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Wednesday, July 16, 2008 | The Mayor’s Office has asked why the president and financial director at the Southeastern Economic Development Corp., the two officials in charge of its financial management, saw dramatic fluctuations in their paychecks in fiscal year 2007-2008, according to a letter to the SEDC finance director.
Carolyn Y. Smith, SEDC’s president, received paychecks throughout the year of anywhere between $7,166 and $34,667 for a two-week period, according to the letter sent Tuesday.
And, in the same document, city accountants included an analysis stating that SEDC has devoted about 38 percent of its total spending in recent years to administrative costs, a much higher figure than SEDC reported following a voiceofsandiego.org story last week that revealed the agency’s clandestine system of bonuses and extra compensation.
Mayor Jerry Sanders’ spokesman, Fred Sainz, said the figure sheds new light on the amount of money the city of San Diego redevelopment department has been spending on its employees versus what it spends on bettering the community.
Greg Levin, the city comptroller, sent a 29-page letter to SEDC Finance Director Dante Dayacap on Tuesday asking him to explain three $32,000-plus paychecks paid to Smith and other larger-than-normal paychecks paid to Smith, Dayacap and another top official throughout fiscal year 2007-2008.
The city had approved a salary of up to $180,000 that year for Smith, while SEDC claims she was paid a salary of $172,000. However, the mayor’s analysis states that Smith was paid a total of $261,393.
“Our review of expenditure reimbursements submitted by SEDC indicates several significant fluctuations in the amount of gross compensation awarded to certain employees responsible for the financial and executive management of SEDC,” the letter states.
Levin’s letter asks Dayacap to explain discrepancies between what SEDC claimed in its budget it would spend on administration costs and what the agency actually spent on administration as a percentage of its total spending.
Smith and SEDC board Chairman Artie M. “Chip” Owen claimed SEDC spends between 5 percent and 8 percent of its total budget on administration costs in a memo sent in response to the voiceofsandiego.org story last week.
But the city accountants’ analysis showed that the agency spends far less on its redevelopment projects each year than it budgets for, and that its administration costs have risen from 16 percent of its total spending in fiscal year 2002-2003 to 38 percent of total spending in fiscal year 2006-2007.
Sainz said the administration costs should have been around 10 percent, a figure closer to what Smith and Owen claimed in their memo.
“That is much more what you would expect of any organization, especially when they have project expenses,” Sainz said.
“Shouldn’t those funds be more appropriately used on the reason why that redevelopment district was started to begin with, which is the betterment of that community, not for a very few select individuals to be paid outrageous compensation packages?” he said.
Levin’s letter detailed every bi-weekly compensation payment made to Smith and Dayacap for the last four fiscal years, figures that SEDC reports to the city every month. That breakdown revealed those two officials have received, proportionally, far more in bonuses and extra compensation than the average employee at SEDC.
SEDC is an arm of the city’s Redevelopment Agency and is responsible for shepherding redevelopment efforts in some of the city’s most blighted neighborhoods.
The list of payments also showed that the paychecks for Smith and the other top officials fluctuated greatly throughout each year.
For example, for the 21st pay period of fiscal year 2007-2008, Smith was paid $34,666, up from $7,166 the paycheck before. The same week, Dayacap was paid $27,575, up from $4,375 the paycheck before. For the same period, the agency’s average staff compensation was $5,006, up from $2,114 the paycheck before.
The accountants’ analysis shows something that wasn’t immediately clear from the review of SEDC’s tax documents that prompted voiceofsandiego.org‘s original story: That Smith and Dayacap receive bonus and extra compensation payments that are much larger than other employees’, even given their larger salaries.
The story last week unveiled a complex system of unbudgeted bonus and extra compensation programs that paid Smith and her top deputy more than an estimated $250,000 above their base salaries in the last four years. Members of the SEDC board of directors and the City Council, which approve the SEDC budget, said they were unaware of the bonus programs.
On Monday, mayoral aides widened their inquiry into SEDC and sent Owen a letter stating that all agency funding would be frozen at the “minimum amount sufficient to permit SEDC to continue operations” in response to questions surrounding SEDC pay.
Sainz said the funding freeze will remain in place until the Mayor’s Office has completed its “due diligence” with respect to SEDC’s budget. The Mayor’s Office also asked Owen to end the extra compensation program; Owen has said the practices will be reviewed at a July 23 meeting.
Levin’s letter asks Dayacap to answer several questions about discrepancies between the budgeted amounts for SEDC’s project expenditures and the actual amount the agency has spent on those projects, according to city records.
And the letter provides Dayacap with a “worksheet” to complete regarding the compensation payments. The worksheet contains a number of questions about each spike in officials’ pay throughout the last four fiscal years, asking which of the various bonus programs accounted for the pay boosts.
The letter asks Owen to respond specifically to the increases in gross pay for Smith and Dayacap, and asks him to describe what “legitimate public purpose” the compensation served. That’s an apparent reference to IRS rules governing excessive executive pay at nonprofit organizations.
The letter asks Owen to respond by no later than Aug. 1. The Mayor’s Office is also waiting for a response to previous letters the mayor and his aides sent Owen on July 8 and July 14.
An SEDC spokesman said it would be inappropriate to comment until the agency had responded to the mayor’s requests.