San Diego Mayor Todd Gloria Wednesday announced a tentative 30-year lease deal to transform a 65,000-square-foot commercial building in Middletown into a massive homeless shelter and resource campus, but others aren't so confident it is the right move.
The Hope @ Vine lease, which still needs to be approved by the San Diego City Council on Monday, is for 30 years at a cost of $1.95 per square foot with annual 3.5% rent increases and an estimated $12.5 million in facility maintenance costs over the term.
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"For years, past mayors and city councils have only engaged in ad-hoc, piecemeal, temporary approaches to addressing homelessness," Gloria said. "Our proposal for Hope @ Vine ensures that the city's response to homelessness is serious and will provide opportunity for those who are homeless now, and may become homeless in the future, to come off the streets and into care for years to come.
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"With this proposal, we are looking to deliver the change that San Diegans want to see with regard to addressing homelessness on our streets, and that is what Hope @ Vine will be able to do."
Not so fast, says the city's independent budget analyst -- an independent office intended to review and publish reports on the mayor's budget moves. Analysts in that office are urging the council to use caution in considering the deal, lest the city find itself mired in yet another bad real estate deal such as 101 Ash Street.
The IBA acknowledges the need for shelter space, but says that as proposed, the shelter would be above market rate and that over the course of the 30-year lease, San Diego would pay $72 million in rent.
"The proposal represents an opportunity to change the city's current approach to shelter by pursuing permanent emergency shelter and potentially provide needed replacement and new shelter beds," the IBA report reads. "However, the proposal also comes with an above market rate lease, as well as significant upfront and ongoing costs associated with rent, lease operating, tenant improvement and program operating costs."
According to the IBA, the city's investment for leasing the property on Kettner Boulevard will cost $15.7 million more than just buying the building outright and completing tenant improvements itself.
If the lease as proposed by Gloria is approved, the city will need to find $29.8 million annually in new revenue -- no easy task for a city just one month removed from a budget process featuring stop-gap measures to avoid service cuts.
The mayor unequivocally disagreed with the findings in the report.
"With all due respect to our own independent budget analyst, he's wrong," said Gloria. "You can find market comps in the area that show more and that there is a parcel that is very similar to what we're proposing in Irvine just a few blocks away. It's currently on the market for $2.25 per square foot."
The mayor makes the case that if the deal is accepted, several advantages would kick in, including:
- 19 months of rent waived, $2.4 million in savings
- $5 million unrestricted contribution from property owner
- property owner responsible for mitigation of any potential hazards identified during renovation process
- property is not available for purchase; however, San Diego has first right of refusal should landlord sell the property
- if property is sold within five years, city would receive profits from sale amounting to 14% of net
- deal includes adjacent parcel of land that can serve "multiple uses including for additional shelter and services"
"This is more than just a standard building lease -- this agreement aims to provide a transformative shelter project that will bring people off the street and help them get the skills and support they need to improve their lives," said Christina Bibler, director of the city's Economic Development Department. "We're investing in a space that all San Diegans can be proud of and will provide services in a modern, comfortable and respectful way."
The city council has met in closed session four times to discuss the possible leasing of the facility, located just west of Interstate 5. Details had previously been scant, other than the location and the "1,000-bed shelter" moniker which has fallen out of vogue by city leaders.
Monday will be the first public hearing on the proposed shelter. Under the proposal being presented to the council, the city would have authorization to spend up to $18 million to modernize and adapt the existing structure into a "transformative campus," with the ability to create separate shelters for distinct populations including seniors and families.
“I have every confidence that the independent budget analyst would not put forward a memo on an issue of this gravity without feeling confident in the experts that they've hired to provide guidance,” said City Council President Sean Elo-Rivera. “The improvements, I think, should be applauded. I'm glad that they happened. I'm proud of the work that the council has done to drive for a better deal. But a better deal doesn't necessarily mean a good deal.”
Site improvements call for a commercial kitchen, laundry facilities, dining areas, indoor and outdoor recreation areas, showers and restrooms. Proposed onsite services include job training, meals, housing navigation and behavioral health services with annual operating costs anticipated to be $26.4 million.
According to the Regional Task Force on Homelessness' most recent Point in Time Count, roughly 3,000 people remain unsheltered in the city of San Diego.
