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San Diego Mayor and City Council postpone settlement vote on controversial 101 Ash Street purchase

The San Diego City Council was set to discuss a settlement proposal at a special meeting Monday but Mayor's Office pulled the item to allow for more time to review.

SAN DIEGO — In a last-minute announcement, San Diego Mayor Todd Gloria postponed a city council vote to buy two downtown buildings for $132 million dollars that the city currently leases, and are now at the center of costly litigation.

City council was set to discuss a settlement proposal from Mayor Todd Gloria to purchase the Civic Center Plaza and 101 Ash Street, a building that has sat vacant for more than five years due to asbestos contamination and safety issues.

“I requested the consideration of the proposed settlement agreement to be delayed for further review by the City Council and the public,” Mayor Gloria said in a statement shortly after the hearing was canceled. “While there is still no ideal outcome to this civic debacle, we have heard clearly that the public should be given more time to review the proposed settlement agreement in its entirety – including all accompanying documents and analyses – and so we are granting that request. We intend to move forward in approximately one month’s time.”

The city's lawsuits over 101 Ash and Civic Center Plaza

In June 2021, the city sued the seller of the buildings, Cisterra Development, the lender CGA Capital, and broker Jason Hughes seeking to overturn the two long-term leases. In the lawsuits, San Diego City Attorney Mara Elliott said the leases should be voided over $9.4 million in compensation that then city volunteer Hughes was paid by Cisterra for helping push both land deals through. 

And while attorneys for Hughes say that city staff and former Mayor Faulconer's Office were aware of Hughes' compensation, City Attorney Elliott said the broker didn't submit official disclosures of his compensation agreement. By failing to do so, said City Attorney Elliott, the deals should be voided. 

“It’s now clear why the 101 Ash Street deal has been shrouded in secrecy: at its heart is a massive betrayal of the public trust and a clear violation of California’s anti-corruption laws,” said Elliott in a June 2021 statement.

Attorneys for Hughes argue that not only did the broker and founder of downtown leasing firm Hughes Marino notify six high-level city staff and the former mayor, but the statute of limitations has also passed and the city does not have a case.

The proposed settlement

Attorneys for the city and its outside counsel have litigated the two lawsuits for a year with a trial set for early 2023. That, however, changed on June 20 when Mayor Gloria held a June 20 press conference urging that the council to settle the two cases. Per the settlement, the city would pay $46 million to buy out the Civic Center Plaza that it leased in 2015. The city would pay $86 million for 101 Ash Street, which was appraised for $67.1 million in 2016. The building was only occupied for less than three weeks before workers were evacuated due to asbestos contamination.

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Since leasing 101 Ash, the city paid more than $32 million to renovate the building and according to a consultant may spend as much as $115 million in remediation work to safely occupy the building. 

Attorney Maria Severson and former City Attorney Mike Aguirre say the proposed settlement is a bad move for the city. They, along with attorney Larry Shea, have filed a lawsuit seeking to void the lease because they say it violates state constitutional requirements. A judge is expected to hear that case in September. Severson and Aguirre say the city council should hold off on any settlements until after they get their shot to overturn it.

"This is a bad deal and you don't double down on a bad deal," said attorney Severson. 

“The Mayor wants to raid the budget, raid the city's funds to pay for a building that has virtually no value. That's taking money from other things the city desperately needs. Even in their own settlement agreement, they admit they can't even say they can occupy the building or that they will occupy the building."

Opposition from City Attorney Elliott

But Severson, Aguirre, and Shea aren't the only ones looking to block any settlement from moving forward. 

San Diego's own City Attorney is also against any settlement.

In a 98-page report, Elliott said buying the buildings and ending the lawsuits would only present more issues, both financially and legally. 

"While the Agreement provides certain benefits to the City...the agreement presents several significant disadvantages to the City and does not adequately protect the City’s legal and financial interests," reads a portion of Elliott's report.

Elliott says buying 101 Ash means the city will have to defend itself against dozens of claims filed by dozens of workers who are now suing the city over exposure to asbestos, as well as whistleblower lawsuits from two CBRE employees and one city of San Diego employee over the occupation of 101 Ash Street.

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