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Audit critical of City of San Diego's building acquisitions

Independent audit: 101 Ash Street among city's bad deals
Posted at 12:07 PM, Jul 28, 2021
and last updated 2021-07-28 21:17:53-04

SAN DIEGO (KGTV) – Findings from an independent audit on the City of San Diego’s botched 101 Ash Street deal also raised questions about other buildings acquired by the city.

The city’s Audit Committee on Wednesday heard a Performance Audit of the city’s Major Building Acquisition Process, and the audit looked at other major property deals over the last five years.

When it comes to the city’s process and acquisitions of 101 Ash Street and four other properties, the audit found a “serious lack of policies and oversights …”

The review concerns these properties, which were bought at a combined total of more than $230 million:

  • 101 Ash Street
  • Civic Center Plaza
  • Kearny Mesa Repair Facility
  • Palm Avenue Hotel
  • Housing Navigation Center

A news release from the office of City Councilwoman Vivian Moreno, the chair of the Audit Committee, stated: “Many questions have been raised about whether these acquisitions were in the best interest of the City.”

The independent audit found that the Real Estate Assets Department (READ) under Mayor Kevin Faulconer “did not understand or properly disclose information about the condition of the buildings it was purchasing,” and did not properly disclose the information to the City Council.

According to the audit, the City Attorney's Office did not consistently document the legal risks of real estate contracts, and that there were unclear roles and responsibilities, with no main decisionmaker installed other than the mayor.

The audit also said not enough due diligence was done on these five buildings, including appraisals and asbestos inspections. The auditor said the value of one building was inflated inaccurately, and that the prior administration limited the City Council's oversight by rushing the timeframes to minimize City Council reviews of the acquisitions.

Moreno said, “We have wasted millions of taxpayer dollars and are stuck with an uninhabitable building at 101 Ash Street, overpaid for the Navigation Center and can’t use the Kearny Mesa Repair Facility to repair our fire trucks. Moving forward, the reforms recommended by the City Auditor will help guard against fraud and the Council having incomplete information about major real estate acquisitions.”

Faulconer’s office sent ABC 10News this statement:

"Protecting taxpayer dollars should always be the priority of city officials. Having fought to establish the Office of the City Auditor, I am a strong supporter of increased oversight and it's clear that these matters call for additional independent review as recommended by the auditor. All the real estate transactions in question were reviewed by all branches of city government prior to their enactment and the adoption of these recommendations will further ensure accountability and transparency."
Kevin Faulconer, Former Mayor of San Diego