April 29 2015 11:13 AM

Lawsuit challenges city-funded nonprofit’s authority to make land-use decisions

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    Mayor Kevin Faulconer and Assemblymember Lorena Gonzalez face off over Civic San Diego.
    Photo illustration by Lindsey Voltoline
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    Andrew McNamara
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    Elvis Perkins
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With limited government oversight, it’s one of a kind in California. Its president is a long-time local developer. Its board of directors includes lawyers that represent developers. It decides what gets developed Downtown. And it controls millions in public money.

It’s the city-funded nonprofit Civic San Diego, and it wants to expand its unique, land-use authority into two of the city’s most underserved neighborhoods, Encanto and City Heights. With plans for a $100- million investment fund to spur growth, the agency could significantly alter the face of several communities.

However, amid mounting allegations the nonprofit operates without proper government oversight, top officials abruptly announced they would abandon the land-use agency at the end of the month. According to recently submitted resignation letters, Chief Operating Officer Andrew Phillips and Board Director Cynthia Morgan-Reed will step down as of Friday, May 1.

A land-use attorney with Higgs Fletcher and Mack, Morgan-Reed will likely continue to work as a registered lobbyist for the law firm. As former board chair, she strongly advocated for maintaining Civic San Diego’s autonomy, including unsuccessfully proposing a gag rule last year that would have prevented board directors from talking to members of the City Council.

Joining former Civic San Diego President Jeff Graham, who left in early 2014 after the controversy first started, Phillips has planned to take a local position at real-estate company Jones Lang LaSalle’s western division.

Phillips was the understudy of Graham—the technical mastermind behind the agency’s expansion plan—and as such, Phillips' departure could be significant. In the short term, it’ll likely mean President Reese Jarrett, less than a year into his tenure, will face a dramatic increase in responsibility.

Jarrett, Phillips and Morgan-Reed all declined to be interviewed for this story.

At the same time, a fiery state lawmaker for the region and a lawsuit filed by one of Civic San Diego’s own board directors have simultaneously accused the land-use agency of operating without proper government oversight, flouting state law.

“It’s so important that the city wake up, slow down and ensure that we have a process that is lawful and makes sense,” said Assemblymember Lorena Gonzalez, who’s started pushing legislation that would force a reluctant City Council to approve all decisions made by the nonprofit.

The autonomy of Civic San Diego allows city leaders to “distance themselves from a fight between developers and the community, a fight that has been decades long,” Gonzalez added. “That’s unfortunate, and I think the Mayor [Kevin Faulconer] has a responsibility to step up and do the right thing.”

In response, Faulconer’s office has dug in its heels, insisting that nothing’s wrong with how the agency’s set up. Then the flames of controversy were fanned last week by several legal memos, including a letter responding to Gonzalez’s concerns from the nonpartisan Legislative Counsel Bureau.

While not directly addressing Civic San Diego, the memo found a nonprofit cannot permit and plan development if it constitutes a “surrender or abnegation” of a city’s land-use authority. The City Attorney issued a memo shortly after echoing the sentiment: “Ultimately, the city is responsible for carrying out these governmental functions, and the city must ensure that it has the oversight it needs to know that these function are properly handled.”

All sides interpreted the documents as favorable to their position, including Faulconer, whose office declined to comment for this story beyond issuing a short written statement.

“Based on the City Attorney’s recent opinion, which is consistent with the State Legislative Counsel Bureau’s analysis, the city of San Diego provides the appropriate safeguards for Civic San Diego to serve our communities,” wrote Charles Chamberlayne, a spokesperson for the mayor, in an email.

That’s not how lawyer Steven Coopersmith reads the recent legal documents.

On behalf of the San Diego County Building and Construction Trades Council and Civic San Diego Board Director Murtaza Baxamusa, he filed a lawsuit in San Diego Superior Court calling for increased oversight of the agency.

“That is not a proper reading of the City Attorney’s memo,” Coopersmith said, referring to the mayor’s office. “The City Attorney’s memo is complex, and it’s fairly forthright about what it says. It is not saying everything is A-OK. That’s just dead wrong.”

The City Attorney’s office declined to comment on whether Civic San Diego is in compliance with state law.

However, the conclusion of the City Attorney’s memo suggested that oversight of the land-use agency could improve: “Based on our analysis, we recommend that the city revisit the existing agreements to clarify [Civic San Diego’s] activities, build in transparency and financial oversight, provide for delegation of permitting authority by separate agency agreement, and include appropriate termination provisions.”

The building trades council’s lawsuit seeks a judge’s discretion on how best to bring the land-use agency into compliance with state law, Coopersmith said.

“If you look at what Civic San Diego is actually doing, the reality of the decisions they’re actually making, it’s clearly right now a delegation and abnegation of power,” he said. “But there are probably safeguards that could be put in place, and that’s what we’re asking the court to rule on.”

For example, a binding community-benefits policy could constitute one of those safeguards, according to the lawsuit. Over recent months, residents and advocacy groups have pressured Civic San Diego to adopt a policy that would create requirements on development projects, such as wage controls for construction workers, as well as benchmarks for local hiring and affordable housing.

As far back as November 2013, the idea of adopting such a community-benefits policy to guide the agency’s mission first sparked conflict when a few Civic San Diego board directors suggested the idea. However, under efforts led by then-board chair Morgan- Reed, the idea was quickly buried.

Last year, City Councilmember Marti Emerald resurrected the call for such a policy. However, facing little pressure from council for reform, Civic San Diego officials drafted a loose document with no binding requirements.

That frustrated community advocates who had been organizing for months to engage leadership at Civic San Diego on developing the policy. After a series of public meetings held by the land-use agency, many community groups expressed dissatisfaction.

“The proposed Community Benefits Policy presented by Civic San Diego is not a true policy because it does not have clear targets and is not enforceable,” said Samer Naji, an organizer with the Center on Policy Initiatives think tank. “A real community benefits policy sets measurable targets to ensure the delivery of badly needed affordable housing, good-paying jobs, infrastructure, and other community needs that are lacking in many San Diego neighborhoods.”

However, Councilmember Myrtle Cole and neighborhood leaders in Encanto backed Civic San Diego’s looser approach, doing their best to fend off attempts to impose strict regulations on the nonprofit.

With both sides deeply entrenched in their views, the fate of Civic San Diego is far from determined. If the mayor and the building trades council’s legal representatives can’t come to an agreement, the issue will likely play out in a bitter court battle. 

Write to joshuas@sdcitybeat.com or follow him on twitter at @jemersmith.