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San Diego's High Rise Money Pit

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PHOTO BY MEGAN WOOD / INEWSOURCE

Above: San Diego's seal is shown at the downtown City Administration Building, May 8, 2018.

A mismanaged real estate deal for a downtown office building is costing the city of San Diego thousands of dollars per day, the San Diego County Sheriff wants to streamline the outsourcing of inmate health care, and how telecommuting during COVID-19 might change our long term work culture.

Speaker 1: 00:01 It was supposed to be the city's new home for doing business. So how did an empty downtown high rise become San Diego is the latest money pit who should provide health care to San Diego's jail population. Why the sheriff wants to take it out of the public's hands. And the novelty has worn off feeling the burnout of working from home during COVID-19 I'm Mark Sauer and the KPBS round table starts. Now

Speaker 2: 00:32 [inaudible]

Speaker 1: 00:36 Welcome to our discussion of the week's top stories. I'm Mark Sauer and joining me on a remote version of the round table. Today, I report her Jessie marks a voice of San Diego Kelly Davis, senior editor at the news website, the appeal and report her Brittany miling who covers business for the San Diego union Tribune. The former headquarters of Sempra energy at one Oh one Ash street, downtown sits empty these days, but that fact has nothing to do with telecommuting office workers amid the pandemic. It has become a Hawking white elephant of a building costing the city of San Diego, tens of thousands of dollars in rent each day. The city's 20 year lease to buy deal for $127 million makes one-on-one Ash street, the latest disaster plaguing the city's real estate assets division. Joining me to discuss how a cash strep city got saddled with one dubious real estate deal. After another is Jesse Marks associate editor at voice of San Diego. Jesse, welcome to the round table. Thanks for having me. Mark will give us an overview of this deal for the former Sempra energy building first, when and why did the city acquire the building?

Speaker 3: 01:41 So back in 2014, 2015, Sempra, which as you mentioned, was the tenant in this building, the buildings across the street from city hall, Sempra was looking to move into new headquarters. So the owners of that property needed to figure out what to do with it. So they came up with an idea to pitch the city on this piece of property, the city needed to house its workforce longterm. It had hundreds of people who had needed to put a into longterm office space and frankly, the current occupy office space that it was occupying was, um, deteriorating. So longterm, it seemed like a good idea. The deal finally came together in 2016 though because the original owners of the property couldn't get it done. But then there was another developer who came back and essentially negotiated with the city. So you had an interesting kind of three way sort of developer city official project in the works. And that's kind of what went wrong with this process.

Speaker 1: 02:31 Yeah. That go into that brokering a little bit. That was really kind of odd. And he had kind of a one foot in each camp among the, uh, the brokers.

Speaker 3: 02:40 Yeah. So you essentially had the owners and then you had a middleman. And so you had these different developer, real estate groups, and then you had the city as the tenant and the deal was, the city would come in and lease the space for 20 years. And then at the end of the time, they would own the building. So essentially their rent payments were going to be like a mortgage just spaced out over two decades. But what happened was the city didn't do it's homework upfront. So they wound up agreeing to, to buy a building over a 20 year period without actually appraising independently appraising or assessing the true condition of the building. So once they got inside it, they realized that there was a lot more going on than they bargained for.

Speaker 1: 03:19 Yeah. That's kind of amazing. I mean, any of us have bought a house or a commercial building. It's just routine a condo, you have it, you have it inspected. And the city was told leaders, apparently accepted that a mere 10 grand power wash the building that's it, employees can move right in instead of what was actually wrong with the one-on-one Ash

Speaker 3: 03:36 Golden, uh, plenty. They got inside in early 2017 and they said to their architects, Hey, take a look at this, come up with a space plan, which was their way of basically saying, figure out how we're going to house hundreds of workers with inside this framework here. So it wasn't until the architects and the engineers actually took a closer look at the building that they realized the HVAC, the plumbing, the electrical, the lighting, the ceiling, it all needed major work. So going into the deal, when it was pitched to the city council in 2016, the city had just taken the word of the developers and the developers had turned over documentation for the condition of the building. But the problem was much of those reports were based just on visual inspections. So the city didn't look very deeply at what, at what the true condition of the building actually was. They just relied on what the developers told them.

Speaker 1: 04:25 City has an entire department for this, a department overseeing hundreds of buildings, properties, totally totaling, billions of dollars. Why didn't the city do its own inspection upfront? Yeah,

Speaker 3: 04:35 That's a, that's a great question. Um, we we've gotten a lot of different answers, but essentially the city has just conceded that they, they dropped the ball, they didn't have, uh, the expertise to really do a deal like this. They, they hurried into it. Uh, the owners had given them some limitations on when they needed to close the deal. So they said within only a few months, you know, we, we took their disclosure documents and we essentially took it at face value.

Speaker 1: 04:57 Really amazing story. You and your colleague, Lisa Halverstadt reported this week, that a second top city manager quote, resign the wake of the Ash street building disaster, uh, who was she and whose head was the first to roll over this deal?

Speaker 3: 05:11 So she was sabelle Thompson and she was the head of the real estate assets department for the city. She'd been there for a couple of years. She'd been brought in to kind of clean it up because it had had some problems. Um, but she herself, uh, is, is strongly implicated in some of the internal investigations that we've, we've seen over the last few days. And she's primarily the one who should have been responsible for getting an independent assessment of the property, but didn't get it. So she resigned effective yesterday, uh, effective Wednesday, I should say. And she was the second public official that we know of who is connected to this project. He's been forced out. The first was, uh, her supervisor was a city manager named Ron via who also helped pitch this project to the city council and sell it to the city council on the belief that it was a move in ready project would save the city money over the longterm. And it was a, it was in good conduct

Speaker 1: 06:00 And America, Kevin Faulkner has responded. Uh, he faced the city council, but what was Faulkner's response regarding Ash street?

Speaker 3: 06:08 Walker's had a really interesting response to this. He's he's tried to spin it too to his advantage by saying, look, we made mistakes. We didn't have the expertise in place that we should have, but you know what we're gonna, we're going to clean this mess up, even though it, it went haywire under his, his watch. He's, he's blamed a culture at city hall of, um, mismanaging properties and then trying to sweep the problems under the rug. So in response to this, he's, he's downplaying, uh, the culture that he's presided over, but at the same time, he's saying, look, I understand it's my responsibility now, to share information with the public and propose corrective actions to get at the root of the problem and the root of the problem, frankly, was that his, his real estate, uh, people didn't know what they were doing.

Speaker 1: 06:49 Yeah. The real estate assets division is it's really in the spotlight on this one. Well, let's talk about a couple of other kind of doozy deals as cities entered into. There was the former skydiving facility and a firetruck maintenance yard that's yet to see any firetrucks. Yeah.

Speaker 3: 07:03 So the skydiving, uh, it's an indoor skydiving center. The city purchased this a couple of years ago and the plan was to convert it into a, uh, homeless housing navigation center. Um, it didn't open until almost two years later. And it now turns out that the city is going back and getting an independent appraisal on what the property is actually worth, because there've been some, some suggestions and complaints that they paid too much for it. And so in that case, again, they didn't do an independent appraisal of the site before they went ahead and bought it. And the second piece of property that you're you're referring to is a, um, it's a separate site. It's in Kearny Mesa, which the city began leasing in 2017. And the idea was that it was going to be, um, a firetruck maintenance yard, but it's yet to actually serve us any firetrucks at this point in time,

Speaker 1: 07:47 Their Faulkner leaves office after the upcoming elections, will this be the major cloud over his legacy?

Speaker 3: 07:53 Uh, that's a good question. I mean, Faulkner has sold himself as being this, this, um, you know, he's a businessman who's going to come in and he's, he's gonna run like an executive and he's going to run a clean and efficient ship. And so on the one hand, it's going to be a hard sell. If, if this, if these projects have all gone haywire or have had problems under his watch, it's going to be hard for him to say that he's done an effective job of managing like an, like an executive he could obviously, and is saying, look, I'm, I'm, I'm rooting out at detecting problems and I'm solving those. So, you know, give me the benefit of the doubt that I'm doing, what I can with the circumstances. But I think more importantly, I'm, I'm kind of skeptical that anyone will think very longterm or voters will remember. Let's say if he decides to run for governor in a couple of years, that he botched some real estate acquisition deals. I think, I think for you and I Mark, um, these things are very important because of what they say about our local city government and how it operates. But I think voters have a short memory, frankly, and, and, uh, if he does run for governor, like I said, on a statewide level, I don't know if it's very potent argument to make

Speaker 1: 08:56 Against him. Maybe the best thing that ever happened was the chargers left town. And we're not in the middle of a pandemic economy with, on the hook for that whole stadium that they were talking about. Hundreds of millions of dollars. Exactly. Exactly. Especially since football probably wouldn't be played this year. Well, I've been speaking with Jesse Marks, associate editor at voice of San Diego. Thanks very much, Jesse. Thanks for having me. Mark jail is not meant to be a pleasant experience, but it is supposed to be a humane one incarcerated or do certain rights, including access to healthcare. It's something we all pay for. And now the County is taking steps that could change who provides medical and other services proponents say it will save taxpayers money critics say it opens the door to reduce quality care from companies motivated by profit. Joining us is Kelly Davis, senior editor for the appeal. Kelly, welcome back to the round table. Hi, thank you. This is a story, a closer reported by local media this week. What's the takeaway from the decision by the County board of supervisors?

Speaker 4: 09:54 Well, just, just for quick background, um, there were two sort of competing proposals on Tuesdays, uh, board of supervisors agenda relating to inmate health care. And the one that prevailed allows the sheriff bill Gore to take the first step toward outsourcing jail, medical and mental health services, uh, it's called a request for interest. Uh, and then the other proposal, uh, was by supervisor Nathan Fletcher, who wants the county's health and human services agency to be the ones responsible for inmate health care and to create a more cohesive system Gore argued that he has the sole authority over jail operations. So this was, you know, this is his decision to make, but I really think it came down to the, the board of supervisors, uh, minus Nathan Fletcher, not wanting to rock the boat and a yes, vote on Gore's proposal was an easy decision because it's not committing to outsourcing. And it's just committing to, to this very preliminary step,

Speaker 1: 10:57 Right? So the idea is just to open this up a field, uh, uh, bids and ideas and, and proposals from various people. We're not really signing anything on the, on the bottom line right now. Now the County already contracts some services to a variety of, uh, private companies. How would this proposal by the sheriff supposedly streamline, streamline that approach?

Speaker 4: 11:19 Well, it would, it would bring everything out of under one umbrella. So there would just be one provider handling, you know, medical care, dental care, mental health care though. Fletcher's proposal would do the same. All the services would be provided through the counties, health and human services agency. So, yeah, so it's all about kind of just, just having one entity responsible for these services.

Speaker 1: 11:44 Part of the public comment this week came from a public workers assigned to jails. One said she believes the Sheriff's department regularly overrides the recommendations, generally doesn't value their work. Uh, how does that tension add to this situation?

Speaker 4: 11:58 So, so this is something that I have heard from, from multiple people who work in the jails, in my reporting, you know, mental health conditions, medical staff, they say that their expertise isn't respected by sworn staff by, by deputies and, and, you know, higher ups in the Sheriff's department. They say, they're not listened to when they make a recommendation, uh, for, for an inmate. And, and, and this is, this is something that has played a role in a number of inmate deaths where you see deputies making medical decisions and, and they're the wrong decisions. So, yeah, so it definitely, uh, frustrates the folks who, who want to have more of a say in how to change the system, how to make it better, how to make it more responsive. You know, they say that they're not being allowed to, to make those recommendations.

Speaker 1: 12:48 A KPBS Monday edition also spoke with union Tribune, reporter Jeff McDonald on this, uh, earlier this week, uh, you've worked with Jeff on a number of stories regarding the details, of course, that's available in the mid day edition podcast. That interview now the Sheriff's department might not be pleased with all the coverage that this issue is getting. Why did it recently cancel its union Tribune subscription?

Speaker 4: 13:10 Yeah. Um, yeah, so, yeah, Jeff and I have we've ported extensively on issues in, in San Diego jails. So in early June, I started here Jeff and I, we started hearing from inmates, family members of inmates, jail staff that the Sheriff's department had canceled it subscription to the union Tribune. Um, the newspapers used to be delivered to, to jail modules and, and Jeff and I would get stacks of letters that every time we wrote a story, we would get all these letters from inmates who read our stories and, and wanted to share their experiences, you know, and sometimes we'd reach out to them, we'd meet, you know, we'd go visit them in jail, uh, interview them. And, and that would be, um, you know, sources for, for, for subsequent stories. I guess the department didn't like that, or, uh, didn't want to reward the union Tribune by continuing to subscribe to it. So yeah, they canceled the subscription. I asked the Sheriff's department spokesperson, why I never got a response. I hear that they now get a USA today is the newspaper, right?

Speaker 1: 14:13 Maybe they like the comics better in USA today. Let's shift the discussion to your work for the appeal. Tell us more about that platform and its mission.

Speaker 4: 14:23 So it's a, it's a nonprofit news organization, um, focused on criminal justice issues and, and all the things that are intertwined with the criminal justice system, uh, homelessness, drug addiction, being a racial justice. They have a great team of reporters who live throughout the U S as the stories are fantastic examples of investigative reporting. And I'm really excited to be working for them, their website, if I could plug that via appeal.org.

Speaker 1: 14:52 Now, is there a particular story or what's on your radar here? What's got your eye looking forward that you're looking into.

Speaker 5: 14:58 I was hired specifically to work on a project writing about coronavirus in jails and prisons. So those outbreaks are continuing, it's an ongoing problem. These places are overcrowded. Social distance. Distancing is impossible. Testing is really slow. People are dying. There's lots of efforts to, to get folks released, to are eligible for release. So, um, big issue, uh, one that I don't see going away anytime soon, and, you know, it's something people should be paid attention to cause with jails folks cycle in and out of jails. So you want your jails to not be kind of, you know, uh, a hotbed of, of, of any sort of, of

Speaker 1: 15:44 A lot, a lot to look at a lot, to explore a lot to write about going forward. I've been speaking with Kelly Davis, senior editor for the appeal. Thanks, Kelly. Thank you, Mark. Many people are simply grateful to still have a job during COVID-19, but while many of us working from home have saved money on gas and eating out maintaining healthy routines can be a challenge when the structure of the office is lost after nearly five months, one reporter for the San Diego union Tribune decided it was time to get back into an office and a re embrace the commute. Brittany Milan covers business for the UT and joins us to talk about finding a work life balance in the age of covert. Brittany, thanks for joining us. Happy to be here. Well, your story this week, it's a personal Awana, but working from home in the downtown newsroom at the UT is off living now with the pandemic. Why do you feel you had to find a setting outside of your home?

Speaker 5: 16:39 Honestly, I feel like we could talk for your entire show just on that one question, because it's very like, there's lots of reasons, but I'll try and narrow it down to just a couple, which is that I found that the working from home scene setting for me contributed to a lot of bad habits. I think that a lot of people set up a structure around physical spaces. So for me, I would always pack a healthy lunch. I'd make sure I only had healthy snacks available at the office. I would work out at the gym across the street from my office during lunchtime and being in those physical spaces was like my, my trigger to do those things. It's like I set up these bumper rails for my behavior and working from home. It was just, you know, 10 hours of your day, uh, in one space. And so then at the end of that time, I kept feeling this need to get out of my apartment. And I found myself consistently going in grabbing takeout, junk food and you know, not having the motivation to work out, cause I didn't want to just work out in my living room again. I definitely think there are, who were different, you know, they're like, I go and I do calisthenics at the park, but, um, I'm just not that person. I found myself doing things that were, were unhealthy instead. So it was about structure for me,

Speaker 1: 18:01 Those who might be interested in doing something like this, how expensive is it? This is kind of a [inaudible] market, right?

Speaker 5: 18:07 It, it, it definitely is. Um, and I didn't get into full detail in the, um, the essay that I wrote, but right now it's very affordable compared to what it once was. You see some private offices going for as low as like three 50, um, depending on the part of town, some of those even come with parking spaces, if you're in an area like mission Valley or maybe, uh, Mesa Vista. And then there are some spaces that you could pay upwards of $2,000 for a private space. So it really depends on if you're looking at a coworking type building, um, or sublease of a commercial real estate building that used to be occupied, you know, by, by an office, a company. So I would say anywhere between three 50 and over $2,000.

Speaker 1: 18:52 Oh wow. All depending like anything else you're choosing, whether it's a home apartment or, or an office. So you're commuting again, you're actually embracing the commute.

Speaker 5: 19:02 Yes I am. And that is that's one point of kind of contention with a couple of readers where, you know, you should be embracing the fact that you don't have to drive and, you know, contribute to pollution. And I definitely understand that point of view. Um, but for me, uh, the commute provide, you know, short of always only have like a 10, 15 minute commute and it provides this kind of trigger for me of, um, separating the home, you know, brain and getting into the Workbrain. I always listen to the news on the way in, or my favorite podcast. And when I arrived to work, I'm just in a different Headspace. And so I I've always enjoyed a commute

Speaker 1: 19:38 And you cover business and startups for the union Tribune, many workers in that sector also use coworking, but how has this area been hit by COVID-19? Is there more of a demand from people who otherwise lost their normal location?

Speaker 5: 19:52 You know, it's kind of interesting because no, I think, I think right now they're in a really kind of a difficult spot, not just coworking, but commercial real estate. You have a lot of companies, most companies that are not in their space and they decided maybe to abandon their space altogether. So they're trying to get out of leases or their, when their lease came up, they went ahead and just said, yeah, we're not going to resign. So you have a lot of, um, open square footage available for sublease and for coworking, that was kind of even a worse position because this was all set up around community and shared spaces right now, most people do not want that. And so they, you know, I talked to several coworking companies that said their occupancy was way down, 75%, 90% down, just lots of empty spots at these spaces.

Speaker 1: 20:40 Yeah. So it sounds like from what you're describing, a lot of this model is, is broken. We see all sorts of office buildings and spaces downtown, for example, other places in the County that are congregated, what happens if suddenly they're not needed anymore? Do they become housing or some other purpose?

Speaker 5: 20:57 I think that's a really fascinating question right now is how will our communities look different? Because obviously we all know that housing is a real need in our community. So the natural thought is we'll do, they should all convert to housing, but in the past it's always been, you have to have a certain mix in a neighborhood for it to be successful. They developers want to have a certain amount of offices so that people have jobs and close relation to their apartments. And there's also that like live, play, you know, retail park spaces, that kind of stuff you want all of it in one space. So if you have some neighborhoods that just become bit of ghost towns for awhile, or don't have the right mix, I think you might see this phase in between while redevelopment happens around our new needs, where you go into neighborhoods that feel very empty. I think right now, a lot of places where there's a high concentration of offices, um, feel pretty desolate right now.

Speaker 1: 21:52 And maybe this, uh, this pandemic will be the catalyst to kind of jump forward. What we've been talking about you for years, or just a big push to, to telecommuting in our, um, in our whole, uh, business model in the United States. Um, you think that that's the case here? Is this going to be a permanent thing? I mean, you mentioned, you touched on the idea that we might get a benefit out of all this from not commuting. And of course we've seen a fossil fuel use go down because of so many people not driving to work.

Speaker 5: 22:23 I think it really, it will require some additional changes because I actually believe that we are wired for a few things that the current telecommute model does not serve very well. And one example of that is humans need community. And for a lot of people, especially younger generations, you're seeing that places where they used to find community like church, for example, that has dropped in populate popularity with younger generations and kind of the, one of the last physical places that younger generations get community is the workplace. And so if the, if the model changes and everything's remote and we're all kind of isolated at home, I'm not sure that that it's going to work without seeing a change. You know, like maybe more businesses pop up that focus on connecting people in physical spaces. I really think that there's some changes before that's going to be a really permanent change.

Speaker 1: 23:19 And you've been in your new space a couple of weeks. Let's bring it back around personally. How has it improved day to day life? I hope it has improved it.

Speaker 5: 23:27 It's improved it immensely. In fact, I don't think I touched enough on that, uh, in the column that I wrote, it's only been a couple of weeks. And so, you know, it's hard to say for sure, but as far as my, uh, mental health goes, it's significant improvement. I feel a lot more energized. I feel I've, I've been a lot more productive and active in the meetings that I've had with my publisher editors. And, um, at the end of the day, when work has done, I feel more sense of accomplishment and fulfillment. And then I can kind of walk away from that and just be someone else at home. Like just, just be, you know, with my husband and have dinner and have that kind of rejuvenation time as well.

Speaker 1: 24:09 Well, work is work and home is home. Now you touched on, uh, some response from readers about, you know, why are you embracing the commute again? What other kind of response did you get from your story?

Speaker 5: 24:20 I honestly could not believe it. I have never written something from the first person before account, and I was really nervous to publish it. I thought, who, who am I to have any kind of complaint over the last few months? I've, I've kept my job and my paycheck, I haven't gotten sick. I haven't lost any loved ones. And, and it felt like writing a piece that was kind of emotional and kind of like, this has been hard. This last five months have been hard. I felt guilty about it. And I, and when I shared it, um, I felt like I'd get a lot of negative response. And instead I've been overwhelmed. I mean, 99% of the responses have been people saying, I feel the exact same way. I feel like I haven't been able to talk about it or put it into words and, and feeling like they really related, I've never written a story that got so much written response, like emails and direct messages and comments. And so I feel like it did, uh, it struck a nerve with a lot of people who kind of felt like they couldn't talk about it themselves.

Speaker 1: 25:18 That's really, really interesting. It may be a whole nother story for you there to get some of those voices into the newspaper. Well, I've been speaking with Brittany miling and business reporter for the San Diego union Tribune. Thanks for joining us today. Thanks for having me that wraps up another week of stories at the KPBS round table. I'd like to thank my guests. Jesse Marks a voice of San Diego Kelly Davis of the new site, the appeal and Brittany miling of the San Diego union Tribune. If you ever miss our show, you can catch up at the KPBS round table podcast on your favorite podcast app. I'm Mark Sauer. Thanks for being with us today and join us again next week on the round table.

Speaker 5: 26:02 [inaudible].

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Mark Sauer hosts KPBS Roundtable, a lively discussion of the week's top stories. Local journalists join Sauer to provide insight into how these stories affect residents of the San Diego region.