Morning Report: The Deal Before the 101 Ash St. Deal - Voice of San Diego

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Morning Report: The Deal Before the 101 Ash St. Deal

Civic Center Plaza / Photo by Adriana Heldiz

Why San Diego entered into such a disastrous financial relationship at 101 Ash St. is a question consuming the attention of many lawyers, journalists and politicians. Late last year, the city moved employees into the downtown high-rise, only to evacuate them a few weeks later after the building was declared a public nuisance. 

It is, however, impossible to understand 101 Ash St. without also understanding another real estate deal. 

Lisa Halverstadt and Jesse Marx reviewed the history of Civic Center Plaza, which served as the model for the financing structure at 101 Ash St. In both cases the city relied on the same middleman-developer and the same one-sided lease, which absolved the sellers of legal liability should anything go wrong. 

But more importantly, the city needed an outside developer to come to its rescue in 2014 because it was unable to buy Civic Center Plaza on its own. A lawsuit filed the same year challenges the way the city raised big sums of money. Officials were reluctant to take their pitch to investors in the bond market because of the uncertainty of future court battles. 

Faced with a tight deadline by the New York-based property owners and the prospect of either a significant rent hike or eviction, officials needed a financier. They ended up tapping Cisterra Development, a company that would also help negotiate the deal at 101 Ash St. a couple years later. 

In some respects, 101 Ash St. was a copy and paste job of Civic Center Plaza. But there’s a reason why one is dominating the news and one isn’t. 

The city had been a tenant at Civic Center Plaza for decades, so it knew the condition of the building inside and out. Before agreeing to purchase 101 Ash St., city officials just took the word of the developers who’d previously come to their rescue. 

We’re Not Done Talking About Ash Street

There’s a good chance that none of us would still be talking about 101 Ash St. if the building’s remodel last year hadn’t spun out of control. Between August and December 2019, county air pollution regulators filed a series of violations related to asbestos. 

Recently released emails and other documents by the city suggest that as those violations began to roll late last year, the relationship between city managers and its general contractor began to strain. By November, as we previously reported, West Coast General was warning the Public Works Department that a number of issues, including the fire alarm system, still needed attention before employees could be moved in. 

This weekend, NBC 7 reported that city workers did in fact move into the building before the sewage system had been repaired and the drinking water had been flushed — meaning there was brown water coming out of the pipes. 

A superintendent at West Coast General described the premature move-in as “a complete disregard for human safety” and said: “I had a number of inspectors come to me and whisper in my ear that they were getting pressure from above.”

Meanwhile, the Union-Tribune reports that a group of outside lawyers who’ve stepped in to figure out what happened are demanding that Mayor Kevin Faulconer stop making rent payments — nearly $18,000 a day — for the vacant building. 

Downtown Jail Is Site of COVID Outbreak

A federal Bureau of Prisons facility in downtown San Diego is the site of nearly 50 coronavirus cases as of late last week after a group of people in a single housing unit were infected with the virus. Nationwide, more than 1,400 federal inmates and 600 staffers have tested positive in recent months. 

Maya Srikrishnan reports that the outbreak hit as tensions were mounting locally since federal defense attorneys told Sen. Kamala Harris in March that federal prosecutors were still pushing to detain people awaiting trial amid the pandemic, even those accused of nonviolent crimes. 

Rather than arrest and detain individuals, the DOJ started issuing Notices to Appear in court. But in July, the federal defense attorneys also accused prosecutors of backing away from that practice, causing an increase in the jail population. 

U.S. Attorney Robert Brewer had disputed those claims. He’s said a recent uptick in prosecutions was related to drug smuggling at the border but the overall rate of prosecutions has dropped since the pandemic. 

Barrios Under Investigation and More Politics News

  • The district attorney’s public integrity unit is investigating City Council District 9 candidate Kelvin Barrios for financial transactions he made as a volunteer campaign treasurer for San Diego County Young Democrats. The probe is separate from a civil investigation by the state’s political watchdog last year in which Barrios admitted to misusing thousands of dollars in donations. (Union-Tribune) 
  • KPBS found an old animated video showing Nazi salutes and a bobbing Hitler above the image of a young Tony Krvaric, chairman of the San Diego County Republican Party. “To go back 30 years to when I was a teenage computer nerd to smear me is low,” Krvaric tweeted in response to the story. 
  • A judge tentatively ruled that Democrat Marni Von Wilpert, a candidate for City Council District 5, cannot describe herself as a “prosecutor” on the November ballot because the lawsuits she files as a deputy city attorney aren’t criminal cases. The campaign for Republican Joe Leventhal challenged that description in court. 
  • State lawmakers killed several housing bills last week but one written by Senate President Pro Tem Toni Atkins survived: SB 1120, which would allow owners of single-family homes to split their lots into two without first needing special permission. Another bill written by Assemblywoman Lorena Gonzalez letting developers build more units in exchange for low-income housing guarantees is also alive. 
  • Last week was a roller coaster for an Uber and Lyft lawsuit against AB 5, the state law limiting when employers can classify their workers as independent contractors. We covered much of it on the podcast. Expect plenty more twists, turns and threats in the run-up to the November election, when voters statewide will consider a ballot measure undoing the original bill. 

In Other News

The Morning Report was written by Jesse Marx, and edited by Sara Libby.

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