Closure of Riato Airport – The Real Story

Miller helped free land for a business partner
By Susan Crabtree – 03/29/06 07:00 PM ET

Rep. Gary Miller (R-Calif.) pushed for a provision in last year’s transportation bill that allowed the city of Rialto, Calif., to shut down its airport. By doing so, he paved the way for his business partner, Lewis Operating Corp., one of his top campaign contributors, to buy the land from the city and make plans to build Renaissance, a community consisting of 2,500 homes, parks and 80 acres of retail space on the former airport property and adjacent land.

Normally, the Federal Aviation Administration (FAA) has sole authority to close airports. “This is the first time … an airport has been closed through the legislative process,” said FAA spokesman Hank Price. “We follow Congress’s direction.” Miller’s relationship with Lewis Operating and its president of Southern California operations, Richard Lewis, dates back more than three decades, to Miller’s years as a developer of planned communities. He founded G. Miller Development Co. in his early 20s, and he and Lewis were competitors, Miller said.

Miller, 57, went on to be elected to the Diamond Bar City Council, the mayor’s office, the California Assembly and Congress, beating scandal-scarred Republican Rep. Jay Kim in 1998. Just months earlier, Kim and his wife had pleaded guilty to accepting and concealing $230,000 in illegal campaign contributions.
Miller said he prides himself on his efforts to disclose his campaign contributions fully. He said he sees nothing wrong with his work to close Rialto’s airport, even though it freed land that his business partner wanted to develop.

“I’ve known Richard Lewis for 30 years,” he said. “Richard’s son and my daughter went to high school together. If knowing somebody is bad, I guess that’s bad.”
Miller denied that his actions created a conflict of interest. “There was no quid pro quo,” he said.

But Theis Finlev, a policy advocate for Common Cause, argues that members of Congress must go out of their way to avoid using their offices to benefit private business partners directly, especially if they also are major campaign contributors.
“Even if it’s legal, it’s horribly unseemly,” Finlev said about Miller’s work to shut down the airport. “It’s not something that inspires confidence in the political process, and should not happen.”

This election cycle, employees of Lewis Operating including Richard Lewis and several Lewis family members have donated a combined $8,100 to Miller’s campaign, according to the Center for Responsive Politics, making the company his top contributor.

Employees of Lewis Operating and members of the Lewis family have donated $19,300 to Miller’s campaign committee since 1998.
Lewis Operating is also a member of the National Association of Home Builders, Miller’s No. 1 contributor since he was elected. The group has donated $44,000 to Miller’s campaign committee since 1998.

Rialto tried for years to close the airport, arguing that it was underused and losing money.
In August 2004, the City Council passed an amendment giving the city the exclusive right to negotiate with Lewis and its partner, Hillwood Development Corp., to purchase and develop the airport land if it should become available. The council approved the prospective sale eight months later.

But finalizing that transaction would have to wait until the city could find a way to close the airport, and the transportation bill provided it last year.
The price tag for the 450 acres of airport land will likely be tens of millions of dollars, but the purchase is still in the appraisal stage, according to Rob Steel, Rialto’s redevelopment director.

“We have entered into contracts of sale with Lewis-Hillwood Rialto,” Steel confirmed.
When it is sold, it will be at fair market value, which the appraiser will determine, a requirement that Miller included in his version of the provision and was in the final bill.

Lewis and Hillwood, founded and chaired by Ross Perot Jr., formed Lewis-Hillwood Rialto LLC when they became interested in the project. There is no way to know how much money the two companies would make on the deal. Lewis Operating and Hillwood officials declined to comment for the story.
Rialto is not in Miller’s district but in that of nearby Rep. Joe Baca (D-Calif.). Miller said Baca backed his efforts to shut down the airport. Baca did not respond to requests for comment.

Other development companies besides Lewis-Hillwood tried to offer bids for the development but were told by a Rialto City Council member that Hillwood’s strong ties to Washington could help the city find a way to shut down the airport. The company was already working with the FAA on developing San Bernardino airport 8.5 miles to the east, and the city thought that relationship could help influence the FAA’s decision.

According to minutes from Aug. 9, 2004, City Councilman Joseph Sampson reminded other members that “based upon knowledge of Hillwood Corp. they do have extremely close ties in Washington, which provides them with inroads on what a final outcome may be in regards to how they might treat the airport.”

But the FAA did not support closing Rialto airport. Since 1984, the city has taken out $15 million in federal government loans to improve the airport. Traditionally, the FAA opposes closing an airport when it has invested in it until it earns a return on the investment.

The provision in the transportation bill requires Rialto to pay back the federal government 90 percent of any unpaid portion of the federal loans it had taken out.
In an interview, Miller said he is not responsible for the final airport language in the bill because Senate conferees struck his provision from the measure. Working with Rep. Jim Oberstar (Minn.), the ranking Democrat on the transportation panel, Appropriations Committee Chairman Jerry Lewis (R-Calif.) managed to insert his own language closing the airport into the final bill.

Rep. Lewis’s provision relocates airport business and equipment to San Bernardino Airport, in his district.
John Scofield, a spokesman for Rep. Lewis, said there are many good reasons for closing Rialto airport, noting that both the city and the county want it closed.
“There are a lot of airports in the area, such as the San Bernardino National Airport and the Redlands airport, which are both better facilities,” he said. “Because of the Santa Ana winds, the [Rialto airport] is only open half of the time anyway.”

Rep. Lewis is not related to anyone at Lewis Operating Corp. Miller, the only California Republican on the Transportation and Infrastructure Committee and a senior member of the Highways, Transit and Pipelines Subcommittee, said he helped push for the inclusion of Rep. Lewis’s provision in the final version of the measure.

Employees of Lewis Operating and other members of the Lewis family also have donated $19,900 to Baca this election cycle, making the company his top contributor as well. Rep. Lewis has received $3,000 since 2000.

Before Lewis Operating joined with Hillwood on the Rialto project, Miller had not received any campaign contributions from Hillwood employees. But after Miller started working on language in the transportation bill, John Magness, senior vice president of Hillwood Investments, cut him a check for $500 dated May 12, 2005, according to Federal Election Commission records.

“I guess they were saying thank you. … I guess that’s what that was,” Miller said.

He said that the city of Rialto chose Lewis Operating, one of the largest real-estate developers in Southern California, for the airport job on its own.
He could not recall, however, when he discovered that Lewis Operating was seeking the airport property. Rialto contacted him about shutting down the airport because he had done business with the city years earlier before becoming a congressman, he said.

He was asked to help because Rialto’s efforts to convince the FAA to shut down the airport had failed. “The FAA doesn’t want anything closed,” Miller said. “I don’t think the FAA has ever closed an airport. It’s like pulling teeth to get them to close an airport.”

He also said he does not see how he benefited from any of his business dealings with Lewis Operating Corp.

Watchdog groups have criticized a number of land deals between Lewis Operating and Miller, as well as his role in helping secure other provisions in last year’s $286.5 billion transportation transportation bill.

As first reported by the Los Angeles Newspaper Group, Miller helped secure $1.28 million in the bill for street improvements in front of a planned housing and retail center that he co-owned with Lewis Operating in his district.

Lewis-Diamond Bar LLC, a company formed to buy the land, is the developer. Miller owns $1 million-$5 million of the company. The other partner is Lewis Operating Corp.

The same year, Miller took out a promissory note from a subsidiary of Lewis Operating Corp., Lewis Investments, for $1 million to $5 million, according to his 2004 financial disclosure records.

The Los Angeles Newspaper Group also ran a critical story about a real-estate deal involving Miller, Lewis Operating and the Southern California city of Fontana.
In July 2005, Fontana’s redevelopment agency spent $5 million to buy land from Miller without notifying the public, an apparent violation of state open-meeting laws.
Miller said that he was outraged about it and that he has since demanded that the city insert a written pledge in the sales contract to make public the sale of the last parcel he owns to the city .

Some six months earlier, Miller had bought the same land from Lewis Operating. He said he did so to avoid tax penalties on profit from a land sale to Monrovia, another Southern California city, two years before.

That profit is estimated at $10 million, according to Miller’s 2003 financial disclosure record and knowledgeable sources. He said he only made $50,000 on the sale to Fontana, barely enough to cover taxes and real-estate transaction fees. “I needed to find property, and that property was available,” he said.
Jonathan Allen contributed to this report.

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