City Audit Prompts Review of Barnes Tennis Center Lease

By Paul Krueger

Barnes Tennis Center executives are willing to renegotiate a lease agreement that pays the city just $50 per month on yearly revenues of more than $7 million.

The controversial lease for city-owned property in Point Loma was signed in 1994. The lease expires in June, 2029, and does not include any periodic increases in the $600 annual payment over the life of the agreement.

Committee member Vivian Moreno said she is “extremely angry” that the city has for decades received such a minuscule share of the Tennis Center’s $7.2 million in revenue. “Any San Diegan would love to have their rent frozen at 1994 levels,” Moreno said.

Committee member Henry Foster was also critical of the agreement.  “If we are writing contracts that aren’t beneficial to the city, shame on us,” Foster said during Wednesday’s meeting. “Quite honestly, this is a mess, and it’s a pattern. And (city) leadership needs to get this problem resolved.”

Details about the lease came to light last week with the release of the City Auditor’s investigation, which was prompted by an call to the city’s fraud hotline.

The investigation found that the Barnes Tennis Center — located on a dozen-plus acres bordering Interstate-8 and W. Pt. Loma Blvd — had also ignored the city’s demand that it stop using an illegally graded area for overflow parking, and “falsely asserted that the area had been used for parking since 1994.”

The investigation also revealed that Mayor Todd Gloria’s staff does not investigate or enforce code violations against lessees of city-owned properties. “Not enforcing code violations by lessees (while issuing fines against taxpayers)… I don’t have another word for it,” Moreno said. “It’s just bananas.”

The Auditor recommended that the Mayor Gloria’s management team require the Tennis Center to correct any lease violations, start enforcing code violations against all city tenants, and take a market-rate approach to the Tennis Center’s lease when it is renewed or extended.

Complaints about the low rate of return on the current lease dominated the Audit Committee’s discussion. “This isn’t Todd Gloria’s money, and it isn’t Vivian Moreno’s money,” Moreno said. “It’s the public’s money, and we need to be absolutely good stewards of this money.”

Committee member Stewart Halpern said the market rate for the Tennis Center lease would be $500,000 to $1 million yearly. “Who (at the city) is empowered to forgo millions of dollars in revenue between now and 2029?” asked Halpern, who is a finance professional and consultant.

Committee member Toufic Tabshouri said the city’s Real Estate Assets Department “should not write any leases that extend beyond five or ten years. These long-term leases don’t serve the City’s interests well.”

Jack McGrory is president of the non-profit Youth Tennis San Diego, which runs the Tennis Center.  He was San Diego’s City Manager in 1994 when he signed the lease on behalf of the public. Though he’s now switched sides and represents the tennis complex, he assured committee members he has no conflict of interest, having left city employment almost 30 years ago.

McGrory disputed several allegations made in the Auditor’s report, and said he personally informed the mayor and department heads about the Center’s creation and use of the overflow parking lot. “No one raised an issue,” McGrory said. He also complained that the Auditor’s office did not seek the Center’s input before releasing its report.

Responding to criticism of the low-revenue lease and the city’s failure to enforce code violations on city-owned property, a mayoral staffer acknowledged that “we definitely had a gap that we needed to solve for,” and that the Mayor is “committed” to assuring that new leases generate more revenue.