San Diego County Grand Jury on Wednesday issued a report calling into question the Chula Vista Tourism and Marketing District's use of tax revenue for staffing costs rather than marketing the city to potential tourists.
The investigative body began evaluating TMD operations and finances last year after a complaint was filed suggesting a misuse of funds. The grand jury’s report found that 72 percent of the $693,487 collected between July 2009 and June 30, 2011, was spent on staff expenses.
The district is funded by a 2.5 percent assessment on local room rents, which is collected by the city and spent by the Chula Vista Chamber of Commerce, which is responsible for managing the TMD and its daily operations.
The management district plan that governs TMD activities states that funds are exclusively for the operation of the Chula Vista Visitor Information Center, advertising and promotion to increase hotel and motel occupancy.
However, the report raised questions about the overlapping responsibility between the chamber and district during its first two years of operation. The chamber’s executive committee also served as the TMD board.
Councilwoman Pat Aguilar said she first found out about the grand jury’s investigation approximately nine months ago when the organization called to schedule an interview with her.
“I’m working so hard to improve Chula Vista’s image and for something like this to come out, it’s embarrassing…” she said.
Aguilar said when she came into office last year she had questions about how the Chamber of Commerce and Tourism and Marketing District did business.
“I couldn’t figure out how much money was coming into the chamber’s coffers from the TMD,” Aguilar said. “It seemed to me that there was no separation of TMD monies and the chamber’s money they raise from their membership.”
Aguilar said her questions to city staff during the council meeting were not answered satisfactorily so she put them in writing for staff as well as chamber CEO Lisa Cohen.
The grand jury interviewed Chula Vista officials, district members and examined TMD and Visitor Information Center financial statements, in addition to reading meeting minutes for the TMD board of directors and the Chula Vista Hotel/Motel Association.
Their findings also state that another spending issue relates to the formation and reimbursement expenses TMD pays the chamber to cover legal fees and the cost of operating the Visitor Information Center, totaling $219,000.
“The grand jury could find no record of the City Council discussing this reimbursement during subsequent budget approval, nor was any breakdown of the costs included in the $219,000 in any TMD financial report,” read the report.
In addition to the staff expenses, the report states the TMD also spent nearly $100,000 or 15 percent to recoup legal expenses to form the TMD, while it only spent 10 percent for marketing and 1 percent for consulting services.
The city of Chula Vista initially approved the formation of the Tourism Marketing District to promote tourism and hotel stays in July 2009, which was originally proposed by the Chula Vista Hotel/Motel Association and is comprised of 22 hotel and motel owners.
“I don’t think we know the details about the (co-mingling of) funds,” Assistant City Manager Scott Tulloch said. “I think we need an explanation from the chamber.”
However, Tulloch said that steps have been taken to create greater transparency and accountability.
“We think the work that’s been done in the last few months will cure issues that the grand jury initially found,” Tulloch said. “We are currently working to cure the others.”
The grand jury’s report states that since the grand jury began its investigation, the city has addressed several issues in March with a formal agreement between the city and chamber, which required a new TMD committee with eight hotel/motel owners or operators (elected by representatives of Chula Vista hotels/motels) and seven chamber executive committee members.
This committee would be the primary decision-making body for TMD activities and finances to ensure they are targeted as well as develop performance measures to meet TMD goals.
“I think when the grand jury reminds us as a city that we should have a role in the oversight of the contract, that’s what we should have and I think we’ve been working on that role,” said Mayor Cheryl Cox.
“On principal I like the idea of having TMDs, I think they make a lot of sense and can work well,” Aguilar said. “It’s unfortunate that this particular one has had these management problems because that’s going to make it harder to establish a new one when this one expires (in the summer of 2013).”
Other issues raised included that the Visitor Information Center is funded entirely by the district and that nine percent of the center’s expenses are for employee auto allowance and phone allowance, $14,260 and $1,080, respectively.
Cohen did not return phone calls seeking comment. A statement she issued via email arrived after deadline.