San Diego Unified enters the development game — and aims to avoid other public agencies’ struggles ...Middle East

San Diego Unified leaders have watched as public agencies in the county struggled to get major redevelopment projects like Seaport Village or Midway Rising off the ground.

That’s why they’ve taken steps to insulate themselves from the same result as they proceed with an ambitious plan to redevelop six properties across the district into close to 3,000 housing units.

Surpassing the goal

The district is prepared to far exceed its overall development goal for affordable workforce housing, a built-in contingency that gives it leeway to pivot if anything goes wrong. 

San Diego Unified’s board set a goal of housing 10% of its staff by 2030 in an effort to boost retention of its 13,559 employees amid the region’s housing affordability crisis.

But that goal of housing 10% of its staff only requires around 1,350 units over the next four years. Yet the district has over double that in the pipeline, with the board approving close to 3,000 units across six underutilized properties. The plan for its University Heights headquarters alone would cover the 10% goal. 

“That was critically important for us, that any employee that was struggling to afford housing, that we were going to build as much housing as we possibly can,” said board member Shana Hazan on Voice of San Diego’s podcast. 

Approving more units than required also means something could go critically wrong at one site without imperiling the core goal. 

Currently, none of the projects rely on district funds. Instead, private developers with a joint-use agreement lease the district’s land, and finance construction through a combination of private loans, tax credit programs and tax-increment financing, depending on the project.

“We know that really, probably the big question mark in all of the proposals that we have approved to move forward is, can the developers actually come through with the financing?” board member Richard Barrera said. 

The district has $205 million in bond funds set aside for the effort to fill any gaps that arise, if for instance construction costs increase or a project misses out on an anticipated state grant. They could also reissue a request for proposals if financing collapses.

Backup planning

That ability to pivot is most evident at 2101 Commercial St., a former warehouse in Logan Heights. There, the board selected Mirka Investments to build 174 affordable units and a 6,000 square-foot childcare center. Staff initially recommended that Decro Corporation build 86 affordable units at the site. 

While staff believe the Mirka proposal will work, board member Cody Petterson has concerns. Steel-reinforced concrete becomes more expensive at eight stories, he said, but the board also wanted to pursue the most units possible, rather than going with a modest, safe choice. 

So, the board’s motion included a key caveat. Should Mirka have any funding issues, district staff would immediately begin negotiations with its competitor, Decro Corporation, instead. 

That would save them from wasting time by reissuing a request for proposals or even the quicker route of contacting each of the other developers who initially bid on the site. A backup plan is in place. 

Petterson also considers spreading the housing across six sites as its own contingency, so they aren’t depending on one project to meet every possible need.

“If you see some of these big sites when you’re trying to do gigantic stuff on the one thing, one project you’re doing, it incentivizes you to try to do things that require additional permitting,” Petterson said. 

In contrast, the district housing proposals all fall within the general and community plans of the six sites, which should free them from extensive environmental review or city council approval. 

“We don’t have to go through the city planning process,” said Barrera. “That not only speeds the development, but it also, frankly, makes our projects less vulnerable to people who want to come out and say, ‘We don’t want affordable housing in our community.’”

Diversifying developers

The six sites also have six different developers. That wasn’t planned, but Petterson and Barrera think that diversification is another strength.

“If it were our staff out there doing this on our own, I would be probably terrified of pulling it off,” Petterson said. “The great thing about not supplanting the private sector and actually using their wisdom and experience and their ability to take risks and understand what their appetite for risk is, the advantage is you can watch from afar, oversee it, but that day to day, navigating the challenges – I think they’ll figure it out.” 

While he takes comfort from the developers’ experience, Petterson also said on the dais the school board should hold them to account for fulfilling their promises. He urged his fellow board members to be willing to start from scratch if a final proposal differs from the original vision. 

“There’s always an incentive to promise the moon, get the project and then alter it, on the presumption that no agency wants to go through the painful process of reissuing a request for proposal,” he said in an interview. 

Petterson and Barrera both expressed confidence they would meet or exceed the district’s housing goals. 

“Had we put … all our eggs into one basket or done these one at a time, if some financing mechanism didn’t work out, or some design didn’t work out or something fell through, we would have another two- or three-year delay,” Petterson said. “So as it is now, we’re very confident that all, or most, of these projects will end up getting built.”

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