TAX AND SPEND

Imagine City Councilmember Jim Madaffer's embarrassment last week when San Diego's bean counters released a report estimating that he will overspend his 2006 council district budget for the fiscal year ending this month by $176,000, or 21 percent.

The report doesn't say what caused Madaffer's run into the red. To find out, we had to ask the city's auditor.

“I believe that's primarily because they have the individual who is sheepherding the Grantville project,” said Larry Tomanek, the city's assistant auditor. That “individual” is Colleen Windsor, former Mayor Dick Murphy's press secretary, whom Madaffer hired as his Grantville redevelopment project director last August-stirring up controversy in the process.

Tomanek said that while part of the deficit resulted from a miscalculation of employee benefit expenses, the bulk of it-$129,000, according to the city's personnel director-is Windsor's salary and benefits.

“My understanding is that there was never any budget adjustment for her,” said Tomanek. “At some point in time the money has to be put there to take care of this.”

According to the report, $120,000 to cover Madaffer's deficit will come from the District 7 infrastructure fund. That money, Tomanek said, is subject to Madaffer's limited discretion and comprises savings from previous budget years. Infrastructure funds would typically be used for improving the East Elliott, Tierrasanta, Navajo, College Area, Eastern Area and Eastern City Heights neighborhoods that Madaffer represents, Tomanek said. Another $26,000 will come out of a fund to replace computers and office equipment in the district's offices.

With Madaffer's discretionary funds exhausted, the city's financial managers want the City Council to cover District 7's remaining $30,000 debt from the general fund, which pays for police, fire, parks, libraries and other basic city services. In the absence of that obligation, Tomanek said that $30,000 would likely go to the city's dwindling emergency reserves or its under-funded employee pension system.

Madaffer responded to CityBeat's requests for comment by issuing a three-page statement on Tuesday. Although he never refers to his budget deficit in the statement, Madaffer cites the equalization of all City Council district budgets-resulting in an $85,323 cut to District 7-as a challenge his district has faced this year. He wrote that he met that challenge “through savings, voluntary furlough and responsible management.”

He also noted that his district has “some of the most senior employees serving the City Council.” He doesn't mention that they are also among the highest paid.

As for Grantville and Windsor's salary, Madaffer said, “Shortly after the beginning of FY '06, I decided to use savings we saved from the prior year to fund our planned marketing efforts. The adjustments being made at this time simply memorialize that decision. This is something we decided and planned for over a year ago.”

But several of Madaffer's constituents are demanding further explanation.

In an e-mail on behalf of himself and two other District 7 community council presidents, John Pilch, who heads the San Carlos Area Council, asked Madaffer to explain how the money that was supposed to benefit their neighborhoods has been used.

Pilch says Madaffer has yet to respond.

“He's making up the deficit from funds that would have gone directly to make his community safer and stronger,” Pilch told CityBeat. “He's taking away from the quality-of-life issues that impact every citizen.”

April Boling, a regular critic of how the city handles its money, as well as a District 7 resident and a former member of several community planning groups, said news of Madaffer's overage is causing a stir in her neighborhood. “How can he be in charge of the city's budget when he cannot manage a budget of 12 people?” Boling asked. “You should be able to come in within a couple of thousand dollars.”

Madaffer has also put his City Council colleagues-who typically don't like meddling in each other's offices-in the awkward political position of having to publicly approve his expenditure after the money has already been spent. The City Council's budget committee is scheduled to review the report June 14, and the full City Council will likely vote on the suggested remedy next week.

City Councilmember Toni Atkins, who chairs the budget committee, said the situation is symptomatic of a longstanding practice at City Hall of gaming the budget. “I think we have to send a very clear message that this is not the way that it's going to work from now on in the future,” she said. “I don't care if it's the library department, the city attorney or a council member, including myself. We have got to live within the budget.”

City Councilmembers Tony Young and Donna Frye echoed Atkins' frustrations, saying they also have questions for Madaffer. Council President Scott Peters declined to comment, and Councilmembers Brian Maienschein, Ben Hueso and Kevin Faulconer didn't respond to phone messages Monday.

Fred Sainz, Mayor Jerry Sanders' spokesman, said that although the report came from a mayoral department, its recommendation that the City Council approve the use of general-fund money doesn't indicate the mayor's approval of the expenditure.

“The mayor has no opinion as to whether it's right, wrong or indifferent,” Sainz said. “We would all prefer that [the City Council] not exceed [their budgets], but it's up to Mr. Madaffer to explain why that's happened and justify the reasons.

“He's a separately elected individual answerable directly to the voters.”

If any of this hubbub about Windsor and Grantville sounds familiar, it's because last August CityBeat broke the news of her hiring after Madaffer's office issued a related statement, the last line of which said Windsor's new position “will be funded by tax increment generated within the Grantville Redevelopment area.”

Pilch wanted to know what qualified Windsor, formerly a TV news reporter for KFMB/Channel 8-known as Colleen Rudy at the time-to manage a redevelopment project. Others asked whether her ties to Murphy, an ideological ally of Madaffer, helped her land the gig.

But it was Madaffer's plan to pay Windsor with redevelopment money-funds that are supposed to be reinvested in the neighborhood that generates them-that had some city officials and citizens steamed.

First, there was the idea that a City Council staffer, not a member of the city's Community and Economic Development department, which oversees redevelopment, would be paid with redevelopment funds. Pilch said Madaffer never mentioned using redevelopment money to pay a staff member's salary when he sold the project to the community.

Former Deputy City Manager Ellie Oppenheim, who oversaw the city's redevelopment efforts at the time, and City Councilmember Frye couldn't understand how Madaffer could pay Windsor with funds that didn't yet exist. In June 2005, the County of San Diego filed a lawsuit challenging Grantville's qualifications as a redevelopment area. With the project in legal limbo, there simply wasn't any new tax revenue to pay Windsor. Frye was also concerned that as a lone council member, Madaffer didn't have the authority to allocate redevelopment funds.

“I don't understand how people can just add staff without some sort of a council action unless it is within his council budget,” she said at the time.

Madaffer was on vacation and unavailable for comment for the original story, but when he returned, he and Windsor met with KUSI reporter Doug Curlee for an exclusive interview. Windsor “is somebody I have watched for quite some time and, in fact, was very happy that I was able to get her before she would probably go off and find a job someplace else,” Madaffer told Curlee, who reported that Madaffer had planned to pay Windsor using his office budget.

As for questions regarding her qualifications, Windsor told Curlee she had some things to learn about redevelopment but already knew the players.

With questions still swirling, CityBeat, using the California Public Records Act, began requesting related documents and e-mails from Madaffer's office and various city officials in August. That process yielded a bevy of documents that show the different funding methods Madaffer attempted to employ to cover Windsor's salary.

They also contradict his statements to CityBeat that “shortly after the beginning of FY '06, I decided to use savings we saved from the prior year to fund our planned marketing efforts,” and that using his infrastructure fund to pay Windsor's salary “is something we decided and planned for over a year ago.”

On June 30, 2005, Madaffer asked Ron Villa, then the director of the city's financial management department, to add two positions, one for Grantville and another for Crossroads, another redevelopment area in his district, to an appropriations ordinance for the coming fiscal year.

In an interview, Villa said that plan was scrapped after staff from the Community and Economic Development Department objected to Madaffer's encroachment on redevelopment turf. Documents show Madaffer's staff began drafting job descriptions for both positions two weeks later.

Just days after that process began and three days before his farewell, Murphy sent a July 13 memo to then-City Manager Lamont Ewell allocating $100,000 from a citywide reserve account of federally regulated Community Development Block Grant (CDBG) funds to the Grantville redevelopment project. Another $100,000 went to the Council District 7 special-projects fund.

The following day, as part of a larger transaction, the City Council approved a $100,000 loan from Madaffer's CDBG funds to the Grantville project.

Villa says such movements of money weren't uncommon under the Murphy administration but said he wasn't sure if there was a direct link between Murphy's CDBG allocation and funding for Windsor's new job.

“Does it pass the smell test? That's up for the public to identify because, as we were operating, it was fine.... It probably bears reexamining, but I don't know if you have another Duke Cunningham on your hands.”

In early August, Madaffer announced his hiring of Windsor and CityBeat published its story.

In an Aug. 19 e-mail, one of Madaffer's staffers informed her boss that Grantville wouldn't generate tax increment until November of 2006. Madaffer was forced to change his funding plans, and four days later he wrote to Villa, Oppenheim, Ewell and other city officials that “pending receipt of tax increment, this position is funded by District-7 office budget on an interim basis with the plan to eventually have the position funded on a reimbursable basis using a combination of existing District-7 CDBG loans used to create the Grantville redevelopment area and tax increment loaned from the Crossroads Redevelopment area.”

When city staff said Windsor's position may not qualify for CDBG funding, Madaffer replied on Aug. 23, “Our funding options are to use either additional CDBG (similar to existing CDBG loans I gave to establish Grantville) or if there are potential issues with CDBG, we can loan [tax increment] from Crossroads to Grantville. I am OK with either....”

In a statement issued the same day, Madaffer said, “This position is funded by the council district 7 office.”

Also that day, Debra Fischele-Faulk, then the acting director of the Community and Economic Develpment Department, drafted a memo indicating that the use of tax increment to fund a City Council position didn't conform to California redevelopment law. In another e-mail, the city's CDBG expert, Ernie Linares, wrote that “it would not be appropriate to use CDBG to fund [Windsor's] position.” Those opinions were later delivered to Madaffer.

On Sept. 1, in preparation for a meeting with Madaffer's staff, Fischele-Faulk e-mailed Oppenheim, her boss, to say that she was comfortable delivering the message about Madaffer's CDBG plans and was anticipating “the question of how this can work. I feel that it is important that I'm consistent with this message you delivered to Jim, which would be via an open process/discussion related to the budget.”

It seems that open discussion never took place.

Sainz, the mayor's spokesman, said the mayor's office bears some of the blame for Madaffer's overage. Madaffer was told last November how much money he had spent, and Madaffer's office “made cuts... in order to go ahead and be able to absorb Colleen Windsor's salary and all of their other budgetary commitments,” Sainz said.

Sainz said the city's financial management department failed to adequately update Madaffer's office on the way the budget situation was shaking out and attributed $30,000 of the deficit to an underestimation of the cost of budgeted employee benefits.

According to the budget report and the auditor's office, City Councilmembers Young and Peters also exceeded their district budgets by $40,000 and $1,000, respectively. Tomanek attributed those overages to similar underestimations of employee benefits.

Sainz said the City Council didn't receive another update until recently. However, in December, the auditor's office began issuing regular reports to the City Council showing how all city departments were doing.

In December, the mid-point of the fiscal year, Madaffer's office had expended 58.8 percent of its budget. That figure rose to 67.6 percent in January, and by the end of April it had reached 96.2 percent.

Sainz said council offices don't necessarily have access to those reports and rely on budget analysts to review them. But Tomanek said they were e-mailed to all council members as well as their chiefs of staff. Moreover, some of the reports were discussed by the Budget Committee-of which Madaffer is a member-and the City Council.

Madaffer “can't say he didn't know about it,” said Tomanek. “The facts are what the facts are. They had an extra employee and higher salaries and more fringe benefits.”

What did Madaffer's constituents gain in return for missing out on $120,000 worth of neighborhood improvements that Madaffer's using to cover Windsor's salary?

According to Madaffer's statement, he's working on flooding issues in Grantville and making plans for “significant improvements” once the county's lawsuit is settled.

Within days of getting the job, Windsor-who said she already knew all the players-was busy trying to find their phone numbers. In an Aug. 30 e-mail, Windsor asked other District 7 staffers if they had contact numbers for financier “Murray Galonsen” [sic] and others. (Murray Galinson is very well known in San Diego politics.) One of her colleagues offered to lend her a phone directory published by the Building Industry Association, a local construction trade group, to help. It did. According to Windsor's calendar, from mid-August to late March, she met with at least a dozen different developers as well as various community leaders, city staff and local business owners.

Records also show that in September she attended a two-day redevelopment seminar in Garden Grove and received a $575.92 reimbursement from the city.

According to a message on Windsor's cell phone, she's currently on maternity leave. An online gift registry shows Windsor and husband Erik were expecting a baby girl on May 2.

Lawyers for the county said the Grantville suit is expected to go before a judge sometime later this year and a Sanders spokesman said the Grantville redevelopment project is anticipated to yield tax revenue around the same time. That money would be held in a trust fund until the suit is settled. The Grantville project owes $575,000 in loans to District 7's CDBG funds and the city.

As for how he plans to pay Windsor's salary in the coming year, Madaffer still has some explaining to do. Despite a $140,000 increase in City Council budgets, Tomanek said that unless Madaffer makes some changes, District 7 is already on track to once again break the bank.