San Diego preparing to put downtown operations building on the market

San Diego is preparing to offer the forlorn and soon-to-be empty municipal building on the outskirts of the Civic Center for sale or lease.

On Wednesday, San Diego’s Land Use and Housing Committee voted 3-0 in favor of declaring the City Operations Building at 1222 First Ave. as surplus.

The action advances the committee’s recommendation to the full City Council for consideration later this month and signals the city’s intent to soon solicit developer interest in the 1.4-acre site.

The surplus designation is a formal step required by California’s Surplus Land Act and essentially means the city no longer needs the facility for municipal purposes. With the designation, the city can sell or lease the site for redevelopment — but it must follow the noticing and negotiating requirements of the state housing law.

Under the law, bidders need to set aside at least 25% of proposed residential units for affordable housing, meaning deed-restricted units rented to low- and very-low-income families making 80% or less of the area median income. Despite the state mandate, which drives up project costs and has derailed past solicitation efforts for other properties, the city is also looking to profit from any future transaction.

Built in 1970, the City Operations Building, or COB, is on the western periphery of the city of San Diego’s downtown Civic Center compound. The five-story building occupies the entire city block bounded by A Street, First Avenue, B Street and Front Street.

The facility has been the longtime home of the city’s Development Services Department, or DSD, and was badly neglected over the decades as the city pursued redevelopment efforts that never materialized. A 9-year-old facility condition assessment report identified nearly $129 million in improvement and maintenance needs.

DSD is currently in the process of relocating to two properties: a new headquarters in Mission Valley and a two-floor office space at 550 W. C St.

By August, the operations building will be vacant of municipal office use with the exception of Fire Station 1, Kip Eischen, a program coordination in the Economic Development Department, told committee members.

Two years ago, under Mayor Todd Gloria’s since-aborted Civic Center Revitalization plan, the 1222 First Ave. real estate was expected to be the future home of a new City Hall skyscraper. At the time, the city put its neighboring assets on the market, expecting that the sale or lease of the land would substantially fund the new City Hall. The solicitation, however, garnered zero interest in the city’s four-block Civic Center complex, likely because of the constraints associated with the Surplus Land Act.

Gloria said in December that he intends to hold on to the main civic quad in light of budget constraints and plans to house even more of the city’s downtown workforce in the City Administration Building, aka City Hall, as well as at Civic Center Plaza. He is, however, seeking to offload the two blocks immediately north and west of the four-block complex.

The mayor is, for instance, advancing a deal to lease on a long-term basis the empty office tower at 101 Ash St. to a developer seeking to convert the property into residential units for low-income families.

Now, the city is also on the cusp of soliciting interest in the 1222 First Ave. block, but it will need to do so within the framework of the Surplus Land Act.

The law was amended in 2019 to prioritize affordable housing when government-owned land is sold or leased.

The process begins with the notice of availability, which alerts affordable housing developers registered with the state that the city intends to sell or lease its property. The notice also starts the clock on a 60-day window for interested bidders to respond with redevelopment plans. After the window, the law requires the city to engage in a 90-day negotiation period with respondents and give priority to the entity proposing the highest number of affordable housing units.

As drafted, the notice of availability expresses the city’s desire to get cash for the COB site.

“The successful respondent will be the respondent who can maximize the monetary payments to the city while redeveloping the site as a high-quality mixed-use, mixed-income development that includes low-and moderate-income residential units,” the draft notice of availability states.

Councilmembers Kent Lee, Sean Elo-Rivera and Raul Campillo said they were in favor of making the COB site available for redevelopment. Councilmember Vivian Moreno was absent.

Elo-Rivera seconded a motion by Lee to recommend approval of the surplus designation to the full council. The motion was modified, at Elo-Rivera’s request, to require language in the notice of availability to ensure that bidders enter into a project labor agreement. Project labor agreements, which are required for city-procured capital improvement projects, are union contracts that establish wages, hours and working conditions for construction work.

There was no discussion on the city’s plans related to the fire station in the operations building.

Wednesday’s committee meeting also included a presentation by the Downtown San Diego Partnership and its partners on a new vision for the Civic Center complex. The concept, prepared by third-party consultant U3 Advisors and funded by Prebys Foundation, is centered around creating an arts and education hub complemented by a world-class public space, thousands of residential units, shops and restaurants, and a hotel.

The vision has the mayor’s support but is distinct from his past effort. It is also largely theoretical and seemingly at odds with the mayor’s decision to stay put.

“It’s just frank for me to note that the vision is difficult to materialize if there is no future plan for what the city’s role is in the space,” Lee said. “This is an odd real estate market, to say the least, … and so I know there have been some discussions about the city not moving forward (with a new City Hall) … but I think that would be a mistake in this market.”

Elo-Rivera expressed a similar sentiment.

“The mayor pulled the plug on conversations around identifying a new City Hall. And I think that was a mistake, because if we’re serious about building a Civic Center that lives up to its name — which is a place that serves people — then we can’t let outdated politics or austerity optics get in the way of that,” he said. “I don’t think that was actually about sound fiscal policy, because it didn’t really save us money. It was about looking frugal, and that is, in fact, costing us time, opportunity and public trust. We’re spending millions to maintain a crumbling and inefficient building, while the land beneath it, which is some of the most valuable public land in the region, is sitting underutilized.”

As for the COB site, the city expects to publish the notice of availability, pending full council approval, in late July or early August, Christina Bibler, director of San Diego’s Economic Development Department, told the Union-Tribune.