Yet another troubled land deal that could hurt Faulconer
Another real estate deal forged by former Mayor Kevin Faulconer has run into problems, adding to his legacy of land transactions that have not gone well for the city of San Diego.
That record certainly won't help his bid to become governor of California, but it remains to be seen how much of a factor it may become in the campaign.
A monkey wrench of potentially massive proportions has been thrown into the effort to redevelop nearly 50 city-owned acres surrounding and including Pechanga Arena in the Midway District.
The process seemed to be well on its way. A developer, Brookfield Properties, was selected in August and Faulconer said negotiations would soon begin. He expected a formal deal would be presented to the City Council in the first quarter of 2021, after he left office in December.
But negotiations were quietly sidelined in midFebruary until it could be determined whether the project can proceed under a relatively new state law.
Before selling land for private development, local governments had long been required to offer the property first to affordable housing developers and public agencies. Those rules wouldn't have applied to the sports arena project because Brookfield is leasing the land.
But an interpretation of a relatively new law essentially says that requirement has been expanded to leased property, according to stories by the Voice of San Diego and The San Diego Union-Tribune. The state issued that draft guideline in November and finalized it Tuesday.
The rules allow for some exemptions, but it doesn't appear they would apply to the sports arena project, which could still survive if affordable housing developers and public agencies pass on the property. This could force major changes on how local governments across the state manage public lands, and may well lead to lead to lawsuits.
The initial interpretation of the law seemed to come as a surprise to the local principals involved. Whether the Faulconer administration, City Attorney's Office, developer and other parties to the process should have seen this coming will no doubt be
debated, certainly if the project is derailed.
Even if, in the end, it turns out this one isn’t on Faulconer and the city was blindsided by the state like everyone else, it still may become another real estate deal that went south under his watch.
There have been some notable ones, as Jeff McDonald of The San Diego UnionTribune has chronicled in recent years:
• 101 Ash St. This is the signature bad land deal of the Faulconer era. The city signed a $127 million lease-topurchase agreement for the former Sempra headquarters on Ash Street in January 2017, “as is.” What was supposed to save San Diego a lot of money is likely to cost the city much more than anticipated because of asbestos contamination and other problems with the building. Amid lawsuits and recriminations, the building remains unoccupied.
• Home navigation center. In 2018, the city purchased a closed indoor skydiving building at 14th Street and Imperial Avenue for $7 million to convert it into a onestop center to help homeless people. There was dispute over the concept, whether it was the right building in the right location, and its cost. The nonprofit agency that initially ran the center left a year later, with the head of the organization contending the facility was more of a public relations move than an attempt to assist the homeless. Faulconer’s top aide said it was the agency leader that caused the problems.
• Kearny Mesa maintenance yard. The city leased warehouse property for 10 years at a cost of $10.5 million in 2017 with plans to convert it into a maintenance facility for San Diego Fire-Rescue Department vehicles. Yet, issues in converting the property surfaced and the facility isn’t expected to service fire trucks until next year. (The real cost of planned renovations nearly tripled from the initial estimate, according to the Voice of San Diego, which noted revised plans reduced the price somewhat.)
The Faulconer administration was criticized for lack of due diligence in these cases. An independent appraisal of the skydiving building and property was not done before the purchase, and critics said the city paid too much.
After the U.S. Housing and Urban Development began examining whether federal grants were used appropriately in the transaction, the city commissioned such an appraisal, which pegged the value at $7.2 million — $200,000 more than what the city paid.
The Faulconer administration also did not get an independent evaluation of the condition of 101 Ash St., a 19-story high-rise constructed in the late 1960s.
It’s too early to tell whether redevelopment of the sports arena area joins the list of city real estate transactions that didn’t work out as planned under Faulconer. Brookfield’s bid called for a new sports arena, 5 acres of parks, 2,100 housing units and 590,000 square feet of retail.
Unlike some of those other land deals, this one has the additional complicating factor of being handed off to a new administration. The future of the project is in the hands of Mayor Todd Gloria, who was sworn in to office in December.
Also, Brookfield’s executive spearheading the project, Zach Adams, left the company earlier this year, according to the UnionTribune’s Jennifer Van Grove. She also noted a lawsuit challenging a successful November ballot measure lifting the 30-foot height limit in the Midway District could cloud the future of the development, which would include buildings above that height.
One more thing to watch, at least, is that Gloria is adamant about creating more affordable housing. Brookfield’s plan had no formal commitment on affordable housing, Van Grove reported, but various state and local laws — and Gloria — likely mean it will be required to some degree.
It’s hard to say whether these real estate controversies will stick to Faulconer on the statewide stage in his bid to replace Gov. Gavin Newsom, who faces a likely recall election possibly in the latter part of this year. Such disputes might not mean much to voters in other parts of California.
But Faulconer has focused much of his campaign on what he considers Newsom’s poor management — on COVID-19 stay-at-home orders, the vaccine rollout, school and business reopenings, and unemployment fraud during the pandemic. So, there’s potential for accusations that the former mayor mismanaged tens of millions of dollars, or more, in taxpayer assets.
One big, seemingly successful land transaction did occur while Faulconer was the city’s chief executive: San Diego State University’s voter-approved purchase of prime city property in Mission Valley to build a new stadium, campus facilities and a regional park.
That happened despite Faulconer, however. He backed a competing proposal that was overwhelmingly rejected by voters.