Gallaher Homes executive spends $500,000 to derail SMART sales tax citing broken promises

A stunning infusion of money from an unexpected source has rocked SMART's campaign to renew the sales tax that subsidizes the commuter rail line running between Sonoma and Marin counties.

Molly Gallaher Flater, daughter of prominent Sonoma County developer Bill Gallaher, contributed more than $500,000 to defeat Measure I — and suggested she would be willing to double the amount to kill the March sales-tax extension the rail agency projects would raise nearly $2.4 billion over 30 years to operate and expand service.

“If I end up spending $1 million to save our community taxpayers from a $2.4 billion mistake then I feel it is worth every penny,” Flater said in a written statement Thursday.

Novato resident Mike Arnold, an economist and longtime critic of Sonoma-Marin Area Rail Transit, said he was approached by Gallaher in October about funding a campaign against the tax measure, and met his daughter for the first time this week. When he learned the size of Flater's donation, his reaction was astonishment.

“How's falling out of my tree? Are you kidding me?” Arnold said Thursday. “I'd never heard of the Gallahers. They're running the campaign, I'm just the technical advisor.”

The financial contribution blindsided SMART officials and members of the Yes on Measure I campaign. They expressed dismay Thursday at the prospect a single donor could jeopardize the future of the public transit system's primary revenue stream for decades to come.

“I think it raises questions why a multimillionaire family would spend over a half-million dollars to take down the SMART train and take away transit options from people who are reliant on it,” said Novato Councilman Eric Lucan, board chairman of SMART. “It's not just concerning to me or the campaign, but should be a concern to voters, and it should be a concern to democracy.”

SMART supporters have just begun to trigger campaign mailers and digital ads, three weeks before ballots are set to go out to voters, but the opposition made a far bigger splash this week, debuting television and radio ads for the 'Not So SMART' campaign.

The flood of money — from a family with a history of campaign spending — has raised the stakes on a political brawl over one of the North Bay's most hotly debated issues.

Without the early tax renewal, proponents say, it could mean the beginning of the end for the 28-month-old system, which has so far cost $653 million to build. Just last month it celebrated the opening of its 2-mile extension to the Larkspur ferry terminal and another new station in Marin County.

“I just think it's a devastating blow to this community if somehow we pulled the plug on the SMART system at this critical time. It's just unfathomable,” said Rep. Jared Huffman, D-San Rafael. “The idea of walking away from all of that is so profoundly wrongheaded, I almost don't even know where to begin. We'll just have to work a little bit harder to overcome, but I think we'll do it.”

Multiple messages left at several phone numbers listed for Bill Gallaher, chief executive officer of Windsor-based Gallaher Homes, went unreturned Thursday. Requests for an interview with Flater, the company's chief operating officer, were answered with the written statement sent by a Sacramento-based campaign consultant, Matt Rexroad of Meridian Pacific Inc.

Flater cited a litany of objections to SMART's bid for early renewal of the sales tax, which would guarantee the system public funding into 2059. The statement notes the agency has yet to build out its planned 70-mile line or the adjacent bike and pedestrian path. Flater assailed SMART's financial projections, calling them a “hoax,” and claimed the rail line serves only a tiny fraction of the public.

“There is no indication that this will change in the future,” Flater said in the statement, questioning whether SMART has met its main objectives, including its pledge to reduce congestion or curb greenhouse gas emissions by moving motorists onto its diesel trains.

“The taxpayers, with their vote to fund SMART, entered into a contract with this public agency expecting delivery of certain promises,” the statement reads. “They deserve to know that these promises have not been met and will not be met. Is SMART really something we can afford to spend more money on?”

Flater's family has used their wealth to influence politics in other local elections.

In the 2016 Santa Rosa City Council election, Flater's husband, homemaker Scott Flater, reported spending a record $202,574 on independent expenditures supporting three candidates — an amount equal to 89% of the total contributions raised directly in 2016 by all six candidates in the City Council race combined, according to public records.

Gallaher and Scott Flater sued The Press Democrat for defamation in 2016 over the newspaper's reporting on the campaign spending. A state appellate court dismissed the lawsuit last year and ordered Gallaher and Flater to pay the newspaper's legal fees.

So far, SMART has constructed a 45-mile line from Larkspur to Santa Rosa's northern outskirts, and about 21 miles of its bicycle path. In December, it launched an expanded schedule, as well as service to its new Larkspur terminal and the new downtown Novato station.

SMART plans to reach Windsor by the end of 2021. But officials have declined to share when they expect to complete future extensions to Healdsburg and Cloverdale, the planned northern terminus for the 70-mile line pitched to voters in 2008. The combined cost for that expansion is $364 million, SMART estimates.

Proponents, including those behind the pro-Measure I “Stay Green, Keep SMART” campaign, argue that the commuter rail system is just getting started. And while a Press Democrat analysis showed that SMART's overall ridership dipped 2.2% in its second year, weekday ridership — including commuters the rail line was launched to serve — rose more than 4% in its second year, to an average of 2,358 people per day. Weekday ridership increased another 4% in its first three months of its third year of service.

SMART's current tax expires in summer 2029. Agency officials say they need the extension almost a decade early to refinance rising debt costs, freeing up more than $12 million in annual savings. The renewal would avoid spending down reserves, now at $17 million, and avert dramatic cuts in service and SMART's workforce that officials say could come within the next few years without the tax renewal.

But the infusion of cash behind the opposition campaign likely narrows what already looked to be a slim margin of passage for Measure I, with a two-thirds majority needed to pass, said Brian Sobel, a political analyst and former Petaluma councilman.

“Money is the lifeblood of every campaign. The more that you have, the better your chances,” Sobel said. “Combine that with the public's natural aversion … to taxes in general, it sets a high bar to overcome, so the proponents really have to kick it into gear quickly.”

Records showing campaign finance donations for the No on Measure I campaign were not available online Thursday from election offices in Sonoma or Marin counties. The campaign will report this week $559,183 in contributions, all of it from Flater, Rexroad said in an email.

The Yes on Measure I campaign has raised about $100,000 so far, according to Lucan, the campaign co-chairman. Disclosures filed with Sonoma and Marin counties show $43,000 in contributions through Jan. 10.

The campaign has begun sending out mailers to likely voters but has not run any radio or television ads — and had not planned on any before Flater announced her opposition, Lucan said.

The surge of opposition funding and advertising means the renewal campaign will need to quickly and dramatically ramp up its efforts, Lucan said. In 2008, when 70% of voters passed Measure Q — after narrowly rejecting a rail tax two years prior — the SMART campaign raised $586,000.

“We are focused on trying to raise as much as we can, but certainly it changes the dynamics of this race,” said Lucan. “Historically, just because one is the most well-funded campaign does not necessarily make it the winning campaign. The one with broadest base and widest base, even if it's getting outspent, really is what it comes down to, and the number of votes. That's the path to victory.”

You can reach Staff Writer Kevin Fixler at 707-521-5336 or kevin.fixler@pressdemocrat.com. On Twitter @kfixler.