EDC Report Violated Law, City Atty. Says

Times Staff Writer

The San Diego Economic Development Corp. violated state law and “potentially” misused city funds by producing a “prohibited campaign electioneering document” critical of the slow-growth Quality of Life Initiative, the San Diego city attorney’s office ruled Wednesday.

But Deputy City Atty. Cristie McGuire, who wrote the opinion, said the EDC should not be penalized for its actions because the city had expressly allowed it to commingle private and public funds as part of its agreement with the agency.

The legal opinion was released in response to a Sept. 8 request from Councilwoman Abbe Wolfsheimer for a review of the propriety of the EDC report.

The report, published Aug. 25, concluded that San Diego unemployment would nearly double by the year 2000 and local commercial and industrial development would be severely curtailed if the Quality of Life Initiative, Proposition J, is approved by voters.


The home-building industry, which is attempting to defeat two city measures and two county slow-growth propositions on the fall ballot, has widely distributed those conclusions in its campaign literature.

EDC President Daniel Pegg and Vice President Paul Devermann were en route to Korea on Wednesday and could not be reached for comment on the legal opinion.

Members of Citizens for Limited Growth, which is sponsoring Proposition J in its election battle with rival council-backed Proposition H, were sharply critical of the EDC report in August and claimed vindication Wednesday.

“I think it’s clear that the EDC has abused their authority in jumping into the ‘No on D and J’ campaign with the development industry,” said Tom Mullaney, co-chairman of Citizens for Limited Growth. Proposition D is the citizens group’s slow-growth measure that would apply to unincorporated areas of the county.


“Our big concern with the EDC is that they’re trying to masquerade as economists,” said Richard Carson, a UC San Diego economics professor who advises the citizens group. Carson said his organization has urged the EDC to have its three studies of the growth issue reviewed by independent economists, but the agency’s officials have refused.

City Attorney’s Office Assailed

Carson also criticized the city attorney’s office for its recommendation against severing ties between the city and the EDC or a financial penalty against the agency, which is receiving $435,000 from the city during the current fiscal year.

“The city should either terminate their contract, or, at the very least, attempt to recover money used to produce and promote these reports,” Carson said.

Although she labeled her decision a “close question,” McGuire ruled that the EDC report transcended the “purely informational” status allowed by the California Supreme Court in its 1976 ruling in Stanson vs. Mott.

“Since the EDC report contains no statement about the projected advantages of the (Quality of Life) measure if adopted, nor does it contain any statement about the competing measure (Proposition H), the report is easily attacked as not containing a fair presentation of the facts,” McGuire wrote.

EDC officials told McGuire that they did not review Proposition H because of their belief that it would not affect the city’s economy. Although both measures call for caps on construction of housing, only Proposition J calls for corresponding limits on economic development to slow job growth in the city.

McGuire’s decision assumes that the EDC must have used public and private money to finance the report because the agency combines its revenue in a single account.


McGuire wrote that the city should not terminate its agreement with the EDC because of the ambiguity of a clause in the agreement prohibiting political activity. The ban is called into question by the fact that the agency has conducted studies on the economic effects of a proposed unitary tax, border-related issues and growth issues, she wrote.

And even though the report was “a potential misuse of public funds,” it would be difficult to determine how much money could be withheld from future EDC payments because the city expressly allowed the agency to mix city funds with private money, McGuire said.