A lot of San Diego's city business is done at a snail's pace, inching slowly through city hall before reaching a city council committee and then the full council for final consideration before an often-contentious audience.
Such was not the case with a unanimous January 26 city council vote for a lease-purchase deal cut behind the scenes by a well-wired developer and a commercial broker, both tied to the city's big-money political establishment.
"Our office has concerns about the manner in which this item was brought forward, especially considering [the] size and long-term nature of the commitment associated with staff’s recommended actions," says a January 23 report from Andrea Tevlin, the city's independent budget analyst.
Tevlin was talking about a 20-year, $91 million contract with Cisterra Development for the lease and eventual acquisition of Civic Center Plaza, a 295,000-square-foot office complex across from city hall downtown.
“While entering into this agreement may result in long-term financial and strategic benefits to the city, it is difficult to quantify those savings with any specificity,” Tevlin added.
Last April, according to the Tevlin report, the city had arranged to acquire the building, which houses 800 city workers, for $44 million. Cash for the deal was to come from the sale of so-called lease-revenue bonds.
But in September, the document says, a bank that holds the building in trust suddenly "demanded that the City enter into a binding contract by the end of October 31, 2014, with escrow to close by December 31, 2014." Because of the hurried-up schedule, a report by the city real estate assets department says, that wasn't enough time to set up the bond issue.
Enter Cisterra. "In light of the inability to currently issue bonds and meet the current owner's escrow closing mandate," says the January 20 document, "the City, working with Jason Hughes (President/CEO of Hughes Marino and unpaid City consultant) was approached by [Cisterra executives] who proposed to purchase the buildings and underlying real property from the current owner within the mandated deadline of March 15, 2015, and enter into a lease-to-own agreement with the City."
Thus began a series of behind-the-scenes wheelings and dealings, off limits to public scrutiny and possibly skirting, judging by the reports, the so-called round robin provision of the state's open meetings act, which bans serial one-on-one meetings in private by councilmembers.
"While Real Estate Assets staff has been proactive in briefing Councilmembers and other offices on the status of negotiations, there has not been any opportunity for the City Council to publicly ask questions of staff on this proposal, to direct staff to provide additional information or details, or to suggest amendments to the proposal," according to Tevlin's report.
"Council last heard this item at a Closed Session hearing in November 2014," the memo continues.
"At that time, discussion was limited to the terms the City was willing to consider in directly acquiring the [Civic Center Plaza] property. The item has not been heard at any subsequent committee or Council meeting."
Adding to the intrigue, "The terms of the proposed deal before Council now are considerably different than those that were contemplated in November."
According to the city documents, Cisterra is currently in escrow on the property, with the deal set to close March 15.
"Staff indicates that January 26th is the last possible date for Council to approve the proposed lease-to-own agreement so that it can be signed by the Mayor before the March 15th close of escrow."
Whether or not the council's exceptional haste was justified, Tevlin’s revelations have shed unusual light on the way city business is privately transacted with city council and mayoral campaign contributors.
According to data on file with the city clerk's office, Cisterra principals have given a total of $31,385 to city campaigns, including $3000 on January 29, 2014, by president Steven L. Black to the mayoral bid of Kevin Faulconer, whose administration championed the office deal.
On October 1, 2014, Black gave $550 to the campaign of recently sworn-in councilman Chris Cate, a former lobbyist for the San Diego Taxpayers Association, a business advocacy group. The campaign of councilman Scott Sherman got $400 and city attorney Jan Goldsmith picked up $640.
Not only a backer of Republicans, SDSU alumnus Black's single largest contribution, $15,000, came in November 2013 to a committee supporting Republican-turned-Democrat Nathan Fletcher, a mayoral hopeful who didn't make it past the primary.
"Prior to forming Cisterra," the company's website says, "Black served as Executive Vice President and Chief Development Officer of Kilroy Realty Corporation, a publicly-traded real estate investment trust he joined through its acquisition of The Allen Group where he was president and partner.”
L.A.-based Kilroy, whose employees and lobbyists have been donors to San Diego campaigns, is currently battling for its controversial One Paseo commercial and residential project in Carmel Valley.
Besides its own connections, a city lobbyist disclosure filing dated December 24 of last year revealed that Cisterra has hired California Strategies & Advocacy, the big Sacramento-based influence-peddling outfit founded by Bob White, one-time top honcho for former San Diego mayor and ex–California Republican governor Pete Wilson.
According to the document, the company is seeking an "award of a [Request for Proposal] for a mixed-use development project for the property commonly known as 7th and Market, downtown San Diego."
The White firm, which has tangled with the state's ethics watchdog over lobbyist reporting, has provided a stream of campaign money to local and state candidates.
In addition, Jason Hughes, who the city reports say was the unpaid city consultant who aided in the deal with Cisterra, is also familiar to local campaign money raising circles.
As reported here in May 2013, eight Hughes family members and employees each kicked in $500 to the 2012 campaign of Democrat Sherri Lightner, now council president.
We have a call in to Cisterra's Black for further details.