for life along with seven other Chicago players for their alleged involvement in intentionally throwing the 1919 World Series to the Cincinnati Reds. Jackson’s alleged involvement in the conspiracy is still the subject of hot debate. Some maintain that the only things Joe was guilty of were being young, ambitious, gifted, and a bit naive.

Ring any bells?