San Jose’s incubator program will not be audited as Councilmember Sam Liccardo was hoping, meaning questions about how millions of dollars were spent, or misspent, will likely go unanswered.
The Rules and Open Government Committee voted unanimously Wednesday to dismiss Liccardo’s request that city staff look into the business start-up programs that were funded by the Redevelopment Agency and continue to be managed by San Jose State University’s Research Foundation.
Liccardo’s push for an audit came after he found a study that went unseen by most city officials for two years and was highly critical of the incubator program. The report states that RDA spent more than $30 million on incubators over a 15-year period, yet annual revenue to the city from 1994 to 2009 was only $280,980, or about $4.2 million total. The study also said that only 11 percent of the 288 companies that “graduated” from the incubator were still in business and located in San Jose as of 2009.
“I’d like to believe that after the city has invested over $32 million in economic development project, and we’ve seen palpable evidence of mismanagement and incompetence, that we’d have the courage to ask for an independent evaluation of the program,” Liccardo said Thursday. “No one takes joy in being audited, but where you see sufficient evidence of problems, we should be willing to ask questions that might give us uncomfortable answers.”
How the written report never made it to the Community and Economic Development in 2009 remains unclear. After numerous committee deferrals, however, city staff did give a verbal report that glossed over some of the study’s gorier details.
Oversight by the SJSURF, which is headed by Mary Sydney, was poor to non-existent in some cases, according to the report. The report noted that annual tracking of businesses by the foundation ceased in 2004.
The committee determined Wednesday that an audit was unnecessary because the city no longer funds incubators outside of lease agreements, which are soon set to expire, and staff’s time and resources are already stretched thin. The council did recently approve paying the $400,000 lease for the BioCenter through next summer. An additional incubator lease agreement runs through 2014, but Mayor Chuck Reed has said that the city plans to extract itself from that agreement.
The committee members on Wednesday included Mayor Chuck Reed, Vice Mayor Madison Nguyen, Pierluigi Oliverio and Rose Herrera, who as an alternate sat in for an absent Pete Constant.