The waves at La Jolla Shores are a beginning surfer’s dream. They break far from shore, and the beach’s gradual slope means that when they do, new surfers have plenty of time to ride the gentle shallow whitewater all the way to shore.

La Jolla Shores is a surf instructor’s dream, too. The scenic strip of San Diego’s coast and its oceanfront hotels and boutique shops draw tourists year-round, providing a renewing pool of potential clients.

Those factors make the four surf instruction permits that the city’s Real Estate Assets Department issues there the most lucrative of the 13 citywide. Since 2005, when the city first required permits for commercial surf instruction on San Diego’s beaches, two companies have shared the sands at La Jolla Shores.

But how the city has distributed those permits in the last four years is threatening to put one of those companies, Menehune Surf, out of business, said Darren Fulhorst, the company’s owner. When his competitor, Surf Diva, was granted only two of the three permits it bid on in 2005, the city circumvented the formal bidding process to create a fifth permit at La Jolla Shores, which it granted to Surf Diva, and in the years since has been unwilling to account for how or why it did so.

That decision, Fulhorst said, set the precedent for the city’s move to revoke one of his two permits and grant it to Surf Diva when the fifth permit was eliminated during the 2008 bidding process. Last year, Fulhorst’s company was awarded only one permit to operate on La Jolla Shores, cutting his operating capacity by half. Surf Diva was awarded the other three.

Gary Jones, the real estate department’s asset manager, the city’s decision was based on scores given to each of the companies’ proposals.

“All the proposals were ranked using seven criteria,” Jones said. “The committee would have weighted the criteria to come up with an overall total score, and evaluated according to that weighted criteria. Surf Diva came out with a better evaluation.”

But Fulhorst said the decision to grant one of his permits to his competitor was spurred more by the department’s need to formally grant Surf Diva the third site it had created to accommodate the company’s demands outside of the formal bidding process in 2005.

In the fall of 2004, the city, in an attempt to regulate the commercial surf instruction operations on the city’s beaches and generate additional revenue, asked existing surf camp owners to submit proposals for the limited permits.

Fulhorst applied for two of the four La Jolla Shores permits to accommodate the Menehune Surf Camp and the Ocean Girl surf school, which he had recently created. Surf Diva, which had recently acquired two smaller surf schools operating on La Jolla Shores, applied for three of the four site permits.

In May of 2005, each company was granted two three-year permits. The decision meant that Surf Diva’s Australian Surf Academy, which would have been granted the third permit the company’s owners requested, would be unable to operate at La Jolla Shores.

That should have been the end of it.

But then a new permit popped up. In a July 11 letter to Surf Diva owner Isabelle Tihanyi, READ property agent Diane Bartko noted that the city had created an additional site, which it called 1A, for the company.

Why that fifth site was created is what Fulhorst has been trying to find out for more than a year, since the end of the 2008 renewal process when he lost his permit. Since then, his operating capacity has been reduced by half, and the investments he has made, like his partnership with a local boutique, and a mortgage on his house, threatened, he said.

Representatives from the Real Estate Assets Department could not account for the decision to accommodate a fifth site permit outside of the formal bidding process in 2005, saying only that it was within the department’s authority to do so.

In deciding how many permits to grant at each beach, Bartko said the department only formalizes the recommendations made by the city’s lifeguard services and parks departments, which evaluate the beaches and determine how many commercial operations each can safely accommodate.

In both 2005 and 2008, that number for La Jolla Shores was four, and four permits were made available during each bidding cycle. The creation of site 1A in 2005 following the conclusion of the bidding process appears to have been made to accommodate the Surf Diva’s third company, although neither city nor Surf Diva representatives would speak about who had requested it.

Marine Safety Captain Rick Wurts, who made that recommendation in both 2005 and 2008, and who would have advised READ on any additional sites, said he could not remember how or why site 1A was created, saying only that the determination of a beach’s commercial capacity changes day to day and over time.

“It’s fairly fluid, and I think that it becomes sort of a balance of all the different things that are in play on any given day,” he said.

Wurts, who in 2005 was also on the READ committee that decided which companies would be issued permits, recused himself in 2008, “in order to ensure that there was an absolutely objective evaluation,” adding that “he didn’t have a conflict of interest with anything. I could have been a perfectly objective part of the evaluation process.”

Marco Gonzalez, an environmental lawyer who represented Surf Diva during the bidding process in both 2005 and 2008, was also unable to recall how he secured the fifth site for his clients in 2005.

“That was a long time ago. I don’t remember,” he said.

In an e-mail, Surf Diva owner Tihanyi said she could not speak for the city’s decision to create site 1A.

“Please contact the City for details regarding site 1A since I did not handle that. Surf Diva acquired the Australian Surf Academy after site 1A was added,” Tihanyi wrote.

But a copy of the 2005 bid submitted to READ by Surf Diva, before the creation of site 1A, shows the Australian Surf Academy as one of the three operations for which it had requested permits.

For Fulhorst, getting to the bottom of how site 1A was created could shed light on the READ panel’s decision to grant Surf Diva one of the permits he previously held.

Fulhorst said he was assured by READ representatives that his permit status would not change when he applied for the two sites in 2008, but was later informed that the READ panel used the existence of the site 1A permit as justification for issuing Surf Diva three of the four permits, even though it was never formally recognized during the 2005 bidding process.

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