It's Time To Settle 101 Ash

By Valentine R. Macedo | Stath Karras, the Voice of San Diego

July 21, 2022

The city of San Diego has struggled to find a solution to 101 Ash since late 2019, when the building was deemed unsafe due to asbestos contamination. It’s a classic San Diego Special. But after a lot of finger-pointing, a solution appears to be on the horizon. Led by Mayor Todd Gloria and his team, the city has reached a proposed settlement with the landlord and the lender of 101 Ash. It’s a fair settlement and according to Kosmont Companies, a well-regarded and independent third-party expert, likely the best outcome for the city. It is an agreement that deserves the support of the City Council later this month.

In the Mayor’s own words, there is no “ideal outcome” to this issue. But what a settlement does provide is certainty. Certainty that lengthy, costly, and unpredictable litigation does not provide. To date, the city has spent tens of millions of dollars on lease payments, tenant improvements, asbestos studies, legal fees, and other consultants – all for a building the city doesn’t own and can’t safely occupy. This is a classic example of why it’s better to mitigate your losses. Simply put, it’s time to put this issue to rest.

The proposed settlement negotiated by the mayor’s team includes the landlord contributing their profits from 101 Ash and the lender waiving costly prepayment penalties for paying off the loans at 101 Ash and Civic Center Plaza. These concessions will save the city millions of dollars. Further, by owning the buildings, the city will now have the flexibility to explore a long overdue redevelopment of the urban core, which includes City Hall. Without a settlement, this is much more difficult, if not impossible.

From an economic development standpoint, redeveloping the city’s urban core is an opportunity to create thousands of good paying jobs for working families. Those jobs will produce new facilities that will increase efficiency and productivity that better meets the operational needs of the city and its employees. Also, the condition of the city’s currently owned buildings is not only substandard, but also risky from a safety standpoint. In fact, some have called them the “sickest and least public-friendly buildings anywhere.” City employees deserve better.

Shortly after proposing the settlement, Mayor Gloria and Council President Elo-Rivera postponed a final City Council hearing for 30 days to allow for more public input. This was the right decision at that time. Full transparency is essential. But it’s now time to act, as it bears repeating there are no silver bullets to the 101 Ash issue – only options to mitigate further losses. Should the City Council opt to litigate and lose, the consequences would be severe. In fact, legal and financial experts have predicted that the city could owe the lender and landlord more than $250 million should the city’s legal strategy not prevail. That’s just not a risk worth taking given the likely outcomes with the settlement option. This is especially important, given the city has now acknowledged that it was their contractor that released the asbestos at 101 Ash that is making the building unhabitable. This fact alone could significantly increase the time and cost of litigation.

Another data point that supports settlement is the Independent Budget Analyst’s (IBA) recent report. The IBA hired Kosmont Companies to evaluate the settlement and related litigation. Kosmont presented their findings alongside a variety of options to help aid the City Council. Their likely case scenario found that adopting the settlement could save the city more than $100 million of future rent and facility needs over the next 30 years, compared to the city continuing to lease space at market rates.

Mayor Gloria committed during his campaign to put an end to San Diego Specials. He’s off to a good start with approvals on longstanding issues, such as short-term rentals, the Barrio Logan Community Plan Update and a franchise agreement with our local utility. Putting this 101 Ash litigation in the rearview mirror is the next logical step and allows the mayor, the City Council and city staff to focus on more pressing needs for the community. We applaud the mayor for taking on these tough issues and we urge the City Council to approve this settlement.

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