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$31.7 Million Total expenditures from the "Special Funds" for Petco Park and QUALCOMM Stadium $97 Million Total subsidies contained in the "Special Promotional Programs" fund that provides grants and support to a myriad of for-profit and non-profit interests 8 Percent Total increase spending on subsidies contained in the "Special Promotional Programs" planned for FY 2005 86 $344,568 Total General Fund subsidy planned under the FY 2004 "Special Projects" Budget for corporate, for-profit events $1 The typical annual rent currently charged under the majority of contracts to non-profit groups in exchange for use of City facilities 25 to 50 Typical lease term given to subsidized groups-removing any chance to cut some of these subsidies in the near-term!

NOTE ON FOOTNOTES: The San Diego Citizens' Budget Project is committed to presenting accurate, methodical research. The Citizens' Budget Plan contains more than 100 footnotes, all of which can be found in the print and full PDF versions.

Reduce Corporate Welfare and Subsidies to Special Interests
Conduct a Complete Review of City Expenditures Benefiting Corporate or Special Interests to Improve Cost Recovery to the Taxpayer While Improving Full Disclosure and Transparency of Public Support for Special Interests

During the budget process, the City proposed a number of significant cuts to library hours, park and recreation programs, and even child care. Unfortunately, there has been little mention of reductions in programs benefiting a variety of special interests throughout the City. Granted, everyone is part of a special interest-and corporate special interests are the lifeblood of a City's economy. No one group should become the whipping boy to balance the budget.

Nevertheless, everyone must contribute to the solution.
From the Chargers’ ticket guarantee and the building of new stadiums for the sports industry to the $4.5 million Convention Center subsidy for the tourist and hotel industry, millions in taxpayer dollars are diverted from general benefit programs to promote the success of a narrow band of interests. One of the biggest sources of special interest subsidies can be read in the City's "Special Promotional Programs" budget-which is enjoying a 10 percent increase in spending this year to a whopping $97,025,977. In addition to providing the bulk of funding for projects such as the ballpark and stadium, these funds provided subsidies and grants to a myriad of groups in the City during FY 2004 including:

• ConVis ($12,500,000)
• San Diego Bowl Game Association ($435,597)
• San Diego World Trade Center ($126,968)
• Asian Business Association ($40,771)
• Food and Beverage Association ($34,800)
• Jazz Festival ($56,625)
• California Ballet Association ($114,092)
• Icarus Puppet Company ($15,234)
…and the list goes on and on covering nearly 250 separate subsidies ranging from a few thousand dollars to tens of millions!

The giveaways do not just go to corporations. A number of sweetheart deals have been worked out with so-called non-profit organizations and business trade associations that have millions in annual revenue. Despite the fact that these groups receive millions in subsidies, very few are required to disclose their organization's financial statements or the compensation of their top officers. While these groups no doubt do good work, many can afford to pay for their own promotional programs, bear a greater share of rent in the City properties they occupy, and reimburse taxpayers for expenses relating to their special events (including police and fire overtime resulting from events.)

While any special interest giveaways should pose concern to taxpayers, the Citizens' Budget Project is most concerned when diversion of funds to special interests occurs in the General Fund of the City's budget. The General Fund is supposed to pay for general City services of benefit to the entire community-not a narrow band of interests. As a result, the reforms articulated for FY 2005 in this plan primarily focus on General Fund savings, while setting the stage for reforms in the Special Funds through greater transparency and public oversight.

• Achieve Full Cost Recovery on Special Events
Perhaps the most pressing area to reduce City subsidies to corporations and other special interests that has an impact on the General Fund comes from special events. Special events require processing of event permits—which the City currently subsidizes to the tune of $344,568 in FY 2003. Another cost is incurred by the Police Department and Fire-EMS Department to provide support to these events — usually incurring huge overtime costs. Sometimes these costs are recovered through fees, but not in all cases.

To implement this reform, the Council should pass a resolution instructing the City Manager to bring a plan before Council by September 1, 2004 to ensure full cost recovery of all General Fund expenses associated with special events—whether sponsored by a for-profit or non-profit entity. The Manager should define a process by which the City Council would have the ability to provide a “grant-back” of special event fees for non-profits who legitimately need a subsidy to hold their public event. In cases where a non-profit is requesting a subsidy, their financials for their organization and event in question—complete with compensation levels for their top five officers—should be made public and kept on record in the Clerk’s office. This would provide the Council and the public with the transparency and confidence necessary that City subsidies are indeed needed.
In addition, the proposal should contain a feasibility study on one option presented by the Citizens’ Budget Project during the “Options” phase to create the “San Diego Chartered Police Agency.” This entity would recreate how the City of San Jose manages special events and provides for increased compensation for police officers through off-duty assignments. This would help reduce overtime costs associated with City event management.

If all of these reforms are implemented along with the Chartered Police concept, the City would achieve $1.5 million in cost savings in FY 2005—with additional cost savings in future years.

• Assess Fair Market Value Rent for City Properties
Just as many corporations and non-profits receive subsidies for special events, many groups receive leases for the use of City properties for free or at rates far below fair market value. In addition to over 500 leases for commercial groups ranging from concession vendors and hotels to Sea World, the City maintains 103 leases with non-profit groups that are heavily subsidized. These numbers reflect only leases managed by the Office of Real Estate—with the Parks and Recreation Department managing other short-term leases and authorizations for use of City properties.

One timely example of these giveaways to non-profit groups is found on the Council Docket—the very same day that this San Diego Citizens’ Budget was presented to the City. The Council approved the following two leases:

The San Diego Citizens’ Budget Project is not trying to pick on these two groups in particular. We reference them only because their leases happen to be approved the same day as the budget plan was presented to the Council. To be sure, both groups provide important community services. However, it is not entirely clear that their finances are so poor that they cannot afford the fair market value of rent—or at least a larger portion of the value. At the moment, the public is kept in the dark on their financial ability to pay.

Consistent to the reforms on corporate and non-profit special events, the Council should pass a resolution instructing the City Manager to bring an inventory of all City leases with current rent charges versus fair market value of the properties—for both commercial and non-profit groups. Council Policy should be modified to ensure fair market value is charged on all properties—whether occupied by a for-profit or non-profit entity.

In addition, the Manager should define a process by which the City Council would have the ability to provide a “grant-back” of rent for non-profits who legitimately need a subsidy—through a public vote of the Council. The “grant-back” would have to be included in each succeeding budget. Should Council decide not to approve the “grant-back” in future years, the lessee would be allowed to break the lease. This would provide protections from the absurdly long terms of 25 and 50 years in some of these leases.

In cases where a non-profit is requesting a subsidy, their financials for their organization—complete with compensation levels for their top five officers—should be made public and kept on record in the Clerk’s office. This would provide the Council and the public with the transparency and confidence necessary that City subsidies are indeed needed.

A mere 5 percent escalation in rents on City-owned properties managed by the Office of Real Estate Assets would net $2.5 million in FY 2005. Additional cost savings could be achieved in agreements managed by the Parks and Recreation Department.

• Expand Corporate Sponsorship Opportunities to Provide Vehicle for “Giving Back” to the San Diego Community
This reform is less about taking public funding away from special interests as it is asking special interests to support community investments. In fact, even ZBMR has recommended to the City that greater efforts and opportunities should be made to ask for corporate sponsorship in support of City programs. There has been some progress. For example, General Motors donated two dozen vehicles to the City—and would have donated more in exchange for modest promotional space on lifeguard stations. The Fire Department has also done this well—collecting $2 million in FY 2005 alone. Certainly the City must be tasteful in offering corporate promotional space, but the City should also be aggressive in asking for corporate support. Expanding support in Park and Recreation area could easily net $1,000,000 in FY 2005—with much more in future years.

• Replace General Fund Support for the Business Resources & Technology Link
This program provides business development research and support services through the City’s Library budget for private entities. While a program like this is certainly helpful to encourage business growth, it is duplicative of other research and support services available from entities such as the Small Business Administration and local business associations. The program was launched with grant funding three years ago—but when grant funding ended, the program found a permanent home in the General Fund. Suspending the program or finding proper funding sources for it would save the General Fund $180,000 in FY 2005.

• Reform the Subsidy of the SD Convention Center
The SD Convention Center runs an operating loss each year of $4.5 million—not counting the $14 million in debt payments made by the City annually. The Convention Center—which generally has a solid management team—insists that the $4.5 million subsidy would be impossible to do without. To provide full confidence that this indeed is the case, the Council should request the Manager issue a Request for Proposals to two outside convention center management firms whereby the $4.5 operations subsidy would be phased out over four years to bring the convention center into break-even. The RFP should include clear performance standards for room bookings and revenue generation to the City to ensure that quality can be accounted for. Should the open-bid competition work, the City would save $1 million annually.

In addition, the City should transfer of the funding source for the subsidy from the Convention Center budget to the “Special Promotional Programs” budget, using offsets within that funding source to accommodate the $4.5 million expense. The resources left over could go into capital projects at the Convention Center to continue to expand infrastructure rather than subsidize operating expenses.