GLORIA SEEKS $2M MORE IN SPENDING ON ASH ST.
Money would resolve claims from contractors hired to rehab high-rise
Mayor Todd Gloria has made one of his first public recommendations for the long-shuttered former Sempra Energy headquarters at 101 Ash St. in downtown San Diego.
Gloria is asking the City Council on Tuesday to approve almost $2 million in new spending on the office tower the city leased in 2017 but has been unable to use due to asbestos and other issues.
The money would be paid to two companies the city hired to rehabilitate the midcentury high-rise. Most of the funds would come from the city’s share of a multibillion-dollar legal settlement 46 states reached with cigarette makers in 1998.
If approved by council members, the payments would push the total amount the city has spent on the vacant building past $55 million at least.
The latest costs include $1.4 million that would go to West Coast General Corp., the Poway company the city hired in 2017 to oversee the massive renovation of the 19-story building.
Another company called Argus Contracting would receive a lump sum payment of just over $408,000 to settle all current and future claims against the city related to a contract that also was signed in 2017. Argus Contracting is located in the Los Angeles County community of Santa Fe Springs.
“During construction of this project, (West Coast General) made claims to the city for extra work, time and costs over differing site conditions,” Gloria aides James Nagelvoort and Alia Khouri wrote to council members.
“Although the city was aware of the presence of asbestos in the building prior to construction and had included that fact in the contract with WCGC, the actual condition of the asbestos was not fully appreciated before the start of construction,” they added.
According to reports to the council, both West Coast General and Argus Contracting filed legal claims against the city after the renovation work was interrupted by a series of asbestos violations issued by county regulators in 2019 and early last year.
In 2016, former Mayor Kevin Faulconer recommended that the council sign a 20-year lease-to-own agreement for the Ash Street property, which is just north of City Hall and had been vacated by Sempra the year
before.
The idea was to consolidate hundreds of city employees in the newly acquired building and save $44 million over future decades by eliminating other, more costly leased office space downtown.
But the agreement was approved “as is” by the mayor, the council, City Attorney Mara Elliott and others, and asbestos and problems with the building’s mechanical systems prevented the city from moving in by July 2017 as planned.
In the meantime, the city paid $18,000 a day to lease the unused building — until Faulconer suspended payments in September. By then the city had spent at least $30 million in repairs and $23 million in lease payments for the vacant building.
The transaction is now mired in litigation — with the landlord and its lender being sued by the city, a San Diego taxpayer suing the city for pursuing an allegedly illegal lease, and a spate of employees suing the city for being wrongly exposed to asbestos.
Before being elected mayor, Gloria, as a city councilman, made the initial motion to approve the lease in 2016.
Since succeeding Faulconer in the Mayor’s Office late last year, Gloria has been mostly silent about how he plans to resolve what has become one of the most vexing — and costly — conundrums confronting City Hall.
“The mayor continues to work with city staff to determine a path forward on 101 Ash Street,” Deputy Chief of Staff Nick Serrano said last month. “He has committed to being open and transparent with the public once a solution is reached.”
The two proposed settlements under consideration Tuesday were reached following mediation sessions and were first presented to council members during a closed session in February.
The payments would push total payments to West Coast General to just over $19.8 million and total payments to Argus Contracting to almost $600,000.
The Ash Street property remains uninhabitable. A consultant hired by the city last year said it would cost more than $115 million to address all of the problems identified by the expert firm.
A hearing is scheduled later this month in San Diego Superior Court, where a judge last week declined the city’s request to reject claims in a lawsuit filed by San Diego taxpayer John Gordon. He wants the lease declared illegal and the landlord to return more than $23 million in lease payments already made by the city.
A separate lawsuit brought by the city does not seek the return of the funding, but instead asks a judge to validate Faulconer’s decision in September to suspend lease payments as long as the building is not usable.
The City Attorney’s Office has said it may amend its complaint to try and recover some or all of the lease payments.
“What matters is who wins in the end,” a spokeswoman for Elliott said last week.