Love where you live!
By Chris Lavin, Editor
LA MESA – When the Downtown Village Merchants Association filed its 2010 taxes the IRS form included this routine question: Was the organization a party to a business transaction with any current directors?
The Merchants Association answered “no.’’
But it was – and it still does.
And then the IRS form asked: Does the organization have a written conflict of interest policy?
Again, the Merchants Association answered “no.’’
A review of the latest Downtown Village Merchants Association financial records by LaMesaToday.com, in fact, shows a number of obvious errors that may be red flags to IRS auditors who are cracking down on the performance of non-profit organizations and closely reviewing their adherence to rules that govern tax-exempt groups.
The Merchants Association leadership says there is nothing amiss in the organization. The answers being questioned on their IRS form 990, they say, were answered honestly and to the best of their ability.
“If we were wrong, we’ll tighten things up,’’ said merchant Deena While, who prepared the IRS forms. “We’re being scrutinized by critics and maybe we’ve been reminded we have to look at these things more carefully and we will.’’
Arlene Moore, president of the Merchants group, dismissed concerns as misdirected attacks from people focusing on the wrong things.
“We need to be getting people into this downtown,’’ she said Thursday. “We answered the questions like they answered the question before.’’ Moore said she focuses more on the marketing aspects of the organization’s events and leaves the paperwork to others.
A review of that paperwork, however, clearly will fuel the criticism that has come at the group by members and former members who portray the Merchants Association as a small cadre of business owners operating more as a private club than a transparent, public organization.
And, perhaps not coincidentally, these criticisms are coming at a time when the future stewardship of La Mesa’s downtown is being debated while a steering committee pursues establishing a professionally managed Property Based Improvement District for this heart of the city’s commercial district.
THE HEART OF A CITY
In the American tradition, “downtowns’’ own a sort of mythical position. It is the town square, the shared public space of a community. It is the home to the center of commerce, religion and civic authority.
“It’s a disgrace that virtually nothing has been done to improve that area,’’ Madrid said recently. “The Merchants Association has been a small group of business owners running things, but there is more at stake for this city for everyone. Not just the current merchants. We should have a downtown that is a destination for this region, but we’re not getting there.’’
So Madrid, the City Council and city staff have been pushing the PBID approach, forming essentially a tax increment district in which local property owners will agree to joint marketing, security and maintenance efforts in the district that roughly runs along La Mesa Boulevard in an arc from University Avenue and back to University near the Vons shopping plaza.
If the PBID, as currently being conceived, wins property owner approval, more than $300,000 per year could be available to apply to downtown marketing and maintenance. That amount would include more than $60,000 from the City of La Mesa, which owns several parcels of land in the district, including large police and fire facilities.
The professional PBID organization, then, would pursue ways of “leveraging” private downtown activity to further fund more promotion and security efforts while the City of La Mesa spends an additional $5-million to redesign and rebuild La Mesa Boulevard.
But this City of La Mesa/PBID approach clearly would insert a new player into what has been a marketing and development effort with two partners joining the city's efforts: the Downtown Village Merchants Association and the La Mesa Chamber of Commerce.
FOLLOW THE MONEY
For all its quaintness, downtown La Mesa is a significant economic engine for the city. Its businesses don’t generate the sales tax revenue of, say, Grossmont Center, but take a look at the annual events that play out along La Mesa Boulevard and money is certainly flowing.
The annual Oktoberfest alone generates more than $200,000 in gross revenues, from which the Merchants Association and the La Mesa Chamber get their biggest source of income each year.
Add to that about $360,000 paid into downtown parking meters each year, funds the city takes in from its weekly Farmers Market and the more than $300,000 the PBID hopes to raise and there may be in the aggregate approaching a million dollars in a pool coming from a downtown virtually everyone agrees needs help.
And there are no shortage of opinions, conspiracy theories and complaints about how downtown money is gathered and used by the various players:
Critics of the Parking Commission, including Merchants Association members, say its funds should be used to beautify and maintain the downtown while that commission has stuck to a plan that limits its spending largely to capital improvements.
Critics of the City of La Mesa believe the city should better respect the value of its downtown and stop charging for every police and fire expense associated with events that generate sales tax revenues and publicity for the city.
Critics of the proposed PBID fear landlords will increase rents to recover the annual assessments and drive out lower-margin businesses.
But most of the recent public and private debate about downtown stewardship has focused on the traditional leader of that effort: the Merchants Association.
Earlier this year Miguel Rojas, owner of La Torta restaurant on Allison, made waves when he quit the organization saying it wasn’t being operated in accordance with its own by-laws and that financial records were being withheld from him.
At a Merchants Association meeting in September, accountant Lynn McRea, a former treasurer of the organization and increasingly a critic of its current management, publicly challenged the accuracy and accessibility of the organization’s books.
The association’s reaction? Treasurer While simply left the meeting. The remaining officers seemed to acknowledge a need for help and asked McRea if she would return to assist in fixing the books. McRea has another focus these days; she heads the PBID steering committee.
In the past, McRea said, the Merchant Association's books were prepared by an accountant and then sent out to an independent auditor to confirm the accuracy. The latest association filings were prepared by While but had no independent auditing process.
A professional auditor may have caught some of the bigger errors.
For example, the organization annually pays two of its directors, Richard Felix and William Vigil, as event coordinators for Oktoberfest and Christmas in the Village respectively. According to association records, Vigil’s annual payment is $2,000. Felix received $22,500 for handling Oktoberfest.
While said the organization didn’t acknowledge the payments to Felix and Vigil – both directors of the association – on its IRS Form 990 because “we weren’t paying them as directors. We were paying them as event coordinators.’’
But the IRS question clearly is intended to disclose any relationship between organization directors and tax-exempt funds and, had they answered “yes,’’ would have required the merchants to supply more transparency on the nature of those payments and the services provided.
No one is accusing the Merchants Association of specific wrong-doing; however, with directors serving as paid contractors of the biggest downtown events of the year, it is not surprising that the association critics have targets of opportunity for their criticisms. And with merchants serving as quasi-public servants in these efforts, there is no shortage of people who question whether they are operating first for the public good or their own.
“People suspect a lot of side deals may be happening in these events,’’ said one city official, who asked not to be identified by name. “There’s really no way to know.’’
Further fueling suspicions and rumor is the fact that the Merchants Association has paid little attention in recent years to the process and paperwork that chronicles an organization’s activities.
The minutes of the group’s meetings did not include record of any votes taken, including approval of the IRS filings, an annual ritual in most non-profits. The organization has not had elections in years, handing its leadership positions from volunteer to volunteer, who serve, it appears, as long as they choose.
This month board member Shannon O’Dunn stepped away from the board. It was summarily announced at the next meeting that she would be replaced by Laura Lothian, a local realtor who has been critical of city officials and the Parking Commission while planning a run for City Council.
While, a bookstore owner, says she believes the Merchants Association is really one of the smaller players in the downtown scene, clearing just $80,000 or so after expenses at Oktoberfest. All the attention the organization is getting, she believes, is because the Merchants Association is the only downtown player not controlled by Madrid and City Hall.
CRITICS IN A CRISIS
The criticism and controversy surrounding these downtown gyrations are clearly grating on many of the merchants. Putting on events like Oktoberfest, Christmas in the Village, the Antique Street Faire and the weekly summer car shows are not easy and require a lot of volunteer hours from merchants who are also operating their own businesses.
Moore, who operates Park Estate Antiques, believes the whole debate is off base.
She returned recently from a European vacation where she witnessed the ravages occurring there amid a European economic crisis. And in La Mesa, she said, she finds people arguing over paperwork and budgeting.
“We are lucky to be where we are,’’ she said. “We don’t need to be asking questions about this stuff. We need to be working to get people downtown into our stores, out spending, to support our businesses and the economy.’’
La Mesa may find out, she said, what it’s like to promote its downtown without people like her willing to volunteer so much time for the city.
A FORK IN THE BOULEVARD
In a retail world being changed so quickly by the Internet and the proliferation of big box stores, there is no guarantee that La Mesa’s current “downtown’’ will always remain the heart of the Jewel of the Hills. The proposed addition of thousands of square feet of new retail space at the Park Station development to the Village’s north and a much-discussed redevelopment of Grossmont Center may redefine the city in coming years.
Still, La Mesa’s political leadership is not giving up on the Village. Using funds from a variety of state, federal and city sources, the city is poised to spend more than $5-million updating La Mesa Boulevard,
including a redesigned streetscape that could easily spur the kind of private investment that has only occurred in spots along the quaint downtown.
City officials clearly drew a line in the sand with a Merchants Association that was having trouble raising enough money and participation to plant and water flowers along the public right of way. In short, the city was asking why it should invest $5-million of public money here (see sample street scape right) if the local merchants were not willing to invest in their own neighborhood.
So in pursuing the PBID option, the city is turning to a new group, the owners of the buildings that line and surround the Boulevard.
The PBID process that will play out through this fall will test the status quo and may, in the end, redraw downtown relationships as clearly as new lines can be drawn on a map.
It may not be a painless process. Already anti-PBID signs are appearing in some store windows.
Where each merchant ends up on these questions and, perhaps more importantly, where the property owners choose to stand, will clearly write the next chapter in the history of La Mesa’s downtown even as the city launches its centennial year.