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For nearly a year, the city of San Diego has been in private negotiations to sell 132 acres of Mission Valley land to San Diego State University. As the negotiations slogged through the summer, the public, and even City Council members, had little idea what was going on.
That changed abruptly Tuesday when a new appraisal of the value of the land came out and exposed a major dispute between the city and university. The two sides disagree starkly about whether the sale price of the land should be reduced by the cost of construction of a large, long-promised river park.
The city says the university promised to purchase the land and build the river park. In fact, last year’s initiative said the cost of the park could not fall on the city’s general fund. If you deduct the price of its construction from the price the university pays for the land, you’re effectively making the city’s general fund pay for the park, in violation of the initiative.
The university, on the other hand, maintains that the land cannot be developed to its potential without building the park. Thus, the price of the land should reflect that burden. If you don’t make that deduction, then the price assumes the park is being built and yet the university would still have to build it.
The fair market value of the land is $68.2 million after you subtract out the estimated $18 million cost of constructing the park, the appraiser, David Davis, concluded. The appraisal had to consider the value of the land as of 2017, because that’s what the initiative demanded. In a follow-up email the city made public, Davis said that he wanted to weigh in on the dispute about the park.
He backed up the city’s view.
“If the city accepts the fair market value as the purchase price, they will, in effect be paying for the demolition and river park improvements as an offset to the purchase price,” he wrote to both parties.
Officials who have been representing the city in the negotiations presented the appraisal and update to the City Council Tuesday. The appraisal is not a purchase offer. It’s not a sales agreement. It was just an update.
But university officials grew concerned the Council was not getting the full picture. SDSU President Adela de la Torre sent a letter to the mayor and City Council to alert them about what she called a discouraging difference of opinion between the university’s representatives and the city’s.
“To ignore the appraisal or to simply use it as a starting point unfairly increases the land price for issues that will be paid for during development of the site and represents ‘double payment’ by SDSU, which is clearly not ‘Fair and Equitable,’” she wrote.
De la Torre confirmed that the university would like to pay the $68.2 million for the land and build the park.
“SDSU is prepared to pay the appraised fair market value for the property, and will provide further economic value to the city by constructing, maintaining and operating the river park in perpetuity and relieving the city of the cost associated with maintaining and operating the existing stadium,” she wrote.
SDSU had hoped to strike a deal by end of summer to keep pace with its plan to break ground early next year. But when that timeline came and went, it was obvious there was some tension.
The city’s team is led by Chief Operating Officer Kris Michell, Planning Director Mike Hansen and Director of Real Estate Assets Cybele Thompson.
Their position is that the appraisal is just the first step to coming up with a “fair and equitable” deal for the City Council to consider. And that deal would include the commitment to the park and other potential measures.
For example, another point of contention is SDSU’s draft environmental review of the project, which is necessary before any construction can begin. (The university has offered to break ground as soon as 2019.) The U-T reported earlier this week that the city has major concerns with the review, arguing that the university isn’t doing enough to lessen the impact of thousands of car trips expected to hit roads in that area.
The city is clearly driving toward trying to compel the university to construct the long envisioned Fenton Parkway Bridge as part of what Hansen and others have said would be normal mitigation requirements for any developer of the land.