Daily Business Report-Aug. 9, 2017
Gary Gallegos speaking at a 2015 meeting of the San Diego Highway Development Association (Credit: San Diego Transportation Development Association)
SANDAG Leader Steps Down
Amid Sales Tax Measure Scandal
By Andrew Keatts | Voice of San Diego
After 15 years leading the San Diego Association of Governments, Gary Gallegos has announced plans to leave the agency by year’s end.
Scandal has consumed the agency for nearly a year after a Voice of San Diego investigation revealed the agency failed to disclose a series of major problems facing the agency’s sales-tax funded transportation program.
SANDAG last year went to voters promising a new tax, Measure A, would bring in $18 billion for countywide projects, even though its staff had already concluded the tax would bring in far less thanks to significant problems with an internal forecast. Staff brought the issue to executive leadership, who refused to act and did not disclose the issue to the public or the agency’s board of directors.
The agency is also running a $17 billion shortfall on TransNet, a sales tax approved in 2004, thanks in part to overstated revenue expectations on the 2004 ballot and a significant increase in project costs that agency leadership failed to disclose for nearly a year.
An outside investigation into the issue released last week, spurred by Voice of San Diego’s reporting, found that as the scandal unfolded, agency leadership encouraged staff to delete emails and hide documentsso that they couldn’t be turned over in response to Public Records Act requests.
The law firm Hueston Hennigen released its investigation last week, and the board of directors voted Friday to review Gallegos’s job during closed session of an upcoming meeting.
Gallegos announced his plans to move on Tuesday afternoon to the editorial board of the San Diego Union-Tribune.
In a letter sent to SANDAG staff Tuesday afternoon, obtained by Voice of San Diego, Gallegos said he had been contemplating retirement but wanted to get the agency through the investigation and continue working on its major projects.
“I feel those goals have been achieved,” he said. “The independent examination found SANDAG did not intentionally mislead the public or the board regarding its forecasting.”
It’s true that the examination did not find evidence SANDAG’s overstated its revenue expectations intentionally – but it did find that agency staff knew about problems with the forecasts for years and leadership repeatedly missed opportunities to address them.
It also found nearly all of the agency’s forecasting staff had concluded before the 2016 election that Measure A would not collect $18 billion. Staffers in a December 2015 meeting outlined the forecast’s fatal problems and directly connected the problems to agency tax revenue, but leadership did not act and did not disclose the problems to the board or public.
SANDAG conducts regional planning and builds major infrastructure projects throughout the county. Its 21-person board is composed of elected officials from the region’s 19 jurisdictions, with the city of San Diego and county of San Diego holding two seats each.
Since 1988, the agency has collected the half-cent sales tax TransNet throughout the county to build transportation projects. It also uses that money to attract major grants from state and federal entities to pay for the full cost of those projects. Voters extended the tax in 2004.
Gallegos, 57, has been with the agency since 2001, running it through the victorious TransNet extension and the failed Measure A increase last year. Under his watch, the agency completed major projects like the widening of the I-15 freeway and purchasing the South Bay Expressway out of bankruptcy. The agency is in the process of building the Mid-Coast Trolley, a light-rail extension from Old Town to UTC, that will also be part of his legacy.
“Gary is the most talented government executive I’ve ever worked with,” said Steve Peace, a former state senator.
Before joining SANDAG, Gallegos was the director of Caltrans for the San Diego region. He took his expertise in freeway construction and financing with him to SANDAG – winning him both accolades and scorn from advocates on both sides of the highways-versus-transit debate that dominated his final years as SANDAG’s director.
Despite the last year of scandal, Gallegos will walk away with a significant recent win under his belt.
The agency had been sued over its 2011 regional transportation plan, with environmentalists and eventually then-California Attorney General Kamala Harris alleging the environmental report for the agency’s 40-year regional plan didn’t properly address the plan’s greenhouse gas impacts.
The challenge was intertwined with a long-running fight between the agency and an emboldened group of environmental activists who alleged SANDAG needed to commit more money to public transit in the region, and less to highway-building. SANDAG had the support of most board members and pro-business groups in town.
SANDAG lost at trial court in 2012 and again with an appeal in 2014. But the California Supreme Court ruled last month that the agency’s report complied with state law.
Scrutiny on SANDAG and Gallegos ramped up last week when the outside report the agency had commissioned confirmed Voice of San Diego’s findings and uncovered the steps the agency took to hide and delete public records.
In addition to reviewing Gallegos’ performance, the board voted Friday to consider implementing policy recommendations from the auditor, to consider investigating the TransNet shortfall and to conduct a forensic investigation into any record deletions.
The investigation focused narrowly on one aspect of VOSD’s reporting – the flawed revenue projections that went into Measure A. Investigators could not look into similar problems with TransNet’s revenue promises, or the decision not to disclose the $8 billion cost increase of TransNet projects. Witnesses told the investigators those issues deserved further investigation.
Gallegos leaves the agency in a precarious spot.
Assemblywoman Lorena Gonzalez Fletcher has proposed a bill, AB 805, that would substantially reform the agency’s board and governance structure, giving larger cities greater say in regional decision-making by allowing a representatives of a handful of jurisdictions to overrule decisions if the cities they represent constitute a majority of the county’s population. It would also institute a performance auditor and auditing committee for the agency. The bill would also give a significant boost to local labor unions.
Gallegos and the agency have fought hard against the bill, at the same time they tried to fend off a steady drip of new revelations from the revenue scandal.
Construction Starts on Apartments
for Homeless Veterans and Others
The hillside overlooking Cesar Chavez Elementary School will be transformed into the site of affordable rental apartments for homeless veterans, non-veteran homeless households, and low-income San Diegans upon the completion of Vista del Puente, a San Diego Housing Commission partnership development that celebrated its groundbreaking last week.
Close to 75 percent of Vista del Puente’s 51 affordable rental apartments will be set aside for homeless households: 26 units for homeless veterans and 12 units for non-veteran homeless San Diegans.
In addition, 13 units will be affordable for families earning up to 60 percent of San Diego’s Area Median Income, which is currently $54,540 for a family of four. All of these units will remain affordable for a period of 55 years.
Located near the intersection of Gamma Street and South 40th Street in San Diego’s Southcrest neighborhood, Vista del Puente will be developed by National Community Renaissance (National CORE) and Townspeople, in partnership with SDHC.
Vista del Puente is one of eight projects that were awarded development funding in the first three years of Housing First San Diego, the Housing Commission’s homelessness action plan.
Funding: Housing Commission, $4 million loan; U.S. Department of Housing and Urban Development $3.8 million; city of San Diego, $200,000
International Trade Commission
Considers iPhone Ban
The U.S. International Trade Commission said Tuesday it will investigate Qualcomm’s charge that certain iPhones and iPads infringe on six of its patents — an initial step that could eventually lead to an import ban on some devices. The ITC’s decision to start an investigation is the latest skirmish in the fierce patent royalty war between Qualcomm and Apple. — San Diego Union-Tribune
San Diego Chosen One of 5
Top Cruise Ship Destinations
For the second year in a row, Cruise Critic, a leading cruise reviews site, has named the Port of San Diego one of the top five cruise destinations in the United States and Canada.
The recognition is part of Cruise Critic’s second annual Cruiser’s Choice Awards, a program naming the world’s top cruise destinations based entirely on consumer ratings submitted with reviews on CruiseCritic.com. All rankings are based on member review ratings for cruises taken in the last year.
The 2017 top five destinations in the United States and Canada for Cruise Critic reviewers are:
Quebec City, Canada
San Francisco, California
Bar Harbor, Maine
San Diego, California
Key West, Florida
The Port of San Diego’s cruise season kicks off on Sept. 15. Currently there are 83 cruise calls scheduled. The Port’s homeported cruise lines, which are cruises that either begin or end in San Diego, are Disney Cruise Line, Holland America Line and Celebrity Cruises.
The Port’s 2017-2018 cruise ship schedule is available online at portofsandiego.org/recreation.
KB Home Coastal Purchases Property
for Construction of Townhomes
KB Home Coastal has purchased a 3.47-acre residential land parcel in Pacific Highlands Ranch for $9.73 million and plans to develop 69 townhomes on the property, beginning this year. The property is located on the north side of Village Center Loop Road, San Diego. The seller was Pacific Carmel AFG, an entity of KB Home.
Colliers International represented the buyer in the transaction.
Salk Scientist Reuben Shaw Receives
Outstanding Investigator Award
Salk Professor Reuben Shaw has received the National Cancer Institute (NCI) Outstanding Investigator Award, which encourages cancer research with breakthrough potential. Shaw, a member of Salk’s Molecular and Cell Biology Laboratory and holder of the William R. Brody Chair, will receive $4.2 million in direct funding over the next seven years to further his work.
The award is granted to innovative cancer researchers with outstanding records of productivity to allow them to take greater risks and be more adventurous in their research.
Shaw’s research focuses on cancer metabolism: how metabolic pathways are altered in cancer and play a role in the origins and progression of the disease. While investigating one of the most commonly mutated genes in lung cancer, Shaw discovered an energy-sensing pathway that shuts down cell growth and reprograms metabolism when nutrients are scarce. This energy-sensing “starvation” pathway suggests an unexpected and direct link between metabolic pathways and cancer.
From this work, the lab’s studies have led to the discovery of new therapies for cancer and metabolic diseases.
Pentagon Issues Guidance on Unauthorized
Drone Operations Near Military Installations
The Defense Department has released a set of guidelines for U.S. military services and installations to address “unauthorized” activity of civilian unmanned aircraft systems near base facilities, DoD News reported.
Navy Capt. Jeff Davis, a Pentagon spokesman, told reporters Monday the new guidance details how DoD should coordinate with local communities on UAS restrictions.
He added the guidance allows department personnel to stop unauthorized drone flight over and near military installations by tracking, disabling or destroying UAS platforms.
DoD also collaborated with the Federal Aviation Administration and interagency partners to establish a classified policy on how to mitigate drone threats.
Davis said the policy was sent to military services and installations in July.
Mid-Year Employment Law Update
San Diego Employers Association hosts a Mid-Year Employment Law Update on Aug. 22, from 8 a.m. to noon at United Way of San Diego County, 4699 Murphy Canyon Road, San Diego 92123.
The event features three prominent employment law attorneys —Chris Olmsted with Ogletree Deakins, and Emily Fox and Carolina Bravo-Karimi with Wilson, Turner, Kosmo.
The attorneys will cover a variety of legal updates of relevance to employers and business owners, including New Legislation and Case Law, Wage and Hour topics, California’s Fair Pay Act, Implicit Bias and more.
The cost is $75 for SDEA members and $95 for nonmembers. Breakfast is included. To learn more and register, visit www.sdeahr.org.
Air Force Has First Female
Enlisted Global Hawk Drone Pilot
The Air Force has its first female enlisted Global Hawk drone pilot.
The service said Tech. Sgt. Courtney completed its undergraduate remotely piloted aircraft training program known as the Enlisted Pilot Initial Class program, on Aug. 4. at Joint Base San Antonio-Randolph, Texas. She graduated alongside three other pilots.
“Tech. Sgt. Courtney doesn’t do this because she’s a girl. She just gets up every day and puts her uniform on and comes to work and kicks butt because that’s what she does,” said Maj. Natalie, an instructor pilot with Air Education and Training Command’s 558th Flying Training Squadron.
“That’s who she is. She’s not a woman pilot; she’s a pilot,” Natalie said in a service release.
The pilots and instructors’ last names were withheld given the sensitivity of their mission, according to an Air Force release.
Gabe Minton Joins Guild Mortgage
Guild Mortgage has selected Gabe Minton as its first executive vice president of information technology. Minton has established a history of success with mortgage banking and technology companies in a variety of settings, with responsibilities that included strategy and execution, communications, software development and vendor relations.
Minton joins Guild from PHH Mortgage, where he served as senior vice president and chief information officer from 2014 to 2017 with overall responsibility for the IT division. Previously, he was with ServiceLink (Black Knight Financial Services), where he served as senior vice president of information services from 2010 to 2014.
Minton served in senior management, strategy and technology positions with Motivity Solutions, Mortgage Cadence and the Mortgage Bankers Association. He was one of the founding members of MISMO, the Mortgage Industry Standards Maintenance Organization (a subsidiary of the Mortgage Bankers Association).
Scott Hermes Named Chairman of
San Diego Tourism Marketing District
Scott Hermes, General manager of the Westin San Diego Gaslamp Quarter, was named chairman of the San Diego Tourism Marketing District (TMD) at the organization’s July 24 board meeting. The TMD is a business improvement district in the city of San Diego that funds strategies to grow hotel stays and transient occupancy tax revenue.
A member of the TMD board since 2015 with over 30 years of industry experience, Hermes most recently served as board vice chairman. He takes over the chairman role from William “Bill” Evans of Evans Hotels, who has stepped down from the board following nine years of service.
Joining Hermes as officers are Vice-Chairman Matt Adams, area vice president for the Manchester Grand Hyatt San Diego; Secretary Colleen Anderson, general manager of Omni San Diego; and Treasurer C. Terry Brown, president of Atlas Hotels.
Other TMD board members include Richard Bartell, president of Bartell Hotels; Matt Greene, general manager of the Hard Rock Hotel San Diego; and Christopher Ostapovicz, regional vice president, asset management for Host Hotels & Resorts Inc.; and newly-elected Director Elvin Lai, CEO and president of Ocean Park Inn.