101 Ash St.: The cavalcade of failure continues

What was once an effort to gain more municipal office space now is being promoted as potentially part of a massive, vague redevelopment around City Hall downtown.

This is the latest bizarre twist in the 101 Ash St. saga, which has had many of them.

Mayor Todd Gloria understandably wants to dig his way out of this everdeepening sinkhole left by his predecessor, Kevin Faulconer.

But his proposed legal settlement with building owner Cisterra Development is bad, maybe really bad. There’s no other way to put it.

Perhaps the deal will change now that he suddenly delayed bringing it to the City Council for approval until the end of the month.

Under the settlement, the city would be paying more than 100 cents on the dollar for the building and indemnify Cisterra of any future liability should things go wrong. You almost get the impression that Cisterra knows there’s still trouble ahead.

As laid out by Gloria, the city would take ownership of both 101 Ash St. and the nearby Civic Center Plaza building, another aging office tower owned by Cisterra that currently houses hundreds of city employees.

Maybe expedience was a priority. As a practical matter, it shouldn’t have been. Even if the city’s litigation to get out of the bad lease-toown agreement for 101 Ash St. is settled, there’s still other litigation pending and more potential lawsuits challenging the settlement. Then there’s the possibility of more physical problems surfacing at the 101 Ash St. building.

Maybe Cisterra has the city and Gloria over a barrel and there’s no way to cut a deal except on their terms.

Two prominent lawyers — a former and the current city attorney — don’t think so. Mike Aguirre and City Attorney Mara Elliott are taking separate, very different legal approaches to undo the lease and get city taxpayers relief. Both think they have a good chance of winning. Granted, that’s hardly a surprising public stance for attorneys, but

these two appear to be itching to make their case in court.

They may have a similar goal, but they aren’t on the same team. Aguirre is suing the city and others on behalf of San Diego taxpayer John Gordon, contending the 101 Ash St. lease is unconstitutional because it creates debt that needs to be approved by voters and wasn’t. That lawsuit is not part of the proposed settlement.

Elliott is leaning on a civil corruption statute to void the leases for both buildings. At the center of the city attorney’s case is Jason Hughes, a longtime volunteer real estate expert to San Diego mayors who — it later was revealed — was paid $9.4 million by Cisterra for his work on the two leases.

Hughes apparently told some members of the Faulconer administration he’d be getting paid. The City Attorney’s Office said that shouldn’t matter under the statute, which essentially says if someone working on behalf of a public entity has a financial interest in an agreement, the deal should be voided.

In any case, it seems those lawsuits at least should have given Gloria more leverage to forge better terms in buying out the leases.

Elliott for some time had made clear to the mayor and council members she opposed where the settlement was heading. On the day the mayor announced it, her office issued an 11page analysis delineating why it was a bad deal for the city.

The settlement calls for the city to pay $86 million for 101 Ash St. and $46 million for Civic Center Plaza. The spending does not include “modernization” needs for the buildings that could add $175 million or more to the cost of the properties, according to Jeff Mcdonald of The San Diego Union-tribune.

Cisterra agreed to return $7.45 million in net profits to the city and the company’s lender, CGA Capital, would waive collecting $11.7 million in fees from the city for paying off debt early.

If the city does not approve the settlement by the end of July, the city will be assessed more than $8,000 a day in late fees.

An earlier report from the mayor’s office concluded that with “known asbestos requirements, the value of the 101 Ash building is virtually zero.” When the City Council initially approved the lease in 2016, the building was appraised for $67 million. Except for a little over two weeks when it was occupied by city workers, the building has been vacant since then.

Appraiser Robert P. Caringella of Jones, Roach & Caringella estimated the value of the land under 101 Ash St. at $36 million to $42 million and a renovated building could be worth $82.2 million to $92.8 million, according to the Voice of San Diego.

City officials and Cisterra have mentioned the potential of that property being part of a redevelopment involving the Civic Center, which is bounded by A and C streets and First and Third avenues. That’s where City Hall and the Civic Center Plaza are located.

For years, there has been talk of building a new City Hall around there. A new development proposal one block away on state-owned property at Front Street calls for including a new City Hall.

While all that was going on, the San Diego Association of Governments abruptly scrapped its plans to build a major transportation center at the Navy’s NAVWAR land on Pacific Highway in Old Town in favor of locating one at a redeveloped Civic Center — where more city-owned land could be available under the Cisterra settlement.

These head-spinning developments were unveiled with almost no warning and, initially, no public input and came as a surprise to some key officials — including board members at SANDAG.

Where the money would come from for this grand design is anybody’s guess, though there’s discussion of public-private partnerships, state funding and, of course, tax increases.

Meanwhile, the council recently voted 6-3 in closed session to back Gloria’s settlement with Cisterra, according to La Prensa.

But because of the nature of the agreement, approval requires a public council vote. One was scheduled for last Monday, but Gloria at the last minute asked that the item be withdrawn for the stated purpose of giving the public more time to review the proposal.

He had faced widespread backlash both for what was in the agreement and trying to rush it through the council. There was speculation that some council members, if not reversing their position, asked him to hold off.

The sins of 101 Ash St. for years have tarnished the reputations of mayors, city attorneys, council members and developers, while the public has been left holding the bag. What it may mean politically will sort itself out eventually.

But often lost in the never-ending controversy is that District Attorney Summer Stephan is quietly conducting a criminal investigation into the original 101 Ash St. deal.

Tweet of the Week

Goes to Ron Filipkowski (@Ronfilipkowski), a former Republican federal prosecutor now a Democrat and defense attorney.

“After listening to Rudy’s version of his ‘attack,’ and then watching the video, I’m beginning to question his top secret evidence of voter fraud.”

michael.smolens@ sduniontribune.com

SANDY HUFFAKER FOR THE U-T Except for two weeks when it was occupied by city workers, the 101 Ash St. building has been vacant.