Report 2001-116 Summary - April 2002

San Diego Unified Port District:

It Should Change Certain Practices to Better Protect the Public's Interests in Port-Managed Resources

HIGHLIGHTS

Although many San Diego Unified Port District (Port) actions we reviewed were in accordance with state law and Port policies, we noted the following exceptions:

  • The Port did not disclose that it offered below-market rental payments to one hotel potentially lowering the Port's revenue by $7.4 million over 10 years.

  • For three major developments, the Port did not seek competition by issuing requests for proposals or qualifications.

  • The Port's contracting practices sometimes do not ensure fair and open awards of its contracts and purchases.

  • The Port lacks postemployment guidelines for its officials and often failed to meet its timelines for employee discipline appeals.

  • The Port can improve its compliance with open meeting laws.

RESULTS IN BRIEF

The San Diego Unified Port District (Port) oversees the land in and around San Diego Bay (bay). It manages the harbor, operates the San Diego International Airport, and administers the public tidelands, excluding those administered by the United States military. Additionally, the Port promotes commerce, navigation, fishing, and recreation on these public tidelands. The Port's jurisdiction includes land in the cities of San Diego, Chula Vista, Coronado, National City, and Imperial Beach, as well as any area within the County of San Diego that is economically linked to the development and use of the bay. The member cities appoint a seven-member Board of Port Commissioners (board) to govern the Port.

Although many Port actions we reviewed were in accordance with state law and Port policies, the Port can change some of its practices to better protect the public's interest in the bay and the surrounding areas. In particular, we discovered several notable exceptions to the Port's policies regarding leasing and development agreements that may affect the value the Port receives from its properties. In one case, the Port did not disclose or justify to its board that it had offered below-market rent to one hotel, which may lower Port revenues by $7.4 million over a 10-year period. The Port also did not consider rents paid on comparable properties when it established the rents for its marinas. This decision reduced the rent paid to the Port by approximately $600,000 over the last two fiscal years. Furthermore, when it pursued three major development projects, the Port did not seek competition by issuing requests for proposals or qualifications and therefore made itself vulnerable to claims that it has acted unfairly and not in the public's best interests.

The Port's contracting practices sometimes do not follow policies designed to ensure the fair and open award of its contracts and purchases. In two cases, the Port amended contracts instead of rebidding them, even though the scope of work had significantly changed. The Port also acted contrary to best practices by allowing consultants to bid on work they helped design in a prior contract. In addition, the purchasing department did not follow Port policies to notify the board and obtain its approval of certain service purchase orders and amendments. As a result of these failures to follow its leasing and contracting policies, the Port has sometimes granted concessions unequally, cannot always guarantee that it receives the best value in its agreements, and has made itself vulnerable to charges that it conducts these aspects of its business unfairly.

To minimize potential concerns regarding conflicts of interest and to meet its commitment to its employees, the Port needs to adhere more closely to certain of its policies and may need to adopt additional guidelines. Although the Political Reform Act of 1974 requires that public officials complete a disclosure statement reporting interests in certain real properties, one commissioner failed to report his interest in one property. Also, because the Port's conflict-of-interest policy lacks postemployment guidelines similar to those in place at the state and federal levels, one former commissioner has represented clients on issues before the board within one year after leaving the board. As a result, the public may perceive that this former commissioner was able to exert unfair influence on the board's decisions. Furthermore, the Port's delays in completing disciplinary proceedings against its employees violate the time frames established in its personnel rules and regulations and may lead to frustration and confusion among employees desiring a timely resolution of these matters.

The Port has not always followed all the requirements of the State's open meeting laws. At a 1998 meeting, the board discussed an issue in closed session even though it had not appropriately notified the public that the issue was being continued from a prior meeting. At a 2001 meeting, the executive director briefed the board in a closed session on an issue that had not been included in the agenda. In addition, the Port has not recently reviewed its costs for providing agendas to the public and therefore cannot be sure that the fees it charges for doing so do not exceed its costs.

RECOMMENDATIONS

To ensure that it obtains the best value in its leases, development projects, and contracts, the Port should do the following:

  • Fully disclose and provide appropriate justification to the board when offering below-market rates in its leases.

  • When establishing marina rental rates, consider an appraisal methodology that combines both economic analysis and consideration of rates paid on comparable properties.

  • Publicly solicit competitive proposals when developing major projects, unless there are compelling public interests not to do so.

  • Competitively bid new contracts instead of amending existing contracts when the scope of work significantly changes.

  • Adopt a policy that would prohibit contractors involved in developing specific requirements for a project from subsequently bidding on that project.

  • Follow its policy concerning board involvement when entering into service contracts.
To minimize potential concerns regarding conflicts of interest and to meet its commitment to its employees, the Port needs to do the following:
  • Encourage Port commissioners and employees who file disclosure statements to review their current and past statements for completeness and accuracy.

  • Consider adopting postemployment guidelines similar to those in place at the state and federal levels.

  • Ensure that personnel appeals are conducted according to Port procedures.
To improve its compliance with the State's open meeting laws, the Port should do the following:
  • Ensure it properly notifies the public of all board discussions.

  • Reevaluate the fees it charges for distributing agendas to ensure that the fees do not exceed the cost of distributing the agendas.
AGENCY COMMENTS

The Port reports that it has already adopted and implemented, or is in the process of adopting and implementing, most of our recommendations. It also provided responses to some of our findings. To provide clarity and perspective, our comments follow the Port's response.


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