Reader Christopher Hall writes:

My concern is at some point the system could be abused where certain developers ‘suggest’ to the city which lots to sell — they make their suggestions through the ‘favored/ preferred’ real estate brokers like Grubb Ellis (sigh.)

The reason why I don’t trust realtor recommendations is because they stand to gain from the city hiring private brokers and selling land in secret. They are not independent. The more the city sells land, and the more they sell it through private brokers, the more the commission the realtors make. The latest questionable arrangement arose with the mayor’s contract with Grubb & Ellis to sell real property through a process that Grubb & Ellis itself recommended. The writer “GrubbyEllis” seems to be making a similar point.

Land use policy and disposition is a dense topic for a Friday.

Therefore, I sincerely appreciate the participation by the San Diego Policy Institute in this significant discussion about the process of selling city land. There are two points by Erik Bruvold that I wanted to address:

If the council has decided that the land in question is truly surplus – that it isn’t needed by the city and/or maintaining it is a drain on the general fund – THEN the city should operate in a way that gets the absolute highest price.

I don’t think we disagree on this Erik. If the purpose of the land sale is solely to raise revenue, then the city identifies liabilities and disposes them for the biggest buck. Council could then finally approve it. However, the mayor is proposing a policy that governs ALL land sales in the city. The policy also applies to subjectively identified “surplus” properties (not necessarily those that are a drain on the general fund). Regardless, we will be stuck with the policy long after the current politicians and current “surplus” lots are gone.

The second issue is the role that realtors play in what economists call “moral hazard.” I agree with Erik that there is a role for realtors where information is insufficient:

What brokers can do is offer to buyers tons of that information for “free”. They (listing brokers) are essentially compensated through their commission of widely distributing such “facts” as the underlying entitlements, leasors, terms, comparable prices, condition of the building, etc.

These could be appropriate for standard commercial property. Though I can conceive the recently trained and equipped city brokers performing the same functions, as effectively.

However, as I mentioned is my previous post, auction theory suggests that the best way to maximize public benefits, where costs and benefits are not easily quantifiable, is through a public auction.

Land is gold in San Diego, and loosing it from the public realm is not something that should be done lightly.


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