‘How can the Downtown San Diego Partnership use property-based business improvement district funds like a piggy bank?” asks Kathy Casey, a resident of Cortez Hill. “Where is the oversight, the accountability?”
During years of budget shortfalls, residents of San Diego have witnessed the City’s list of basic services shrink. But for thousands of downtown residents, basic services aren’t the only thing vanishing before their eyes. The assessments they pay into the property-based business improvement district, called Clean and Safe, also seem to be vanishing.
Residents say that instead of using assessments to make the five downtown neighborhoods — Cortez Hill, Marina District, East Village, Gaslamp, and Core Columbia — cleaner and safer, the Downtown San Diego Partnership is spending thousands of dollars on expensive consultants with little oversight from the City.
In past years, the Downtown Partnership, a nonprofit business booster that manages the improvement district, overcharged district residents hundreds of thousands of dollars as a result of a flawed engineer’s report. Now, residents say, these consultants’ contracts are another scheme from a corporate-welfare agency to profit from public funds.
The improvement district collects approximately $5.6 million annually to clean and secure the five neighborhoods. In exchange for managing the district, the Partnership is paid $72,000. District assessments also pay some Downtown Partnership staff salaries, totaling $1.612 million. That’s not all. According to financial documents, during fiscal year 2011/2012, the Downtown Partnership paid a consultant $160,000. That money went to Marco Li Mandri to make Clean and Safe more efficient and to renew the program, among other things.
But there was another consultant fee not mentioned in the 2011/2012 Clean and Safe budget, a contract with Denver firm Progressive Urban Management Associates, whose work began in August 2011.
The problem, say some residents, is that Progressive Urban Management wasn’t hired for the Clean and Safe program. The consultant was hired to help restructure the Downtown San Diego Partnership’s business plan. According to the contract, the consultant’s objective was to “Create an organizational restructuring plan that will build the [Downtown San Diego Partnership’s] influence to champion downtown development, management and marketing.” The Partnership has paid $25,954 for the work. And while the Partnership is a private organization and can allocate funds any way it chooses, 73 percent of the bill, or $18,946, was paid with Clean and Safe money.
This use of assessment funds is not authorized by California’s Streets and Highways Code, the City’s Maintenance Assessment District Ordinance, or Clean and Safe’s contract with the Downtown Partnership.
“The current [property-based business improvement district] contract that started in 2005 specifically states what it covers,” says Kathy Casey. “It includes sidewalk cleaning, landscaping and tree maintenance, trash pickup, enhanced lighting and public safety. [District] members should not be paying the Downtown Partnership to restructure its business plan.”
The contract with Progressive Urban Management, according to Casey, was never approved by the district’s advisory board, at least not at a public meeting.
It was discussed at one meeting, however. On May 23, 2012, representatives from Downtown Partnership gave a presentation to the Centre City Advisory Committee, downtown’s community planning group. “In order to best serve the needs of our members and downtown, we have initiated the process of restructuring our organization,” read the presentation. “We have hired a consultant to create a strategic plan for our organization that incorporates best practices from around the country.”
Not only did the Downtown Partnership fail to present either Li Mandri’s or Progressive Urban Management’s contract to the Clean and Safe advisory board, it also failed to send either contract out to bid. Therein lies a gray area for San Diego’s sole property-based business improvement district. The City has recently clarified that business improvement districts must follow municipal laws regarding contracts, but the Downtown Partnership maintains that those laws govern maintenance assessment districts and do not apply to business improvement districts.
According to section 65.0214 of the municipal code, which is under a division titled “Maintenance Assessment Districts,” when a contract provides for an expenditure of between $10,000 and $50,000, “the Non-profit Corporation shall solicit written price quotations from at least five potential sources.”
In the case of contracts worth over $50,000, such as Marco Li Mandri’s, “the Nonprofit Corporation shall advertise for sealed proposals.” The municipal code that governs City contracts for services, goods, and consultants, section 22.3203, is more explicit, stating that the purchasing agent must advertise for “bids or proposals for a minimum of one day in the City official newspaper.”
None of this was done, residents say.
Asked why the contract with Progressive Urban Management was not sent out to bid and why section 65.0214 of the municipal code was not followed, Janelle Riella, spokesperson for the Partnership, responded on July 5, “Section 65.0214 of the Municipal Code refers to Maintenance Assessment Districts. We are a Property and Business Improvement District (PBID) and we do not apply.”
But this had been refuted at the May 15 city council hearing on the annual appropriation process for business improvement districts. Meredith Dibden-Brown from the Office of Small Business and deputy city attorney Adam Wander stated that business improvement districts are required to obtain five bids for contracts over $10,000.
“The City doesn’t have a Municipal Code section specific to [business improvement districts],” says Gina Coburn of the city attorney’s office.
“The reason we require the nonprofits to follow the same procurement laws as the City is because the City is merely contracting with the nonprofits to perform administrative duties that would otherwise be the responsibility of the City,” she explains. “The City can’t contract around the procurement laws. In other words, the City can’t get out of following the procurement process required when dealing with [business improvement district] funds (public funds) merely by contracting with another entity to handle the City’s administration of the [business improvement district] program.”
The absence of oversight and lack of public input has come up often since the City and its residents began depending on assessment districts to provide basic services.