San Diego’s top real estate official did not seek input from her staff or review internal files before recommending the city buy out the 101 Ash St. lease, a sweeping new complaint alleges.
The memo to the City Auditor’s Office also says real estate director Penny Maus imposed a three-year limit on leases in order to by the City Council and that employees were told not to respond to emails from other department heads, council offices or even the mayor.
Those are among a series of grievances over the past two years that the document recounts. It says it is the latest attempt to force change after prior complaints to senior officials, human resources managers and even union leaders went unaddressed.
“The city of San Diego should be aware of the level of waste and abuse that is occurring within the real estate and airport management department, which has led to a toxic, hostile, revenue-wasting and unproductive work environment,” says the confidential memo, a copy of which was reviewed by The San Diego Union-Tribune.
The 10-page complaint is dated Feb. 21 and addressed to assistant city auditor Matt Helm. The City Auditor’s Office declined to comment, beyond saying it is being treated like any allegation submitted to the office.
It is unsigned but claims to have been written by employees who report to Maus, the former Port of San Diego manager who was brought in by Mayor Todd Gloria soon after his 2020 election victory.
According to the memo, changes pushed by Maus in the name of reform have backfired, causing people to leave, depressing morale and wasting taxpayer dollars.
“Please do not underestimate the personal risk that we are taking by filing this complaint and we do not pursue this lightly,” its authors say. “We do feel our careers and reputation are currently at risk or we would not be taking this step.”
The Mayor’s Office declined to address the allegations or Gloria’s confidence in his real estate director. A spokesperson issued a brief statement endorsing an outside review.
“The city of San Diego takes all allegations of fraud and abuse seriously, and we will any investigation into these claims that the city auditor chooses to conduct,” spokesperson Rachel Laing said by email.
Council President Sean Elo-Rivera said in a statement that he respected employees for coming forward.
“The accusations are concerning and should be taken seriously,” Elo-Rivera said. “I anticipate the audit committee’s review of the matter and, as always, will give serious attention to any recommendations.”
According to the memo, an unhealthy work environment in the department has reduced productivity.
In the three years ending June 2020, the department completed 389 property agreements, about 11 every month. Just 79 deals were closed in the 18 months ending in December, an average of 4.4 per month, the employees said.
Michael Zucchet, general manager of the Municipal Employees Association, the union that represents the city’s white-collar workers, said the memo was written by about a dozen employees.
His staff began hearing “alarming and substantive complaints” about Maus and her treatment of his last summer, Zucchet said.
“We generally communicated what we were hearing to various of the city’s HR staff, and then on Sept. 26, 2022, MEA filed a formal written complaint with the director of the city’s HR department,”he said.
That filing detailed specific threats and policy violations the union alleged Maus and her senior staff had committed against lower-level staff, he said.
Zucchet said he received a reply from the human resources director saying that she had “shared and discussed the information with city management and the matter is being addressed internally.”
He said the personnel chief declined to provide any details “due to the nature of the complaint” and he has not heard from her since.
“We are disappointed that it has taken so long, given the severity and magnitude of the allegations,” Zucchet said.
For her part, Maus issued a brief statement.
“Our team has worked hard to improve the city’s real estate department and I am proud of our progress,” she wrote. “I welcome full transparency and look forward to the truth being shared.”
She did not respond to the allegations that she had limited city leases to three years to avoid council review, banned staff from responding to outside emails and manages a toxic and hostile office.
READ to DREAM
Maus arrived at San Diego City Hall two years ago this month, charged with remaking a department that had been blamed by both Gloria and former Mayor Kevin Faulconer for a series of real estate blunders by the city, including the 101 Ash St. transaction.
According to her profile on LinkedIn, Maus was awarded a bachelor’s degree in political science from Northern Illinois University in 2001 and a master’s in business istration from the University of Phoenix five years later.
Maus spent several years in the private sector before taking a job as an asset manager at the Port of San Diego, where she was eventually promoted to real estate manager.
The 13-year port veteran succeeded Cybele Thompson, who resigned in 2020 as more details emerged on the city’s lease for the former Sempra Energy headquarters at 101 Ash St.
Thompson and three other top Faulconer istration officials testified in subsequent depositions that the lease-to-own deal was pushed at the mayor’s direction, even though it was more expensive than buying the building outright.
Gloria tasked Maus with reorganizing the Real Estate Assets Department, long known as READ, which had boosted annual revenue from $45 million in 2014 to over $60 million in 2020.
Within months, it was rebranded the Department of Real Estate and Airport Management, or DREAM.
The office now manages more than 1,600 city-owned properties totaling some 123,000 acres, including parks, fire stations, police stations and Petco Park, home field for the San Diego Padres.
Most of the department’s work involves managing existing leases and negotiating extensions, rather than buying and selling city properties.
The office also oversees the airports at Montgomery and Brown fields. This year, the city boosted the department budget by some $3 million, to $38 million, and increased its budgeted staff from 54 to 66 people.
But according to the complaint, one quarter of the staff has left in the past year, and 30 percent of full-time positions are vacant.
“One hundred percent of the READ employees who have departed in the past two years have cited current leadership as their reason for leaving,” the report to the city auditor said.
It also says property agents are responsible for “well over 100 leases” each, “which is an entirely unmanageable workload.”
Maus brought in longtime port associate Lucy Contreras as her top deputy. According to city budget documents, department revenue climbed to more than $75 million last year and is estimated to sur $82 million this year.
But the outsiders have not endeared themselves to the complaint’s authors.
In addition to banning written replies to emails from outside the department, the complaint alleges, department leadership demanded leases of no more than three years so the transactions would not require council approval.
“Not only does this result in a lack of transparency to the City Council and the public, but it is wasteful because no tenant is going to invest any substantial capital improvements to a property on which they only have three years,” it said.
The memo cites a recent plan to lease a portion of the Rancho Bernardo Recreational Area that was previously rented to the Lake Hodges Bowl Club.
Staff recommended a 10-year deal based on improvements that would be needed on the site. But employees said Maus restricted the bidding to tenants who agreed to three years and limited where the bid was promoted.
“This space, as many others on city-owned property, remains inactive and abandoned,” the complaint said.
‘There are no files’
The complaint includes portions of a recent deposition Maus gave related to litigation generated by the Ash Street debacle.
Under Faulconer, the city agreed to an “as-is” lease-to-own deal for the property without conducting a property assessment. But the building proved unsafe to occupy, and the lease spawned multiple lawsuits.
Last summer, Gloria and the City Council agreed to pay off the full value of the lease — more than $100 million for a building that had been appraised at $67 million in 2016 but now, according to the Mayor’s Office, is worth “virtually zero.”
In a deposition conducted by attorney Michael Aguirre, Maus said she had read portions of the Ash Street lease but could not recall which parts. “There are no files related to 101 Ash in my department,” she said.
The new complaint against her also alleges that city property agents cannot access other important files because Maus last year ordered all records inputted into a new computer system.
It says Maus gave little direction on how to implement the change and that files that were not moved would be deleted in six months.
“There is no central repository anymore for READ files,” they wrote.
The staff said Maus and Contreras proposed replacing existing software for more than $500,000 even though an the existing program would be much less expensive.
“It makes no sense to replace the currently successful real-estate tracking software at a time when READ is so under-staffed and revenues are so important to the city,” the complaint said.
In 2021, City Auditor Andy Hanau issued a lengthy report criticizing a host of real estate deals beyond the Ash Street lease that were made under the former mayor.
One of the top recommendations was to create a checklist to make sure that future transactions were conducted with full due diligence.
According to the complaint from real estate employees, Thompson proposed rewriting the council policy for acquiring city property years ago — including implementing a checklist — but it was never adopted.
“This proposed policy removes the ability from the mayor and executive team to force READ to bring an item forward without adequately explaining the need or the risks to City Council,” it said.
The policy upgrade “would empower city staff to present details to City Council that they should have in order to vote.”
It remains unclear whether the city auditor will pursue an investigation.
