The Morning Report
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The debacle surrounding 101 Ash St. has been a fixture in Councilwoman Barbara Bry’s campaign for mayor. She has highlighted it almost more than anything else as disqualifying for her rival, Assemblyman Todd Gloria, who approved the lease-to-own deal without enough scrutiny, she alleges.
Now, though, she’s defending the purchase of another downtown building the city rushed to buy and that is back in the news as it devolves into another debacle.
In January 2018, Bry joined fellow Council members in unanimously voting to purchase a shuttered indoor skydiving facility and convert it into a navigation center where homeless San Diegans could be linked with housing and other help. The City Council approved the $7 million purchase. But the transaction was so rushed, the city did not do an appraisal, leading to claims from real estate pros and others that the building may have been worth far less.
Almost three years later, the building has never met its potential. Last week, the city ended its contract with operator Family Health Centers of San Diego. That agency’s CEO alleged that the project was “orchestrated more as a public relations undertaking than a needed and important component of a homeless continuum.”
City officials are preparing to later this month share plans with the City Council for the San Diego Housing Commission to take over the facility, a move they have said will lead to improved outcomes.
The next mayor could decide the building’s fate over the long haul.
Gloria has for years been critical of the purchase and the fact that the navigation center doesn’t actually house or shelter homeless San Diegans.
Bry, on the other hand, says the decision was a good one and that it will work out for the city with the Housing Commission at the helm. She defends her vote to purchase the building by pointing to an outside appraisal the city recently secured showing the facility was worth $200,000 more than it paid in 2018.
The city sought the appraisal following a request from federal officials scrutinizing the purchase.
Investigators from the federal Department of Housing and Urban Development, whose analysis was triggered by the city’s use for federal block grant funds for the purchase, have since concluded that the city’s purchase met HUD requirements and that the acquisition “was a reasonable and eligible cost,” according to a letter obtained by Voice of San Diego.
“(HUD) has asked the city to strengthen its procedures to ensure that, in the future, appraisals are obtained in advance of property acquisition and are current to accurately reflect the market value,” Rufus Washington of HUD’s California Office of Community Planning and Development wrote in a Sept. 23 letter.
Washington wrote that the city had assured federal officials it was working to address weaknesses in its policies and procedures uncovered in HUD’s analysis.
The city’s 2018 acquisition of the former skydiving center, still outfitted with a pair of 30-foot tall wind tunnels, drew questions soon after the purchase.
After the city grappled with a deadly hepatitis A outbreak that battered its homeless population, Faulconer had been eager to change the storyline. Real estate financier David Malcolm, a longtime Faulconer supporter, who also donated $1,050 to Bry’s mayoral campaign earlier this year, had long urged the mayor to pursue a service hub for homeless San Diegans.
By September 2017, an East Village skydiving business that Malcolm’s son helped manage had crumbled and county records show Malcolm’s mortgage company took possession of the property. A month later, Malcolm updated records to clarify that his company hadn’t put up the money for the skydiving facility.
That November, Malcolm told the mayor and two other top city officials about the building. City real estate officials later hurried to set the stage for a purchase, bypassing their usual process of seeking an appraisal.
Instead, they described an appraisal that concluded the skydiving center was worth $15 million to $22 million. They didn’t mention they were summarizing two reviews passed along by the seller, or that at least one of those analyses had factored in furniture and equipment.
Before signing off on the 2018 purchase, Bry and other City Council members praised city staff for their work on the navigation center project – just as Gloria in 2016 once praised city officials for their work on the 101 Ash St. purchase now considered one of the worst real estate blunders in the city’s history.
“Thank you for negotiating a good deal,” Bry said at the time.
Months later, Bry was less enthusiastic. She joined City Councilman Chris Ward in calling for a holistic city homelessness plan before proceeding with the project. She said the city might consider selling the property or using it for another purpose if its services weren’t prioritized in a broader city homelessness strategy.
“I think it’s better at this point to keep (the navigation center building) empty than to spend money on something we may not need, or may not be the best use of our money, since we have limited financial resources,” Bry told VOSD in October 2018.
A month later, Bry voted against an operating contract with Family Health Centers and questioned whether “we should be spending millions of dollars of precious taxpayer money on a housing navigation center and whether it would be effective in helping homeless people find housing.”
Gloria also raised concerns before the navigation center opened.
“There are many outrageous aspects of this real estate deal but the most frustrating one is that this 26,500-square foot, three-story building will house NO ONE,” the assemblyman wrote in an August 2019 Facebook post. “Let’s stop doing dumb stuff like this and embrace proven strategies like permanent supportive housing that will solve San Diego’s homelessness crisis.”
The center opened last December.
Bry weighed in on the project again in January when the Housing Commission proposed an extension of the contract with Family Health Centers, which also runs health clinics across the county.
By then, the city had received a homelessness plan that called for a review of the navigation center and nearby Neil Good Day Center. City officials promised a third-party review of both programs.
After asking a Family Health Centers senior vice president questions about staffing and data it had collected at the January City Council meeting, Bry joined a City Council majority in voting to support a contract extension through June. The vote included an authorization for the Housing Commission to extend the contract through Dec. 31 to allow time for the outside analysis.
But by May, the city and Family Health Centers were privately discussing how the nonprofit could step away from the center.
The same month, city officials proposed allocating $1 million in block grant funding to operate the navigation center in the fiscal year that began in July.
Bry backed up City Council President Georgette Gómez after she advocated pulling the $1 million proposed for the navigation center.
“I will second your motion,” Bry said. “Very pleased that you took out the funding for the navigation center. Community development block grant money is a very important resource for excellent programs that serve communities.”
The City Council later voted 8-1 on the block grant allocations.
Anthony White, Family Health Centers’ director of community and government relations, said the nonprofit was never notified of that vote.
A request for proposals to analyze the operations of the navigation and nearby day center was later quietly canceled amid the pandemic, which hit just as navigation center operations ramped up. Meanwhile, the city focused on an unprecedented effort to shelter homeless San Diegans staying at the Convention Center – and find housing for them.
Last week, after months of disputes with Family Health Centers, the city officially notified the nonprofit that it was ending its navigation center contract effective Oct. 29.
A few days later, Bry said at VOSD’s Politifest debate that she was confident in the Housing Commission’s ability to take on the project and was not sure whether the contract with Family Health Centers “was a good choice.”
“The Housing Commission is going to be moving into that space and they will be doing the appropriate outreach so the building will be used for what it was intended to be used for, which is to do outreach by social workers to homeless individuals in downtown and that was a good use,” Bry said.
In response to questions from VOSD this week, Bry campaign aide Scott Kavieff wrote that Bry respects Family Health Centers’ work in the community but believes the Housing Commission is uniquely suited to operate the navigation center.
“Allowing the nav center the opportunity to succeed is not an error,” Kavieff wrote. “Neither is using data to determine where and how precious resources should be spent.”
Gloria, who on Sept. 18 named Family Health Centers his Assembly district’s nonprofit of the year, wrote in a statement that he hopes the City Council will look at whether it could use the building to house homeless San Diegans when it hears the Housing Commission’s proposal later this month.
If the mayor and City Council approve the Housing Commission arrangment and he is elected mayor, Gloria pledged to track the Housing Commission’s progress and assess how the navigation center’s work aligns with his goal to end chronic homelessness in the city.
“If this new arrangement is likely to help San Diego meet my goal of joining the other cities that have successfully ended chronic homelessness, then we will maintain it,” Gloria wrote. “If it won’t, then we will find another use for the property.”