Media powerhouse flexes political muscles

Manchester could benefit from terminal development

by Brooke Williams | inewsource

The Tenth Avenue Marine Terminal, a sprawling industrial dock downtown, has been the target of developers for more than a decade. Its cranes and cargo containers are within walking distance of the convention center, hotels and San Diego’s bustling nightlife.

Now two businessmen determined to build a football stadium on the terminal have taken over the county’s largest newspapers and are positioning themselves politically to push their development plans forward.

Little more than a month after hotel developer Douglas Manchester and his business partner John Lynch took over the executive offices of U-T San Diego’s Mission Valley headquarters last December, they declared on the front page that the newspaper’s top priority was to persuade the powers that be, and the public, to build an entertainment complex on the terminal, with parkland, a beach and a football stadium.

Lynch, who used to own a sports radio station and was drafted into the NFL, has been pushing this vision for years. He and Manchester also have long been supporting and building relationships with mayoral candidate Carl DeMaio and county Supervisor Ron Roberts, who could be valuable allies.

Why do Lynch and Manchester want this so badly? Neither would agree to be interviewed for this story until after the election in November.

Publically, they contend their idea is best for the city.

“We believe this is the natural location and it would be a great vision for San Diego down the road,” Lynch said recently. “Economically, I defy someone to come up with a plan that’s any better.”

The development also could be good for Manchester.

Although he sold the hotels he built just up the street from the terminal, federal records show that as part of the sale, Manchester received hundreds of millions of dollars worth of stock in the hotel conglomerate that bought them. He still holds interest in that company.

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When Jerry Shipman, who has worked on the terminal for most of his adult life, gazes over the bay and hears the clanging of ships unloading, he sees generations of good-paying jobs.

“To have a stadium built, have a super bowl brought here…are you kidding?” he said. “You guys are all foreigners as far as I’m concerned.”

Shipman, president of the local chapter of the International Longshore and Warehouse Union, is fed up with fighting off developers.

“Every election year we have to go through this,” he said.

Back at least to the 1990’s, people have wrestled over the use of the terminal. In 1998, it was envisioned as a deck for a baseball stadium. In 2004, it was a football stadium. And in 2008, it was a voter referendum to amend the master plan for the Port so developers could build the stadium on a deck.

Former Port Commissioner Peter Q. Davis said it was “like a bloodbath” in 2004 after he proposed building a stadium on the terminal, so when he read the U-T editorial, “I was surprised that Doug felt that strong about it — strong enough that he’d make it a key part of the newspaper’s philosophy.”

Lynch has said the vision really is his.

“It’s my vision more than his, but he has supported me completely in it,” Lynch told a gathering of the Harvard Business School Club of San Diego recently.

In a 2009 editorial on XX Sports Radio, the station he founded, Lynch said, “The Tenth Avenue Marine terminal remains the most underutilized, desired, and developable property in America.”

He was even more blunt before the business crowd, saying, “I think the Port is one of the greatest scandals of our lifetime.”

inewsource and KPBS interviewed a variety of people who think the Manchester-Lynch plan is unlikely to happen, including Port officials, labor and business representatives and politicians.

Three weeks after the U-T published the editorial, the Port voted unanimously to reconfirm — for the third time in 14 years — that the terminal cannot be developed.

Even if that vote were to change, Michelle Ganon, the Port’s director of marketing and communications, estimated that 23 government agencies could need to weigh in on a proposal to repurpose the terminal. Although relatively small, Tenth Avenue is a rare deep water port that can accommodate large cargo ships.

The Port’s recent approval of a 24.5-year lease with the Dole Fresh Fruit Company for operations on the terminal appeared to have killed the vision for development.

But from the ashes ….

Lynch fired off a demanding email on Aug. 9 to port commissioner — and congressional candidate — Scott Peters days before the lease was approved.

“Do you intend to vote for the extension at [sic] the Dole lease?” Lynch asked. “There should be a provision that the PORT of [sic] successor (if PORT is disbanded) should be able to move Dole to National City.”

In his response, Peters avoided disclosing how he would vote, but said the lease could be undone. He also addressed the U-T’s proposal.

“Nevertheless, should the community and the Port decide that the U-T’s vision is possible and desirable, and assuming it could clear the enormous public opposition and permitting hurdles,” he wrote, “there is nothing in the Dole lease or any of the other leases at 10th Avenue that would prevent that from happening.”

On the same day, Lynch also drilled Roberts about the Dole lease: “Ron, This is scandalous and not on [sic] the best interests of the city what can we do to stop it?”

Roberts did not respond, according to records his office provided.

Pressing on since then, Lynch called the Dole lease the “Chiquita Banana Caper.”

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City leaders, including the two candidates for mayor, say they want to keep the Chargers in San Diego and the Chargers have made it clear they need a stadium to replace Qualcomm, which was built in 1967. There is still no consensus on where to put it or how to fund it.

Mayor Jerry Sanders has been trying to finalize a plan to put a new stadium in East Village, but that might not happen before he leaves office at the end of the year.

Councilman DeMaio — a Republican who is heavily endorsed by Manchester and Lynch — said his staff is focusing on financing options for a new stadium rather than a potential location. Both he and his mayoral opponent Bob Filner have said they oppose funding a stadium with public dollars.

Although the U-T editorial presented a detailed vision and an artist’s rendering of the terminal’s remake, Manchester’s team did not present a formal proposal to the port, according to results of an inewsource request for public information.

Nevertheless, the city’s downtown machine hummed with politicians, activists, reporters and others who wanted to weigh in on the idea.

“It generated a lot of buzz, over a topic that always generates a lot of buzz–a stadium,” said Mark Cafferty, president of the San Diego Regional Economic Development Corp. “We’ve needed a stadium for a long time.”

Cafferty speculated that there is likely more going on behind the scenes.

Lynch acknowledged as much in his speech to the business group this month. A recording of the meeting was provided to inewsource by Bruce Bigelow, who covers local technology and biotech startups for the website Xconomy.

Lynch told the group they’ve been working behind the scenes having “concrete meetings” with “hopefully the right people,” but they’ve “tried to keep it down low.”

Manchester and Lynch have been using their powerful megaphone to advance their agenda. They own U-T San Diego and are acquiring The North County Times. They have a robust Internet news site and mobile applications. They also launched a TV station. Lynch boasts about his new status.

“In the radio business, I would ask to meet with the mayor, but they would blow me off, and I’d get with some junior staffer three months later,” Lynch told the business group. “I’ve been in about about six meetings with the mayor(s), and they’ve all been in my office — it’s an entirely different experience.”

(Lynch’s reference to one mayor or more than one is unclear on the recording of the meeting. In an email seeking clarification, Lynch wrote, “The point was simply illustrative. Mayors and staff members … not a big deal…” )

Manchester and Lynch have attempted to assure the public that they won’t personally benefit from the proposal.

Lynch told the business group, “The bad guy they talk about him profiting from this thing down there. Of course, he sold all his hotels down there. He’s 70 years old. I don’t think he’s going to be building any more hotels there anyway.”

The newspaper published an editor’s note at the end of the front-page editorial proposing the entertainment complex, saying Manchester “has no interest in any hotels or other components proposed in this editorial.”

inewsource examined property holdings, business relationships and corporate records, and found no evidence that Manchester owns property near the terminal. However, filings with the Security and Exchange Commission show he sold two hotels in part for shares in Host Hotels & Resorts, Inc., the hotel conglomerate that bought them.

Manchester acknowledged last week in an email that he still owns shares, but he did not reply to an inewsource followup, asking for details.

However, Host’s prospectus shows he owned a total 12,065,067 shares in May 2008, the year he sold the Marriott Hotel and Marina. They were worth approximately $210 million that day, according the closing rates of the stock exchange. An additional $6 million worth of operating partnership units, which can be converted into stock, were acquired in the company in March 2011 when he sold the Manchester Grand Hyatt San Diego, according to SEC records.

If Host Hotels & Resorts, Inc. benefits from a stadium development, so would its shareholders.

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Even before Manchester and Lynch began to dominate the local media scene, they were financial supporters of Carl DeMaio. They endorsed his bid for mayor in an editorial that wrapped the front page. They’re also friends of Roberts, whose district includes the terminal.

Roberts said he has known Manchester since their days at San Diego State. He and Lynch have talked over the years about sports and possible sites to build a new football stadium. Roberts said he has long supported alternative uses for the terminal.

Roberts’ calendar shows he was scheduled to meet with Lynch four times from January through June, at least three to specifically to discuss “the vision.” One meeting was a few days before the editorial ran.

Roberts said he played no role in the development of the U-T proposal. But once he heard about it, he thought it deserved to be discussed.

“That property is so prime that we should be considering it for other uses,” he told inewsource.

Lynch talked admirably about Roberts in his speech before the business club.

“There are not a lot of courageous politicians,” he said. “I told Ron Roberts we would cover his back,” he said. “I said, what a great legacy for you…put your $200 million in there, and let’s deal with this as business project, not as a political project, that’s how we’ll get a stadium built.”

Last week, Roberts said he is an advocate of a new stadium but stressed that the U-T’s plan is just one option. “I have never agreed that I was going to jump in front of his vision,” Roberts said.

Lynch also has touted “significant progress” in promoting his plan with “one of the Mayoral candidates.”

DeMaio, the U-T’s choice for mayor, told KPBS he is not the candidate Lynch is referring to, and he is adamant that he does not support the plan.

Lynch briefed him early on about the project, DeMaio said, and since then, his position has been clear.

“I believe that there are plenty of opportunities to make that terminal a powerful economic force in San Diego,” he said. “You can put a stadium anywhere; you can’t put a deepwater terminal anywhere.”

Congressman Bob Filner, the other mayoral candidate, has made Port expansion a major part of his campaign. When told Lynch said he’s making “progress” for his development plan with a mayoral candidate, Filner said, “I don’t think its me, so they’ve never talked to me. As I like to say, by the way ,Carl DeMaio says reform in every other word that he uses. Reform means Real Estate For Manchester.”

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Although DeMaio does not appear to be on the same page with Manchester and Lynch about the Tenth Avenue Terminal, they have other issues and a history in common.

DeMaio said he first met Manchester in 2003 — a year after he arrived in San Diego from Washington, D.C. — when he was reaching out to business leaders about the city’s financial crisis. He said he just picked up the phone and called Manchester.

“We had a great conversation,” DeMaio said.

They bonded against a movement to raise hotel taxes in 2004. “Doug and others stepped forward and said ‘we believe that tax increases are not the solution; we want to support your reform agenda’,” DeMaio said.

As part of that strategy, DeMaio set up a tax-exempt political advocacy group known as a “527” called San Diego Citizens for Accountable Government. At that time, the only donors to the group were Manchester, Lynch, their companies and DeMaio’s company, according to forms filed with the Internal Revenue Service.

In 2004 and 2005, Manchester and his companies gave DeMaio’s group $150,000 and Lynch donated $38,400 of free airtime.

DeMaio used contributions for ads against the hotel room tax rate and political flyers favoring Roberts, who was running for mayor of San Diego. One flyer had a scorecard with green check marks under Roberts and red Xs under his opponent.

Manchester also supported DeMaio’s race for city council, hosting a fundraiser for him in 2007.

So far in this election, Manchester has given at least a total of $90,000 to the Republican Party of San Diego and the DeMaio-crafted Proposition B, Comprehensive Pension Reform for San Diego. The Republican Party of San Diego has endorsed DeMaio and so far has directed $130,000 to his mayoral campaign.

In addition, Lynch has donated $1,000 to DeMaio’s campaign, and Richard Gibbons, president of Manchester Financial Group, has given $500. An individual can give a maximum of $500 to a candidate in San Diego in each of the primary and general elections.

Asked how he can assure the public that if elected he won’t be influenced by media kingpins Manchester and Lynch, DeMaio told KPBS, “It’s certainly, I think, easy to tell because it’s not my agenda. Their proposal is something certainly that’s creative but its not something that I support.”.

Brian Adams, professor of political science at San Diego State University, believes the U-T vision is unlikely to happen, especially because the downtown business establishment is divided on it and financing is a problem.

“I’m not sure controlling the local newspaper is enough to push through a project like this. It’s clearly not enough by itself,” he said.

So why put so much effort into this particular plan?

“One theory could be that they have some sort of financial interest,” Adams said. “Another theory is that they want a big project, they want something for their trophy case.”

Brooke Williams is an inewsource correspondent in Washington, D.C. KPBS investigative producer Joanne Faryon contributed to this report.

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