The City of SAN Diego Todd Gloria Mayor December 30, 2022 Honorable Michael T. Smyth Presiding Judge of the Superior

The City has received multiple notifications that holdover leases are a concern, yet the percentage of leases in holdover status has continued to increase. Response: The City of San Diego agrees with the Grand Jury’s finding. The City has received multiple notifications that holdover leases are a concern and this number has increased. The Department of Real Estate Assets and Airport Management (Department) has current vacancies and is in the process of filling the vacant positions to assist in decreasing the number of holdovers.

There are processes in place for handling faithful performance deposits for RFPs successfully executed, but no process found for handling deposits for successful RFPs that cannot be executed due to no fault of the proposer, resulting in extended retention of funds. Response: The City of San Diego disagrees with the Grand Jury’s finding. The Department has a standard process for all refunds, including the return of deposits generated through a Request for Proposal (RFP). This process is initiated once the selection process is completed and an award has been made. The property agent submits a Request for Payments/Refund to the Senior Account Clerk, who generates an Accounts Receivables Refund Request Form that is routed for signature approval to the Deputy Director. This form is then sent to the Treasurer for check issuance. When refunding a deposit collected under a RFP, the property agent sends a letter to the unsuccessful proposers notifying them that they were not selected and that their deposit will be refunded.

The increased insurance requirements in the pending 2022 three-year lease indicated a need for a substantial increase in coverage for the TPG, which could also be a concern for other properties in long-term holdover. Response: The City of San Diego agrees with the Grand Jury’s finding. Insurance requirements are updated at the time a lease is renewed; therefore, keeping a lease on holdover could be a concern for other properties in holdover.

DREAM does not have a consistent process for inspecting Torrey Pines Gliderport; property report forms do not include detail on resolution of deficiencies noted, nor responsible party. Response: The City of San Diego disagrees in part with the Grand Jury’s finding. Attachment 1 It is the Department’s policy that inspections are conducted as per the terms of the agreement or no less than every three years. The Department’s lease administration system sends property agents reminders to conduct annual inspections. The property agent utilizes an inspection form to record observations; any deficiencies are communicated to the lessee via a letter or email. This communication to the lessee identifies the responsible party. However, in recent years, due to the COVID-19 global pandemic, and staffing levels, the inspections have not occurred.

DREAM had previously agreed to updating Council Policies 700-10 in 2017; five years later, this has not been done. Response: The City of San Diego agrees with the Grand Jury’s finding. Council Policy 700-10 has not been updated; however, preliminary draft of this and two related policies (700-12 and 700-32) are under internal review and will be brought forward for Council action in 2023.

Inadequate staffing is the reason for ongoing operational shortcomings, such as continuing large numbers of holdover leases, inconsistent documentation of insurance records, and irregular property inspections. Response: The City of San Diego agrees with the Grand Jury’s finding. Inadequate staffing and the ability to attract talent contribute to the Grand Jury’s finding. RESPONSE TO RECOMMENDATIONS: