The city of San Diego is suing prominent local developer Manchester Financial Group for failing to properly clean up contaminated soil at the former Navy Broadway Complex before dumping the construction waste at an inactive landfill.
On Thursday, San Diego City Attorney Mara Elliott filed a breach of contract complaint against the developer and its subcontractor, AMG Demolition & Environmental Service, Inc., in San Diego Superior Court.
The suit seeks $5 million to repay the city for the cost associated with cleaning up the developer’s alleged mess.
“(Manchester’s) attempt to saddle development costs on city taxpayers while contaminating our environment is reprehensible,” Elliott said in a statement. “(The developer) ignored our environmental laws, demonstrated a blatant disregard for regulatory directives and broke nearly every commitment made to city leaders, leaving San Diego taxpayers to foot the bill for millions of dollars in cleanup costs. The city of San Diego will not tolerate that type of corporate misconduct.”
Doug Manchester, who chairs Manchester Financial Group, said late Thursday that the lawsuit “absolutely has no merit,” but added that he could not comment further at this time. The company’s president and CEO, Ted Eldredge, is currently in Europe, Manchester said and was not available to respond to requests seeking comment.
A representative of San Diego-based AMG, reached late Thursday afternoon, declined to comment, noting that the company had not yet seen the complaint.
The lawsuit is an escalation of a yearslong dispute between the city and the developer, which for many years controlled the 12-acre former Navy Broadway Complex. The site consists of the eight blocks south of Broadway between Pacific Highway and West Harbor Drive opposite the downtown waterfront. The property, owned by the Navy, is now primarily leased to life science real estate investment firm IQHQ.
In 2006, Manchester Financial won a 99-year lease to build what was then called the Manchester Pacific Gateway project in exchange for replacing the Navy headquarters. The mega hotel, office and retail project faced numerous setbacks and never materialized. But the developer eventually made good on its promise to the Navy, and, in 2020, completed the 17-story, waterfront Navy building.
That same year, Manchester also sold off the bulk of the Broadway complex’s leasehold to IQHQ for $230 million. The development firm retained one block and has teamed with Fairmont Hotels to build a flagship resort.
The alleged wrongdoing stems from construction-related activities in 2018 and 2019. The city claims that Manchester Financial and AMG Demolition violated the of a specially negotiated, November 2018 right-of-entry permit for the closed South Chollas landfill in Oak Park.
The permit allowed the project subcontractor to deposit 130,000 cubic yards of “clean native soil” from the Broadway complex site as cover soil at the shuttered landfill. The permit was issued after the developer received a special waiver from the Regional Water Quality Control Board to deposit clean soil. The clean designation is important as state law prohibits the deposit of new waste at shuttered landfills, and was a condition of the waiver and permit.
But between November 2018 and January 2019, AMG dumped contaminated soil at the Chollas landfill, the city alleges. The soil contained wood, concrete asphalt, metal, plastic and liquids, according to a soil investigation report referenced in the complaint.
“The soil that defendants brought to the Chollas landfill was so saturated with liquids that it was dripping from the trucks along the route to the landfill and emitted a foul odor after it was deposited,” the lawsuit states.
As a result, the Solid Waste Local Enforcement Agency and the Regional Water Quality Control Board directed the city to halt the import of the soil, and the city shut down the developer’s activities in January 2019.
Thereafter, the regulatory agencies issued five reports identifying violations, including a cease-and-desist order.
Manchester and AMG refused to take responsibility for the waste, according to the complaint, and continued to insist that they had only delivered clean soil. As a result, the city eventually removed the contaminated soil from the Chollas landfill and disposed of it at the Miramar landfill, at its own expense. The city also regraded the Chollas landfill to bring it back into compliance with regulatory requirements.
In May 2022, the city sent a demand letter to AMG to recover the expenses it incurred in addressing the violations cited by the regional board, but AMG “refused to make any payment whatsoever,” the lawsuit states.
As recently as September of last year, all of the parties participated in a day-long private mediation effort but were unsuccessful in reaching an agreement, according to the lawsuit.
The city’s lawsuit is not the first to take Manchester to task for violations in connection with a development project.
In 2013, the city of San Diego sued the Grand Del Mar resort, which Manchester’s company developed, alleging that the luxury hotel had “graded extensively” on the Carmel Valley property for the purpose of creating equestrian trails, constructing an equestrian center, and putting in three paved parking lots, while failing to secure required permits. In addition, the city accused the resort of constructing a helipad without first getting the necessary permits in violation of city, state and FAA regulations.
Within a year of being notified of the helipad violation, the resort agreed in 2012 to cease using the helipad, the legal claim stated.
According to San Diego Superior Court records, the Grand Del Mar was ordered in 2013 to pay the city penalties totaling $87,456. Two years later, Manchester sold the property to the Fairmont Hotels chain.
The latest legal dispute with the city comes as Manchester Financial is planning to build a 36-story, 1,150-room hotel on a nearly 2-acre parcel between Pacific Highway and North Harbor Drive on the former Navy Broadway Complex. The project is dependent on the company’s ability to find an equity partner and a construction loan for the $550 million project, Eldredge said last month. His hope, though, is to break ground sometime this year.
“The project is completely ready to go, and we could break ground tomorrow but the debt market has changed quite a bit, and capital markets are not real excited with ground-up construction,” he told the Union-Tribune in January. “Once interest rates stop going up and the capital market stabilizes we’ll go out to market and build.”
Earlier this year, Manchester Financial was selected by the Navy to replace the agency’s obsolete NAVWAR facilities and remake the rest of the 70.3-acre military campus with private development. It is partnered with McLean, Virgina-based Edgemoor Infrastructure and Real Estate on the endeavor.
