Sportsplex lease error stirs pot in Poway
Poway city officials under billed a tenant for nearly six years on a lease at the Poway Business Park and, after discovering the error, quietly negotiated a settlement that called for some of the repaid money to go toward the Tony Gwynn Memorial instead of city coffers.
City Manager Dan Singer negotiated the proposed deal without notifying the City Council, after learning in March that Sportsplex USA had been underpaying on its city lease since 2010, a shortfall of about $90,000. Singer disclosed the agreement to the council in a memo late last week, a day after the San Diego Union-Tribune requested details of the lease.
It’s the second time in few months that a city billing error has made headlines. Poway under billed Pomerado Hospital for its water usage by about $800,000 over a seven-year stretch, before discovering the problem last summer. Singer notified the council about that issue earlier this year.
In the Sportsplex case, council members said they were outraged that they hadn’t been told about the problem earlier and said the deal — which hasn’t been formally executed — won’t stand.
“There is no way we should be just now hearing about this,” Councilman John Mullin said in a written response to Singer’s memo. “If this issue became known to staff in March, it should have been made known to the council in March.”
Under the settlement, Sportsplex agreed to pay its full rent for 2015 and make up one year’s past deficiency of $15,875 — $10,000 of which would go toward the Gwynn memorial. Singer declined to say Monday whose idea it was to put some money toward the project.
Mullin and others found the donation particularly troubling. The council has vowed for months that no taxpayer money would be spent on the memorial, a tribute to the late Padres great and longtime Poway resident.
“It’s wrong financially. It’s wrong morally,” Mullin said of the agreement.
Mayor Steve Vaus said he was “flabbergasted and furious” when informed of the deal. “This is not how this mayor or this council does business,” he said.
“I will not let this incredible tribute to Tony be tainted,” Vaus said, adding that he would not accept the $10,000 for the memorial. “Hell no.”
On Monday, Singer defended his actions, saying the agreement will help Poway avoid costly litigation, while maintaining a good relationship with Sportsplex, a company that generates roughly $100,000 in city revenue each year. He said the City Council will discuss the issue in closed session Tuesday night.
Sportsplex USA — one of the first public/private recreational sports partnerships in the country — has been operating since 1994 on a 15-acre city-owned site in the Business Park that features three professionally maintained softball fields, two indoor soccer arenas, batting cages and a sports pub.
Under its lease, the company pays Poway a flat rate — now $48,000 each year — plus a percentage of its annual gross revenues. The under-billing began in 2010, when the revenue payments were set to increase from 7 percent annually to 8 percent, payable each March. The uptick didn’t kick in and the company continued paying the 7 percent.
After the discrepancy was discovered, a review of the lease agreement was conducted and both the city and Sportsplex consulted with legal counsel, Singer said in his memo.
Sportsplex argued that the city’s acceptance of the company’s annual payment “was, in effect, an acknowledgment that they were in conformance with all the provisions of the lease and that their gross receipts and lease payment were accurate and appropriate,” the memo said.
Sportsplex owners Paul and Bill Bergh off did not respond to requests for comment.
Singer’s memo said he and City Attorney Morgan Foley believed Poway could have recovered up to three years of back payments, but that “through a series of discussion and negotiations I brought this matter to conclusion without a drawn-out legal dispute and associated costs.”
Councilman Dave Grosch said Friday the settlement never should have included a memorial donation.
“This is a misdirection of funds,” he said. “Money owed to the city by the Sportsplex must be paid into the general fund and not into the Tony Gwynn Memorial Fund. This is totally inappropriate.”
The Sportsplex controversy comes at an awkward time for the city manager. Four times in the past two months the council has met in closed session to discuss Singer’s performance evaluation and contract.
Usually such evaluations are perfunctory and require no more than two closed sessions.
The council has not reported any action taken as a result of those sessions and would not comment about the evaluation, which Singer said was delivered to him last Thursday.
Jones is a reporter for the San Diego Union Tribune.