Complaints from a growing number of tenants at Liberty Station have raised questions about the NTC Foundation’s stewardship of 80 acres of city-owned property and, more specifically, the 26 historic buildings it is charged with preserving.

The tax-exempt organization was created by a vote of the San Diego City Council after redevelopment of the former Naval Training Center was approved in 1999.

The nonprofit was set up to renovate and preserve some of the most treasured structures in Point Loma, dozens of Mediterranean-style buildings that for decades helped ready almost 2 million sailors and recruits for combat.

It also was designed to promote the arts through a civic and cultural center serving the broader community of painters, dancers, sculptors and other creative forces, along with their patrons.


Now many longtime tenants say the foundation has veered from its mission by putting commerce above the arts.

Among other complaints, artists say the charity charges excessive rent and retaliates against those who speak out. They are frustrated that the board of directors meets in secret and declines to release agendas or minutes.

“Without direct dialogue with us, the artists and tenants, the foundation cannot possibly address the issues or be true to its original vision as an arts and culture destination,” said Michelle Moore, a jeweler who leases space in what’s now called the arts district at Liberty Station. “Without the artists there is no foundation, just a leasing agency enjoying tax credits.”


Foundation officials, who offer discounted rents to non-profit groups, reject the notion that they are not supporting the arts. President and CEO Lisa Johnson said there is room for all sorts of activities at the former Naval Training Center, and within the arts district specifically.

“Our whole goal at Liberty Station is to make sure our guests have a great experience,” she said during an interview at the Dick Laub Command Center. “We feel like this is a great benefit for all of our tenants.”

Johnson said her lawyers determined that the foundation does not have to invite the public, or tenants, to board meetings. She said tenants have many opportunities to provide feedback to senior staff and to board members.

“They’re not required to be opened to the public,” Johnson said of the meetings. “It’s not anything special or magical, it’s that they’re just not required.”


Moore is not the only dissatisfied tenant.

Last month, the foundation declined to renew the lease of an art teacher who questioned why meetings are closed to the public even though the board is managing a city-owned asset.

“They asked me to leave without any warning,” said Lauren Becker Downey, who has operated the Bravo School of Art at Liberty Station for nine years. “It was a shock to me … It makes me kind of angry.”

Becker Downey said foundation leaders are less focused on cultivating the arts than they are on promoting attractions like restaurants, movie theaters, ice skating and a long-proposed swimming pool.


“I’m not seeing the arts district going in a good direction for the artists,” she said. “We may be more trouble for them than they want us to be, especially those of us who speak up.”

Even though the foundation controls the public property under a 55-year lease, San Diego officials do not audit the nonprofit and play no role in overseeing the community of art schools, dance studios, niche museums and other culture-oriented programs, city officials said.

Instead, they monitor the agreement to make sure the foundation complies with its lease.

“The lease/s with the NTC Foundation are for the rehabilitation, management and operation of the building/s for the uses allowed in the lease and NTC Precise Plan,” supervising public information officer Jose Ysea said by email. “The city does assure that the terms of the lease are met. The city does not have any oversight of the policies and procedures of the NTCF.”


Richard Opper served on the NTC Foundation board until last month. He said the tenant complaints had no bearing on his decision to resign.

“The people running the place have become obsessed with what I earlier called the shopping-center approach and it’s not necessarily warranted,” he said.

Opper said artists have a legitimate grievance about getting priced out of their studios and galleries. The same thing happened in the Gaslamp Quarter and other neighborhoods that are now trendy.

“There’s a transition going on at Liberty Station,” he said. “The question is what kind of arts district do they want? That conversation should be in the public square. It has been under the radar an awful long time, and it should be in front of everybody.”


From vision to reality

The NTC Foundation was incorporated as a public-benefit charity in June 2000, the same week San Diego officials inked a deal with The Corky McMillin Cos. to remake the navy training ground abandoned by the Department of Defense in the 1990s.

While the neighborhood soon bustled with new homes and businesses, the arts district took longer to prosper.

The NTC Foundation borrowed millions of dollars to pay for renovations, which continue to this day. It also created a litany of limited partnerships and LLCs, eligible for a historic tax credit program administered by the U.S. National Park Service.

Alan Ziter is the foundation executive director, a role he said was designed to work more closely with the artists than CEO Johnson, who serves as the senior administrative officer. He said the organization tried to keep rents low, but the nonprofit must be financially viable.


× Complaints from a growing number of tenants at Liberty Station have raised questions about the NTC Foundation’s stewardship of 80 acres of city-owned property and, more specifically, the 26 historic buildings it is charged with preserving.

“When the city approved NTCF, they said ‘You need to be sustainable’,” Ziter said. “They didn’t want another real estate asset that wasn’t paying its way.”

So far, 16 of the 26 buildings under the foundation’s jurisdiction have been renovated. All told, the arts district has nearly 100 tenants, including museums, galleries and studios. It draws more than 500,000 visitors a year, claims an economic impact of $41 million and supports more than 700 jobs, the foundation said.

Renovations were made possible with borrowing and other financial arrangements between related entities and wholly owned subsidiaries and commercial lenders. The loans and credits have created a complicated financial outlook for the foundation.


According to its most recent federal tax filing — required to be made public in exchange for a federal tax exemption — revenue declined from $9 million in 2015 to just over $3 million in 2016. Over the same period, salaries nearly doubled to $663,000 and expenses rose from $2 million to $3.9 million.

The tax filing lists six different related entities with names including NTC II Tenant LP, NTC Liberty Station II LLC and NTC Liberty 19 Owner LP.

As private entities, the revenue and spending by wholly owned subsidiaries and partnerships are not disclosed, although portions of their financial activity are reflected in the foundation’s independent audits.

The most recent auditor, Swenson Advisors of San Diego, issued a qualified opinion in April 2017 (an unusual determination in the nonprofit sector) because certain details were not made available to financial examiners.


“The foundation has not included the accounts of any of these entities in its ‘parent company only’ financial statements,” auditors said. “The effects of this departure from generally accepted accounting principles on financial position, results of activities and cash flows have not been determined.”

‘The public square’

In grant applications to the San Diego Commission for Arts and Culture, NTC Foundation says it provided discounted rent to tenants within the Liberty Station arts district.

“NTCF has provided $310,000 in RENT SUBSIDIES so nonprofit arts groups and artists can be in a quality space with other professional artists, where they can sell their art and achieve long-term stability at a rate they can afford,” last year’s application said.

The city gave the foundation $182,000 in 2017-18. Earlier this year, it was recommended for a 2018-19 grant of $192,000.


The subsidies range between 42 and 73 cents per square foot off the average commercial rate of $1.99 a foot per month, the foundation said. That does not include fees for utilities and other maintenance costs that can reach $1.50 per foot or more.

Johnson and Ziter acknowledged the subsidies are only available to official nonprofits — not the dozens of tenants who make their living teaching, creating or selling art.

“She’s a commercial artist trying to make as much money as she can,” Ziter said of one tenant who complained about escalating rent and fees. “I don’t know why she feels entitled to a subsidy as a commercial artist.”

Tenants say they have tried for years to get a closer accounting of the money they pay — not just in rent, but in the so-called expense reimbursement that is added onto their monthly invoices. For a 350-square-foot studio, that cost can reach $190.


“Money comes first in this neighborhood now, especially since it has become popular,” said Jesse Brown, who has operated the Chi Chocolat specialty chocolate shop in Liberty Station for almost a decade.

Brown said he asked for years to attend board meetings, or at least see cost breakdowns for increases in rent or maintenance fees, but he is always denied.

“I wish I knew what their numbers were like and why they continue to drive up the prices,” he said. “Why am I paying more for trash when I’ve got 50 more people sharing those costs now than before?”

Johnson said the foundation estimates utilities and operating costs each year, then charges tenants a monthly rate equal to their fair share of those expenses.


“A yearly reconciliation is provided at year end which itemizes the validated costs for the given year,” she said in a statement. “If more was spent than anticipated, a charge is placed on the account. If expenses were overestimated, a credit is provided.”

David Snyder of the First Amendment Coalition, a Northern California open-government group, said the community would be better served if the NTC Foundation opened board meetings and complied with the California Public Records Act.

“Folks are rightfully concerned,” Snyder said. “When you have a foundation that is acting on behalf of an elected body and managing property that’s publicly owned, it stands to reason that entity should be subject to the same provisions as the elected body.”

Ysea, the city spokesman, referred questions about foundation records and board meetings to the City Attorney’s Office. Gerry Braun, a spokesman for City Attorney Mara Elliott, said the city has not performed a legal review to determine whether the NTC Foundation should follow the California Public Records Act and the Ralph M. Brown Act governing open meetings.


“A fact-intensive analysis is required to answer such a question,” Braun said by email. “If the question is posed to us by our client, we can dedicate public resources to answering it.”

A 2012 legal opinion published by the City Attorney’s Office concluded that a Balboa Park nonprofit created by action of the City Council “is likely a legislative body subject to the Brown Act.”

State law generally provides that entities created by a legislative action must comply with the same rules as the legislative body.

Until recently, the foundation website stated the nonprofit “was established in 2000 by the city of San Diego as a 501(c)(3) nonprofit.” Now the words “by the city of San Diego” no longer appear in that passage.


Johnson said the group edited the message because the foundation was established “by intent of the city.”

“We wanted to ensure everything we communicate is completely accurate and as clear as possible,” she said in an email.


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jeff.mcdonald@sduniontribune.com (619) 293-1708 @sdutMcDonald