Phoenix mayoral candidate Peggy Neely pledges to rein in the influence of developers at City Hall and to strengthen ethics in government — but some of her past actions as a public official don't conform with her new political message.
New Times Photo Illustration
Friends of Peggy Neely: The ex-councilwoman helped out Chicago developers John and Daniel Klutznick, who contributed substantially to her campaign.
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Especially the former councilwoman's dealings with CityNorth, a $1.8 billion mixed-use community in North Phoenix, and its Chicago-based developer, Thomas J. Klutznick Companies.
Neely was an early advocate for the nearly $100 million performance-based tax rebate deal the Klutznick firm got from the city in exchange for public parking spaces in a CityNorth garage. And her longtime political consultant, Chuck Coughlin, is the same man who was on the Klutznicks' payroll lobbying for the controversial tax incentive.
Court and city documents obtained by New Times, dated between 2006 and 2010, offer a behind-the-scenes look at how Neely pressured staff into helping the firm's owners — who contributed substantially to her campaign war chest.
The rare glimpse was made possible because of a lawsuit between two feuding developers.
Gray Development's Bruce Gray filed suit against Thomas J. Klutznick Companies in 2009, claiming (among other things) that the firm intentionally thwarted his efforts to build luxury apartments at Desert Ridge, another mixed-use development in North Phoenix that neighbors CityNorth.
As part of that legal action, attorneys deposed key figures — including Neely, her staff, city planners, and brothers John and Daniel Klutznick. They also subpoenaed internal e-mails and reams of other documents.
The crux of the case is that, as master developers at Desert Ridge, the Klutznicks had control over the projects that took root in that 5,700-acre complex, which features living spaces, shopping, dining, and entertainment.
The Klutznick brothers also were developers of neighboring CityNorth, and they had plans of their own to incorporate posh homes in their development. In an attempt to block the potential competition from Gray, the brothers wouldn't grant approval for his project.
And the Klutznicks worked with then-Councilwoman Neely to frustrate Gray's attempt to get city approval for his project and its 1,162 residential units. The Klutznicks wanted to cap his project at 882 units.
"Someone had to stand up for the residents," Neely tells New Times, in an attempt to explain her opposition to Gray's project. "We worked with Gray Development to find a way to make sure the neighborhood was protected."
She refers to concerns of some Desert Ridge residents about an increase in traffic that the additional 280 units would generate.
In July 2010, a jury sided with Gray and awarded him a $110 million judgment.
But before that landmark award, as Gray's proposal moved through the city's planning process, Neely kept the Klutznicks apprised of his movements within City Hall.
Depositions from Neely and her assistants reveal that they used their personal e-mail addresses to forward internal e-mails regarding Gray to the Klutznicks — a surefire way to keep the exchanges out of public view.
In her deposition, Neely claimed that using the city's e-mail system outside of City Hall was "cumbersome" and that such e-mails were "next to impossible to send."
But Neely's then-assistant, Sarah Dobbins, forwarded e-mails that Neely wanted her to send to the Klutznicks first from her city account to her personal Yahoo! account and then to the Klutznicks.
Despite Neely's calls for transparency in city government, the way she and her staff operated almost guaranteed that the e-mails would not be discovered during a public-records request. But it couldn't shield them from a court-ordered subpoena, which is how the e-mails eventually got discovered.
As they used private e-mail accounts, Neely's staff members were instructed to employ a special code to alert Neely that she had mail waiting for her.
The Arizona Republic reported on that system in 2007, noting that "the protocol tells staff members that after forwarding messages to her personal AOL account, they should send a subsequent message to peggy.neely@phoenix.gov with the code phrase 'just touching base. see ss.' That told Neely to check the AOL account."
In Dobbins' 2009 deposition, she confirmed that was how business was being done.
When Gray requested information from the city Planning Department, Neely forwarded an e-mail to John Klutznick that she received from the director of the city's Development Services Department. When Neely wrote a memo to a deputy city manager asking him to revisit development fees that the Klutznicks were expected to pay, she passed that along to the developer. When Gray hired a public-relations firm, she also fired off an e-mail giving the Klutznicks a heads-up.
Her involvement didn't end there.
Before Gray's proposal went before the Phoenix Planning Commission on April 5, 2006, Gray and the commissioners asked for an opinion from the city attorney on whether Gray had a legal right to develop the 1,162 housing units he requested.
Apparently, Gray did have a legal right to build the units, the city attorney decided, but his opinion never was made public.
On March 31, 2006, Daniel Klutznick wrote in an e-mail that he "spoke with the councilwoman's office and . . . confirmed that the city attorney will not be putting forth an opinion on the approval process, as requested by Gray at the last meeting."
When the case between Gray and the Klutznicks went to trial, Daniel Klutznick's testimony reveals that Neely told him the opinion wouldn't be public.
