Two former Transportation Department supervisors who diverted nearly $100,000 of taxpayer money into their private business will have to reimburse the city only $5,000 a piece.

Robert Palomarez, 53, and Kurt Hough, 56, accused of using city materials and employees for private projects during city work time for years, pleaded guilty to two counts each of theft in Pima County Superior Court Thursday.

The pair were indicted in 2012 on 11 charges including conspiracy, illegal control of an enterprise, and several theft charges after a nearly yearlong investigation found they misappropriated city materials and equipment from 2004 to 2010 for personal benefit. The indictment and other documents listed $83,000 worth of work and materials used, plus eight other paving and landscaping projects that didn't have prices attached.

Hough pleaded guilty to using city resources to haul dirt to a friend's home in Vail on Feb. 17, 2009. Palomarez pleaded guilty to using city labor, materials and equipment for a project at Shakey's Pizza on Nov. 4, 2004. Both pleaded guilty to using city resources for a construction project at Kelly Electric Co. from October to July 2007. The cost of each project was between $1,000 and $2,000, according to the plea agreement.

Both men must pay $5,000 in restitution to the city of Tucson and $1,000 to the Arizona Attorney General's Anti-Racketeering Revolving Account.

City officials were divided on whether the restitution is adequate and said state prosecutors and the courts were responsible.

"I think it's a lousy deal," said City Councilman Steve Kozachik. "At the very least, (Hough) should pay back what the taxpayers just subsidized him for having nearly a year's paid vacation. … That would at least allow us to break even. In this case, the taxpayers get screwed and he got a long-term paid vacation."

In addition to the money lost to their illegal work, Hough was on paid leave for 11 months during the investigation, collecting $65,320. In all, the city paid about $144,000 total in paid leave to the employees it investigated.

Mayor Jonathan Rothschild said the city did its due diligence by rooting out corruption.

"The city did what it had to do in terminating the employees and correcting the problem," Rothschild said. "The city and its taxpayers are the victims here. … It is up to the court to determine the criminal penalty."

Assistant Attorney General Mike Jette said he consulted with the city officials to determine a restitution amount.

Jette said setting restitution amounts is tricky, especially when some of the incidents are almost a decade old.

"It's extremely difficult to re-create the historical record when the case is so old," he said. "No one really remembers how many hours or how many people or was it a day off or not. The big thing is they took responsibility for utilizing city resources when they're not supposed to."

City officials were unable to provide the amount they told the Attorney General's Office they wanted.

City Manager Richard Miranda said he's confident with how the city handled the entire affair and accepts the court's decision.

"The city did its job. We were made aware of the wrongdoings, started an investigation, provided information to the Attorney General's Office and levied discipline," Miranda said. "We respect the judicial process and the judge's decision."

The 11-month investigation into the city's Transportation Department was among the largest in Tucson history, costing five employees their jobs and exposing numerous violations, including:

• In August 2010, Hough ordered the construction for $7,883 of an unauthorized concrete motorcycle pad at the city's west lot near East Ajo Way and South Park Avenue because he and his "motorcycle buddies" didn't like parking on asphalt.

• In February 2009, Hough ordered Palomarez to deliver 15 tons of city dirt to help a friend, Ken Kelly, owner of Kelly Electric, build a BMX track at another friend's home in Vail at a cost of $600.

• Between October 2006 and July 2007, Hough ordered at least five city workers, plus equipment and materials, to build a retaining wall and pave the parking lot at Kelly Electric, 1144 W. Miracle Mile.

• In May 2010 and again in September 2011, he had a city crew pave a private road in the Midvale Park area.

• Hough used city workers and equipment to pave his own driveway.

• In 2010, Palomarez directed the delivery of multiple loads of dirt and sand to the Sunnyside High School baseball field, where his brother is a coach, and had city employees work on the field.

• In November and December 2009, Palomarez cleared dirt for a private contractor. The dirt was stored on a city lot and used later for his private side jobs.

• In 2007, Palomarez graded and paved a parking lot at a small south-side church that couldn't afford to pay, costing taxpayers $1,007.

• In November 2004, Palomarez cleared, graded and paved a parking lot at the now-closed Shakey's Pizza at 4802 S. Sixth Ave. Cost: $1,712.

• In November 2007, Palomarez graded and paved drives at Evergreen Cemetery at North Oracle Road and West Miracle Mile. Cost: $17,043.

According to city documents, Hough, as streets administrator, "treated the Streets Division as a personal enterprise" and developed a culture of fear and retribution within the division to direct city personnel to use city materials and equipment for his personal gain.

Hough and Palomarez face between four months to four years in prison or up to three years' probation when they are sentenced by Judge Casey McGinley on June 4.

Contact reporter Veronica Cruz at or at 573-4224 and Darren DaRonco at or 573-4243.