It’s business as usual for the Hillcrest Business Association, which for some members means watching association executives and the board’s president steer the improvement district afoul of the law by entering into self-enriching sweetheart deals.
On the other hand, for staff members, business as usual means another day of threatening emails from a small minority of rabble-rousers who want nothing more than to impede progress in the business district and convince the city to disband the association.
The latest blowup erupted on January 13 when Hillcrest Business Association’s board awarded their board president Johnathan Hale and his publishing company, Hale Media, publisher of several local publications including the San Diego Gay and Lesbian News, a sole-sourced advertising contract to promote the Hillcrest Mardi Gras event.
The agenda item sent to members failed to provide details of the contract, including the amount. Longtime critics of the business district jumped at the chance of raising a potential conflict-of-interest violation.
The advertising agreement between the Hillcrest Business Association and Hale Media is not the first. In fact, the association hired Hale Media in 2013 to help promote its annual events. In the two years that have passed, Hale Media has entered into several additional agreements, all while Hale has served as president of the board of directors. According to estimates provided by the business association and minutes from board meetings, Hale Media has received nearly $25,000 to promote the association’s events. All agreements have been single-source contracts, meaning no bids were sought from other media outlets.
“The Hillcrest Business Association board was not presented with any written contract, no written ‘term sheet’, and no letter agreement of any kind,” David Lundin, owner of Son Appareil Photography, tells the Reader. “No competitive bids were sought. No effort was undertaken to explore potential lower-cost alternatives, including but not limited to volunteers or contributors for such marketing and photography work....
“The agreement may be a great deal for the business association, but none of the safeguards were observed,” Lundin added. “This total disregard for the legal safeguards is characteristic behavior for the current president and executive director.”
During the past year, Hale and executive director Benjamin Nicholls, have responded to similar accusations. As reported by the Reader in June 2014, business owner Mat Wahlstrom accused Nicholls and Hale of trying to undermine critics by refusing to grant them eligibility to the business association’s board of directors.
The latest contract agreement with Hale Media, say Lundin and Wahlstrom, is another example of Nicholls and Hale abusing the system for their financial benefit.
“I’d have to comb the city’s conflict of interest policy, but I’m pretty damn sure it doesn’t say it’s okay to reward yourself so long as you have your cronies do it for you,” Wahlstrom contends.
“It doesn’t matter how much or little Hale Media is paid, or whether the money is not from public funds. Those services could be provided by another qualified [business association] member or outside vendor but is instead being handed no-bid to the board’s president.”
The business association’s 1985 articles of incorporation provide some leeway when it comes to services provided by members.
Section VI of the articles of incorporation states, “no part of the net income of the corporation shall inure to the benefit of or be distributable to its members, trustees, officers, directors, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered….”
And while there is wiggle room in the articles of incorporation, the City of San Diego has strict policies prohibiting business improvement district non-profits from entering into no-bid contracts. According to the city’s “conflict of interest and procurement policy” for nonprofit corporations managing assessment districts, bids must be solicited for any contract over $5000.
“When a contract provides for an expenditure greater than $5000, but equal to or less than $10,000, the nonprofit corporation may award the contract but shall seek competitive prices either orally or in writing.”
Hillcrest Business Association executive director Nicholls, however, says not only is the compensation to Hale Media reasonable but saves the association money. In addition, says Nicholls, the money used to pay Hale Media is not public money but comes from donations.
“First, the [Hillcrest Business Association] observes the City’s conflict of interest policy,” claims Nicholls in a January email. “This procedure dictates that when board members get paid for a service we have to have them state their conflict and then abstain from the vote. None of the money paid to Hale Media comes from any government source. We have been paying Hale Media for marketing services for about a year now. The minimal amount we pay covers hard costs, such as labor. The majority of services that [Hillcrest Business Association] receives from Hale Media is donated. We receive thousands of dollars in free media each year from Hale Media to promote all our events.”
By Nicholls’s estimates, the Hillcrest Business Association has paid Hale Media $9350 since 2013. That money paid for full-page ads for each annual Hillcrest Business Association event: Taste of Hillcrest, CityFest, Mardi Gras, Hillcrest Hoedown, Pride Block Party, and Taste ’n Tinis. Email and text-message blasts to 24,000 recipients, social media promotion, street teams, and allowing for banners to be placed at news headquarters were included in that cost. According to a February 23 meeting agenda, estimated costs for the 2015 promotions total $15,000.
“This is a significant donation over the course of the year that totals many, many, thousands of dollars,” Nicholls writes in a January 27 email. “This year, I am going to approve the agreements one event at a time. That’s why the Mardi Gras activities were on the agenda recently…. [I]t would be noticeable if we didn’t engage with Hale Media and their target audience for our events.”
Wahlstrom and Lundin, however, say that despite the alleged savings on contracts — especially those involving board members — as required by the city’s conflict-of-interest policy, they need to be made public in order to ensure proper accountability and transparency.
Adds Wahlstrom: “It’s difficult to see how no-bid awards to Hale Media, apparently without oversight or audit for return on investment, serve a purpose for anyone other than Johnathan Hale.”
Hale declined to comment for this story.