SAN DIEGO — The San Diego City Council will continue Tuesday considering Mayor Todd Gloria's proposed 30-year lease for a 65,000-square-foot commercial building and its potential transformation into a massive homeless shelter and resource campus.
Gloria last week announced a tentative 30-year lease deal for Hope @ Vine at a cost of $1.95 per square foot with annual 3.5% rent increases and an estimated $12.5 million in facility maintenance costs over the term.
On Monday, after more than 7 hours of discussion, the council voted to continue discussing the plan next Tuesday.
After Monday's hearing, Gloria issued this statement:
"Today's hearing was an opportunity to get feedback from the City Council and the public on our Hope @ Vine proposal. My administration is happy to continue refining the current proposal, but Council members must provide specific negotiating points, which I am immediately requesting from them. San Diegans expect bold action on homelessness, which is what Hope @ Vine represents, and we must continue to address this crisis with the urgency and compassion that it demands.''
Not so fast, says the city's independent budget analyst — an independent office intended to review and publish reports on the mayor's budget moves. Analysts in that office are urging the council to use caution in considering the deal, lest the city find itself mired in yet another bad real estate deal such as 101 Ash Street.
The independent financial review found some flaws in the appraisal process as well as several potential financial miscues that would come at taxpayer expense.
The IBA acknowledges the need for shelter space, but says that as proposed, the shelter would be above market rate and that over the course of the 30-year lease, San Diego would pay $72 million in rent.
"The proposal represents an opportunity to change the city's current approach to shelter by pursuing permanent emergency shelter and potentially provide needed replacement and new shelter beds," the IBA report reads. "However, the proposal also comes with an above market rate lease, as well as significant upfront and ongoing costs associated with rent, lease operating, tenant improvement and program operating costs."
According to the IBA, the city's investment for leasing the property on Kettner Boulevard will cost $15.7 million more than just buying the building outright and completing tenant improvements itself.
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."
Days after the IBA released its report, the City Attorney identified potential legal issues and several red flags if the city moves forward with the contract as it's currently written.
If the lease as proposed by Gloria is approved, the city will need to find $29.8 million annually in new revenue — no easy task for a city just one month removed from a budget process featuring stop-gap measures to avoid service cuts.
The mayor makes the case that if the deal is accepted, several advantages would kick in, including:
- 19 months of rent waived, $2.4 million in savings
- $5 million unrestricted contribution from property owner
- property owner is responsible for mitigation of any potential hazards identified during the renovation process
- property is not available for purchase; however, San Diego has first right of refusal should the landlord sell the property
- if the property is sold within five years, the city would receive profits from sale amounting to 14% of net
- deal includes an adjacent parcel of land that can serve "multiple uses including for additional shelter and services."
"This is more than just a standard building lease — this agreement aims to provide a transformative shelter project that will bring people off the street and help them get the skills and support they need to improve their lives," said Christina Bibler, director of the city's Economic Development Department. "We're investing in a space that all San Diegans can be proud of and will provide services in a modern, comfortable and respectful way."
The City Council has met in closed session four times to discuss the possible leasing of the facility, located just west of Interstate 5. Details had previously been scant, other than the location and the "1,000-bed shelter" moniker which has fallen out of vogue by city leaders.
Monday was the first public hearing on the proposed shelter. Under the proposal being presented to the council, the city would have authorization to spend up to $18 million to modernize and adapt the existing structure into a "transformative campus," with the ability to create separate shelters for distinct populations including seniors and families.
Site improvements call for a commercial kitchen, laundry facilities, dining areas, indoor and outdoor recreation areas, showers and restrooms. Proposed onsite services include job training, meals, housing navigation and behavioral health services with annual operating costs anticipated to be $26.4 million.
According to the Regional Task Force on Homelessness' most recent Point in Time Count, roughly 3,000 people remain unsheltered in the city of San Diego.
WATCH RELATED: San Diego budget analyst questions homeless mega-shelter prior to council vote (July 16)