SJ Civic Audit Angers Officials

The nonprofit organization that runs the San Jose Convention Center and San Jose Civic Auditorium has come under fire from city officials after an audit revealed the group overshot last year’s budget while losing millions.

According to documents obtained by the San Jose Mercury News, the audit reported Team San Jose lost nearly $7 million during the 2009-10 fiscal year, including $1 million on a series of concerts the group promoted with Nederlander at the San Jose Civic Auditorium.

Specifically, the audit noted Team San Jose agreed to take on a majority of the risk for the Civic Auditorium concerts in its agreement with Nederlander, which apparently set contractual targets for per-person F&B sales that Team San Jose failed to meet for 14 of 15 concerts. City Auditor Sharon Erickson advised the terms of the contract be renegotiated in her report.

Other findings in the audit revealed flawed reporting procedures, a lack of transparency and overspending by more than $750,000 by the group.

While generating the largest single net loss during Team San Jose’s tenure running the facilities, executives for the group received thousands of dollars in bonuses, the report found.

Team San Jose CEO Dan Fenton told the Mercury News his group was proud to have met five of eight performance targets, was responsible for “almost $90 million in direct spending” in the city and “looks forward to working with city staff” on Erickson’s recommendations.

City officials, however, don’t appear to be seeing the situation through such rose-colored glasses.

“It’s a day late and $7 million short for Team San Jose’s management,” councilman Sam Liccardo told the paper, noting that contracts signed by the group without the city’s knowledge imposed “multimillion dollars in obligations on the taxpayers.”

Mayor Chuck Reed added the city should “seriously look at getting more competition for the management of the convention center.”

As the overspending reportedly puts Team San Jose in violation of its management agreement, the city has the option to re-bid the contract for the downtown facilities.