New city hall on Manchester’s waterfront could gain traction

When the next mayor of San Diego takes office, he’ll be confronted with the problem of housing more than 2,000 city employees who are working either in run-down buildings or in rented offices.

Mayor Jerry Sanders nearly closed a deal on a new city hall two years ago. The $290 million proposal would have replaced the deteriorating, 50-year-old building on C Street. But the city’s dismal finances were still front and center, and faced with putting the issue before the voters, Sanders took it off the table.

At about the same time, behind closed doors, another idea was proposed. It went nowhere, but under a new administration and a brighter financial picture, it could gain traction as the debate over a new city headquarters resurfaces.

KPBS and Investigative Newsource have learned one of the city’s most powerful developers — local media mogul Doug Manchester — suggested city hall move to the Navy Broadway complex, a mega waterfront development he’s building downtown. And at least one mayoral candidate suggests it’s an option.

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The Navy Broadway complex is considered among the most prime waterfront real estate in the country; an eight-block chunk of land between the Star of India and Seaport Village. Manchester likes to call it San Diego’s front porch.

Navy Broadway City Hall San Diego

Artist’s rendering of Doug Manchester’s proposed redevelopment of the Navy Broadway Complex. Credit: Manchester Financial Group

The development, which has been in the works for more than 20 years, obligates Manchester to build the Navy a new $162 million headquarters, free of charge, in exchange for the right to develop hotels, retail, and more office space at the site. It’s a big deal with a big price tag – more than $1.2 billion dollars.

The development has been mired in litigation for years, but when the bulldozers converge, Manchester will need tenants to make it profitable. Perry Dealy, Manchester’s point man on the project, thinks a government complex on the waterfront could be a winning proposition.

“If we look at the analytics with Civic San Diego, and with the mayors office, and the planning department, I think that there will be some great options that evolve working together, one of which will be putting city hall on the corner of Pacific and Broadway,” Dealy said.

“The potential would be there, and certainly from a visionary standpoint, it would be off the charts cool,” he said.

Cool factor aside, securing city hall as a tenant could also attract investors to the project, according to several development experts.

Dealy said Manchester has been contemplating the idea for four or five years. The Investigations Desk has learned Manchester met with Sanders April 2009 and asked him to consider moving city operations to his waterfront development.

Phil Rath, the mayor’s former deputy director of policy, remembers the discussion.

“We didn’t have many meetings between Doug and the mayor. In fact, I think that might have been the only one,” he said.

He recalled Manchester pointing out that the city needed to resolve its space needs, and then said “what more appropriate place would there be for the seat of city government than on the waterfront.”

Rath said, “The result of the meeting was ‘Thanks for bringing that to our attention, but we have another plan that is being pursued.’ ”

Doug Manchester, owner of U-T San Diego.

That plan was to build a new civic center complex on the C Street site. Charles Black was the development consultant the mayor hired to manage the deal.

The city was facing a $37 million bill to repair its aging buildings between 2010 and 2020, Black said. “And that’s not to make those buildings nice or to make them work well. It’s just to keep them minimally habitable.” The deal also would have eliminated the need for overflow city offices in rented space.

Black said the winning proposal, forwarded by West Coast developer Gerding Edlen, would have saved taxpayers $21 million in repairs and rent in the first 10 years, $42 million over 20 years. Black does not believe the city could find a cheaper alternative.

The City Council needed six out of eight votes, a supermajority, to approve the project but decided to put the question to a public vote.

According to people close to the project, the mayor didn’t think enough money could be raised to mount a viable campaign in support of the initiative. So despite supporting the project, he used his veto to pull it from the ballot.

“All the city did … was defer the issue because the fact of the matter is when you look at those buildings where we house our city employees you know its just a temporary solution,” Black said.

Council President Tony Young resurrected the problem of space and expense in his new year’s address in January.

Council will be “deciding on spending million of dollars to patch-up and maintain a perpetually eroding city hall building or instead building a new civic facility,” Young wrote.

The clock is also ticking on the city’s 24 leases, with the seven biggest ones–worth a total of $12.4 million–expiring in the next two years. They include Civic Center Plaza, which costs $4.6 million a year, and 600 B Street, where city offices occupy half of the 24-story building for about $4.2 million a year.

It will be up to the new mayor and council to come up with a long term solution.

Councilman Carl DeMaio has financial and political ties to Manchester that date back to 2003, not long after DeMaio arrived in San Diego. Manchester’s U-T San Diego endorsed DeMaio on the front page, and the newspaper owner gave DeMaio’s political action committee $49,000 in the last reporting cycle.

DeMaio strongly supports Manchester’s Navy Broadway development project. It’s part of his Pathway to Prosperity, his 86-page job creation plan.

San Diego City Councilman Carl DeMaio is running for mayor.

“DeMaio proposes that the City include as part of its federal legislative outreach an effort to secure additional funding for the project… and a commitment to expedite all reviews of permits for substantial conformance with the development agreement,” he wrote on page 23.

DeMaio also led the opposition against the last proposal to build a new city hall.

“It’s the wrong project at the wrong time,” he told KPBS These Days in 2009.

It’s a position he is proud of, and one he maintains.

“No, I do not support a new city hall,” DeMaio said Monday. “I do not think it’s the right priority for San Diego.”

But would he support leasing space for city employees in Manchester’s waterfront project?

On Monday, he said no. On Wednesday, his campaign said maybe.

Both answers were in response to comments KPBS and I-Newsource learned DeMaio made at a meeting of downtown business people on July 24.

Councilman Todd Gloria was there.

Gloria said he and DeMaio were speakers at the board of directors meeting of the Downtown San Diego Partnership. Gloria, whose newly drawn council district includes downtown, said he’s long supported replacing the antiquated city hall, which he believes will save money.

When DeMaio was asked for his position on a new city hall, Gloria said DeMaio acknowledged his opposition to the last project, saying he favored reducing the number of city workers and renegotiating leases.

“He ended his answer by suggesting the city should consider relocating city hall to a future waterfront office building at the Navy Broadway complex,” Gloria said, “and that if it were done we could redevelop the old city hall site, sell it for a mixed use project.”

When the Investigations Desk asked DeMaio about those comments on Monday, he insisted: “That was not what I said. What I said was that we need to be locking in lease rates in our current location.”

On Wednesday, the Investigations Desk fact-checked the statement with DeMaio’s office. Its response, in part: “It is accurate to say that Carl DeMaio has “suggested” that this proposal, along with many others, be studied/considered as possible options.” (emphasis included)

Democratic Congressman Bob Filner is running against Councilman Carl DeMaio for mayor.

Mayoral candidate and congressman Bob Filner opposes the Navy Broadway development because he says the high-rise buildings in the plan would block access to the bay. He’d rather see parks at the location.

As for a new city hall? Filner says a new building could save money, and despite opposing Manchester’s development, didn’t rule out the waterfront as a possible location.

The Navy Broadway project has been tied up in litigation for years. It cleared a major legal hurdle last month when a federal judge rejected claims the Navy did not address threats of terrorism in its original development plan. The case could be appealed.

Another hurdle is the California Coastal Commission. It contends the original development design, created 20 years ago, is dated and needs to be revised. The Navy and Manchester disagree, creating a “standoff,” according to Mark Delaplaine, a federal consistency supervisor with the commission.

Perhaps the biggest obstacle to the project is the market itself. There is a glut of office space. Recent published reports put the downtown vacancy rate at more than 17 percent.

A government tenant could help sell the project to investors, development experts say, but they caution that renting government offices at top dollar, no matter the view or “cool” factor, would be a tough sell for any elected official.

Manchester himself says he still likes the idea of a waterfront city hall, but contends it’s premature to talk about tenants when he’s still at least two years away from construction. He also says he’s not worried about attracting investors because he already has something better to offer than the city as a tenant.

“There’s not a lot of office space downtown that’s on the waterfront,” he said. “Matter of fact, there’s zero, so we do a hold the key for some incredible opportunity for some of the existing tenants in the downtown market to move to the waterfront.”

This story was written by Lorie Hearn, of Investigative Newsource, and reported by Joanne Faryon, of KPBS, and Brooke Williams, of Investigative Newsource.

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About Joanne Faryon

Joanne Faryon is an investigative reporter and multimedia producer for inewsource. During her 20 year career in journalism, she has been a documentary producer, a print, radio and TV reporter, and host of a nightly news show. Contact her directly with news tips: joannefaryon@inewsource.org