This story was reported for San Diego News Network on March 26, 2009.
Despite an expected $60 million shortfall for the next fiscal year, San Diego’s Centre City Development Corporation is still looking into possibly rebuilding downtown’s Civic Center Complex.
Last night, CCDC presented the anticipated peer-review report, conducted by Ernst & Young, of the original analysis completed by Jones Lang LaSalle. Although Ernst & Young found various glitches with JLL’s evaluation of the proposals offered by developers Hines and Gerding Edlen Development, many San Diegans are contemplating whether rebuilding the civic center is even worth the bother.
According to the Ernst & Young report, glitches found in JLL’s evaluation include: Cash flow assumptions that weren’t supported by current market evidence or weren’t documented in the JLL report; Potential total gross obligations were subdued; JLL rental rates may have been too aggressive.
In addition to examining development proposals, the consultants also weighed in on seven non-redevelopment proposals (see chart), in which they determined a “Hold Steady” approach, a non-redevelopment approach, would be viable if modifications were applied.
“E&Y recommends that a true short-term (10 years) scenario, assuming no changes or renovations, be completed in the existing leased and owned space so the city can evaluate its short-term space needs giving consideration to the current financial crisis,” the report stated.
However, according to Robert Arends, GED spokesperson, this “Hold Steady” approach is just a “Band-Aid” fix and does not solve the long-term solution because the city is in need of major fixes.
Tom Cody, GED principal, said there are consequences for not redeveloping the complex.
He called it: “An inefficient, extremely high-risk building that could put the city at jeopardy for millions in liabilities and that might generate short-term savings but at great expense to the city over the long-term,” Cody said. “E&Y’s report has determined that non-redevelopment scenarios are only temporary fixes, likely to adversely impact tax payers and cost many more millions over the long term.”
But, with a current, unprecedented deficit and a fresh $103 million loan withdrawn from Bank of America, opponents have questioned why the city would want to spend additional money to build a new civic center in a time of such economic despair.
The league of opponents includes Councilmember Carl DeMaio, who has spoken out against the proposed new civic center even before entering office.
The councilmember who initially released a memorandum in September of last year, said the original assessment gathered by CCDC would “cost taxpayers $7.21 million more in the first 10 years than staying in the existing city buildings – with a negligible cost difference over 15 years.”
In spite of DeMaio’s contentment with CCDC and Ernst & Young for its second analysis, he said the city should still complete two tasks before rebuilding the civic complex: fix the financial problem and join forces with other governments because of the “obligation to serve its constituents.”
“You can’t build a new house until your finances for the house are in order,” DeMaio said. “We need to challenge the state, county, courts and city to get together.”
Lani Lutar, president of the San Diego Taxpayers Association said that DeMaio’s points were valid.
“I think he raises interesting issues that we will certainly look into,” Lutar said.
Lutar, who was present during the meeting, said the association has not yet evaluated the Ernst & Young report but does support public work projects if they benefit the taxpayer.
“Before, we support public works, we put a lot of thoughtful analysis into it and we evaluate all viable options,” Lutar said.
Want to know how your tax dollars are spent in the City of San Diego? “Pocket Change,” an in-depth, weekly series on San Diego’s budget will begin on Monday, March 30.
Also, don’t forget to send in your thoughts about the proposed Civic Center Complex to your councilmember.
San Diego State University public affairs professor Salvador Espinosa said the ultimate answer as to whether the complex should be redeveloped is based on two questions: “Is this the right time to do it? And, if this is going to stimulate the local economy?”
He said if the complex would offer jobs to locals, then it could be useful to the city’s economic problems.
According to CCDC, San Diego’s Civic Center Complex accommodates 1,000 city employees and “is in need of an estimated $125 million in renovations and seismic retrofitting…” CCDC also stated that the city spends $13 million to lease private office space for 2,000 employees each year. And, according to DeMaio, because of the current economic situation occupancy rates in downtown have dropped nearly 20 percent. This in turn, “gives the City an advantage” to re-negotiate leases, said DeMaio.
CCDC is also examining other alternatives, including any possible partnerships that would help create the creation of new city facilities.
On Tuesday, the city confirmed that next year’s fiscal deficit would be at least $60 million with revenue dropping by about $16 million. Last Thursday, the city also accepted a $103 million bond at a 3.89 percent interest rate from Bank of America to fund city maintenance works.
Hoa Quach is the political editor for the San Diego News Network.