Audit blasts chamber over convention center

Santa Clara City Council votes to terminate 34-year agreement with the organization

After a damning new audit accused the Santa Clara Chamber of Commerce of mismanaging the city’s convention center, the Santa Clara City Council voted this week to terminate its 34-year agreement with the organization.

The chamber has managed the center and the city’s visitors bureau for more than three decades, but the new audit accuses the organization of misusing government resources and allowing conflicts of interest to go unchecked.

“The audit finds that the city of Santa Clara has missed out on approximately $18.9 million of convention center revenue over the past seven years, resulting from a combination of unauthorized discounts and fee waivers,” Mayor Lisa Gillmor, who has long been critical of the chamber’s management of the center, said in a statement Wednesday.

“Given the decades that the Santa Clara Chamber of Commerce has been holding these contracts, it is likely that the city has lost additional tens of millions of dollars due to mismanagement, self-dealing and misuse of one of our city’s valued assets.

This council’s efforts to reform must now focus on fixing this situation, making sure this never happens again.”

Performed by TAP International and released this week, the audit found that employees for the convention center and the visitors bureau earned commissions and bonuses, respectively.

While that’s not unusual for the sales industry, the extra pay wasn’t approved by the City Council or addressed in budgets.

And it wasn’t paid out of Santa Clara’s monthly payments to the chamber, but informally out of the city’s Tourism Improvement District, without a legal agreement in place. According to the audit, none of the city management staff knew about the payments.

In an email Wednesday, chamber president Nick Kaspar said his team was reviewing the audit, which it received late Tuesday, and would present its response to the City Council in October.

The audit called into question some of the discounts organizations got when they used the convention center. The booking policy allows for some discounts when an organization pays for a certain level of catering services, but at least one faith-based group got more than $1 million in discounts without purchasing catering services.

In some instances, city agencies were also permitted to use convention center space without paying a facilities charge, a move the audit questioned, given that “the convention center is a public enterprise operation.”

The audit also raised concerns about self-dealing. The visitors bureau spent $5,000 in taxpayer money in April to run ads in the Santa Clara Weekly, which is owned by Miles Barber, a member of the chamber’s board of directors. The chamber also apparently permitted its own political action committee to use the facilities, which may violate guidelines outlined by the state’s Fair Political Practices Commission.

In an email Wednesday, Barber questioned Gillmor’s motives for requesting the audit. The visitors bureau, Barber said, wanted to advertise in the city’s only paper and received numerous responses as a result of the ads.

During a tense meeting Tuesday, the council voted in favor of issuing a roughly six-month termination notice to the chamber for its convention center management contract. It now plans to solicit proposals to run the center under a new, stronger contract.

The council had requested the audit in May after it came to light that the city had been paying the chamber an increasingly large fee to manage the convention center without a clear understanding of what the money went toward.

The audit, while critical of the chamber’s actions, also called out Santa Clara for failing to properly oversee the organization.

“It is unfortunate and, quite frankly, irresponsible that the city or chamber, in fact, did not review the operations or contracts for over 34 years to provide the opportunity to update past practices and work together cooperatively,” Kaspar wrote in an email.

In her own statement, city manager Deanna Santana acknowledged the city had been lax in its oversight of the chamber.

“While the Council has been focused on various reform efforts to improve management of public resources, we must acknowledge the city’s past failures in overseeing these contracts,” Santana said. “We must now dedicate the necessary professional resources to take corrective action.”

The audit points out that the convention center and the visitors bureau currently operate as separate entities and “could benefit from an integrated and comprehensive marketing plan.”

Santa Clara has retained the firm Jones Lang LaSalle to develop a plan for the future of the convention center. Dan Fenton, who resigned from his post running San Jose’s convention center in 2010 amid accusations of mismanagement, works for the company.

For now, the chamber said it is committed to continuing to book conferences and other events that will benefit the city’s business community at the convention center.

“I truly hope that the chamber and city are pulling in the same direction and that we do not let outside influences or alternative motives deter us from doing what is right for Santa Clara,” Kaspar said, “because we have a very dedicated and strong board that is ready to bring Santa Clara and the chamber into the future.”