San Diego mayor Todd Gloria's proposed settlement agreement involving the building at 101 Ash St. would allow the city to buy it and Civic Center Plaza.
Cisterra Development would refund the city $7.4 million it made in profits on the Ash Street transaction, but it would get to keep the $6.2 million it made on the Civic Center Plaza.
After the San Diego City Council approved the initial lease-to-own agreement in 2016, it was discovered that the Ash Street building was uninhabitable. The costs to fix it have been estimated to be up to $115 million. In the proposed settlement, the city would have to pay the remediation costs to fix the building.
The proposed settlement calls for the city to pay $86 million to buy 101 Ash Street, even though it has been appraised at about $67 million. The city's chief operating officer Jay Goldstone said the city would pay for the building by diverting money from infrastructure projects like road improvement projects and storm water initiatives.
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"What we’re recommending is to take cash that was being allocated to capital projects, free up that cash and use it toward the acquisition of 101 Ash, and then go out and bond finance, which the city could have done initially for these other capital projects, at a lower tax-exempt interest rate, so, net, it will save the taxpayer money," Goldstone said.
Goldstone said the infrastructure projects won't be delayed or impacted by changing the funding scheme and, ultimately, the interest rate the city would get from financing the capital projects through a bond versus the interest rate it would get for borrowing money to pay for the building is lower.
"Instead of paying for those projects with cash, we’ll bond finance those projects," Goldstone said. "It will not slow down a project, it will not impact negatively any of those projects, it will still be on schedule. It's just the source of funding will be changing."
Goldstone said the city could save anywhere from $3 to $25 million by funding the acquisition of 101 Ash in this way, but many people are still opposed to this proposed settlement because they believe the city shouldn't be spending $86 million on a building that was appraised at $67 million and might need to get torn down.
Goldstone said it's hoped the city council will vote on the settlement on July 26. Last month, the mayor asked the city council to postpone the vote scheduled for June 27 because, he said, he was asked by people in and out of city hall for more time to go over the proposal.
In a statement to NBC 7, the San Diego City Attorney's Office — which has recommended that the city council reject the settlement — said it has no legal concerns with the financing structure of the proposal.
City Councilmember Vivian Moreno has already publicly stated that she does not support the settlement. City Councilmembers Sean Elo-Rivera and Chris Cate have said they support it.