City manager’s move still ongoing

It’s not often that municipal employees go out of their way to publicize their salaries. So when Newport Beach City Manager Dave Kiff wrote an open letter Aug. 4 explaining what he and the City Council earn, Daily Pilot editors were happy to publish it.

Curious residents now understood more about their public servants’ compensation in the wake of the Bell salary scandal. And as some of those residents surely did, the Pilot also clicked the links in the letter and examined the budgets to confirm the figures.

All the numbers appeared to check out. But one incentive in Kiff’s letter didn’t have a dollar amount next to it — his home.

In follow-up interviews, Kiff and other city officials provided the details.

Based on the city’s agreement with Kiff, Newport Beach paid $471,250 in September 2009 to help Kiff move within the city limits. While experts say it’s likely a safe investment — Kiff has to pay the city if he sells the home or if he and the city part ways — the outlay came at a time of tight economic times.

Less than one month after the sale closed on the house, Kiff announced that the city faced an $8-million budget deficit.

Essentially, the city paid for about half of Kiff’s $935,000 home near the west bluff of the Upper Newport Bay. He has lived in Laguna Beach for more than 14 years, and once he was promoted to city manager, the City Council wanted him to move to Newport.

“If I had had my druthers, I wouldn’t have had to move,” Kiff said in an interview. “But I didn’t want to be the first city manager who didn’t move to Newport Beach.”

The city charter stipulates that the city manager has to live in town. But California law says municipalities cannot force employees to live within their city boundaries, so the city couldn’t legally enforce the rule. This fall Newport voters will decide on a measure to amend the charter to reflect the current law.

In the meantime, council members wanted their manager nearby. They were willing to pay for it.

“I think it’s important to be part of the fabric of the community,” said Mayor Keith Curry, “and you don’t get that as a commuter.”

Councilman Mike Henn said he thought it important for Kiff to be “fully immersed in the culture” and “issues” of Newport Beach.

Kiff had been assistant city manager for 11 years prior to his promotion in September 2009.

When he negotiated for his compensation, the council asked what he could afford to pay for a new home, he said. Council members offered to pay up to $550,000. Kiff and his partner agreed to look for a home and to try to move within a year.

They found a one-story house on a tree-lined street, off of Irvine Avenue. Built in 1954, the home had been “completely rebuilt,” according to Zillow.com, an online real estate site.

Still, Kiff’s partner wanted to remodel because he saw an opportunity to improve it and enjoyed such projects, Kiff said.

Since then, they have been overhauling parts of the home and are about 80% complete. They have fulfilled their obligation to “use best efforts” to move within the year as his contract stipulates, he says, and plan to move as soon as it’s ready.

“I know I’ve played by the rules and tried to do the right thing,” Kiff said.

Kiff will be able to recoup all the money he spent to remodel the home, when and if the home is sold. At that time, he also has to give the city 50.4% of the property’s value, less the improvement costs, whether the home appreciated or depreciated.

Hypothetically, the city could lose money on the deal, but since Kiff purchased the home when the market was down, that is unlikely, said Walter Hahn, an Orange County real estate consultant.

“If they hold on to it for a few years, they’re going to make money,” Hahn said. “I think the city’s going to make out.”

The money came from the city’s reserves, not the operating budget, Curry said.

“It’s not like it’s being spent,” he said. “We have basically invested in a piece of Newport Beach real estate and will enjoy the upside of that investment.”

One other hypothetical risk for the city — albeit an unlikely one, according to several in town — is if Kiff falls behind on his payments. He has a first mortgage with Bank of America, property records show, and the city holds a second deed of trust on the home.

If he were to default on the bank loan, the city has some options to avoid losing cash in a foreclosure sale, city attorney David Hunt said.

City Hall could purchase and sell the home to recoup its share, or it could go after Kiff for the amount, Hunt supposed.

Considering the risk posed by the real estate market, the council thought it was still important enough to get Kiff to live in the city. It would honor the “spirit of the charter,” Henn said.

“In light of everything that’s going on in Bell, it’s a reasonable investment to make,” he added.