City Hall roosters Scott Sherman and Kevin Faulconer

When it comes to guarding the henhouse, termed-out City Hall roosters Scott Sherman and Kevin Faulconer may peck it out over a canceled “piggyback” contract.

A handcuffed city audit committee stinks

“ Silence may be as variously shaded as speech.”

—Edith Wharton

Last week’s meeting of the San Diego City Council’s audit committee was truly a sight to behold.

In an age of exploding misinformation, misdirection and misguidance emanating from the White House, it did Spin’s heart a modicum of good to watch local folks tally forth on an admirable path toward wresting some power away from the mayor’s office when it comes to supervising the proverbial henhouse.

On a 3-1 vote, the Audit Committee offered its blessing to a March ballot measure initiated by its chairman, termed-out Councilmember Scott Sherman, that would eliminate the mayor’s involvement in the process of selecting an independent city auditor.

“We don’t want to have the administration choosing an auditor who oversees administration,” Sherman told his colleagues last week.

A representative of equally termed-out Mayor Kevin Faulconer dispatched to the committee meeting gave a general thumbs up to the proposal, offering a few technical tweaks and support for splitting up the current 10-year term into two potential five-year stints.

“In the end, we also aren’t going to be here in about a year and change, so we’re looking at it dispassionately more from a good public policy standpoint,” Almis Udrys, Faulconer’s deputy chief of staff for innovation and policy, assured committee members.

While it’s good to know two outgoing Republican stalwarts with uncertain political futures seem aligned on backing true independence for the city auditor, the measure still needs approval from the City Council, which is expected to take up the proposal before a holiday legislative recess late next month.

What is less certain, unfortunately, is how the bureaucratic game will be played leading up to the time when voters get to decide just how independent they want the city auditor to be. That reality played out during a subsequent agenda item only minutes after the ballot-measure bonding moment.

Back in September, the city auditor released a report lambasting a multimillion-dollar city contract with an unnamed company, alleging the so-called “piggyback contract” was unfairly awarded and quite possibly violated state laws, the city charter and the San Diego municipal code.

In typical “piggyback contracts,” smaller organizations can “benefit from leveraging the prices and terms from larger organizations,” city fraud investigator Andy Horita explained to the audit committee. In San Diego’s case, it “adopted the process, pricing, terms and conditions of a contract from a much smaller organization,” Horita added, referring to the mysterious company only as “the vendor.”

The odd part of the story, however, is that just days before last week’s committee hearing, the San Diego Union-Tribune had reported who that vendor was—Host Compliance, a Seattle-based short-term-rental-management firm—in a wild tale about a deputy city treasurer filing a complaint that the auditor’s report had damaged her reputation and forced her to retire after 21 years with the city.

The Union-Tribune reported that Robbin Kulek Lockie, the deputy city treasurer, named Host Compliance as the unnamed contractor in a city auditor fraud hotline case report dated January 3 of this year. In her claim, the UT reported, Kulek Lockie said an internal review exonerated her. (The company’s president and CEO, Ulrik Binzer, told the UT the auditor’s report was “flawed” but did not address allegations of favoritism and collusion.)

So, last week it was likely no mystery to audit committee members whom they were talking about, even though no names were uttered in public. Some members expressed frustration about the limited information they had been given, despite the committee’s oversight responsibilities. The public version of the report they received spanned 50 pages; the confidential version given to the mayor’s office and Chief Operating Officer Kris Michell was 100 pages, said interim City Auditor Kyle Elser, who’s run the office since last October after predecessor Eduardo Luna left in frustration for a similar position with the city of Beverly Hills.

The 50 pages alone contain dynamite, describing a well-documented, two-year effort by the mystery vendor to curry favor with city staffers who felt pressured to enter into a contract and did so while allegedly circumventing city regulations, council approval, collective bargaining requirements and frankly common sense. Elser said his preference would have been to provide the confidential report to the audit committee.

Committee member Stewart Halpern agreed. “It’s just unclear in my mind if this committee can exercise the proper oversight responsibility without seeing the full contents of the confidential report,” he said.

Ron Villa, the city’s assistant chief operating officer, did his best to assure committee members that the mystery contract was not renewed and such contract stumbles would never happen again. And while Villa said he agreed that all of the recommendations made by the city auditor “made sense” to prevent such abuses in the future, he did add, “We…could not come to an agreement with the opinions that were identified in the investigation.”

Deputy City Attorney Joan Dawson seemed skeptical that the confidential report could be released beyond administrative staff, adding, “We have to be mindful of the confidentiality provisions of state law.”

The problem at least for Cory Briggs—who’s challenging Dawson’s boss, City Attorney Mara Elliott, in the 2020 election—is simple: Elliott’s office signed off on the Host Compliance contract last year without traditional council approval for consultant contracts valued at more than $250,000.

“The informant is protected, but the illegal conduct is not,” Briggs told Spin. “What transpired is not protected. It’s public business. The City Council should know whether or not there was an illegal contract and people got money they shouldn’t have gotten.”

A city attorney spokesman declined to respond, but Sherman may have put it best: “It’s tough to make decisions when people can’t comment on something. It bothers me, is all I can say.”

After the meeting, Sherman said it’s bad enough that the city seems frozen in dealing with short-term rentals as a whole, but trying to find out who does and doesn’t pay taxes is even more maddening. “This whole situation has been incredibly frustrating,” he said. “Frankly, if we’d just get off our ass and pass a damn law, we’d have some finality.”

Spin Cycle appears every other week. Write to johnl@sdcitybeat.com.