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Thursday, Aug. 28, 2008 | The Centre City Development Corp. will delay the proposed Civic Center redevelopment project after identifying a potential conflict of interest in the financial analysis that justifies the entire effort.
CCDC officials announced Thursday that Mike McShea, the lead analyst vetting the project’s financial assumptions, had taken a job with one of the companies involved in the development that could create a new City Hall.
The disclosure further expands the number of projects facing scrutiny at CCDC, the city’s downtown redevelopment authority, delaying another of the agency’s major projects in the wake of its former president’s departure.
CCDC announced last week that it would evaluate every project planned or proposed during former President Nancy Graham’s tenure. Graham, who resigned July 24, received money from two developers doing business with CCDC while she worked at the agency, court documents show. She didn’t report that income in required financial disclosure forms; CCDC aims to determine whether that lack of disclosure tainted any projects she was involved with.
One project has already been delayed and could be scuttled when the CCDC board meets Sept. 10: A proposed 41-story, $409-million skyscraper at 7th Avenue and Market Street. With Graham at the helm, CCDC chose The Related Cos. as the project’s preferred developer in March 2007. At the time, Graham had an ongoing business relationship with the company’s Florida affiliate, according to court records.
Graham is not the reason for the Civic Center delay, however. CCDC hired Jones Lang LaSalle as its financial consultant for $675,000 and tasked the company with analyzing proposals from two different developers to rebuild City Hall and the entire Civic Center Complex. McShea conducted the analysis, which was released earlier this month, for Jones Lang LaSalle.
CCDC officials said McShea began talking with CB Richard Ellis about a position there in June and accepted a job with the company Aug. 8. He informed CCDC of the new job Aug. 13. CB Richard Ellis was included as the property manager for the proposal by Portland-based developer Gerding Edlen, which fared the best in the financial analysis.
“It’s not that there was an actual conflict,” said Jeff Graham, CCDC’s vice president for redevelopment. “It was the perceived conflict.”
The project was headed to City Council on Oct. 21, but will likely be delayed four months because CCDC wants to hire an outside firm to review Jones Lang LaSalle’s financial analysis.
“The underlying financial assumptions are so important, we’re not going to shortchange what we’re doing,” CCDC Chairman Fred Maas said.
CB Richard Ellis will be prohibited from participating in the Civic Center proposal.
Other projects at CCDC will face similar scrutiny because of potential conflicts of interest. Nancy Graham was extensively involved in negotiations about the inclusion of a 1,929-room Marriott hotel in the proposed Ballpark Village project, a massive mixed-use development adjacent to Petco Park. Lennar Corp., part owner of the land on which Ballpark Village will be built, was a business partner of Graham’s and paid her $125,000 last year.
Within months of receiving that money, which came from a partnership among Graham, Lennar and The Related Group in a Florida development, Graham participated in negotiations about Ballpark Village at CCDC. She attended at least 17 meetings about the development, which is primarily led by JMI Realty, Padres owner John Moores’ development company.
Public officials are prohibited from influencing decisions that can benefit their former business partners within a year of receiving income from a business.
Graham’s involvement with Ballpark Village and other projects will be evaluated by James Lough, an El Cajon attorney hired by CCDC to determine whether Graham improperly influenced any developments. Lough will investigate and prescribe remedies if any problems are spotted.
He will also write all pending and previous project applicants to ask them to disclose whether they have ever had a financial relationship with Graham. Applicants would not have any obligation to respond, Maas said. He warned that the process wouldn’t be pretty and that the results of the investigation would include much more than Graham’s relationships.
Lough has already analyzed the disclosure issues associated with the proposed skyscraper at 7th and Market. He said Wednesday that Graham was involved in “key elements” of the deal. She publicly said she’d recused herself from the project. Little has been known about how involved Graham was, however, as the only information about her participation had been gleaned from her personal calendars. Those showed that she was scheduled to participate in negotiations and other meetings with the developers.
Lough is scheduled to present his findings on 7th and Market to CCDC’s board when it meets to discuss the project’s future Sept. 10.
CCDC also presented Bob Stern, president of the Los Angeles-based Center for Governmental Studies, to the media Wednesday. CCDC has hired Stern, a former state Fair Political Practices Commission attorney, to review and potentially revamp its ethics rules and conflict-of-interest code.
Stern said he would evaluate ways to enhance the staff’s awareness of ethics rules and possibly tighten up the agency’s conflict rules. He undertook a similar effort at the Unified Port of San Diego several years ago.
“When you talk about going beyond the standard code,” Stern said, “the question is: How far beyond do you want to go?”