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San Diego Mayor Jerry Sanders’ administration violated city law last year by authorizing, without City Council approval, a $658,000 contract to the consultants who are designing his city government privatization effort, known as “managed competition,” according to the City Attorney’s Office.

The most the mayor can authorize without council approval is $250,000, according to the municipal code. City documents show that the administration accepted a one-year contract worth $658,515 with Virginia-based Grant Thornton, LLP in April of 2007.

It is unclear whether the administration has actually paid Grant Thornton more than the $250,000 threshold, or if it owes the consultants more than that amount. However, Sanders is scheduled to go before City Council on Monday to request $400,000 from the city’s “appropriated reserve” fund that will go to Grant Thornton.

The appropriated reserve is supposed to be used for “unintended expenses,” according to Independent Budget Analyst Andrea Tevlin.

The city’s acceptance of the Grant Thornton contract in 2007, coupled with the last-minute request for $400,000, have raised suspicions that the administration is attempting to get retroactive council approval for money it has either already promised to Grant Thornton or already paid to the consultants.

“It’s not hard to conclude that that is probably what is going on,” said Chief Deputy City Attorney Michael Calabrese, who notified the Sanders administration in an April memo of the city attorney’s position regarding the agreement.

When asked about the issue, Sanders spokesman Fred Sainz called it a “philosophical difference of opinion” between the administration and the city attorney on mayoral powers.

“We believe the manner in which the city has engaged with Grant Thornton has been completely legal, appropriate and straight forward,” Sainz said.

Grant Thornton is one of the largest and most experienced consulting firms in the nation when it comes to designing government privatization efforts. The firm is currently at work drawing up documents that will provide the framework of the city’s managed competition program.

Managed competition is the cornerstone of Sanders’ fiscal agenda. In order to get out from under its large debt obligations, the city must be able privatize some of its services, the mayor says. It is a highly controversial issue, especially among city workers and unions.

As things stand now, Calabrese said the administration violated both the municipal code and the city charter with its acceptance last year of Grant Thornton’s proposal.

Annual payments to consultants are almost always an estimate, because they are paid by the hour. However, the administration’s estimates still have to be less than the $250,000 threshold to avoid going before council, Calabrese said.

“You have to guess,” he said. “Well the guesswork was $650,000, which means you have to go to council.”

Regarding consultants, the city charter states: “If the cost of hiring an expert or consultant exceeds a sum to be established by ordinance of the City Council, no such expert or consultant shall be hired without approval from the Council.”

“The way this has been done, the effect has been to tie the council’s hands, and that is not what the law requires,” Calabrese said.

Stay tuned for more.

DAVID WASHBURN

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