PORT DISTRICT LEAPS INTO NEW DEVELOPMENT

 

A letter from two important and long-term tenants on the tidelands to the City Council has stirred up some new controversy on the waterfront. The purpose of the letter concerned the need to have a convention center expansion to retain the lucrative Comic-Con convention and attract other large groups bringing tourist dollars to San Diego.

The purpose of this letter from Fifth Avenue Landing is an offer from the tenants holding a lease on 6 acres of undeveloped land suitable for the convention center expansion. However, lease modifications would be necessary to pursue the proposal since they present lease which has six years to run prescribes the construction of a 400 room hotel. The tenants propose a lease buyout of $13.8 million to allow the city to proceed with a potential convention center site.

All the complications of such an aggressive project were revealed in detail by columnist Dan McSwain of the San Diego Union-Tribune. Not only will it require major modifications to the lease on the site by the Port District but also a major commitment by the City of San Diego to find the funding of the convention center expansion. Prior efforts for this project have failed under legal opposition which would surely be revived under the new tenants’ proposal.

The obstacle course for such a divisive venture includes an amendment to the Port District master plan, approval by the California Coastal Commission and the San Diego City Council, not to overlook the potential of numerous legal actions to block the project. Probably the most critical issues to be resolved are the highest and best use of Port District land, securing funding sources for construction and avoiding the inevitable legal restraints promoted by Corey Briggs who successfully defeated the last effort to expand the convention center.

Before proceeding any further in the complexities of the politics involved, it is necessary to understand the relationships among the Port District, the City Council, the tidelands lessees and the California Coastal Commission. The San Diego Unified Port District was created by the State of California in 1962 as an independent entity governing the use of specified tidelands. The board of commissioners consists of the mayors of the five cities within the Port of San Diego. They function independently from the City Councils or the County Board of Supervisors and are responsible to the governing body of the State of California.

The misunderstanding about the ownership of the land and its management within the five cities often leads to public controversy when the operations of a specific tenant on the port land  conflict with a neighbor community. The gentrification of the South Bay and Barrio Logan areas where much of the maritime industry thrives has created legal actions over noise and air pollution, especially from those who want to grab the land for tourist related or high-rise housing development.

When the Unified Port District was created by the State, the use of 34 miles of tidelands  incorporating five cities was specifically defined for use as maritime industry and services. That means there has already been a stretch to allow construction of the convention center and multiple hotels and tourist related facilities on the tidelands.

Coming back to the Fifth Avenue Landing tenant proposal, the City Council has until March 1 to buy out the $13.8 million option and proceed with a suitable site for the convention center expansion. It won’t be an easy goal on such short notice with so many restrictions to be amended. However, it is an opportunity for the tourist industry to add this convention expansion to protect its future business without having to collaborate with the Chargers in a joint project.

Another area on the waterfront that is often confused with the operations of the Port District is the land occupied by the 12th Naval District. It occupies eight blocks of prime land in the middle of the Embarcadero between the Broadway Pier and the Midway Museum. For at least 25 years Douglas Manchester has been working with the Coastal Commission and the U.S. Navy to redevelop their site to provide waterfront housing and office space with a new headquarters building for naval use.

There have been years of litigation challenging the early conditional use permit expiration, but that seems to be resolved now as the $1.3 billion Manchester Pacific Gateway project is soon to begin construction.

Neither the Port District nor the City Council have principal authority to master plan this Gateway Project.  The architect’s renderings appears to build a wall of high-rise buildings along Harbor Drive. It hardly represents the long-sought planned Gateway to the city where most of the visiting cruise ships arrive. The only open space is a postage-stamp-size park opposite the Broadway Pier but backed by what appears to be a 25-story office building.

There is an environmental challenge pending federal appellate court ruling before proceeding with the project which began in 1987 with a revised development agreement in 1992 that granted Manchester a 99-year lease on the land.

There will be a number of other major changes in the appearance of the Embarcadero and adjoining Harbor Island over the next five or more years. Several long-time leases expire and are being renewed with new tenants providing more upscale facilities. Anthony’s Fish Grotto lost their 60-year leasehold to a new tenant headed by the Brigantine Company. Seaport Village will be totally dismantled and improved with another new tenant despite the efforts of the present tenant to obtain a lease renewal. The plot of land on Harbor Island being abandoned by the rental car business is in a controversial best-use approval by the California Coastal Commission.

No doubt these more aggressive leasehold renewals that will provide a new look to the Port District land and presumably better rental revenues is the result of leadership from the Port District CEO Randa Coniglio. She took over in June 2015 after serving with the Port District for 15 years as the administrator of the port leaseholds.

In prior years, Port District was not very aggressive in requiring suitable upgrades to its leasehold properties. The commissioners, appointed by the city councils of the five cities within the Port District, were not necessarily aggressive businessman or experienced in real estate transactions (with exception for the Chairman, Marshall Merrifield, with an economics degree from Princeton).  The board depends on staff recommendations that apparently in the past favored the status quo with established tenants.

That has all changed as the Port District becomes an aggressive landlord in managing its valuable waterfront properties under new leadership.