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Centre City Redevelopment rides first class while city on its way to bankruptcy

One-third of their contracts had no competitive bidding

— Civic activist Mel Shapiro says that Centre City Development Corporation is "a sacred cow." Actually, it's more like a 500-pound gorilla that plops itself down anywhere it desires. Recently, Shapiro thought it odd that Centre City had hired a lobbyist; after all, Centre City's mandate is only to advise the Redevelopment Agency, which is the city council. Why did it need a lobbyist? Shapiro asked the agency and was told to look at Centre City's monthly president reports. He was astonished to find that Centre City's president, Nancy Graham, has almost as much latitude to pass out contracts without oversight as the mayor has.

And look at the difference. The 2007 San Diego budget is $2.556 billion. Centre City's budget is $176.4 million, or roughly 7 percent of the city's. The San Diego government has 11,416 employees; Centre City has 51. But the average salary at Centre City is $85,400; in city government it is $61,000.

Graham can dole out contracts to consultants for up to $250,000 without the Centre City board looking over her shoulder. The mayor can dish out the same sum without city council approval. When a contract is amended, Graham can hand out another $200,000 in a different year without her board looking at it. The mayor's limit is a little higher -- $250,000.

Shapiro got a list of the contracts that Graham unilaterally passed out last year and the first two months of this year. She handed out $5.5 million last year and $1.1 million in January and February of this year. A full $2.2 million, or one-third of those contracts, were sole source; there was no competitive bidding.

"That is outrageous," says Carl DeMaio, president of the Performance Institute and a member of a federal government commission to reform the acquisition process. "We documented in our report to Congress that one-third of federal contracts were sole source, or noncompetitive. When we released that in January of this year, folks from both sides of the aisle, Democrats and Republicans, were outraged. There was agreement that this was unacceptable, that we have to infuse more competition in contracting and also need more transparency."

Says DeMaio, "What we need is the good old free market; $250,000 is an awfully high threshold. The standard nationally is to give someone authority to give [contracts] up to $25,000 [without oversight]."

Says Councilmember Donna Frye, "There is always a concern when anyone has the ability to sole source contracts. I would want to know why they are not put out for competitive bid. And the $250,000 threshold seems high, particularly for an unelected official."

The San Diego Municipal Code mandates that a purchasing agent doling out a contract for between $5000 and $10,000 must seek competitive prices orally or in writing. For a contract between $10,000 and $50,000, the purchasing agent must solicit written price quotations from at least five potential sources. Contracts below $5000 do not have to be competitively bid.

What are some of the contracts that Graham meted out during the 14 months under study? In September of last year, Pam Hamilton, senior vice president and a Centre City employee for more than 24 years, retired. She was earning $160,000 a year when she left her post. But she really didn't leave. That same month, she was given a $150,000 "project consulting services" contract. The contract was "sole source due to specialized nature of the required consulting services," says the Centre City president's report for September.

"I am doing consultant work for them [Centre City] to manage projects or to complete projects for which I was the project manager," Hamilton says.

In June of last year, Graham dished out the maximum $250,000 contract to Opper & Varco, the former law firm of Councilmember Scott Peters. "Opper & Varco is counsel to the [Redevelopment] Agency and [Centre City] with respect to environmental issues," explains Helen Peak, attorney for Centre City.

That same month, Keyser Marston Associates got the maximum $250,000 contract for real estate consulting services. "Keyser Marston provides on-call general economic consulting services for [Centre City]," says Peak.

In May, Westlake Reed Leskosky got a $134,494 contract for architectural engineering design services on the Balboa Theatre restoration. It was a fourth amendment; the total contract is for $2.44 million.

In October, Bruce A. Husson, a veteran of San Diego Unified and Sweetwater schools, got a $45,000 sole-source contract to evaluate the need for schools downtown.

The law firm of Allen Matkins Leck Gamble Mallory & Natsis got two contracts totaling $80,000. That's the firm of John Davies, former president and director of Centre City.

Throughout the period, law and architectural firms picked up sole-source contracts, often at the maximum $250,000.

"We believe there are adequate safeguards to protect against contracts going out to friends and political allies," claims Peak. For technical and professional consultants, Centre City conducts a request for proposal and request for qualifications. The consultants are selected from the pool of the firms with the highest ratings; some of those consultants may get a sole-source contract from Graham.

The bottom line is that Centre City is riding first class while the city is on its way to bankruptcy. Yet Centre City continues to drain money from the city's general fund. In essence, redevelopment is a scam to take money from the city and direct it to developers. Almost the entire downtown is considered "blighted." That's a joke. About 14 percent of the property-tax dollars from the area goes to the city, and the rest goes to Centre City, which continues to parcel it out to developers. Centre City's board and staff mainly consist of people owing their allegiance to the development industry.

Frye says that Centre City should begin paying off $100 million that it has borrowed from the city. In addition, she wants Centre City to take over the debt service on the ballpark bonds, which is now down to $11 million, following the refinancing of the debt. "The fact is that it is not [Centre City] that has to sign off on this," says Frye. "It is the city council, which is the Redevelopment Agency. The question is whether the council has the will. So far it has not."

DeMaio agrees with Frye. "People at [Centre City] told me they were flush with cash," says DeMaio. "I said, 'Why should the city pay for Petco Park? It's redevelopment in a blighted area. It would save the city all that money.' They [Centre City] said, 'We have other projects.' They have a list of projects with special-interest developers, and the city is on the brink of bankruptcy."

Peak is not sure that community-redevelopment law would permit the shift of the ballpark burden from the city to Centre City.

There is an answer to that: the laws should be changed. There is a good argument that Centre City should be abolished so that more money can flow into the city's general fund. If that can't be accomplished politically, at least the laws should be changed so that the Centre City chief executive cannot dole out fat contracts willy-nilly.

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— Civic activist Mel Shapiro says that Centre City Development Corporation is "a sacred cow." Actually, it's more like a 500-pound gorilla that plops itself down anywhere it desires. Recently, Shapiro thought it odd that Centre City had hired a lobbyist; after all, Centre City's mandate is only to advise the Redevelopment Agency, which is the city council. Why did it need a lobbyist? Shapiro asked the agency and was told to look at Centre City's monthly president reports. He was astonished to find that Centre City's president, Nancy Graham, has almost as much latitude to pass out contracts without oversight as the mayor has.

And look at the difference. The 2007 San Diego budget is $2.556 billion. Centre City's budget is $176.4 million, or roughly 7 percent of the city's. The San Diego government has 11,416 employees; Centre City has 51. But the average salary at Centre City is $85,400; in city government it is $61,000.

Graham can dole out contracts to consultants for up to $250,000 without the Centre City board looking over her shoulder. The mayor can dish out the same sum without city council approval. When a contract is amended, Graham can hand out another $200,000 in a different year without her board looking at it. The mayor's limit is a little higher -- $250,000.

Shapiro got a list of the contracts that Graham unilaterally passed out last year and the first two months of this year. She handed out $5.5 million last year and $1.1 million in January and February of this year. A full $2.2 million, or one-third of those contracts, were sole source; there was no competitive bidding.

"That is outrageous," says Carl DeMaio, president of the Performance Institute and a member of a federal government commission to reform the acquisition process. "We documented in our report to Congress that one-third of federal contracts were sole source, or noncompetitive. When we released that in January of this year, folks from both sides of the aisle, Democrats and Republicans, were outraged. There was agreement that this was unacceptable, that we have to infuse more competition in contracting and also need more transparency."

Says DeMaio, "What we need is the good old free market; $250,000 is an awfully high threshold. The standard nationally is to give someone authority to give [contracts] up to $25,000 [without oversight]."

Says Councilmember Donna Frye, "There is always a concern when anyone has the ability to sole source contracts. I would want to know why they are not put out for competitive bid. And the $250,000 threshold seems high, particularly for an unelected official."

The San Diego Municipal Code mandates that a purchasing agent doling out a contract for between $5000 and $10,000 must seek competitive prices orally or in writing. For a contract between $10,000 and $50,000, the purchasing agent must solicit written price quotations from at least five potential sources. Contracts below $5000 do not have to be competitively bid.

What are some of the contracts that Graham meted out during the 14 months under study? In September of last year, Pam Hamilton, senior vice president and a Centre City employee for more than 24 years, retired. She was earning $160,000 a year when she left her post. But she really didn't leave. That same month, she was given a $150,000 "project consulting services" contract. The contract was "sole source due to specialized nature of the required consulting services," says the Centre City president's report for September.

"I am doing consultant work for them [Centre City] to manage projects or to complete projects for which I was the project manager," Hamilton says.

In June of last year, Graham dished out the maximum $250,000 contract to Opper & Varco, the former law firm of Councilmember Scott Peters. "Opper & Varco is counsel to the [Redevelopment] Agency and [Centre City] with respect to environmental issues," explains Helen Peak, attorney for Centre City.

That same month, Keyser Marston Associates got the maximum $250,000 contract for real estate consulting services. "Keyser Marston provides on-call general economic consulting services for [Centre City]," says Peak.

In May, Westlake Reed Leskosky got a $134,494 contract for architectural engineering design services on the Balboa Theatre restoration. It was a fourth amendment; the total contract is for $2.44 million.

In October, Bruce A. Husson, a veteran of San Diego Unified and Sweetwater schools, got a $45,000 sole-source contract to evaluate the need for schools downtown.

The law firm of Allen Matkins Leck Gamble Mallory & Natsis got two contracts totaling $80,000. That's the firm of John Davies, former president and director of Centre City.

Throughout the period, law and architectural firms picked up sole-source contracts, often at the maximum $250,000.

"We believe there are adequate safeguards to protect against contracts going out to friends and political allies," claims Peak. For technical and professional consultants, Centre City conducts a request for proposal and request for qualifications. The consultants are selected from the pool of the firms with the highest ratings; some of those consultants may get a sole-source contract from Graham.

The bottom line is that Centre City is riding first class while the city is on its way to bankruptcy. Yet Centre City continues to drain money from the city's general fund. In essence, redevelopment is a scam to take money from the city and direct it to developers. Almost the entire downtown is considered "blighted." That's a joke. About 14 percent of the property-tax dollars from the area goes to the city, and the rest goes to Centre City, which continues to parcel it out to developers. Centre City's board and staff mainly consist of people owing their allegiance to the development industry.

Frye says that Centre City should begin paying off $100 million that it has borrowed from the city. In addition, she wants Centre City to take over the debt service on the ballpark bonds, which is now down to $11 million, following the refinancing of the debt. "The fact is that it is not [Centre City] that has to sign off on this," says Frye. "It is the city council, which is the Redevelopment Agency. The question is whether the council has the will. So far it has not."

DeMaio agrees with Frye. "People at [Centre City] told me they were flush with cash," says DeMaio. "I said, 'Why should the city pay for Petco Park? It's redevelopment in a blighted area. It would save the city all that money.' They [Centre City] said, 'We have other projects.' They have a list of projects with special-interest developers, and the city is on the brink of bankruptcy."

Peak is not sure that community-redevelopment law would permit the shift of the ballpark burden from the city to Centre City.

There is an answer to that: the laws should be changed. There is a good argument that Centre City should be abolished so that more money can flow into the city's general fund. If that can't be accomplished politically, at least the laws should be changed so that the Centre City chief executive cannot dole out fat contracts willy-nilly.

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