San Diego, CA
City Staff Spent $6 million More on Rentals Without Council Approval. Councilmembers Want Answers
A year ago, San Diego city auditors found that staff spent millions more on rental equipment for city departments than what councilmembers approved. But the auditors couldn’t find who OK’d the additional spending.
Over the last month, councilmembers have demanded answers from city staff after an audit found that a contract with Herc Rentals increased by more than $6 million without approval from the City Council.
“I had asked on the dais on Oct. 6 where the $6 million had come from that was taken from the general fund and increased unlawfully to the Herc rental contract,” Councilmember Marni von Wilpert said during an Oct. 20 City Council meeting. “I’m still waiting for an answer.”
The city has a contract with Herc Rentals to rent trucks, forklifts and other equipment and services. This equipment is used by city workers across several departments responsible for park maintenance, public safety and more.
For fiscal year 2020, councilmembers approved spending up to $14.3 million on rentals. The contract now allows spending up to $65.5 million.
City law requires the City Council to review and approve certain changes to city contracts. The Council is required to approve new contracts over $3 million and all adjustments to contracts over $200,000.
The city auditor found that didn’t happen in 2023. That year, staff adjusted the Herc Rentals contract in October by $4 million and then again in December by $2.7 million. Other adjustments made to the contract were approved by the Council.
The city auditor’s team said departments didn’t know whether their contracts needed Council approval.
In a statement, Ombretta Di Dio, spokesperson for purchasing and contracting, said the contract was adjusted “to pay outstanding invoices and allow departments access to rental equipment and vehicles to address operational needs, with the intent of obtaining retroactive approval.”
She said rental equipment and vehicles supported critical operations to the city. When some city vehicles were out for repair or missing parts, they used Herc rentals to help in emergency situations like the 2024 floods.
The city auditor gave Voice of San Diego the list of every transaction with Herc Rentals from 2019 to 2024. The transactions are from dozens of departments like public utilities, homelessness strategies and solutions, and transportation.
Di Dio said departments have “flexibility within their approved budget to manage non-personnel costs… When overages occur in one area, they are typically offset by savings in another—ensuring that operations continue without disruption.”
According to the 2024 audit, “when contract alterations are brought to Council late, it puts pressure on Council’s approval responsibility. As a result, Council’s ability to provide meaningful oversight may be reduced if there is not time to consider other vendors without disrupting critical services.”
In other words, when contracts are brought late to the City Council it limits their role and authority to make sound decisions on the contracts. Think of it like making charges to a shared credit card. Each department is charging to the credit card, unaware of how much other departments are spending on it too. Then, Council has to deal with the bill.
Say a department spent more than $50,000 on rental vehicles. They have a better chance of getting that approved by Council if they bring it late, because, well, they have already spent it and now they owe Herc.
So, Council might feel pressure to approve the action to adjust the contract so they can ensure Herc gets paid. But they don’t know if the departments have that money budgeted, they just know they owe Herc.
Councilmembers either vote no – and risk interrupting services – or vote yes and continue to meet the demands for rental equipment across departments.
The Herc contract is an example of these pressures. The Council recently approved an additional eighth amendment to increase the amount in July. The Council voted to increase the contract with the condition that they want to see a specific audit on it.
“I think one of the things I struggle with sometimes is who will bear the consequences if these contracts aren’t approved,” said Councilmember Sean Elo-Rivera during the Council meeting on Oct. 6.
“I think this is what puts us in a particularly difficult position as councilmembers… it is typically rank and file everyday employees who are doing the work.”
It’s unclear why the city is spending so much with Herc. A spokesperson with the city said the transportation department received a mid-year adjustment in FY25 to account for increased needs so that other departments’ needs were not reduced.
The city auditor is planning to do an individual audit on the Herc contract and any other vehicle contracts.
“We will begin the audit in the near future,” said City Auditor Andy Hanau.
Claudia Abarca, director of purchasing and contracting, said they implemented eight recommendations of the 13 made by the city auditor in the last year. One of these recommendations includes updating the Council approval threshold and clarifying alterations for goods and services contracts.
Still, councilmembers are frustrated and looking for answers.
“Do you realize we had a budget fight this past year for over $4.5 million in which the mayor vetoed it and we overrode the veto?” said Councilmember Von Wilpert during the Council Meeting on Oct. 6.
“Somebody had to use a city computer and make that adjustment unlawfully. It’s against the municipal code to do that, so who did that?”
Councilmember Raul Campillo also chimed in to ask if the city disciplined the employees who made the illegal adjustments. Abarca said they did.
“I’m really hopeful that’s what happened here, because this wasn’t a few dollars over,” said Councilmember Campillo. “This was several million dollars over.”
Abarca said that city departments were behind on payments and in a deficit of what they owed Herc. She said her staff was directed to make the unauthorized adjustments when they ran it up the chain of command.
“I don’t know that it went to the mayor himself, I know I did bring this up to the DCOO (deputy chief operating officer) and we’ve been working on this contract for quite some time,” said Abarca. “We’ve done several refinements on how we are monitoring and actually managing the spend for each department to ensure we don’t get to this place again.”
Abarca added they have not altered any contracts above $200,000 without it coming forward to the City Council since 2023.
It’s still unclear who is directly responsible for the contract changes, and where each department pulled money from their budget to pay Herc.
San Diego, CA
Coastal Commission ruling opens door to development of National City waterfront
National City’s Pepper Park can soon expand in size by nearly 50%, thanks to a ruling this week by the California Coastal Commission to approve the National City Balanced Plan.
The approval of the plan at the CCC’s Wednesday meeting, developed by the Port of San Diego, means that not only will the popular park have the ability to increase in size, big changes are coming for commercial, recreation and maritime uses on the National City bayfront.
“We are grateful to the California Coastal Commission for its support of the National City Balanced Plan,” said Danielle Moore, chair of the Board of Port Commissioners. “The progress we have made has been anchored in tireless collaboration with the community, business leaders and, of course, the city of National City. It’s about bringing more recreational opportunities to the bayfront while also streamlining and strengthening maritime operations, and we are eager to bring these projects to life.”
Other components of the balanced plan include:
- Realigning Marina Way to serve as the buffer area between commercial recreation and maritime uses
- The closure of Tidelands Avenue between Bay Marina Drive and West 32nd Street, and West 28th Street between Tidelands Avenue and Quay Avenue, around six acres, to increase terminal efficiency by eliminating redundancies
- The development of a recreational vehicle park, tent sites, cabins and the “ultimate development of up to two hotels with up to 365 rooms, as well as dry boat storage,” a port statement read
- A connector rail project to connect the existing rail and loop track located on the National City Marine Terminal to additional rail car storage spots at the existing Burlington Northern Santa Fe National City Yard east of the National Distribution Center
The Board of Port Commissioners must accept the CCC’s certification, then the port and city can begin the process of completing the above projects.
“I am proud of the work we have done to help create a lasting legacy for National City, the Port of San Diego, and the entire region,” said Port Commissioner GilAnthony Ungab. “Nearly a decade in the making, this plan balances the interests of the community and many other stakeholders, addresses public access, maritime, and recreation uses, and expands waterfront access in my community.”
The National City Bayfront is 273 acres of waterfront land and 167 acres of water, and includes the National City Marine Terminal, Pepper Park, Pier 32 Marina, the Aquatic Center and pieces of public art.
San Diego, CA
Gloria announces effort to add more townhomes, cottages to San Diego neighborhoods
Mayor Todd Gloria announced an initiative Wednesday intended to expand housing options in neighborhoods by integrating small-scale residences such as townhomes, rowhomes and cottages into an area’s existing character.
The Neighborhood Homes for All of Us initiative is also intended to support community land trusts — nonprofit organizations that acquire land to create permanent affordable housing.
“Since Day 1 of my administration, I have been focused on building more homes that San Diegans can actually afford — and getting them built faster,” Gloria said at a news conference Wednesday. “‘Neighborhood Homes for All of Us’ is the latest piece of that puzzle. This innovative program will break down the barriers that have gotten in the way of building the type of housing that I believe is ideal for young families and first-time homebuyers for whom the dream of homeownership has long felt out of reach.”
Around 80% of land zoned for housing in the city is restricted to single-family homes, which continue to increase in price, Gloria said. And a significant portion of new housing being built consists of apartment buildings with primarily studio and one-bedroom units, leaving working-class families fewer and fewer options for homes.
Neighborhood Homes for All of Us is intended to increase the housing supply and allow community land trusts to keep housing affordable in disadvantaged communities for low- to middle-income families.
“San Diego is an incredible place to raise a family, and more families need the opportunity to do that in San Diego’s existing, highly desirable single-family neighborhoods where their kids can learn and play in a great community,” City Planning Director Heidi Vonblum said. “But today, that comes at a price that is out of reach for too many. Integrating more options for families requires careful and thoughtful planning, with input from existing and future community members across the city, to ensure these new home opportunities for San Diego’s families are built in ways that best enhance and benefit San Diego’s amazing neighborhoods.”
The initiative will roll out in two phases. In the first phase, beginning this week and continuing through next summer, San Diegans can help determine what the neighborhoods can look like. The public will be able to see renderings showing small-scale neighborhood homes within San Diego’s existing communities, along with new regulations that “provide a clear pathway for building these homes,” according to a statement from Gloria’s office.
Phase 1 will also include an open house and ways for the community to provide feedback and concerns.
Phase 2, scheduled for the second half of 2026, will be for city staff to develop regulations allowing for the building of more neighborhood homes in a way informed by the public feedback.
The initiative is partly funded through a Regional Early Action Planning grant from the San Diego Association of Governments.
San Diego, CA
Affordable housing project for San Diego Unified teachers moves forward
The first of five affordable housing projects for San Diego Unified School District teachers was approved on Wednesday night.
The school board voted unanimously in favor of working with the developer who bid on the project at the Instructional Media Center on Cardinal Lane. The Affordable Workhouse Housing project promises 100% affordability, with 108 one-, two- and three-bedroom units, and some surface lot parking.
“It’s a practical solution to a very real problem, and it sends a message that we are committed to stability, not just for employees but for the students,” one speaker said.
Board members say the project will be fully funded by the developer, DECRO Corporation based in Culver City, and that the estimated annual rent revenue is $125,000 dollars. It is expected to increase 2.5% each year.
Some in the neighborhood are concerned.
“We are one way in and one way out. We are built in a canyon,” neighbor Callie Grear said.
“Parking here is horrible,” neighbor Paul Grear said. “Everybody is parking in front of our street. I can’t even park in front of my house.”
“The safety of our neighborhood is in jeopardy with this plan,” neighbor Patricia Torres said. “We are already overcrowded. We are asking this board to reconsider building on this site.”
Despite the pushback, board members unanimously voted in favor of moving forward with the developer on this project. Unless exempt, it will first undergo city scrutiny. There are still four other locations still on which SDUSD wants to build.
A vote for housing on those other four properties has been postponed until January so that the school board can hold a workshop and appropriately question the developers that are bidding on those projects.
In all five projects, San Diego Unified hopes to build 555 units in the next 10 years.
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