On The Money: "Sweetheart Deal" In Davis?

The city of Davis could be on the hook for tens of thousands of dollars, in a business venture that critics are calling a "sweetheart deal" for an out-of-state company. The Davis City Council approved the contract with Zipcar.
 
For college students like Meghan Olmstead, Zipcar offered an easy, convenient way to move.

"I took my stuff from storage and moved it into my new apartment. And I also went grocery shopping," the UC Davis student told CBS 13.

Zipcar members never pay for gas – just the time they use the car. Meghan Olmstead reserved her Zipcar for three hours – to get her wheels when she wanted them. It's called car sharing – a concept endorsed by the Davis City Council as a way to reduce pollution. In fact, in the Davis deal with Zipcar, the city promises guaranteed revenue for the company, if no one uses the vehicles.

"I think that is outrageous," said Bob Dunning, a columnist for the Davis Enterprise. Dunning believes city leaders got snookered into a "sweetheart deal" for Zipcar.

"We're guaranteeing profitability for Zipcar up to $74 thousand dollars a year," Dunning said. The columnist told CBS 13, "And if you look at the Zipcar contracts with other cities - the other cities are way to smart to give Zipcar a guarantee of profitability. They're not willing to do it. For some reason Davis gave them the store."

Other California cities, like San Francisco and Los Angeles are not giving Zipcar any revenue guarantees at all. Santa Barbara has also said no to guaranteed money for Zipcar.

Davis will also provide four free parking spaces downtown for Zipcar. But the company actually pays for downtown parking in other cities including Washington D.C. and Portland, Oregon.

"How is it a good deal for the City of Davis?" longtime Davis resident Bernita Toney wanted to know.

The Davis City Council insists those revenue guarantees will be minimal – if more people use Zipcar.

"Most communities have seen a 30 - 40% utilization," said Stephen Souza, who has served six years on the Davis City Council. Souza told CBS 13, "So I would say that we'll see anywhere from $2000 a year to $20,000 a year that would be utilized."

Souza insisted the revenue fees will not harm taxpayers.

"And the money was already extracted form developers. It's not general fund money," Souza said.

But Bob Dunning, the chief critic of the deal, isn't buying it.

"That's one of the oldest dodges in the game that politicians do," Dunning told CBS 13. He argued that elected officials often say, "...that's not taxpayer money, that's this money or this money. It's all public money. It's all your money. It's all my money. It's not their money." Dunning stated.

Dunning is also critical of the revenue guarantee being a form of "unfair competition". He says some rental car companies in Davis offer a similar service to college students, without any city subsidy at all.

The Zipcar contract also requires the City of Davis to provide a marketing person to promote Zipcar, along with another employee to transport the vehicles for maintenance. Under the terms of the contract, "City's employee will coordinate all cleaning and maintenance activities with Zipcar's Fleet Manager."

The city will likely contract out with a UC Davis student to help coordinate cleaning and maintenance activities, Stephen Souza told CBS 13. He added the marketing duties would take minimal time and likely be handled by the city's Deputy Manager.

While Davis officials embrace the environmental goal of removing cars from the road, critics contend the city is doing just the opposite with a pending loan to a car dealer. Be sure to catch Wednesday's On The Money report, at six p.m.

If you see examples of questionable government spending, send us an e-mail to onthemoney@kovr.com. You can also follow On The Money stories in progress via Twitter at twitter.com/mikeluery.