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In San Diego, there’s always a reason not to build low-income housing.
The City Council was set Tuesday to finalize a $5.85 million deal to build over 100 low-income homes on city-owned property in southeastern San Diego, at the corner of Hilltop Avenue and Euclid Drive.
But the deal, orchestrated and approved by the city-owned nonprofit redevelopment agency Civic San Diego, is on the rocks due to a potential conflict of interest by one of the agency’s board members.
Phil Rath, a Civic San Diego board member, has been a registered lobbyist on behalf of the nonprofit developer Affirmed Housing Group since 2013. Civic San Diego selected Affirmed Housing’s proposal to develop the Hilltop and Euclid property, and Rath voted in favor of the decision.
Theresa Quiroz, a board member for San Diegans for Open Government, spelled out the allegation that Rath’s vote represents a conflict in a letter sent to the City Council hours before it was scheduled to vote on the project. San Diegans for Open Government has been attorney Cory Briggs’ client in numerous lawsuits against the city over the years.
Quiroz said the relationship between Rath and Affirmed raises the question of whether Civic San Diego’s decision to award the project to the developer was in taxpayers’ interests.
“This conflict of interest has tainted the selection of and proposed transaction with Affirmed Housing Group,” Quiroz wrote. “No action short of complete rejection and disqualification of Affirmed Housing Group can cure this actual and/or perceived conflict of interest.
Civic San Diego selected Affirmed’s proposal in June 2016 over proposals from two other development teams.
After receiving the letter, the City Council kicked the project aside to review the letter’s allegations.
“Due to late-breaking information we have received regarding the Hilltop and Euclid project just minutes before this Council meeting began, I would like to make a motion to continue the hearing on this item until Tuesday, Jan. 9, 2018,” Council President Myrtle Cole said. “This will give staff and the city attorney time to review information that was just received.”
It’s possible the move will prove a needless delay, and that no conflict existed.
The letter includes a lobbyist registration from Rath for Affirmed Housing from late 2013, and Affirmed is still listed as one of Rath’s clients in the county’s latest monthly lobbyist report. But he didn’t list the company as a significant source of income on his statement of economic interests with the city for 2017, which specifies significant sources of income from the previous year.
San Diego’s Ethics Ordinance only requires officials to disqualify themselves from decisions due to financial relationships from the previous 12 months. If Rath hasn’t received any income from Affirmed in the last year – as his statement filed with the city suggests – and his disclosure with the county is merely out of date, then he wasn’t required to recuse himself.
Gil Cabrera, former chair of the city’s Ethics Commission, said the 2013 lobbying disclosure isn’t enough to determine whether Rath should have been disqualified.
“I can understand why being a registered lobbyist might raise the question, but given the date of the disclosure and the fact that they aren’t listed on his Form 700 suggests he hasn’t received income from them for some time,” Cabrera said.
Rath said he had a financial relationship with Affirmed before joining the Civic board, which does not constitute a conflict of interest. He lobbied for the company in 2014 on a project in San Marcos called Eastgate. It was an affordable housing project with various funding sources, and Affirmed asked Rath to help it secure some county funds to complete the deal, he said.
“The basic problem with the letter is that it presumes I have an ongoing relationship with Affirmed Housing, which is not true,” Rath said. “If anything, I probably should have taken them off my registration with the county when the relationship ended.”
Briggs said that’s still a problem.
“The guy knows there’s a process for removing people who are no longer clients,” he said. “Has he done no lobbying at the county in the last three years? Is he going to show us his books to prove they’re no longer a client?”
Quiroz and Briggs both said that even if Rath wasn’t required to recuse himself, there’s still an appearance of a conflict that damages the city’s process.
“The reasons I feel passionately about this is, we need a large and diverse group of affordable housing developers to solve our housing crisis,” Quiroz said. “The other two developers who had applied to this project now are in the position where they have to ask themselves, ‘Should we bother going back to the city of San Diego where it appears there is this conflict where we will never have a chance?’”
Civic San Diego regulates downtown development on behalf of the city, and manages certain redevelopment projects in low-income communities elsewhere in the city. The city formed it by combining its two former redevelopment agencies when the state killed the redevelopment program in late 2011.
The agency manages former redevelopment projects – like the Hilltop and Euclid property – and has been seeking to build up its finances to maintain relevance once those funds run dry. It’s started competing for federal new market tax credits and is forming an investment fund targeted for transit-focused development along with the city’s Housing Commission.
Shuttering or constraining Civic has been a priority on the left since the agency was created. Assemblywoman Lorena Gonzalez Fletcher proposed a bill in 2015 that would have given the City Council final say on all of its decisions, but Gov. Jerry Brown vetoed it.