SAN DIEGO — San Diego's Independent Budget Analyst released its review of Mayor Todd Gloria's 1,000-bed homeless mega-shelter proposal for Kettner and Vine.
The independent financial review found some flaws in the appraisal process as well as several potential financial miscues that would come at taxpayer expense.
On July 22, the city council will make its final vote on whether to proceed with the mega-shelter proposal.
In terms of the cost, the Independent Budget Analyst looked at the cost the city would pay at the current price structure. According to the report, the city agreed to pay $1.95 per square foot for Kettner and Vine, with a 3.5% increase for each year of the 30-year lease whereas comparable sites were found from $1.45 to $1.54 per square foot.
The Independent Budget Analyst found that the annual 3.5% rent increase only magnifies the discrepancy.
"The proposed lease is not competitive with market rates for similar properties and is likely to further trend above market due to the high annual rent escalator," reads the report.
The budget analyst also found that the Mayor's Office failed to follow the due diligence needed when acquiring properties similar to those mistakes made for 101 Ash Street and the Civic Center Plaza acquisitions.
Specifically, the budget analysts found that the Mayor's Office inspections of the property "lack independence."
Added the budget analyst, "An independent appraisal was not completed for this site, as staff determined an appraisal was not appropriate since the City is seeking to lease rather than purchase the property."
In addition, the budget analyst found the property owner, Douglas Hamm, identified $18 million in project improvements to be made and the city went along with it.
Reads the report, "We note that the estimated tenant improvement cost of $18.0 million was developed by the landlord’s consultant at the City’s direction to the landlord based on the intended use as a shelter. The City has requested its consultant to validate the cost of tenant improvements needed. The validation results of the building condition assessment and tenant improvement costs have not been made available to our Office at the time this report was developed."
In its report, the city's budget analyst found that the annual management costs were estimated at $30.7 million a year during the 30-year lease. The report found that the Mayor's Office did not identify the funding needed to run the shelter. The city would either have to find new funding or take other shelters offline to pay for the mega-shelter.
Lastly, the analysis found that opening a 1,000-person shelter goes against the city's own plan for addressing homelessness by not adding resources to prevention and affordable housing.
"The funding identified for the upfront Kettner and Vine tenant improvements would be diverted from new affordable housing, which is considered a more permanent long-term solution to homelessness," reads the report.
Mayor Todd Gloria's Deputy Chief of Staff Nick Serrano told CBS 8 in a statement,
“This is a worthy proposal that will tackle the biggest challenge in our city right now in getting up to 1,000 people off the street, connected to services, and on a path to permanent housing. The City has spent months performing due diligence, conducting appropriate assessments, negotiating on behalf of taxpayers, and securing additional concessions at the bargaining table that have made this an even better deal than initially proposed. This has the potential to be a game changer in how San Diego addresses homelessness, which is why the City Council should support it.
“However, we will also make clear to the City Council that doing nothing is not an option. We must add more shelter beds to our system, and the Mayor is resolute in ensuring that happens.”