As Recent Scandals Prove, Public Officials Fail at Due Diligence

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Tricentennial Commission CEO Edward Benavides gives welcoming remarks during the Tricentennial Celebration Commission meeting at the San Antonio Central Library.

Bonnie Arbittier / Rivard Report

Then-Tricentennial Commission CEO Edward Benavides gives welcoming remarks during a Tricentennial Commission meeting at the San Antonio Central Library.

When it comes to public policy, it is easy to get caught up in the “scandal of the day” and miss the larger picture. What's worse, sometimes policies are based on said scandal, and we later find that those policies didn’t solve the problem, because the scandal wasn’t the real problem.

San Antonio has recently seen its share of such scandals – namely those surrounding the bid for a Major League Soccer expansion team, Centro San Antonio, the Tricentennial, and most recently, the San Antonio Symphony. On the surface, these issues seem to have little in common, and when examined, yield little more than a finger-pointing marathon. But beneath the surface there appears to be one issue in common – a lack of due diligence by local government officials.

In terms of raw public money, the City of San Antonio and Bexar County likely spent around $40 million on Toyota Field and the STAR Soccer Complex. Even before the City and County jointly acquired Toyota Field for $18 million in late 2015, the City had allocated around $5 million from the 2007 bond for the initial land cost, and the County invested about the same amount as part of its 2008 youth sports bond projects. Once the soccer complex was approved, the City contributed millions more in water, streets, and sewer infrastructure.

The resulting soccer facilities have been transformative for youth and collegiate soccer in San Antonio. Considerable due diligence went into the development of each of the County's youth sports facilities, and the success of the facilities finally recommended by its Sports Facilities Committee is reflective thereof.

The MLS bid, however, seems to have lacked that same level of due diligence. It became fairly apparent that MLS was far more enamored with Austin than with San Antonio, and that the leader of the expansion committee owned a team that he wanted to relocate to Austin.

Through the international soccer body FIFA, MLS "owns" the right to establish teams in U.S. cities, so even though it rejected our application, it retained those rights. We failed to ask MLS for an “escape clause,” one that would have allowed us to negotiate with Mexican professional leagues if not selected. It seems that we left all the chips on MLS' side of the table.

Centro San Antonio's embezzlement scandal shows the same pattern, but on a much smaller scale. A simple background check, perhaps the most basic form of due diligence, could have prevented that disaster. Perhaps a certified public accountant in the chief financial officer position would have been the next level of due diligence. Even simple things like tasking the same person with both operations and finance should have been a potential red flag for board members.

The Tricentennial is a mystery. How could former Mayor Julián Castro, who was so passionate about “the decade of downtown,” delay starting a Tricentennial Commission?  San Antonio is hosting its fourth Men’s Final Four this year and has previously organized two Women’s Final Fours. Despite San Antonio’s experience hosting these events and the NCAA’s experience producing them, we had to bid on the 2018 Men's Final Four five years in advance and begin work on it three-and-a-half years in advance.

Once the Tricentennial Commission finally got started, its leaders violated nearly every rule of nonprofit governance in its structure and didn’t learn lessons from similar efforts in our community. Instead of starting an independent nonprofit, the City started the Tricentennial Commission as a nonprofit government corporation that acts as an arm of the City.

Formerly a City department known as the Convention and Visitors’ Bureau, Visit San Antonio spun off into an independent nonprofit, so it could function more effectively. The Fiesta Commission is an independent nonprofit that coordinates the production of a multi-week festival every year.

Historically, nonprofit government corporations have a much harder time raising money – specifically because of the word “government” – than independent nonprofits. Another misstep: Starting with five co-chairs immediately set the stage for no accountability or chain of command.

Most recently, San Antonio saw the death and resurrection of its Symphony – the pattern is starting to get scary. The City and County spent more than one-quarter of a billion in public dollars to develop the Tobin Center for the Performing Arts as a home for the Symphony – including the surrounding site, improvements to nearby portions of the San Antonio River, and a new parking garage. More recently, the nonprofit that ran the Symphony was replaced with one deemed more capable of raising funds, but six months post-coup, the new management discovered that it couldn’t make it work.

A large crowd enters the Tobin Center of the Performing Arts for the first of two Tricentennial concerts.

Bonnie Arbittier / Rivard Report

Spectators enter the Tobin Center of the Performing Arts for the first of two Tricentennial concerts by the San Antonio Symphony.

Could a pension obligation have been a surprise? Weren’t there payments into that fund on the books? Pension obligations are certainly one of the trickier components of corporate mergers and acquisitions, but the “new and innovative management” was loaded with corporate experience. How did we end up back in the exact same place we have been with the Symphony for the past 30-plus years?

Every one of these efforts top-level professional soccer, Centro San Antonio, the Tricentennial, and the Symphony is worthwhile and of great benefit to our community. I supported, and still support, all of them. That is what makes the pattern of a lack of due diligence so frustrating. It appears that every time our local governments get involved in private-sector activity, its officials lack the skill sets to complete due diligence on those projects.

Often, consultants are hired to arrive at predetermined answers. At other times, leaders' great instincts about what to do next were not tempered by an equal dose of rigor. Sometimes it is pure politics – strong business or political leaders promoted the answers before the questions were even developed.

Whatever the cause and whatever the project, due diligence has been in short supply. We should all heed these examples as warnings, because big and ambitious projects are always on the horizon in San Antonio. They should be, but they should be preceded by legitimate due diligence.

11 thoughts on “As Recent Scandals Prove, Public Officials Fail at Due Diligence

  1. Along with a lack of due diligence, an even greater concern is the city’s dishonesty in dealing with public projects. Take for example the media contract awarded KSAT that exempts all other media sources from coverage of our Tricentennial celebration. Sculley and her multiple chairpersons of the Tricentennial Commission conspired secretly with Phil Lane at KSAT to secretly award the million dollar contract to KSAT without even offering others a chance for competitive bids. It was only after this sneaky, under-the-table scandal began being leaked that the commission suddenly announced a competitive RFP bid. Believing it to be a fair competition, several media outlets went through the laborious process of providing bids, only to learn the secret contract with KSAT was honored after all. This is despicable. It is good-old-boy, shady politics at its best, and it’s shamefully, patently and absurdly unfair. Instead of national exposure (like New Orleans is currently enjoying for their 300th) our city must settle for one lame, forth-rate local TV station, instead of the world’s coverage. Good for Phil Lane, KSAT and his crooked “insider” city cronies, but terrible for our entire city. As long as this crooked contract stands, it will serve as proof that our city government and Sculley need to change their ways and start playing fair, honestly and honorably.

  2. I hope KSAT TV can make enough millions to wash the disastrous publicity and public relations melt-down caused by their unfair Tricentennial contract. Hard to imagine this being worth the shame it has brought our city, KSAT TV and Phil Lane. Sometimes, it pays to do the right thing. Cancellation of KSAT’s contract with the Tricentennial commission is long, long past due.

  3. Great article. Many of these missteps could have been avoided by a more careful and methodical vetting of the projects in question. At the risk of having tomatoes thrown at me, I would suggest that capable attorneys with reputations for integrity be involved in the vetting process. They are experts at recognizing red flags and preventing or diminishing unnecessary risks. And there are many attorneys in this city who are both highly capable and who have great integrity.

  4. The concept of assigning responsibility and then not providing adequate oversight with detailed follow-up evaluations has been building for decades. It has been a problem with school districts and campuses, with universities, with the airport–probably with every governmental agency. Why? Because it is so much easier and “nicer” in life not to confront people but to pretend that everything is going okay.

  5. In regards to the attorneys in town, many represent a variety of these entities and also are a part of the good old boy network. They are a part of the problem.

    Maybe, everyone should boycott and call the businesses buying time on KSAT for Tricentennial coverage.

  6. Thank you for your thoughts, George. I’ll remember “due diligence” and other points and questions you raised in the article. I’ll bookmark this page too, so I can especially reread your last two paragraphs (starting with “Often, consultants are hired to arrive at predetermined answers….”)

    I’m embarrassed about Centro, since even lil’ ol’ me knows to do a thorough background check on someone handling loads of money.
    I don’t know where Spurs Sports and Entertainment was in our governments’ handling of the MLS attempt at a team, but if we didn’t secure at least their advice then chalk up another embarrassment by our gov’t leaders.

  7. KSAT behaved abominably to the detriment of our city and to our Tricentennial.
    A boycott of KSAT is completely appropriate, especially neither KSAT’s Phil Lane nor the city (Sculley) has made any effort to rectify the scandal and rescind their ill-gotten contract between the city and KSAT. It is highly unlikely that the three sponsors; Ancira, Frost Bank and the Children’s Hospital were even aware of KSAT’s fowl deed when they paid KSAT a million for sponsorships. This scandal just will not go away until/unless that awful contract ceases to exist.

  8. Just how long does the city and City Manager Sculley plan to ignore this situation with the unsavory contract with KSAT? This must not be allowed to stand. Other legitimate, earnest and honest businesses (like Channel 4) were never even given a chance. Unlike KSAT, other local TV stations bent over backwards to help the city year after year.

  9. The author could easily have added the Center City Housing Incentive Policy, which, after 5 years, is finally getting an assessment of its overall performance; a performance that resulted in unaffordable housing costs and nearly $100M in taxpayer-subsidized gentrification and displacement.

    The program was extended by the Council in 2016 after an analysis by (then) Interim Director John Jacks said it needed to be extended and more focused on the Central Business District.

    But just over a year later the Council and the Mayor talk about its unintended and “unhealthy consequences” and clearly state that the incentives should have been halted earlier. Say, 2016, maybe?

  10. The “pension obligation” was and is a non-issue; the symphony has long been current on its payments to the multi-employer AFM pension fund. The only circumstance under which a large pension obligation would fall on the San Antonio Symphony would be withdrawal of the musicians from the fund such as would occur if, for example, the musicians were no longer members of the musicians union. Our new board chair, Kathleen Vale, has stated publicly that while she could see why the supposed pension obligation might have been an issue for the newly formed Symphonic Music for San Antonio, it was not an obligation or a concern of the Symphony Society of San Antonio.

  11. I live downtown and don’t see any flags or banners or anything else proclaiming that we are a Tricentennial City. While New Orleans has banners, medals and flags and daily Mardi Gras style parades heralding their Tricentennial we have manhole covers that proclaim 300 and I will bet that they get stolen,

    It is just a good thing that Nurenberg, SculleJoy and the Council were not in office during HemisFair, There would have NOT been a Fair perhaps all their efforts are for the police releasing illegals or on telling Amazon and Nissan that we don’t want their plants here or they spend all their time choosing the colors of the new $18,000 drapes for the Mayor’s office.

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