While Rome Burns, City in Open Spat with San Angelo’s Chamber

SAN ANGELO, TX — The San Angelo City Council escalated its ongoing spat with the San Angelo Chamber of Commerce over economic development on Tuesday.

During the budget hearings earlier this year, Mayor Brenda Gunter took the Destination Marketing Organization, or DMO, to task over its request to retain its funding from Hotel Occupancy Tax at $1.1 million. The council originally had knocked down the DMO’s proposed budget for FY 2023 to $865,000, a significant decrease. The council eventually relented somewhat and set the DMO budget at $1.012 million but required the head of the DMO to present quarterly presentations about meeting agreed upon objectives to council to qualify for $15,500 of its funding each four months.

Mayor Brenda Gunter at the time said that the previous $1.1 million budget was a temporary upward adjustment in 2022 and due to the lower tourism economy during Covid-19 the DMO didn’t spend all of that money anyway.

The DMO is managed by the San Angelo Chamber of Commerce, the same organization that handles about a third of San Angelo's economic development efforts financed with the half-cent sales tax through a contract with the City of San Angelo Development Corporation, or COSA-DC. The $1.012 million DMO contract was approved on the consent agenda. The council sunk their teeth into the $262,500 economic development contract in open session on Tuesday, however.

The contract has not been revised in years, Mayor Brenda Gunter said. She latched on to the contract’s 14 “tasks” it required the Chamber to accomplish each year for the $262,500 that COSA-DC paid the Chamber annually. None of the 14 tasks are relevant today, she said.

Councilwoman Karen Hesse-Smith was dissatisfied that the duration of the contract was for two years. She wanted the contract shortened to only one year. Her reasoning? COSA-DC lost its director, Guy Andrews, over the summer and has not yet found a replacement. She proposed that the COSA-DC reduce the duration of the contract to a single year so that the yet-to-be-found new COSA-DC director can craft his or her own economic development contract with the Chamber. The search for a new CODA-DC director is stalled. The City of San Angelo’s Human Resources Department is poised to hire a recruiter to find a new director.

The council was also worried about the “co-mingling” of funds between the money the Chamber directly spends on its own economic development initiatives and the money the Chamber receives from COSA-DC.

Chamber President Walt Koenig expressed that he was amenable to the shortened contract to one year, but said that the short duration hurts the Chamber’s business continuity and may impact retention of its economic development staff.

The irony is that the council spent 27 minutes discussing the COSA-DC contract with the Chamber that amounts to only $262,500. For the subsequent agenda item, to consider spending over $51 million for a sewer line upgrade underneath Lake Nasworthy, the council spent just 21 minutes.

In the end, the Council voted against approving the Chamber’s contract, sending it back to the COSA-DC board to revise the term from 24 months to 12 and to add language to prohibit the co-mingling funds by a 5-1 vote. Councilman Tom Thompson voted in favor of approving the contract without modification. Councilwoman Lucy Gonzales was not in attendance.

COSA-DC met Thursday, two days after the council threw back the contract for revisions. Koenig reiterated his desire to work with the City over the contract, but he was visibly shaken but deliberate as he spoke about the impact of the contract spat on the Chamber’s economic development mission. The COSA-DC board appeared to be more inquisitive about the reasoning behind the council’s decision to throw the contract back and what the exact provisions the Council wanted changed to earn its approval. Acting COSA-DC Director and City CFO Michael Dane provided an explanation. The changes of the contractual services the Chamber will provide in return — the 14 tasks — could be modified with a contract revision later, he said. The current contract with the Chamber remains in effect until Dec. 31, 2022.

COSA-DC Vice President John Bariou suggested that if the Council wants a one-year term, the next contract should be for three to five years. He expressed that longer term contracts aid business continuity. Newly appointed COSA-DC board member Rick Mantooth, nominated by the mayor and appointed only Tuesday, said he opposed long-term contracts.

At the same meeting, Bariou dropped a bomb. He compared the wrangling over the $262,500 contract with the Chamber to the $724,000 City Services Agreement that was recently extended to 2024 and is auto-renewed annually without any resistance from the council. In previous COSA-DC board meetings, Bariou had requested a breakdown of what the City Services Contract’s $724,000 funds other than the $414,000 payroll of the four-man COSA-DC staff. That staff is down to two souls with no director as of now. Thus the payroll expense is much less. So far, Bariou has not received the data.

The City Services Agreement is a significant issue to some. In fact, former COSA-DC Director Guy Andrews listed a reason for his early retirement the City staff’s intransigence to detail what the City provides for the surplus $310,000 above and beyond the COSA-DC staff payroll in the contract. The undercurrent of the questioning is that the C-suite of City Hall is using the City Services Agreement to “skim” revenue from the half-cent sales tax to finance the salaries of high level City managers and directors. This runs against the desires of the voters who approved the sales tax years ago to exclusively bolster economic development.