There’s no question that something has to be done about the decades-old firetrap our city’s political leaders and bureaucrats call home. The present City Hall is undeniably overcrowded, obsolete and unsafe physically.
Much has happened since then-Mayor Frank Curran moved into the 11th-floor mayor’s office more than four decades ago when the city was little more than a U.S. Navy port. Today, that ugly tower struggles in vain to serve a world-class metropolis that hosts an array of global companies in addition to a continuing Navy presence.
The questions are what to do about it, how to do it, and when.
Plans to put a $320 million bond measure on the ballot in November were scuttled by Mayor Jerry Sanders last month, ostensibly to give a half-cent sales tax hike proposal breathing room. More likely, there was the gnawing realization on the part of the mayor and other supporters that the measure was doomed to fail and that the half-cent sales tax hike stands a better chance if it doesn’t have to compete with a flawed rationale for building a new City Hall.
A Good Sales Pitch
The sales pitch would have argued that a new City Hall would save taxpayers money primarily because it could accommodate all the city offices that are now in various privately owned office buildings at a cost of about $13 million a year in lease payments. That includes utilities, janitorial, maintenance and other such costs that would remain constant regardless of whether the City of San Diego owns or leases the building. And, it’s based on a projected leasing rate of $2.17 per square foot.
For the record, I support a new City Hall. However, the city’s forecast that leasing rates for the spaces the city is currently leasing will average $2.17 per square foot in 2013 is unrealistically high, if not absurd.
It’s supply and demand, plain and simple. The present leasing climate in which numerous downtown tenants have either moved or closed their doors has created an overall space availability rate of 20 percent. The 1.8 million square feet currently available is expected to remain vacant for an average of 27.3 months.
The recent move of the Knobbe Martens Olson & Bear LLP law firm from its three full floors in the downtown 550 Corporate Center to Carmel Valley adds to the current available space. Also, one of downtown’s largest private employers, American Specialty Health Inc., will soon relocate from its 156,000 square feet on South Front Street to 190,000 square feet in Sorrento Mesa. And, of course, we can expect a steady number of smaller, troubled tenants to continue to close their doors, a few thousand square feet at a time.
Financial Disaster for City
It gets even more challenging for a $2.17 lease rate prediction if and when a new City Hall comes on line. An additional 500,000 square feet of city-leased space would plop onto an already squishy office leasing market. That space alone adds 6 percentage points to the availability rate. Together with other departures, the current 20 percent availability rate could easily soar to 30 percent, which would send leasing rates into a downward spiral.
While this scenario would offer fantastic bargains for office tenants, it would spell financial disaster for city government and other public agencies that depend on property tax revenues. Reduced building revenues resulting from slashed rates would force many owners into foreclosure, while sending other landlords scurrying to the county assessor’s office to petition for lower property taxes because their properties have been devalued. Think about the impacts that would have on the $2.17 per-square-foot leasing projection and the diminished property tax revenues the city would then have to service the City Hall bond debt.
Given the times and state of municipal finances, a new City Hall would be a tough sell to voters with or without the sales tax hike or flawed cost-savings rationale. That concerns some of us who worry that if a sales tax increase is approved, the San Diego City Council will then approve building the project — without a public vote. Such a “nuclear option” would infuriate voters and could even incite a recall campaign — the last thing our city needs.
When the time comes, voters need the chance to weigh in on whether to approve a new City Hall and be given the right reasons to do so. The city needs a new headquarters to better serve its residents, businesses and all who draw nigh for services. The city deserves a seat of government that befits its status as a world-class city.
Use better services and old-fashioned civic pride to promote the measure. We could use a good dose of both just about now.