The San Diego City Attorney’s Office has added its voice to a growing chorus criticizing a plan to convert an empty warehouse in the Middletown neighborhood into one of the nation’s largest homeless shelters.
The blistering 11-page analysis, released Friday, identified a number of red flags in the 30-year agreement.
“As currently written, the proposed Lease does not adequately protect the City’s legal or financial interests, and the City would benefit from further negotiation, legal analysis, and due diligence,” wrote Assistant City Attorney Jean Jordan.
A representative for Mayor Todd Gloria, who has championed the warehouse as a way to ease the region’s shelter shortage, again defended the plan.
“The real liability for the City and its taxpayers is continuing to leave thousands of people unsheltered on our streets — people who are hungry, sick, and even dying,” Nick Serrano wrote in an email. He noted that the city attorney’s office, which was involved in the negotiations, didn’t find the lease to be illegal. “Let’s be clear: any big project carries risk and we have worked hard to have responsible protections for taxpayers.”
A spokesperson for San Diego businessman Douglas Hamm, who owns the property at Kettner Boulevard and Vine Street, declined to comment.
The lease was only made public a few days ago, and Friday’s report follows a review by the city’s Independent Budget Analyst that was similarly critical of efforts to put more than 1,000 people in a structure purchased at above-market rates.
But the city attorney was far more direct.
San Diego leaders erred by holding a news conference about the shelter plan in April that suggested a solid deal was already in place when the City Council largely hadn’t been consulted and the agreement gave too much to the landlord, lawyers wrote.
The city attorney’s office said negotiations continued to be mishandled in ways that allowed the property owner “to refuse to engage in meaningful discussions” and “make overly ambitious demands,” leading to a document riddled with problems.
San Diego would essentially have to accept the building as is, flaws and all, and Hamm wouldn’t be liable for certain damages, the analysis found. More than $18 million might be needed for renovations, yet there’s a decent chance that price tag could go up with the city footing the bill.
Even if the owner delays the process, he’ll “likely have insufficient funds to repay the City,” and San Diego might end up paying rent before the structure can be used.
Although the landlord is supposed to take care of any air pollution, he appears to be off the hook once renovations wrap up, and the city doesn’t have much say over the cleanup, the report said. Suggested fixes to the lease on this front were reportedly ignored.
Hamm “bought the Property with full awareness of the risk of environmental contamination,” the assistant city attorney wrote. “Accordingly, it is unfair for the City to bear the risk of any environmental remediation.”
If someone gets hurt on-site, San Diego shoulders more of the burden since the “City will be liable for loss or injury” even if it was caused by certain cases of negligence on behalf of the landlord.
San Diego faces further liability if it ever sublets part of the building and a requirement to keep the place looking nice is unnecessarily vague, the report states. “Each time the City wants or needs to make any alterations, no matter how minor, the City will need to seek Landlord’s consent,” according to the report. This “may prevent the City from making any manner of alterations to the Property in the future, whether to accommodate the smooth operation of the contemplated homeless services center or the transition to a different use.”
Even a highly touted part of the agreement, giving San Diego first dibs to buy the property if it’s ever up for sale, might come with a loophole while a pledge by Hamm to give $5 million toward the project “could be an illusory and unenforceable promise.”
As to what the city might pay if it wants to keep renting the building after the lease ends, once millions of dollars have been invested and the warehouse has served as a centerpiece of the area’s shelter system?
Since there aren’t extension options, the dollar amount would be entirely up to the landlord, lawyers wrote.
The City Council is scheduled to consider the shelter proposal Monday.
