Photo by Sam Hodgson
The arrival of Mayor Bob Filner and city staff turnover have complicated efforts to finalize managed competition contracts.
Statement: “We made an agreement. You may remember it was a long, drawn-out process where we came to agreement that they would get money but they would give a specified amount of money to what’s gonna be the most important tourist thing for the next few years, that is our Centennial of Balboa Park,” Mayor Bob Filner said in a June 3 interview on KPBS’ “Midday Edition.”
Determination: Barely True
Analysis: Mayor Bob Filner has repeatedly battled with tourism officials over a contract that allows them to collect cash to market the region. The bickering didn’t stop after Filner signed the deal.
Last week, the mayor initially refused to send money collected via a 2 percent surcharge on hotel stays to the city’s Tourism Marketing District because he said the district’s board might not hold up their end of the bargain.
He said the agreement obligated the district to allocate 5 percent of tourism marketing dollars to a committee organizing the Balboa Park Centennial celebration and that the board was not following through..
Filner eventually forwarded the city’s check Friday after the board agreed to give nearly $500,000 to Centennial organizers but the brawl could easily be revived in coming months. Filner has shown he isn’t afraid to pick a fight with hoteliers and other major additions to the city’s contract with the tourism district could provide the mayor with ammunition for another battle.
New legal protections in the city’s contract with the district could mean a smaller pot of money for marketing efforts, which may complicate the board’s ability to meet Filner’s demands in the future.
So we decided to fully vet Filner’s claims that contractual language requires the district to provide funds to the Centennial committee.
In a June 3 appearance on KPBS’ “Midday Edition,” Filner claimed the Tourism Marketing District committed to give a specific amount of cash to the committee.
That statement simplifies the situation a bit, as we explained in a post last week.
The contract the mayor signed in April only says the district should anticipate an application for funds from the Centennial committee.
Here’s the exact language in the contract:
You’ll also note the agreement lays out the percentage of Tourism Marketing District funds likely to be requested over the next three years.
But saying you’ll consider an application for funding is not a guarantee you’ll fund it.
City Attorney Jan Goldsmith said as much in an April memo.
“It simply allows an application to be submitted to the TMD for funding, something that could be done by any group,” Goldsmith wrote. “The amendment does not commit the TMD to approve funding.”
There’s a reason for that. Proposition 26, a state law, complicated public officials’ ability to raise fees and now requires them to demonstrate a specific benefit for the group or industry receiving extra money. (To clarify, in the case of the Tourism Marketing District, hotel visitors actually pay the fee but hoteliers have successfully argued that they foot the bill.)
I provided more details on how this works in a post last week:
The Tourism Marketing District’s budget is supported by a 2 percent fee on hotel stays, so any group that hopes to get cash from the district must prove their event will bring in additional hotel visitors. As a result, organizations seeking this money need to document the number of visitors they expect to draw and detail ways their group will encourage those stays. The groups put together applications and the Tourism Marketing District decides who should get cash, and how much.
This set-up would also apply to the Centennial committee.
Lee Burdick, the mayor’s director of special projects and legal affairs, argued additional language in the contract adds weight to Filner’s demand for marketing dollars for the Centennial.
Here’s the portion of the contract she referenced:
I asked two experts who specialize in contract law to weigh in.
Nancy Kim, a professor at California Western School of Law, once spent her days negotiating contracts for tech companies in Silicon Valley.
She reviewed the portion of the contract that mentions funding for the Centennial committee and declared it unenforceable.
“It doesn’t say that they will approve any application,” Kim said. “It doesn’t have anything about what the approval criteria are and whether they need to approve anything at all.”
She added that the legal language Burdick emphasized — that approval of the Centennial’s request shall not be “unreasonably denied” — could be read to ensure the planning committee is reimbursed for sales, marketing and other efforts rather than that their request for funding be approved in the first place.
Jeremy Telman, an Indiana-based law professor who edits a blog for other contract law professors, took a slightly different view after reading the agreement.
As long as there’s an appropriate application, Telman said, the contract appears to say the tourism board has to pay up or be in violation of its agreement with the city.
“So long as (Balboa Park Centennial committee) is asking for money to be used for sales, special events and advertising and there would be grounds to generate more hotel stays, I would think the Tourism Marketing District has to give them the money,” he said.
Still, Telman acknowledged a judge or outside arbitrator would likely have to decide whether the board’s decision to deny funding or allocate less than suggested would be reasonable or in violation of the contract if this scenario played out.
It isn’t inconceivable, particularly given Filner’s propensity to take on tourism officials.
And the updated Tourism Marketing District agreement includes some new rules that could significantly decrease available cash for the district, meaning there could also be less money for the Centennial committee.
The new contract calls for hotels to sign waivers clearing the city of any liability in two ongoing lawsuits related to the Tourism Marketing District and any others that may arise.
Surcharges collected at hotels that haven’t signed waivers won’t flow into district coffers. Instead, they’ll be held in a city account.
It’s difficult to predict how many city hotels will submit the required paperwork. At its Friday meeting, the tourism board looked at budget projections should only 60 percent sign waivers. (That’s the percentage of hoteliers who supported the tourism district in a 2012 petition drive ahead of a November vote on whether to continue charging hotel guests extra fees to fund marketing efforts, according to district executive director Lorin Stewart.)
If only that portion of hoteliers submit necessary paperwork, the district expects its budget for next year will drop from $23.4 million to about $12 million.
Both estimates include another hit too. The new contract also requires the district to set aside up to $2.3 million to cover the city’s legal expenses.
This could all translate into less money than the mayor wants for the 2015 celebration.
“If there is less funding, it means that the Balboa (Park Centennial) will receive less funding,” said John Lambeth, the marketing district’s attorney.
The tourism board will likely try to follow through on funding laid out in its new contract with the city but whether they can depends on whether the money is available in the first place, and the strength of the Centennial committee’s applications.
The board responded kindly to Centennial organizer’s first proposal. It opted to allocate $499,258 to the cause this year and another $2.3 million next year.
It’s worth noting a potential drop in available cash due to the hotel waiver requirement could cut the latter amount in half though the Lambeth said the board would still probably still aim to set aside 10 percent of its disbursable funds for the Centennial.
So where does that leave the mayor’s claim that the board agreed to provide a specified amount of cash to the 2015 event?
We dub a statement “barely true” when it contains an element of truth but is missing critical context that may significantly alter the impression the statement leaves.
This ruling applies here. The mayor is correct that contract does suggest specific amounts to go to the Balboa Park Centennial committee but the tourism board hasn’t promised that cash. In fact, a state law prohibits the tourism board from simply cutting a quick check and other new rules imposed on the district could make it more difficult for the board to appease the mayor.
If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.
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