Thursday, Sept. 4, 2008 | For a few weeks in August, the proposal for a new sail-shaped City Hall seemed to have a chance at relatively smooth ride through the machinery of San Diego city government, with both Mayor Jerry Sanders’ office and City Council President Scott Peters sending positive vibes.

But after last week’s revelation by the Centre City Development Corp. of a possible conflict of interest involving the consultant that performed the analysis, the proposal’s tell-tale is showing stiff political headwinds, coming mainly from those who have a shot at being on a newly constituted City Council.

The proposal by Portland-based Gerding Edlen calls for an iconic 33-story City Hall building to anchor the redevelopment of the four-block Civic Center Complex. The developer and CCDC staff spent much of August presenting the proposal to the public. Along the way, they highlighted a financial analysis by Jones Lang LaSalle showing a significant cost savings if the city went ahead with the project rather than continuing to lease more than half of its office space.

And save for a scathing review by Councilman-elect Carl DeMaio, the proposal was well received. Peters said that based on the financial analysis, it would be “riskier not to do it than to do it.”

The CCDC board had been scheduled to vote on the proposal late this month, and it was to go before City Council in October. Then last week CCDC announced that Mike McShea, who led Jones Lang LaSalle’s financial analysis, had taken a job with commercial real estate firm CB Richard Ellis, which was listed as the property manager in the Gerding Edlen proposal.

As a result, the proposal has been effectively shelved for several months while CCDC, the city’s downtown redevelopment authority, hires another consultant to review the analysis by Jones Lang LaSalle to make sure McShea’s possible conflict didn’t color the analysis in Gerding Edlen’s favor.

Now, the proposal will almost assuredly not go before council until the New Year, when the city’s governing body will look dramatically different with DeMaio and three other new members.

For most of the summer DeMaio has publicly railed against the project, calling it too expensive for a city in such bad financial shape. He has said that a new City Hall should be integrated with other long-awaited projects like a new downtown library and paid for with a $200 million infrastructure bond, rather than be financed through the sale of public land as the Gerding Edlen plan envisions.

Interviews with the six candidates vying for the three remaining open seats, as well as sitting council members who will remain in office, indicate that hard questions won’t just be coming from DeMaio.

Several said the possible conflict heightened concerns they already had about Gerding Edlen’s project being the only proposal up for review after the other finalist dropped out following McShea’s analysis. And all have lost at least some degree of faith in CCDC’s ability to make conflict-free decisions in light of the Nancy Graham scandal.

Two candidates — District 3 Democrat Stephen Whitburn and District 7 Republican April Boling — want an analysis of the cost by experts who are not affiliated with CCDC. The rest are promising a level of scrutiny that is perhaps higher than would have occurred if the proposal had gone before the current City Council.

“There is a general lack of trust in the process,” said Marti Emerald, the Democratic candidate in District 7. “Is the financial analysis accurate? Are the numbers skewed? It really does take us back to square one.”

Said District 1 Republican Phil Thalheimer: “[Council] won’t be able to have the type of debate it should have” if there is only one developer offering one approach.

District 4 Councilman Tony Young is showing a level of concern that he typically would not voice before a proposal goes before council.

“I’m not convinced that it’s going to actually save the city money — that it won’t be some huge boondoggle,” Young said.

Sanders spokesman Darren Pudgil said the mayor will withhold judgment until after the review of the analysis. “If in fact the numbers continue to show that this project will save a considerable amount of money, then the mayor believes it should continue to be looked at,” Pudgil said.

A CCDC official and a Gerding Edlen executive say the proposal went through a robust competitive process, and are confident that it will hold up through a second financial analysis.

Gerding Edlen is proposing a wholesale redevelopment of the Civic Center Complex, with the cornerstone being the $440-million, 1-million-square-foot City Hall. The developer is also proposing to purchase the City Operations Building and the Evans Jones Parkade and develop the area into office, residential, retail and possibly hotel space.

There have been proposals to build a new City Hall for decades, with proponents citing a need to replace the decades-old, asbestos-filled, sprinkler-deficient city-owned buildings. However, CCDC is pushing hard now because the city leases about half of the 1 million square feet its employees occupy, and those leases will be up in the coming years. CCDC projects the city’s annual rent payments will increase by between $5 million and $6 million if it does nothing.

The financial analysis headed by McShea showed that by going with the Gerding Edlen proposal, the city would save as much as $62 million over the next 15 years, and more than $400 million over 50 years. Most of the projected savings in the early years will come from the sale or long-term lease of the operations building and the parkade.

Jeff Graham, CCDC’s assistant vice president for redevelopment, said the project was competitively bid — eight firms responded to the agency’s nationwide call for developers with the qualifications to build the project. And City Council would have had two proposals to consider had Hines Corp. not dropped out of the running.

The Texas-based company was a finalist along with Gerding Edlen, and had proposed building a new City Hall without the corresponding development. But Hines dropped out after the financial analysis gave a clear edge to Gerding Edlen. Paul Twardowski, who heads up Hines’ San Diego office, said the firm has no plans to resubmit its proposal in light of the McShea revelations.

“We are perfectly fine with having the one best, final proposal,” Graham said. “We feel the competitive process has played itself out to the end.”

Tom Cody, the Gerding Edlen executive in charge of the proposal, said he welcomes the increased scrutiny.

“The project needs to stand on its merits,” Cody said. “I’m very comfortable that when people are educated about the project, it will warrant support.”

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