In response, golf authority chairman resigns
ENCINITAS — The council recommended at last week’s meeting that the board overseeing the Encinitas Ranch Golf Course should seek competitive bids for contracts and regularly report finances to the city.
Last fall, residents raised fiscal oversight concerns at the course, which is run by the independent board Encinitas Ranch Golf Authority.
As a result, a council subcommittee made up of Council members Tony Kranz and Lisa Shaffer reviewed ERGA finances over the course of four meetings.
They presented their findings to council April 16, including a recommendation that the contract for managing the course on a day-to-day basis should go out to bid once the current agreement expires in seven years.
That’s in response to ERGA awarding a 10-year contract to JC Resorts in 2010 without competitive bids. Shaffer said JC Resorts’ fees compare favorably with other golf course management contracts, but competitive bidding should be followed as a best practice in the future.
Shaffer added that if competitive bidding is in place, it’s likely JC Resorts would be chosen again.
“We’re not saying throw JC Resorts out,” Shaffer said. “We’re saying go through the right process.”
The council also suggested that management contracts last five years, with the option to extend, instead of 10 years.
While ERGA’s five-member board includes City Manager Gus Vina and two city employees, council doesn’t have jurisdiction over the group. ERGA will consider the recommendations separately in the upcoming months, the board agreed on April 22.
The board will do so without Bill Dean, who resigned from his volunteer position as ERGA chairman the day after the council meeting. He did not respond to an email request to comment.
In the aftermath, an ERGA ad-hoc committee will search for a replacement to Dean.
Council members voted 3-2 to recommend replacing Dean.
Several ERGA actions from 2007 to 2009 ignored a development agreement that governs the golf course, and Dean was part of the board’s decisions, Kranz said.
He added that deviations from the agreement should have been brought before the council.
“This is not a witch hunt; this is just let’s have a fresh start,” Kranz said.
Deputy Mayor Mark Muir disagreed, saying Dean alone shouldn’t be held responsible for ERGA’s actions.
“The success or failure isn’t dependent on one person,” Muir said.
In response, Shaffer said the subcommittee proposed removing all ERGA board members who served from 2007 to 2009; it just so happens Dean is the only one still serving.
Earlier in the meeting, Shaffer elaborated on ERGA ignoring the development agreement, a document that the city and developer Carltas drafted in 1995.
“The good news is that the financial irregularities do not appear to be motivated by personal financial motives,” Shaffer said. “We did not find anybody corrupt. The bad news is that the requirements of the development agreement were consciously ignored without seeking the consent of the parties to the agreement.”
In 2008, ERGA voted to place $114,300 into its reserves, when the development agreement specifies those funds should have gone to the city’s general fund, according to the subcommittee’s report.
Ultimately, it’s unlikely the action had a net impact on the city’s general fund or Carltas’ bottom line, the subcommittee found. Prior to 2007, Carltas was entitled to roughly $114,300, but didn’t claim the money then and the funds went to the city’s general fund.
Still, the report states ERGA deviated from the development agreement and did not get council approval. Consequently, the public was left in the dark.
After an audit in 2011, ERGA once again resumed normal accounting practices, and so further issues are unlikely to occur, according to the report.
To make sure there’s better communication going forward, the council recommended that ERGA provide semi-annual reports with budget information and revenue distribution to the council.
The subcommittee also examined a controversial contingency fund ERGA created in 2011 to pay for golf course improvements during the recession.
The contingency fund resulted in ERGA paying less money to a CFD (community facility district) bond payment. So, about 1,000 homeowners had to contribute more in property taxes to the CFD bond payment.
ERGA board members have defended the contingency fund, stating it will improve the golf course over the long term. Ultimately, this means more revenue to pay into the CFD bond and other funds, they have said.
The subcommittee didn’t have any recommendations in this area. And its report noted homeowner groups appreciated further explanation about the contingency fund.
Dick Stern, president of the Encinitas Ranch Community Association, said he appreciated the council subcommittee looking into the matter, noting he agreed with all of the recommendations.
Resident Gerald Sodomka said the subcommittee report didn’t go far enough. He argued the city needs a forensic audit for ERGA, which council didn’t support.
“I strongly believe that in order to avoid any of these kinds of problems in the future, it’s necessary to examine all the inconsistencies and deviations over the years,” Sodomka said.
However, Kranz said the subcommittee conducted a thorough review of financial statements and determined a forensic audit isn’t needed.