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Mission Bay starved for cash in wake of Covid-19

Financial watchdogs in the dark, under-staffed, audit says

Mission Bay (Santa Clara Point)
Mission Bay (Santa Clara Point)

When the flow of lease revenue once used by the city to maintain Mission Bay and its environs dried up during the Covid 19 pandemic, the cash wasn't replaced, leaving the one-time municipal jewel vulnerable to a cascade of maintenance failures.

Exacerbating the situation, two citizen committees tasked with protecting the bay's fiscal status have been kept in the dark by officials about the leases and construction projects they are supposed to monitor.

So says an August 2 report to the city council by City Auditor Andy Hanau regarding a looming crisis for the park, long crucial to local recreation and tourism.

"The Mission Bay Park Improvement Fund’s Oversight Committee and the San Diego Regional Parks Improvement Fund’s Oversight Committee are responsible for overseeing revenues and expenditures associated with leases and capital projects within the boundaries of Mission Bay Park and San Diego Regional Parks," according to the document.

But committee chairs told auditors they had received inadequate data.

"Specifically, they requested the City provide more detailed project information regarding the cost for each phase of the project.

“For example, a breakdown between planning, design, and construction costs. The Committee Chairs also requested a cost breakdown within each phase to show the portion expended for City labor (inclusive of fringe and overhead) versus consultant and contractor costs.

"Without this information, the Committees are currently unable to assess the relationship between actual construction costs and the costs associated with planning and designing the facilities. Additionally, they are not able to assess what factors are driving cost increases."

With shortness of funds, the urgency for more transparency is growing, Hanau's report suggests.

"Whenever a request is made to increase funding/budget of a project that requires committee approval, detailed project estimates including factors driving cost increases should be provided to the [oversight] committees," says the document.

But some key information isn't available, even to city staff. "The City does not have documentation to show routine site visits of leased properties are occurring," according to the report.

"Without these site visits, the City may be unaware of lease violations, including any potential safety hazards, poor maintenance conditions on properties that could have been visually identified, or any potential liability risks to the City that may have arisen on properties," notes the audit.

"In addition, there may be instances of unapproved change in business operations or unapproved sublease operations."

Pointing out that not all leases involving so-called in-water improvements require inspections of the properties, the audit advises, "given the nature of Mission Bay land—a saltwater bay, the City should improve its oversight and ensure in-water improvements are being properly maintained."

The integrity of two other committees vital to keeping the park intact is also called into question by the report.

"The Mission Bay Park Committee currently has 1 vacancy, and of the 10 remaining members, 6 are serving under expired terms," according to the document. "The Park and Recreation Board is currently fully staffed; however, 8 members are serving under expired terms."

Noting that city law "requires that an interval of four years must pass before a person who has served eight consecutive years on the Mission Bay Park Committee can be reappointed," the auditors wrote that they "found the Mission Bay Park Committee has two members that are currently serving beyond eight consecutive years in violation of the Municipal Code."

With plunging lease revenue, the concerns are growing.

"The Mission Bay Improvement Fund saw a 68 percent reduction in revenue from FY2019 to FY2020 from $7.4 million down to $2.4 million.

“In FY2021, the [Mission Bay Improvement Fund] did not receive any lease revenue.

"Without adequate funding, capital improvements in Mission Bay and San Diego Reginal Parks will be hindered.

“A possible source [of replacement funds] would be additional allocations from the General Fund since the General Fund has received funding from the Coronavirus State and Local Fiscal Recovery Funds program under the American Rescue Plan Act to compensate for lost revenues and associated impacts of the pandemic."

To avoid a growing fiscal crunch, the report recommends that "the Department of Finance present an option to compensate the Improvement Funds for lost revenue to the Mayor for consideration as part of the mid-year budget update."

In a July 29 response, the city's Chief Operating Officer Jay Goldstone agreed with the audit's findings.

"The Department of Finance will evaluate replenishing the Park Improvement Funds after considering the Mayor and Council’s budgetary priorities and in compliance with the use of COVID-19 federal relief funds," wrote Goldsmith.

“If approved by the Mayor, the budget amendment will be included in the Fiscal year 2023 Mid-year Quarterly Budget Monitoring Report for Council consideration.

"Target Implementation Date: February 2023"

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Mission Bay (Santa Clara Point)
Mission Bay (Santa Clara Point)

When the flow of lease revenue once used by the city to maintain Mission Bay and its environs dried up during the Covid 19 pandemic, the cash wasn't replaced, leaving the one-time municipal jewel vulnerable to a cascade of maintenance failures.

Exacerbating the situation, two citizen committees tasked with protecting the bay's fiscal status have been kept in the dark by officials about the leases and construction projects they are supposed to monitor.

So says an August 2 report to the city council by City Auditor Andy Hanau regarding a looming crisis for the park, long crucial to local recreation and tourism.

"The Mission Bay Park Improvement Fund’s Oversight Committee and the San Diego Regional Parks Improvement Fund’s Oversight Committee are responsible for overseeing revenues and expenditures associated with leases and capital projects within the boundaries of Mission Bay Park and San Diego Regional Parks," according to the document.

But committee chairs told auditors they had received inadequate data.

"Specifically, they requested the City provide more detailed project information regarding the cost for each phase of the project.

“For example, a breakdown between planning, design, and construction costs. The Committee Chairs also requested a cost breakdown within each phase to show the portion expended for City labor (inclusive of fringe and overhead) versus consultant and contractor costs.

"Without this information, the Committees are currently unable to assess the relationship between actual construction costs and the costs associated with planning and designing the facilities. Additionally, they are not able to assess what factors are driving cost increases."

With shortness of funds, the urgency for more transparency is growing, Hanau's report suggests.

"Whenever a request is made to increase funding/budget of a project that requires committee approval, detailed project estimates including factors driving cost increases should be provided to the [oversight] committees," says the document.

But some key information isn't available, even to city staff. "The City does not have documentation to show routine site visits of leased properties are occurring," according to the report.

"Without these site visits, the City may be unaware of lease violations, including any potential safety hazards, poor maintenance conditions on properties that could have been visually identified, or any potential liability risks to the City that may have arisen on properties," notes the audit.

"In addition, there may be instances of unapproved change in business operations or unapproved sublease operations."

Pointing out that not all leases involving so-called in-water improvements require inspections of the properties, the audit advises, "given the nature of Mission Bay land—a saltwater bay, the City should improve its oversight and ensure in-water improvements are being properly maintained."

The integrity of two other committees vital to keeping the park intact is also called into question by the report.

"The Mission Bay Park Committee currently has 1 vacancy, and of the 10 remaining members, 6 are serving under expired terms," according to the document. "The Park and Recreation Board is currently fully staffed; however, 8 members are serving under expired terms."

Noting that city law "requires that an interval of four years must pass before a person who has served eight consecutive years on the Mission Bay Park Committee can be reappointed," the auditors wrote that they "found the Mission Bay Park Committee has two members that are currently serving beyond eight consecutive years in violation of the Municipal Code."

With plunging lease revenue, the concerns are growing.

"The Mission Bay Improvement Fund saw a 68 percent reduction in revenue from FY2019 to FY2020 from $7.4 million down to $2.4 million.

“In FY2021, the [Mission Bay Improvement Fund] did not receive any lease revenue.

"Without adequate funding, capital improvements in Mission Bay and San Diego Reginal Parks will be hindered.

“A possible source [of replacement funds] would be additional allocations from the General Fund since the General Fund has received funding from the Coronavirus State and Local Fiscal Recovery Funds program under the American Rescue Plan Act to compensate for lost revenues and associated impacts of the pandemic."

To avoid a growing fiscal crunch, the report recommends that "the Department of Finance present an option to compensate the Improvement Funds for lost revenue to the Mayor for consideration as part of the mid-year budget update."

In a July 29 response, the city's Chief Operating Officer Jay Goldstone agreed with the audit's findings.

"The Department of Finance will evaluate replenishing the Park Improvement Funds after considering the Mayor and Council’s budgetary priorities and in compliance with the use of COVID-19 federal relief funds," wrote Goldsmith.

“If approved by the Mayor, the budget amendment will be included in the Fiscal year 2023 Mid-year Quarterly Budget Monitoring Report for Council consideration.

"Target Implementation Date: February 2023"

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