Thursday, June 25, 2009

Rick Wurts and Marco Gonzalez have memory problems; why did the city help Surf Diva and damage Menehune Surf School

A Battle Over Surf Camps at La Jolla Shores
June 22, 2009

The waves at La Jolla Shores are a beginning surfer's dream. They break far from shore, and the beach's gradual slope means that when they do, new surfers have plenty of time to ride the gentle shallow whitewater all the way to shore.

La Jolla Shores is a surf instructor's dream, too. The scenic strip of San Diego's coast and its oceanfront hotels and boutique shops draw tourists year-round, providing a renewing pool of potential clients.

Those factors make the four surf instruction permits that the city's Real Estate Assets Department issues there the most lucrative of the 13 citywide. Since 2005, when the city first required permits for commercial surf instruction on San Diego's beaches, two companies have shared the sands at La Jolla Shores.

But how the city has distributed those permits in the last four years is threatening to put one of those companies, Menehune Surf, out of business, said Darren Fulhorst, the company's owner. When his competitor, Surf Diva, was granted only two of the three permits it bid on in 2005, the city circumvented the formal bidding process to create a fifth permit at La Jolla Shores, which it granted to Surf Diva, and in the years since has been unwilling to account for how or why it did so.

That decision, Fulhorst said, set the precedent for the city's move to revoke one of his two permits and grant it to Surf Diva when the fifth permit was eliminated during the 2008 bidding process. Last year, Fulhorst's company was awarded only one permit to operate on La Jolla Shores, cutting his operating capacity by half. Surf Diva was awarded the other three.

Gary Jones, the real estate department's asset manager, the city's decision was based on scores given to each of the companies' proposals...

But Fulhorst said the decision to grant one of his permits to his competitor was spurred more by the department's need to formally grant Surf Diva the third site it had created to accommodate the company's demands outside of the formal bidding process in 2005.

In the fall of 2004, the city, in an attempt to regulate the commercial surf instruction operations on the city's beaches and generate additional revenue, asked existing surf camp owners to submit proposals for the limited permits.

Fulhorst applied for two of the four La Jolla Shores permits to accommodate the Menehune Surf Camp and the Ocean Girl surf school, which he had recently created. Surf Diva, which had recently acquired two smaller surf schools operating on La Jolla Shores, applied for three of the four site permits.

In May of 2005, each company was granted two three-year permits. The decision meant that Surf Diva's Australian Surf Academy, which would have been granted the third permit the company's owners requested, would be unable to operate at La Jolla Shores.

That should have been the end of it.

But then a new permit popped up. In a July 11 letter to Surf Diva owner Isabelle Tihanyi, READ property agent Diane Bartko noted that the city had created an additional site, which it called 1A, for the company.

Why that fifth site was created is what Fulhorst has been trying to find out for more than a year, since the end of the 2008 renewal process when he lost his permit. Since then, his operating capacity has been reduced by half, and the investments he has made, like his partnership with a local boutique, and a mortgage on his house, threatened, he said.

Representatives from the Real Estate Assets Department could not account for the decision to accommodate a fifth site permit outside of the formal bidding process in 2005, saying only that it was within the department's authority to do so.

In deciding how many permits to grant at each beach, Bartko said the department only formalizes the recommendations made by the city's lifeguard services and parks departments, which evaluate the beaches and determine how many commercial operations each can safely accommodate.

In both 2005 and 2008, that number for La Jolla Shores was four, and four permits were made available during each bidding cycle. The creation of site 1A in 2005 following the conclusion of the bidding process appears to have been made to accommodate the Surf Diva's third company, although neither city nor Surf Diva representatives would speak about who had requested it.

Marine Safety Captain Rick Wurts, who made that recommendation in both 2005 and 2008, and who would have advised READ on any additional sites, said he could not remember how or why site 1A was created,
saying only that the determination of a beach's commercial capacity changes day to day and over time...

Wurts, who in 2005 was also on the READ committee that decided which companies would be issued permits, recused himself in 2008, "in order to ensure that there was an absolutely objective evaluation," adding that "he didn't have a conflict of interest with anything. I could have been a perfectly objective part of the evaluation process."

Marco Gonzalez, an environmental lawyer who represented Surf Diva during the bidding process in both 2005 and 2008, was also unable to recall how he secured the fifth site for his clients in 2005.

"That was a long time ago. I don't remember," he said...

Sunday, June 21, 2009

Dean Calbreath hopes Arnold Schwarzeneggar will stop tax breaks

Tax changes may be key to plugging budget hole

Dean Calbreath
San Diego Union-Tribune
June 21, 2009

With California on the brink of insolvency, Sen. Dianne Feinstein recently recalled the days when, as mayor of San Francisco, she would venture out into the neighborhoods and ask people what kind of services they wanted.

“Do you want more police?” Feinstein would ask.

The answer would come back, loudly, “Yes.”

“Do you want more firefighters?”

The answer would come back, loudly, “Yes.”

“Do you want to pay for them?”

“And instantly,” Feinstein said, “there would be a booming 'No.' ”

Speaking to a crowd of mostly government workers at Lawrence Livermore National Laboratory late last month, Feinstein said “that's part of the dilemma of (the California budget crisis). And the hard part of it is where the cuts have to come from.”

Feinstein's comments get to the heart of the problem facing Sacramento now. How many schools, libraries, parks and other public services is California willing to do without as we try to close our budget deficit, currently pegged at $24.3 billion?

Gov. Arnold Schwarzenegger's proposal before the Legislature is to rely on cuts alone to fix the budget: $5.5 billion from health and human services, $5.1 billion from education and $1.3 billion from the court and prison systems. The rest of the money would come from one-time sales of state assets; borrowing from cities and counties (an idea that infuriates local officials); furloughs, pay cuts and layoffs of state employees; fee increases and cuts in other services.

Schwarzenegger pledged last week to veto any budget that includes new taxes beyond what he has already proposed, which largely consist of increases to the state sales and income taxes.

“To do another tax increase is irresponsible,” Schwarzenegger said.

But if Schwarzenegger really wants to be responsible about putting out a budget, he should re-examine some of the tax breaks that were inserted into the budget last year to gain the votes needed for a two-thirds passage in the Legislature. And he should reconsider some of the taxes that were abandoned during the budget negotiations.

A conference committee of the Legislature last week proposed doing just that: clipping out the tax breaks and adding back the taxes. Despite Schwarzenegger's veto pledge, he should give the panel's recommendations some consideration:

Oil companies. California is the fourth-largest oil-producing state in the country behind Louisiana, Texas and Alaska. But despite our reputation as a high-tax area, California has never imposed severance taxes for pulling gas or oil out of the ground.

That's a stark contrast to the other oil-and gas-producing states, most of which have double-digit severance taxes. The taxes in conservative, Republican-dominated Alaska are at 25 percent, generating so much money that the state is able to pay residents $2,000 per year as a benefit, besides building a war chest for when oil will no longer be available.

The conference committee proposed putting a 9.9 percent severance tax on oil – a proposal that Schwarzenegger supported last year – which would generate an estimated $830 million in revenue.

Joseph Sparano, who represents oil interests as head of the Western States Petroleum Association in Sacramento, argues against the severance, noting that in California, as opposed to some (but not all) oil-producing states, oil companies pay property taxes for the land where they are drilling.

“If you add the severance tax, oil producers would be paying higher taxes than anywhere else in the country,” he said.

Sparano may have a point. But perhaps we could at least lift severance taxes to the point where we'd be on a par with, say, Texas, Louisiana, New Mexico and Wyoming, which now collect far more on their oil and gas than we do, even after taking property taxes into account.

Corporate tax breaks. During the budget negotiations in February, the Legislature inserted three corporate tax breaks that resulted in a total gap of $2 billion to $2.5 billion

Data from the state Franchise Tax Board show that one of the proposals – to allow companies to choose between two ways of being taxed in the state – would largely benefit the 0.1 percent of companies in California that make more than $1 billion per year. Much of the benefit would go to just nine companies, saving them an average of $33 million a year.

“These massive, permanent tax cuts will exacerbate California's persistent budget troubles, requiring deeper cuts in public services or potentially larger tax revenues from California's families,” said a report of the California Budget Project, a liberal think tank in Sacramento.

Another proposal, which would allow corporations to transfer taxes among related companies, would benefit just 0.03 percent of corporations, with the top six companies saving an average of $23.5 million a year.

Auto license fee. Schwarzenegger's first action as governor was to roll back California's fee on automobile licenses, which put a $4 billion hole in the budget. As the budget problems mounted last year, Schwarzenegger was forced to increase the license fee. And now the Legislature is proposing to raise it an additional $15.

The standard argument against raising taxes is that it would discourage people from buying automobiles. But will an additional $15 fee on an auto license really stop Californians from buying a new car? That's doubtful – but it could generate millions of dollars for the health care, education and other services being cut.

Cigarette taxes. The committee is proposing to increase excise taxes on cigarettes and other tobacco products by $1.50 per pack, nearly tripling the tax on a pack of cigarettes from 87 cents to $2.37. This proposal would increase revenue by an estimated $1 billion next year.

Esmael Adibi, economist at Chapman University in Orange, who happens to be a smoker, complained that such a tax would be “Draconian” and would fall most heavily on the poor.

But if you weigh the value of helping people quit smoking versus laying off teachers and suspending health care for poor children, it would be hard to call it an altogether bad idea. Even if that proposal were chopped down by 90 percent, to 15 cents per pack instead of $1.50, it would still generate $100 million in revenue, which would be enough to keep quite a few teachers on the job.

The bottom line is that to have a balanced budget, there will be pain all around. Assembly Speaker Karen Bass, who supports the tax revisions, said she just wants to make sure “that the shared pain be shared by oil companies and tobacco products, as well.”