San Diego, CA., Dec. 09 – A nearly $400 million high-rise project that promises to give downtown San Diego its first five-star hotel cleared a major hurdle Tuesday when the San Diego City Council agreed to negotiate a deal with the developer.
While the proposed East Village development has received high praise, its fate had remained uncertain because of concerns raised last month by some council members that the project did not go far enough in ensuring that future employees of its tenants — among them a Ritz Carlton hotel and a Whole Foods market — would earn living wages and be free to unionize.
At issue Tuesday was whether the city should initiate negotiations with San Diego-based Cisterra Development on an agreement spelling out the precise scope of the hotel, office and housing project, as well as how much the developer would pay to acquire city-owned land at 7th Avenue and Market Street where the high-rise would be located.
The council voted 8-1, with Council President Sherri Lightner dissenting, to begin negotiating with Cisterra on a development deal, although the final agreement will still need the council’s blessing.
In addition to a 160-room hotel and gourmet grocery store, Cisterra proposes 156,000 square feet of office space, 238 public parking spaces, 115 apartments and 58 Ritz-branded condos that would sit atop the 39-story high rise. An additional 32 apartments would be reserved for low-income renters.
In all, there would be 6,000 square feet of open space, including a public plaza at the corner of 8th and Island avenues. The plans also calls for Cisterra, which most recently completed a new downtown headquarters for Sempra, to purchase the adjacent 57-room Clermont Hotel, which years ago was a celebrated jazz hotspot.
Cisterra, whose management firm would continue to operate it as a single-room occupancy hotel, has said it plans to invest up to $1 million in renovations.
Downtown leaders, resident groups and representatives of the business community, as well as construction worker unions, turned out to support the project that they said will not only deliver hundreds of jobs but also transform a key area of a still redeveloping East Village.
The proposed development also drew a large crowd of hotel union workers, who urged the council to take a stronger stand on guaranteeing well-paying union jobs.
“A vote in support of this project does not comply with what you say should be a living wage in San Diego,” said Brigette Browning of Unite Here, which represents local hotel workers. “If that’s what the (Ritz Carlton) says it will pay they should have no problem with this.”
The City Attorney’s office on Tuesday reiterated advice that it provided earlier this month in a memo stating that the council does not have the legal authority to impose such a provision on the East Village development.
While Cisterra already has consented to a labor agreement that would ensure the hiring of union workers for the construction of the project, it was unable to persuade Ritz Carlton and Whole Foods to commit to hiring unionized workers, said Jason Wood, a project principal with Cisterra.
The hotel company, however, has recently committed in writing to pay its non-tipped employees at or above San Diego’s living wage, Cisterra founder Steve Black told the council.
Under San Diego’s living wage ordinance that applies to contractors doing work for the city, the prescribed hourly wage is $12.02, plus health benefits.
“We were given various rules to follow while we pursued this project and we followed each of them,” Black told the council before it took its vote. “We expected those rules wouldn’t change. In good faith, over the last 24 months, we have invested over a million dollars and thousands upon thousands of hours. And now the rules seem to be changing.”
It is still undecided how much the developer will pay for the project site as that will be a part of months-long negotiations, but Black said Tuesday it will amount to “tens of millions of dollars.” All proceeds will go into a fund designated for the provision of low- and moderate-income housing.
Councilman Todd Gloria, who represents the downtown area, acknowledged there is much to love about the development, including hundreds of construction jobs and the provision of affordable housing.
“It’s unfortunate,”he added, “that Cisterra was not informed from day one that the issues of pay and worker benefits are a priority for this City Council … This issue is not going to go away with today’s vote.”
Lightner suggested that Cisterra and its tenants consider voluntarily complying with the city’s living wage ordinance before the final development deal returns to the council.
“This is a very valuable piece of city-owned property,” she said. “I believe we have a responsibility to ensure the project creates good jobs, not just during the construction phase but also in the businesses that will operate on the site.”
Tuesday’s vote culminates a two-year-long process that began in December 2013 when Civic San Diego sought proposals for the downtown site bounded by 7th and 8th avenues and Market and Island Avenue.
Assuming Cisterra can negotiate a development deal within the next four months, construction could get under way by early 2017, with completion targeted for late 2019, said Wood.
As part of its vote Tuesday, the council promised to revisit the issue of worker pay and benefits for projects reviewed by Civic San Diego.
It asked that a new operating agreement for the planning agency be completed by early next year and that it include a policy addressing wages and hiring for privately developed projects, most notably those that involve public monies or land.
There is no consensus, however, on the council right now for such a policy. When the council considered the Cisterra project last month, Gloria had sought to tie a development deal to union worker provisions but could not get a five-vote majority.
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