City Second-Guessing Itself on Festival Funds : Arts: Officials complain that Costa Mesa hasn’t been properly recognized for its $400,000 investment. Some say the city should never have gotten involved.

As the ambitious Festival of Britain kicks off today, officials are debating whether the city will recoup its $400,000 investment to co-sponsor the event and whether funds could have been better spent on a local arts group.

The city voted in July to give $400,000 to the three-week festival, which is an arts celebration and retail promotion for South Coast Plaza. At the same time, it rejected a $1.5-million grant proposal by the Costa Mesa Tourism, Arts and Promotion Corp., established by the city last year to generate funds for the arts through tourism and promotional events.

The council concluded that the Festival of Britain could accomplish the same goal as the Tourism, Arts and Promotion Corp. (TAP) but for less money and voted to make Costa Mesa the only city to co-sponsor the event.

The decision, however, amounted to a virtual death knell for the fledgling tourism group.

Saying it could not fulfill its mandate without the grant, TAP’s board of directors voted two weeks ago to disband. It’s now up to the City Council to decide whether the organization will continue to exist.

On Thursday, the president of TAP complained that the city had effectively bypassed its own commission in supporting the British festival.

“We had every reason to believe the festival would have been processed through TAP, it would be a natural function because promotional activity to enhance arts is one of our missions,” said TAP Chairman Michael Chitjian. “We would have also expected to provide oversight on how the city’s money is being spent and what kind of return the city had made for its support.”

Instead, the council voted this week to spend an additional $12,500 to hire an outside firm to calculate how much money the city ultimately earns from the event.

In their initial presentation, festival promoters estimated that the city would see a return of about $600,000 on its $400,000 investment, based on a prediction that $20-million worth of British goods would be sold at South Coast Plaza during the event. City officials projected a less ambitious $300,000 in current and deferred sales tax and hotel tax revenue.

Chitjian is not alone in his complaints. The city’s support of the festival raises a slew of issues, not least of which is whether governments should be involved in promoting private enterprise.

Some city officials have argued that the festival is largely a promotional campaign for South Coast Plaza and question whether the city is offsetting expenses that should be borne elsewhere. Henry T. Segerstrom, developer and co-owner of the mall, is co-chairman of the Festival of Britain.

But some council members reply that the city will benefit in several ways from the festival and is justified in providing funds for the event.

City Manager Allan L. Roeder acknowledged that that city’s grant includes no restrictions and can be used wherever festival organizers see fit, including promotional activities. Also, the city did not require that estimates of the financial benefit to the city be met as a condition of funding or that it be given regular financial reports, Roeder said.

“It raises the question of whether the city should be involved in these kinds of events and what kind of accountability there should be,” Roeder said.

Officials with the Festival of Britain and South Coast Plaza could not be reached for comment.

There has also been grumbling among city officials and some residents that many of the festival events take place outside of Costa Mesa, and one council member has asserted that the city has not been sufficiently recognized for its involvement.