The City of SAN Diego Council President Myrtle Cole Fourth District November 8, 2018 Judge Peter C. Deddeh Presiding

The Chargers’ departure gave the City an opportunity to recoup revenue on Stadium advertising and suite sales. Response: The Mayor and City Council agree with the Grand Jury’s finding.

When a parcel is landlocked.

Stadium staff could have sold the Stadium advertising. Response: The Mayor and City Council partially disagree with the Grand Jury’s finding. Ensuring that stadium advertising revenues are maximized requires sales staff, expertise in negotiating advertising agreements, knowledge of market contacts and relationships, and knowledge of industry standard advertising rates. The City’s staff at the stadium currently consists of a stadium manager, a program coordinator, a senior management analyst, an administrative aide, and a clerical assistant, and none are qualified to sell stadium advertising. Developing staff with this expertise would have diverted resources away from the actual management of the stadium and booking of revenue-producing events at the stadium. In FY18, the budgeted operating revenue for the stadium was $3.0 million. However, actual revenue for FY18 was $6.7 million, in large part because the stadium’s staff was able to focus on booking revenue-producing events at the stadium. While the City could have attempted to sell stadium advertising, the net gain of $3.7 million from booking events, in contrast to the City’s FY 18 revenue from suite sales of $263,000 and from advertising sales of $475,000, makes it clear that City taxpayers were best served by focusing the City’s efforts in areas of the stadium staff’s expertise in recruiting revenue- producing events.

When the sale to a contiguous owner would correct a site deficiency.

Stadium staff could have sold the suites. Response: The Mayor and City Council partially disagree with the Grand Jury’s finding. Similar to the City’s response to Finding 02, selling stadium suites requires sales staff, expertise in negotiating suite sales agreements, knowledge of market contacts and relationships, and knowledge of industry standard suite rates, none of which the City’s staff located at the stadium are qualified to do. Developing staff with this expertise would have City Response to San Diego County Grand Jury Report Titled “San Diego Continues to Lose Money on Stadium Management” diverted resources away from the actual management of the stadium and booking revenue- producing events at the stadium.

When a fee interest in a pipeline or other right-of-way is no longer required, it may be sold to a contiguous owner. A restrictive pipeline easement of adequate width or other required easements will be reserved from said sale.

The City gave away revenue it could have retained. Response: The Mayor and City Council disagree with the Grand Jury’s finding. This finding assumes that the City’s existing staff, which lacks advertising and suite sales expertise, could have generated greater advertising and suite sales revenues than the professionals the City contracted with to perform this function.

When other governmental, public and quasi-public agencies submit acquisition proposals, a sale may be consummated per Municipal Code Section 22.0907, Sales of Real Properties to Public Agencies. These agencies shall include but not be limited to: Federal, State, and County agencies; school districts, special districts, and regulated utility companies.

The City allowed work on the contract before its effective date. Response: The Mayor and City Council agree with the Grand Jury’s finding. Fox Sports did start work prior to the effective date of the contract. Their work consisted of developing an RFP and soliciting interest in the market. However, as no costs were incurred during this process and no commitments would have been binding or finalized without a fully executed contract in place, risk to the City was limited.

When qualified nonprofit institutional organizations offer to purchase City-owned land, a negotiated sale may be consummated at fair market value providing there is 1) a development commitment, and 2) a right to repurchase or a reversion upon a condition subsequent. Institutional organizations such as churches, hospitals, extended care facilities, private schools and community service organizations are required to develop under the City’s conditional use permit procedure.

The City allowed Stadium suites to be sold before it authorized the sales. Response: The Mayor and City Council disagree with the Grand Jury’s finding. Suites were marketed prior to commencement of the agreement with the Bowl Association, however, no suites were sold prior to execution of the agreement.

When a property has been offered by public auction and no acceptable bids were received, it may be sold on a negotiated basis to any applicant submitting an acceptable offer within six months following the date of auction.

Real property exchanges may be consummated by direct negotiation per Municipal Code Section 22.0904, Exchanges of Real Property. However, exchanges will be considered only with other governmental agencies or when there is an advantage to the City. CP-700-10 IBA Report 18-30, Attachment 1 Attachment A CITY OF SAN DIEGO, CALIFORNIA COUNCIL POLICY CURRENT H. Rezoning Prior to completion of the sales transaction, City land shall be considered for rezoning in accordance with the General Plan, existing community plans or other City Council direction if a higher sale price will result. Also, all unnecessary easements affecting title to the property shall be removed if this will result in a commensurate increase in value. I. Easements The City will receive current fair market value for the removal of restrictive easements or access rights previously paid for by the City or other governmental agency or reserved in a sale of City property. J. Priority Handling Since time is of essence in land transactions, all such actions by Council and Committee shall be given the highest priority and special handling. Such action which must first go before a Council Committee will be placed on an early portion of the Committee agenda in order to assure prompt action. Subsequent to the Committee action, the item shall be placed on the docket of the next regular City Council meeting as a Supplemental Item. K. Public Utilities Installed by Private Entities The applicant for the use of unimproved City land for public purposes, such as streets, sewers, and other public utilities, shall compensate the City for the fair market value of the rights to be granted by the City. The amount of compensation shall be established by appraisal. However, lands which have been conveyed to the City after July 18, 1983, by private entities shall at the option of the grantor carry a reservation to the grantor for a period of 10 years following the date of conveyance to the City which would permit the grantor to install public utilities serving the grantor’s adjacent land without the payment of compensation to the City therefore, and provided further that such installations shall not adversely affect any prospective use of the City’s property. Persons who grant property to the City without charge shall have an automatic right to have such public service easements set aside on the donated property in the above manner. CP-700-10 IBA Report 18-30, Attachment 1 Attachment A CITY OF SAN DIEGO, CALIFORNIA COUNCIL POLICY CURRENT LEASING OF CITY-OWNED REAL PROPERTY The City of San Diego has a very diverse real estate portfolio. While the policies below are to actas the standard that governs most leases, the City acknowledges that parts of its leasing portfolio, such as Balboa Park, Mission Bay Park, Non-Profit organizations, Agricultural lands, Airports and Telecommunication Sites have specialized needs or restrictions. In these cases, Council Policy 700-10 will act as a framework for a sub-policy that will govern a specific area. Should a conflict arise between the framework policy and the sub-policy, the sub-policy will govern. A. Criteria for Leasing City property shall be considered for leasing when one or more of the following criteria apply:

The City needs rules on contracts that allow private parties to issue RFPs on the City’s behalf. Response: The Mayor and City Council disagree with the Grand Jury’s finding. The criteria under which the City might chose a third party to issue an RFP would be based on specific circumstances and expertise. Additionally, while Fox Sports did make solicitations for potential naming rights advertisers, this solicitation was not an RFP issued on behalf of the City. The San Diego Municipal Code (SDMC) addressing the competitive process for contracts governs only the City’s selection of contractors. It does not address how third-party contractors conduct their business, including how they find vendors or advertisers, but those third parties are required to mirror as closely as possible the practices of the City.

Development on parklands shall be in conformance with City park development plans, and construction shall comply with City park design criteria.

The City had the time and expertise to issue its own renaming RFP in time for the Stadium events of September 2017. City Response to San Diego County Grand Jury Report Titled “San Diego Continues to Lose Money on Stadium Management” Response: The Mayor and City Council disagree with the Grand Jury’s finding. Had the City conducted a search for a naming rights sponsor, it would have been through the RFS (Request for Sponsorship) process. Qualcomm’s naming rights expired on June 13, 2017, and the City negotiated up until that expiration for Qualcomm to renew. Ultimately, Qualcomm did not renew their sponsorship agreement. Initiating a RFS process after the Qualcomm negotiations concluded would not have allowed the City to contract with a naming rights sponsor in time for the commencement of the 2017 college football season. This would have greatly reduced the sponsorship revenue available for those naming rights.

Lessees shall provide desired services and facilities to the general public without discrimination as to race, color, creed, sex, age, or national origin.

The City needs rules on third parties judging responses to RFPs. Response: The Mayor and City Council disagree with the Grand Jury’s finding. In some cases a third party will have special expertise that would be valuable for judging RFP responses, and the same rules would apply to that third party as apply to City employees. However, as noted in the City’s response to Finding 08, the solicitation Fox Sports made for potential naming rights was not a City RFP.

The Fox Sports and Bowl Association contracts did not conform to the requirements for sole source status. Response: The Mayor and City Council disagree with the Grand Jury’s finding. Sole source certifications for both agreements were reviewed by the City Attorney’s Office and approved by the Purchasing & Contracting Department in compliance with the SDMC. Because the City planned to cease scheduling events in December 2018, the relatively short period of time created a challenge in garnering interest from available suppliers of private suite sellers and stadium sponsorship sales. In addition, the first game of the 2017 San Diego State Aztecs Football season was scheduled for September 2, 2017, so it was imperative that suites and advertising sales be maximized prior to that date. Further, the City already had a contractual relationship with the Bowl Association associated with the Bowl Association hosting Holiday Bowl at the stadium since 1978. The City also has had a contractual relationship with Fox Sports, as Fox Sports is a partner of San Diego State University and the University holds a Use and Occupancy Agreement to play collegiate football games at the stadium.

The City needs rules on valuing revenue-generating contracts. City Response to San Diego County Grand Jury Report Titled “San Diego Continues to Lose Money on Stadium Management” Response: The Mayor and City Council partially disagree with the Grand Jury’s finding. Rules on valuing revenue-generated contracts are important, and the City has already adopted a number of them: the City has multiple Council Policies governing how to value revenue-generating contracts, including Council Policy 700-10 (Disposition of City- Owned Real Property), 700-12 (Disposition of City Property to Nonprofit Organizations), 700-41 (Use of the RFP Process for Lease of City-Owned Land) and 900-20 (Naming of City Assets). See attached Council Policies (Attachment A).

Agencies leasing property purchased with CDBG funds may sublease the property only with advance written permission of the City Manager. Subleases will be considered on their individual merits and consistency with conditions placed upon the City by the Federal funding source. Fees generated from subleasing will belong to the City and be deposited with the City Treasurer upon receipt by the Agency. OTHER INFORMATION: The following related Council Policies are additional requirements for the use of specific properties, except as otherwise noted. It is not intended that the requirements of these policies be waived by this policy. Council Policy No. 700-03, Use of City Land by Youth Sports Organizations. Council Policy No. 700-04, Balboa Park Lease and Rentals. Council Policy No. 700-09, Leases to Noncommercial Nonprofit Organization and/or clubs in Mission Bay Park. Short-term leases negotiated in accordance with Council Policy 700-10 are exempt from this policy. CROSS REFERENCE: Municipal Code SEC. 22.0901 Council Policy 700-11, Policy on Certain Properties Leased to Non-Commercial Nonprofit Organizations CP-700-12 IBA Report 18-30, Attachment 1 Attachment A CITY OF SAN DIEGO, CALIFORNIA COUNCIL POLICY Council Policy 700-41, Use of the RFP Process for Lease of City-owned Land Assigned responsibility - Property Department HISTORY: “Lease Negotiation” Adopted by Resolution R-169955 03/15/1962 Repealed by Resolution R-212957 04/04/1975 “Leases to Nonprofit Organizations Outside of Balboa Park” Adopted by Resolution R-251957 06/30/1980 Amended by Resolution R-254651 07/20/1981 Amended by Resolution R-262834 04/08/1985 CP-700-12 IBA Report 18-30, Attachment 1 Attachment A CITY OF SAN DIEGO, CALIFORNIA COUNCIL POLICY SUBJECT: USE OF THE RFP PROCESS FOR LEASE OF CITY-OWNED LAND POLICY NO.: 700-41 EFFECTIVE DATE: September 8, 1986 BACKGROUND: The City of San Diego disposes of its real estate holdings through public auction sales, negotiated sales transactions and leasing, in accordance with Council Policy 700-10, Disposition of City-owned Real Property. In many cases, land is made available for development through a competitive process and a Request for Proposal (RFP) is used to advertise the availability of the property and the responses of interested candidates are used to select lessees. PURPOSE: It is the purpose of this policy to insure that the use of the RFP process for lease of City-owned land is open, competitive, and consistent with the best interests of the City. It is further intended that the use of the RFP process will be both objective and efficient. POLICY: It is the policy of the City of San Diego that the use of the RFP process for the lease of City-owned land shall be as follows: