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Decision Affecting Solar Turbines, Developer Coming Soon

SOLAR TURBINES

President: Jim Umpleby.

Revenue: $3.3 billion in 2010.

No. of local employees: 3,800.

Headquarters: Downtown San Diego.

Year founded: 1927.

Stock symbol and exchange: Subsidiary of Caterpillar Inc., CAT on the New York Stock Exchange.

Company description: Manufacturer of industrial gas turbine engines and other equipment used for oil and gas production.

Key factors for success: Continued increase in worldwide exploration and transmission of oil and natural gas; innovation and industry leading technologies; dedicated and long-term employees.

A battle over a small downtown San Diego parcel pits a residential developer against one of the city’s biggest employers.

In a conflict that is nearing a decision in the next few weeks, developer Jonathan Segal of Jonathan Segal FAIA Inc. is attempting to gain final approval for a proposed 232-unit apartment building with some retail space. The Fat City Lofts project would replace an existing restaurant and closed Fat City nightclub that occupied a 1.5-acre lot at the corner of Pacific Coast Highway and Hawthorne Street.

Despite the fact that mixed-use zoning on the parcel allows for a multifamily project as well as other commercial uses, Fat City’s neighbor Solar Turbines has objected to the development, saying it would threaten its operations, and jeopardize the 1,800 high-paying jobs at the site. Solar employs 3,800 at two local sites and 7,800 worldwide. The subsidiary of Caterpillar Inc. has a local payroll of about $280 million, with an average salary of $73,000, the company said.

Solar President Jim Umpleby said allowing residences across the street from its plant would trigger regulatory review that could seriously impair the company’s manufacturing operations. The reason is the state’s air pollution regulations, which require manufacturing operations to maintain prescribed distances from homes, schools and hospitals.

By allowing housing, state regulators could determine that residents’ health may be at risk, and revoke some of the many permits Solar needs to manufacture its industrial gas turbines, Umpleby said.

“This would impair our ability to make changes to our industrial processes,” Umpleby said.

‘What’s at Stake’

“We’re not making a threat (about leaving San Diego if the project is approved), but it’s important that city leaders understand what’s at stake,” he said.

That message hasn’t been missed by some of San Diego’s top elected officials, who have come out forcefully to support Solar’s side. The county Board of Supervisors has joined a host of other regional officials and other leaders in adopting a resolution opposing the Fat City project. Supervisor Greg Cox said the proposed project “threatens Solar’s very existence.”

Segal said that Solar should have known the parcel was zoned for a residential project long ago, given the fact that the zone permitting apartments has been in place since 1992, and was updated in 2006; yet the company never objected until recently.

Segal was so certain he was right, he said he would abandon the project if Solar proved the state’s regulations could impede its business.

“In the event that Solar absolutely demonstrates to me that the construction of this residential property will force them to shut down their operations and lose 1,800 jobs, I’ll immediately back out,” he said.

No Compromises

Both sides have met and discussed possible compromises, but to no avail, each side said.

“We are not opposed to developing that site,” Umpleby said. “If they want to build a hotel, restaurant, shopping, all of that is fine.”

Segal offered to sell the property at “below market value” to Solar, but the company said that offer — neither party would divulge the amount — wasn’t below market value. Umpleby said buying a parcel to prevent certain types of uses would set a bad precedent, and could cause other developers to try the same tactic.

Umpleby said the bottom line in the dispute is the law is on Solar Turbines’ side, and its position should be upheld. “Our view is that the law is on our side,” he said.

Segal had a different opinion. “We are a country of laws and the law is on our side,” he said.

The board of the Centre City Development Corp., the downtown arm of the city’s now winding down Redevelopment Agency (due to state fiat), voted 4-2 to deny the proposed Fat City project, with three members abstaining. However, the decision on whether the CCDC approves or denies the project rests with Chairman Kim John Kilkenny, who has two weeks to render it. If either party is dissatisfied, it may be appealed to the city’s Planning Commission.

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