The economic development group for the region’s largest city is scrambling to restore its image after five directors resigned and its staff came under fire for spending taxpayer dollar sat faraway restaurants and resorts.
The Economic Development Corp.of Oxnard, or EDCO, is a private nonprofit that receives about half ofits annual budget from the city to attract, retain and grow businessesin Oxnard. In recent weeks, five of16 directors — including Chair Pat McCarthy,the head of a large Oxnard building firm — have stepped downin the face of strict financial disclosurerules that would have forcedthem to reveal customer relationships.
Moreover, EDCO’s leaders facedscrutiny from critics in the VenturaCounty Star when it ran a prominentstory about travel expenses charged to EDCO’s credit card. Statements obtained by the Business Times from EDCO show charges such as $393.14 spent at steakhouses in Texas during a trip in early 2010; a $181.26 tabat a grill in Atlanta and a $213.81 billat a Phoenix restaurant in 2009; and a$396 bill at the Quail Lodge Golf Clubin Carmel and a $680 charge at the Ojai Resort Golf Shop, both in 2008.
“What immediately caught our eyewas extensive travel around the country which seemed unrelated to what EDCO is supposed to be doing,” said Fred Rosenmund, an Oxnard attorneywho filed public records requests forthe credit card statements. They used credit cards foritems as smallas buying a $4 cup of coffee atStarbucks.”
Steve Kinney, EDCO’spresident, saidthe expendituresare part of how the group formsand maintainsthe relationshipswith businessand government officials that eventually turn into jobsand tax revenue for Oxnard.“It’s the normal course of businessthat is carried out in the public sectorand the private sector,” Kinney told the Business Times.
“The question of theappropriateness of charging meals onthe company credit card? That really escapes me. A charge at a Starbucks? That to me was a cheap way to get somebusiness conducted.” Kinney said that EDCO’s expendituresare primarily overseen by its board of directors, which includes two members — Mayor Tom Holden andCouncilman Bryan MacDonald — from Oxnard’s city government. A monthly check register is submitted to the council for approval.
Each year, the groupprovides a report to the city managerin its budget proposal. But Kinney saidthat day-to-day oversight of individualspending decisions largely rests withthe group’s four-member staff. “It’s pretty casual, to tell you thetruth, and it’s been that way for years,” Kinney said of City Council oversight.“The council looks for an annual reporton what successes have occurred andwhat activities have occurred, and that’s pretty much the extent of it.”
For the past decade, EDCO has received$330,500 a year from the city of Oxnard. Normally, that’s about half its budget, with the rest coming from the private sector. This year, it’s about 60percent of the budget because privatecontributions have fallen off with theeconomy.
The increase in the ratio ofpublic support meant that board members,even those from the private sector,needed to file the same extensive confl ict- of-interest disclosures that public officialsdo andcould spend no more than$420 on businesslunches.Five boardmembers resignedratherthan disclose their business relationships to competitors.
EDCO’s troubles stem at least in part from theblack cloud hanging over Oxnard’s city government. The city’s public works director resigned in a scandal over gifts he received from people and groupsthe city did business with.
The FBI andVentura County District Attorney’s Officer aided City Hall to collect documents. The actions, along with the city pay debacle in Bell that raised ire across the country, has increased scrutiny onall of Oxnard’s public spending.
Rosenmund, the EDCO critic, allegesthat the $260,000 in salary madeby EDCO’s top two employees did not receive adequate board oversight. Kinneycounters that the decisions weremade in a closed session of the board,as are all personnel decisions, and thatno member of the public was aroundafter the group’s meetings to announce the results to.But Kinney conceded that the salarydecisions from those closed sessionswere not included in the public minutesfor the next EDCO board meeting, anomission he calls “my mistake. … I did fail to write those compensation resultsin the minutes.”
EDCO’s board will not hold electionsfor new directors until this summer. Oxnard attorney Marc Charney has temporarilytaken over as the chairman ofthe board. He said its next meeting willfocus on ways to make the group moretransparent. He emphasized that therehasn’t been any wrongdoing at EDCO and that the group’s expenditures havebeen “appropriate” for boosting businessin Oxnard.
“We’ll probably change our proceduresto the extent that there’s much more public disclosure of what we’redoing,” Charney said. “Outsiders willknow what EDCO is spending its moneyon. There is no attempt to hide that.”
Kinney said EDCO has succeededin bringing a raft of businesses to Oxnard. “The highlight has to be Haas Automation,”Kinney said. That firm movedits headquarters — and about 1,200well-paying jobs — to Oxnard from Chatsworth when it became frustrated with its efforts to expand in Los Angeles County. “It’s been a magnet for othercompanies to move here. … We went tothem. The single most persuasive factorwas our commitment to the speed ofgetting their permits.”
Future of economic development
EDCO is one of several private nonprofiteconomic development groups inthe Tri-Counties that receives a blend ofpublic and private funds. The Economic Development Collaborative-Ventura County, or EDC-VC,operates a small business development center, helps businesses secure fundingand helps at-risk businesses keep jobs in the county. It receives about $47,000 ayear from Ventura County’s cities and$25,000 a year from the county, said Bruce Stenslie, CEO of the group.
Another$100,000 comes from the privatesector.
Overall, though, that money mostlyserves as matching funds so that the EDC-VC can secure federal funds and grants to round out its $1.1 million operating budget. Stenslie said the EDCVC produces detailed monthly reportsthat filter up to the U.S. Small Business Administration, along with the U.S. Department of Commerce and other parts of the federal government.
“We document every expense. Whenwe submit our invoices, we print ourentire quick books system and copyreceipts in detail to justify those expenses,” Stenslie said. “The Workforce Investment Board requires that wedocument in excruciating detail everyjob we identify as at-risk and saved. I’d be thrilled for anyone to take a look inmore detail at our work.”
In San Luis Obispo County, the countywide Economic Vitality Corp.,or EVC, is supported by a 50-50 split of private funding and money from city governments. Of its $400,000 budget,about $80,000 comes in the form of acontract with the county government, said CEO Mike Manchak.
Manchak saidhe gives a regular report to the Board of Supervisors on the EVC’s activities and achievements.
Manchak said that with the coffers of public and private sponsors alike hurting,it’s more important than ever foreconomic development groups to showtheir stakeholders what the return is onthe investment.
“People will force organizationsto be more accountable and transparent, and that’s a very, very good thing,” Manchak said.
Manchak also said that taxpayersare discerning enough not to be scared away from public-private partnerships in general because of controversy surrounding one group.“The issue is not whether it’s a public-private partnership — the issue iswhether it’s a poorly managed organization,” Manchak said. “I think peopleare smart enough to take a closer lookat how their money is used. It’s very sadwhen an organization uses the public’smoney that way and takes advantage ofthe public’s trust.”
Full disclosure: The Business Time sparticipates on the board of directors or advisory boards of the following groups: Economic Vitality Corp. and Softec ,both in San Luis Obispo County; the Martin V. Smith School of Business at CSU Channel Islands; and the Ventura County Economic Development Association. It has no role in the oversight of EDCO and is not a sponsor of EDCO.
• Contact Stephen Nellis at [email protected]