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Tuesday, Mar 19, 2024
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Waterfront Park Nears Key Vote

The first phase of a key component to the controversial $850 million Liberty Station mixed-use project in Point Loma , a waterfront park , will hinge on a San Diego City Council vote to authorize the sale of $16 million in private-placement bonds.

Covering 361 acres of prime bayside property less than six minutes from Lindbergh Field, the massive project is a collaboration of the city’s redevelopment agency and San Diego-based Corky McMillin Cos. It’s on the grounds of the former San Diego Naval Training Center, which closed in 1997 as part of the federal government’s Base Realignment and Closure program.

The May 24 council vote on the bond issue will, in part, reimburse McMillin for improvements to the area and fund the first phase , about 18 acres , of the planned 46-acre NTC Park. According to a McMillin spokesman, it will be the largest waterfront park in San Diego since Mission Beach Park was approved in 1982.

While the city’s poor financial standing prevents it from making a public offering, an outside bond counsel recommended the private-placement bonds as the best way to proceed, said Elizabeth Kelly, financing services manager for the city treasurer’s finance services division.

“It makes sense from a cost perspective to issue these bonds now, rather than wait to do a public offering,” said Kelly, “because there is a general market consensus that interest rates will be moving upward.”

Under private placement, the sale of the bonds would be limited to a group of qualified institutional buyers, as defined under the Securities Act of 1933, she said. These bonds do not require any city disclosure documents, Kelly added, but each investor who buys the bonds must sign a “big boy” letter, acknowledging that they understand that the bonds are not backed by the city, but are secured solely by special taxes levied on that particular community.

Investors also must agree not to resell their investment, and “understand that there could be potential adverse developments with respect to the city’s investigations and financial condition,” said Kelly. In this way, she added, “You are addressing, to every extent possible, the potential that the bondholder could be impacted in the secondary market.”

Petco Park, she said, used a variation of the private-placement bonds.

NTC Park, said Walter Heiberg, the senior vice president of McMillin Land Development, is in a Mello-Roos district, “so the homeowners, the business owners, retail and hotel owners will be paying the fees for building the park and roads.”

“They are the only people paying into it,” he added.

While Liberty Station, which is 40 percent complete, has been hailed as a national model by proponents, critics still are troubled that the City Council in 1999 tapped McMillin for the project over Lennar Corp., a multibillion-dollar national homebuilder based in Miami.

“San Diego was handed an attraction, what would have beat Balboa Park hands down, unique, with no competition,” said John McNab, a former Navy officer and leader of Save Our NTC, a local citizens group dedicated to preserving the former Navy base. The group has filed several lawsuits since the project’s approval over the years and is calling for an investigation by the city into what it calls “nonconformance” by McMillin on park construction. “The Lennar proposal was vastly superior.”

But former 2nd District councilman Byron Wear, who shepherded the Liberty Station project in its early days, disagreed.

“Lennar, with all due respect, was not the company for this job,” he said. “They could have done an adequate job, but we needed a locally based firm. McMillin has been successful with its other developments, and I know how to find Corky McMillin. He is a man of his word.”

Mitch Mitchell, the vice president of public policy and communications for the San Diego Regional Chamber of Commerce, considers the project a good use of former military land.

“We should be proud of the fact that this reuse of NTC is moving ahead and showing tremendous results thus far,” he said. “There have been some concerns expressed by a few groups about the plan, but that’s to be expected. Most of the concerns are being addressed, but a plan of this magnitude will have its critics. It’s the end results that should be judged. It’s like the ballpark project, which is now enjoying the fruits. At the end, people will be more than satisfied, they will be overjoyed.”

The group, which has no formal membership roster, wants the city to retake the property from McMillin and develop the “original intent” , a waterside Balboa Park.

“That would provide a minimum of $100 million of general fund revenues and potentially over $200 million in revenues to the city through direct leases, enhanced sales tax revenue and visitor impacts,” said McNab.


Building Hotels

The quality of the planned hotels is also among his concerns.

“The development agreement was very specific,” McNab said. “They are supposed to build a hotel comparable to the quality of the Paradise Point Hotel (in Mission Bay) or better.”

One of the hotels, Hilton Homewood Suites, will provide 150 extended-stay rooms, while the Courtyard by Marriott will feature an additional 200 visitor rooms.

“We did research,” McNab said. “It showed that extended-stay hotels don’t generate the same room rates as visitor hotels and they don’t generate near the same level of TOT (transient occupancy tax). The whole idea was to generate TOT revenue for the city.”

But Heiberg said the hotels will indeed be of high quality and disagreed that extended-stay hotels aren’t moneymakers.

“That is a total misunderstanding of what the hotel requirement was,” he said.

McNab also criticized the planned retail mix and treatment of the historic buildings.

“Old Town is demonstrating that if you maintain buildings as they are, you generate enormous visitor cash flow,” he said. “You keep the buildings and build upon their historic integrity and you have monster cash flow.”

But Alan Ziter, the executive director of the NTC Foundation, which is shepherding the project’s planned 26-building NTC Promenade, a civic, arts and cultural center, said Liberty Station is attracting a lot of national attention.

“It’s the most amazing opportunity for San Diego,” he said. “Twenty-six buildings this close to Downtown on the waterfront. It’s an unprecedented opportunity for San Diego. I came back from a conference in San Francisco, and no one has anything this big. It’s a model for the country. There is a whole creative collaborative community developing here at NTC.”

Still, McNab insists that Liberty Station, as it is now conceived, is a bad deal that should be renegotiated.

“Every time we turn around, McMillin defaults or is in noncompliance and, instead of saying, ‘You screwed up, you’re jerking us around on this deal,’ the city lets them renegotiate it.”

It’s a charge that Heiberg finds ironic, adding that the project remains on schedule, but could have been done even sooner if Save Our NTC hadn’t kept intervening.

“Save Our NTC has sued us and lost every one of them,” he said. “They have always been proven incorrect. We would be ahead of our time frame if it were not for the continued delays of a very small group of people.

“This controversy has delayed, in general, the whole project, which delays the tax increment from coming in, and the TOT from coming in, and jobs generated in the hotels and office buildings, and the civic arts and cultural center. Every delay in the project hurts the city. It is not good for the city of San Diego, especially when all the controversy proved to be not founded in fact. We are doing all the right things. We are in full agreement with all of our contracts.”

Maureen Ostrye, the acting deputy director of the city’s redevelopment agency, agreed.

“Things are running pretty smoothly,” she said, adding that military property can languish for years due to jurisdictional squabbles, but “this has been a quick and clean process.”

City Attorney Michael Aguirre had been planning a review of the Liberty Station contract, but Ostrye said, “We’ve been working with Aguirre’s office and we don’t anticipate any problems. The project is progressing on schedule.”

City Councilman Michael Zucchet, whose 2nd District encompasses the project, wasn’t available to comment on Liberty Station. But Alan Wexler, an aide to Zucchet, said that Zucchet fully supports the project.

Wexler dismissed the ongoing criticism of Save Our NTC, saying, “They bring up the same issues, the city staff tries to address their concerns, but they continue to be unhappy with the responses. The project is moving forward as dictated by the agreement.”

There has been no time frame set for a second bond issue, which would be used for the park’s second phase, Wexler said.

“The goal is to do it in the next two years,” he said.

Heiberg said McMillin is eager to move ahead on the project, which originally was scheduled for completion in 2012. In fact, the City Council on May 24 will consider a change in the NTC agreement, requiring McMillin to finish the project by 2008, building Liberty Station in two, rather than three, phases.

Heiberg said McMillin had been prepared to get moving on the park last year but was hamstrung by the city’s financial crisis.

“We believed the city was going to sell these bonds last year and we were working to that end,” he said, “hoping to accelerate the park and start last year. We are always anxious to get things done sooner than later, and it’s too bad it’s taken this long to get through the process.”

Added Mitchell, “Developers are usually criticized for being behind schedule, but McMillin has done a wonderful job of staying on schedule and now they’re moving ahead of schedule.”

Wear, now the director of strategic planning for the regional Carrizo Gorge Railway and a land use and transportation consultant, said he considers the project his “proudest accomplishment” in office.

“I know it was controversial, but the park, the arts and culture, the education components are coming out just like we had thought,” he said. “It was always designed to be a mixed-use project. We needed that to generate income and job creation as a result of the base closure. It’s never been a burden on taxpayers. In fact, it’s a tax generator.”

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