San Diego business transparency measure to go on November ballot

San Diego business transparency measure to go on November ballot
San Diego's seal is shown at the downtown City Administration Building, May 8, 2018. Photo by Megan Wood/inewsource

Add another San Diego ballot measure to the long list for November’s general election.

The City Council voted unanimously Monday to put an amendment before voters on Section 225 of the City Charter – a vaguely worded and long-ignored transparency law requiring anyone doing business with the city to disclose their identities.

An inewsource investigation from August 2016 found that this “Mandatory Disclosure of Business Interests” law, which voters overwhelmingly approved in 1992, has rarely been enforced. As a result, there is little to no information about the people behind billions of dollars in city contracts and purchases.

Councilwoman Barbara Bry, who has advocated for clarifying the law, spoke to inewsource after the vote.

“The city gives out hundreds of millions of dollars a year in contracts, and it’s very important for the city to know with whom we’re doing business to make sure we’re doing business with people who have good reputations,” Bry said.

“Often, when you do business with an LLC, you don’t know who really owns that limited liability corporation – so you don’t know who you’re doing business with.”

Bry expects the City Attorney’s Office and Office of the Independent Budget Analyst will write the ballot language within the next week.

She also confirmed that if voters approve amending the language in November, Section 225 will ultimately require the country’s most opaque corporations – Delaware LLCs – to disclose their ownership when doing business with the city.

How We Got Here

After nearly entering into a $47 million real estate deal with an alleged mobster in the early 1990s, a San Diego mayor and councilman led the charge to place an initiative on the ballot that mandated all city-engaged businesses disclose the financial interests behind them.

The new law passed with more than 86 percent of the vote and took effect in July 1992.  

But the law was poorly written, and three city attorneys petitioned the council to clarify it over the past quarter century. They wanted to know what a full disclosure of business interests looked like; what type of interests must be identified; and what it meant for a person to be “involved” in a transaction.

All three city attorneys failed to get the clarifications.

In 2016, inewsource requested the disclosures behind 38 contractors that account for more than half a billion dollars in city business. Only four disclosed the names of their board members or corporate officers. Not one disclosed all of the information required under Section 225.

inewsource brought the findings to then-Council President Sherri Lightner and Councilman David Alvarez. They got the city attorney involved, but the council was advised it couldn’t just change the city charter – that would require an amendment.

That led the council to approve this past December a business transparency ordinance as a placeholder until voters could decide this year whether to clarify the language.

Surrounding Cities

Since then, inewsource has requested contracts from San Diego County’s 17 other cities to determine whether they require disclosures similar to Section 225.

The majority do not.

Contracts worth millions of dollars between private companies and the cities of Del Mar, El Cajon, Encinitas, Escondido, Imperial Beach, La Mesa, Lemon Grove, National City, Oceanside, Poway, San Marcos, Santee, Solana Beach and Vista showed no such disclosures.

Some contracts listed the names of a company’s primary officers, but inewsource could find none that asked specifically for the business to list all interested parties.

City clerks for La Mesa and Encinitas told inewsource they are both “currently evaluating the need for such regulations.”

Carlsbad, Chula Vista and Coronado do have detailed disclosures in place.

inewsource is an independent, investigative journalism nonprofit supported by foundations, philanthropists and readers like you. For more inewsource coverage, please visit inewsource.org

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