SAN MARCOS, Texas (KXAN) — When the San Marcos city attorney’s office fired up its email the morning of Aug. 20, the office found a formal ethics complaint in the inbox. The complaint was sent from a San Marcos resident just 48 hours after our investigation into a city councilman’s connection to a grant program.
The city sent the complainant an email confirmation the morning of Aug. 20, telling the man the city is sending Councilman Scott Gregson and the city’s Ethics Review Commission a copy of the complaint.
San Marcos City Council will first have to decide whether to hire an attorney to handle the case for the city.
Council will take that decision up during its Sept. 4 meeting. From there, the ethics commission will decide whether an ethics violation happened related to Gregson and his business partner benefiting from $27,563 in city taxpayer-funded grants.
If the commission finds a violation in an ethics case, the city’s ethics ordinance shows the potential penalties range from a written warning up to suspension or removal from office for elected city officials. If the commission recommends a suspension or any level higher for elected officials, the City Council would have to decide whether to implement that sanction.
“Mr. Gregson has been compliant with the ethics statute in every respect. He did what he thought was right.”
Councilman Gregson did not agree to be interviewed for this report, and instead had his attorney respond. “Mr. Gregson’s on vacation. Mr. Gregson has been compliant with the ethics statute in every respect. He did what he thought was right,” Charles Soechting, Sr. said in a phone call.
The Grant Program
In April 2016, the San Marcos City Council voted to hand over tax dollars to businesses as part of the city’s Business Improvement and Growth program. The program, called BIG, provides businesses and the building’s owner a grant of up to $20,000 for money spent on renovations.
KXAN’s analysis of the BIG grant program shows the largest chunk of tax dollars went to properties owned by Gregson and his business partner Vance J. Elliott. Records provided by the city through an open records request show $27,563 for four separate grants connected to Gregson and Elliott.
In 2007, Gregson and Elliott formed East Hopkins, LLC. Gregson’s latest public financial filing shows he lists himself as a “Manager/Member” in the LLC, valuing his 50 percent share in the LLC at $1.9 million.
A KXAN review of each annual public disclosure filing of the LLC shows Gregson and Elliott have each maintained their ownership share in the East Hopkins corporation since its founding in 2007.
Hays County property records show East Hopkins, LLC owns multiple properties along East Hopkins Street.
City records show 107 E. Hopkins St. was given $20,000 in taxpayer-backed grants for permanent improvements made to the building, including a new fire sprinkler system.
Those addresses include 107 E. Hopkins St., which received $20,000 in taxpayer-funded grants in 2017.
City records show the application for the $20,000 was filed by Sam and Amy Ramirez, who rent the space from East Hopkins, LLC and operate Blue Dahlia Bistro there.
The grant money was used to add a new fire sprinkler system, awning and what the city calls “historic feature restoration.” Another $4,075 grant went to Buzz Mill, a business located at 194 South Guadalupe St., which is also owned by East Hopkins, LLC.
A fourth application in the records KXAN obtained shows a $3,488 grant went to help pay for new signs at Rita’s Parlour, a business located at 1504 Aquarena Springs Dr., a property owned by Aquarena Plaza, LLC. Texas Secretary of State records show Aquarena Plaza, LLC is registered to Elliott.
Potential Ethics Trouble
“It has the appearance of impropriety. It is not appropriate for a council member to be part of applying for a program for their own city. It’s the type of thing that causes the public to have mistrust in government and its programs,” Austin ethics law expert Fred Lewis told KXAN.
Lewis has spent decades exposing and suing Texas cities for not following the law. Council Member Gregson was one of six council members who voted to create the BIG grant program.
“Voting for the program is fine because everybody who is eligible can apply. Where the council member would get in trouble is if they tried to influence the process after he was already a recipient of the grants,” Lewis said.
KXAN found no evidence Gregson tried to influence the grants he and his business partners’ tenants applied for and received. Gregson has denied any involvement in city staffers’ decisions on approving the BIG program grant applications.
City council minutes show that five months after creating the BIG grant program, Councilman Gregson seconded the motion to approve the city’s budget that funded the program.
The problem for Gregson, according to Lewis, would come if Gregson voted on city budgets that funded the BIG grant program.
A review of council minutes for the 2016-2017 and 2017-2018 fiscal year budget votes show Gregson voted on both budgets and the minutes for those meetings, but do not show Gregson ever recused himself or provided any public disclosure regarding his tenants and his properties receiving grant payments.
“You can’t run a government where it appears to the public, where it appears the money is going not for public purposes, but to benefit council members, their businesses and their cronies. That’s what destroys public faith in government,” Lewis told KXAN investigator Jody Barr.
“The BIG Grant Program strives to increase sales and/or revenue for the property owner or tenant,” the city’s website shows as the mission of the program. Lewis argues that while Gregson and Elliott’s tenants applied for the grants, the property owners benefit because of the permanent upgrades made to the buildings.
“The bottom line is, a council member — once he’s a council member — needs not to be applying for discretionary grants from his own city,” Lewis said. “But, this is why the council member shouldn’t be applying because all it does is cause mistrust and demeans the integrity of the San Marcos city government.”
“I am comfortable I have not violated…”
Gregson joined the San Marcos City Council in November 2015 and is the city’s deputy mayor pro tem. Gregson told KXAN in a written statement two weeks ago that he does not plan on seeking a second term.
Gregson declined to participate in this investigation with an interview, but issued written statements to KXAN.
“I did not recuse myself from the Business, Improvement and Growth (BIG) program vote because I was not planning to apply.”
“I did not recuse myself from the Business, Improvement and Growth (BIG) program vote because I was not planning to apply. To date, I have not and have no intention of applying for matching funds under this program,” Gregson wrote in an Aug. 16 emailed statement. “I had nothing to do with submitting the application, completing the work, providing the dollars to draw down the matching funds, or the city manager’s approval of the application.”
When KXAN asked Lewis to review the public records related to this investigation, Lewis also reviewed the city of San Marcos’ ethics ordinance. Lewis pointed to a potential violation of the “Standards of Conduct” section related to Gregson’s participation in votes on the city budgets that funded the BIG grant program.
In response, Gregson said during the budget process he votes on ways to fund “roads, utilities, police and fire protection and infrastructure. Each of these are available to everyone in the community.”
He goes on to say that he recuses himself “at any time and to the extent I determine any program will create financial benefit to me or a financial partner.” In an email, Gregson adds, “I am comfortable that I have not violated the Section you have referenced.”
Gregson’s statement also mentioned the deadly July 20 San Marcos apartment fire to his tenant’s use of a 2017 taxpayer-backed grant to help purchase a $21,800 fire sprinkler for the Blue Dahlia Bistro.
“For one tenant, the application was for fire sprinklers. Given our recent tragedy, I am relieved they took these preventative measures,” Gregson wrote. “It’s clear election season is getting into gear and anti-small business activists are attacking an outgoing council member who is not running for re-election to attract attention. What’s not clear is why they would attack a program that helped a small business acquire fire sprinklers so soon after a deadly fire.”