A new city audit finds San Diego lags far behind other big California cities in bringing in grant funding — a key factor in large budget deficits the city is facing.
The other major cities in California get two-thirds more money per resident than San Diego in annual funding from state, federal and other grants. San Diego averages $337 per resident, while the other large cities average $558.
The gap is even wider when it comes to grant funding for infrastructure projects, with San Diego averaging $97 per resident compared to an average of $180 in other large California cities — 85% more than San Diego.
Grant funding made up just 11.5% of San Diego’s total revenues during fiscal year 2023, far less than the 19.7% average among the state’s other large cities.
According to city auditors, a key challenge for San Diego in securing some grants is the lack of required local matching funds — which the city would be in a better position to provide had voters approved proposed tax hikes in recent years.
In 2020, city voters rejected a $900 million housing bond that would have made the city eligible for many millions in state matching grants to build subsidized rental housing and housing for people who were formerly homeless.
And last year, city voters rejected a one-cent sales tax increase that would have generated about $400 million per year. City leaders said they planned to use much of the money for infrastructure, including matching funds.
Also last year, city leaders decided not to pursue a flood prevention tax that, if passed, would have raised millions — including possible matching funds — for stormwater projects across San Diego.
City Councilmember Vivian Moreno, chair of the council’s Audit Committee, said it’s particularly frustrating that San Diego lags on federal grants when the city is home to multiple military bases and the busiest international border crossing in North America.
The 74-page audit raises concerns about the city’s Government Affairs Department, which oversees grant applications, pressuring other city departments to go for grants that those agencies’ leaders say might not make sense.
“Departments are concerned that Government Affairs is pressing them to apply for grants that they do not have capacity to manage, while Government Affairs is seeking to ensure these departments apply for as many grants as possible to supplement the city’s limited resources,” the audit says.
Leaders of the Government Affairs Department disagreed with that characterization in a lengthy response to the audit, contending staffers in other departments are not confused about their roles and haven’t been pressured.
The audit recommends San Diego make more than a dozen changes to how it handles grants, including establishing its first grants strategic plan to help seek grants that address key priorities and that the city can realistically secure.
“Effective grants planning is essential to ensure that an organization is well-positioned to submit timely and persuasive grant applications that align with its priorities,” the audit says.
A strategic plan could help with proactive planning, enhance collaboration among city departments and address any issues with lack of staffing or matching funds, the audit says.
Such a plan could reduce bickering among departments by clearly setting priorities in advance, the audit says. The plan would also give city leaders an earlier look at planned grant activity and allow them to be more selective on which grants the city seeks.
The audit notes that the San Diego Association of Governments, the Port of San Diego, the North County Transit District and the city of Oceanside all engage in strategic planning for grants.
Other recommendations in the audit include subscribing to a service that alerts cities when grants become available and creating a city grants resource library to preserve institutional knowledge.
The Government Affairs Department agreed to all 13 proposed changes, but department Director Walt Bishop said some would have to be delayed until he can add enough staff.
Andy Hanau, the city auditor, said he understands staffing concerns in light of the $250 million budget deficit the city faces for the upcoming fiscal year.
But Hanau said Bishop should consider the potential return on investment, noting that a more effective grant program could yield tens of millions of dollars for the city.
The audit includes some praise for the city’s grants program, noting that there has been significant improvement since a 2018 audit prompted several changes.
In fiscal 2023, the city secured $491 million in grants — 81 percent more than it got four years earlier, with $271 million in fiscal 2019.
Grants were even higher in fiscal 2021 and fiscal 2022, but those are considered outlier years because the city received hundreds of millions in federal pandemic relief.
The city’s 2018 audit found deficiencies in identifying and applying for grants and inadequate oversight of grant administration. Since then, it has instituted new policies and a new review process and hired two grant specialists.
“The city has implemented many positive changes to its grants program over the last five years, one of which is that Government Affairs conducts an annual internal review of the program to assess progress and areas for improvement,” the audit says.
Bishop said the city’s grants program is improving.
“While no one here is claiming victory, there’s been undeniable progress made,” Bishop said when the Audit Committee reviewed the audit March 12.
He said, however, that the matching funds problem is significant.
Recent or upcoming projects funded by grants include the new West Mission Bay Drive bridge, subsidized housing projects, free meals at city library branches and a new interchange at Interstate 805 and Palm Avenue.
The comparison cities in the audit are Los Angeles, San Jose, Oakland, Sacramento, Fresno, Bakersfield and Anaheim.
Long Beach and San Francisco were excluded, because those two cities also provide health services, the audit said.
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