By Robert Haugh
Yesterday, we reported the details of the Convention Center audit that TAP International shared with the City Council Tuesday night.
Today, the Santa Clara Chamber of Commerce got their termination letter. They’ve been managing (or mismanaging) the Convention Center for 34 years.
The City sent out a press release today, too. Here’s the major reason for the termination:
The audit showed a disturbing pattern of financial and operational mismanagement which reduced the financial potential and performance of both entities while also raising major ethical concerns. The Auditor recommends that the City engage state and federal agencies to investigate potential violations of law.
A City analysis of the audit’s findings shows that the Chamber’s operation of the Convention Center and CVB resulted in $20.5 million of net losses and City subsidies over the last several years. The vast majority of that amount was lost revenue from excessive facility discounts and free rentals from 2011-2018.
Here’s what Mayor Lisa Gillmor said:
The audit finds that the City of Santa Clara has missed out on approximately $18.9 million of convention center revenue over the past seven years, resulting from a combination of unauthorized discounts and fee waivers. Given the decades that the Santa Clara Chamber of Commerce has been holding these contracts, it is likely that the City has lost additional tens of millions of dollars due to mismanagement, self-dealing and misuse of one of our City’s valued assets. This Council’s efforts to reform must now focus on fixing this situation, making sure this never happens again. We need to reset how the convention center operates.
Here’s what City Manager Deanna J. Santana said:
The audit confirmed serious misuse and mismanagement of the City’s assets and the City’s past lack of oversight added to the problem. While the Council has been focused on various reform efforts to improve management of public resources, we must acknowledge the City’s past failures in overseeing these contracts. We must now dedicate the necessary professional resources to take corrective action. Unfortunately, the audit shows that the magnitude of corrective action needed is significant.
If anyone thinks this is the end of the Chamber story, think again. This is likely just the beginning. As the City press release says, the City will be in contact with the IRS and the California Fair Political Practices Commission to report the Chamber’s “potential violations of law.” Wow.
Let’s hope those federal and state agencies take the audit findings seriously.
A Culture of Self-Dealing
Two years ago, we found some evidence of Santa Clara Weekly lobbyist/publisher Miles Barber engaging in self-dealing with the Chamber and its PAC. We published a story on October 20, 2016.
Here’s the key section from that report two years ago:
I filed a formal complaint with the IRS regarding the newspaper publisher’s conflict of interest on the Chamber Board of Directors … The Publisher helps decide whom the Chamber supports then the publication then gets paid by the Chamber to advertise for those candidates.
According to a Chamber board member Dave Tobkin: “The PAC uses some of its separate funds to pay for political ads, flyers, and televised interviews. Almost all of these expenses are paid to Chamber board and members.” [underline added]
That sounds like “self dealing” which is legally prohibited by the IRS. I think this is wrong. The practice certainly isn’t transparent. Santa Clara deserves better.
It’s obvious from Tobkin’s response that the Chamber has a culture of self-dealing. And they’ve had it for a long time. It took an audit to bring a lot of it out into the open.