City of Santa Clara locked in battle over convention center

Santa Clara has been paying the chamber taxpayer funds to manage the convention center without an agreement specifying what it is getting in return

For years, Santa Clara has paid the local Chamber of Commerce a fee to manage the city’s convention center. But in an astounding example of local government gone wrong, a recent report reveals that the city has been paying the chamber an increasing amount of money using taxpayer funds without an agreement specifying what, exactly, it is getting in return.

“I think we need to get to the bottom of how it happened,” said Mayor Lisa Gillmor at Tuesday’s City Council meeting, where the news dominated much of the night’s discussion. “This was done without the council’s knowledge or the public’s knowledge.”

In 1984, the city and chamber entered into an agreement that said the chamber would manage the convention center, overseeing marketing, booking events, hiring staff and other jobs. The contract had no end date, and, it turns out, didn’t even specify that the city would pay the chamber a management fee.

“For decades, staff has been paying a management fee without a required contract that specifies the payment terms and structure for which to issue public funds,” acknowledges the report, put together by the city manager’s office.

Yet, like clockwork, the city paid the chamber. For nearly 30 years the fee was a flat $45,000 a year. Then, it began increasing in 2014, rising dramatically to more than $145,000 a year in 2017. With apparently no explanation to the council, the way the payment was calculated shifted from a flat rate to one based on a percentage of proposed revenue for the convention center.

“Over the past three fiscal years, the management fee has been increased without proper disclosure to the City Council nor required legal agreements,” the report notes.

According to City Attorney Brian Doyle, any increase should’ve been brought before council as a line item in the budget for approval.

The chamber says it did present the management fee as a line item to city staffers. But it appears that fee never made it before council, and instead was rolled into other budget items by city staff.

“The chamber isn’t trying to do anything nefarious,”

Ravinder Lal, a longtime member of the chamber’s board told the council.

Yet Gillmor blamed the group for a lack of transparency and suggested the city take over general oversight of the convention center instead.

“To date, the Chamber of Commerce has not provided us with much information about how they add value,” Gillmor and Councilwoman Teresa O’Neill wrote in a recent email to their fellow council members. “Equally troubling, they have not accounted for how they used the increased funds the last two years.”

It’s unclear exactly who is to blame for the mess. In the last several years, both the city and the chamber have seen a turnover in senior staff,

and there’s been little oversight of the chamber’s management of the convention center.

The chamber, said City Manager Deanna Santana, who has been in the role less than a year, also has had access to the city’s general account and the ability to issue checks. In recent weeks, the city’s finance department has begun reviewing payments, but the checks went unmonitored for years.

“This is not the first time matters like this have come forward,” Santana said, acknowledging that the report does not “shine well” on city staff or the administration.

“There were some major, major mishaps here with our public finances,” Gillmor said.

Chamber board chair

Joe Siecinski and chairelect Jan Eric Nordmo told the council they’re open to changing the management agreement, but want the chamber to continue managing the convention center. The organization’s management of the center, they said, has helped boost demand for hotels and other amenities in the area.

“We’re in this together,” Siecinski said.

In a letter to the council dated May 10, Siecinski recommended continuing the current method for figuring the management fee, 2 percent of the convention center’s budgeted revenue. Exactly how the chamber spends the money is unclear,

according to the city, but the chamber says the fee is justified.

“When reviewing our performance, we believe that the current structure provides a reasonable management fee,” Siecinski wrote.

But it’s unclear he’ll get his wish.

In their email, Gillmor and O’Neill said they “see little to no justification” for paying a management fee at all, and on Tuesday the council voted to suspend payment of the fee until the city manager’s team can arrange an audit of the agreement.

According to Doyle, the city attorney, the agreement requires the chamber to continue to manage the convention center even if the payment of a management fee stops. Siecinski did not immediately respond to a request for comment about whether the chamber views the agreement the same way.

Ultimately, the future of the convention center, which hosts thousands of attendees each year at a variety of events, from design expositions to dance shows, appears to be in limbo for now.

“This to me,” said Councilwoman Debi Davis of the situation, “is like the perfect storm.”