Judge Says San Diego's Site Sale Violated State Law

A Superior Court judge has signaled she intends to rule in favor of a government watchdog group that filed a lawsuit to block San Diego’s sale of a parking lot near Petco Park to a development team led by the San Diego Padres.

The city sold the four-block site—a parking area known as Tailgate Park—in 2022 for $35.1M to Tailgate Development, a joint venture between Tishman Speyer and Padres Next Fifty, a partnership between the MLB franchise and real estate investment firm Ascendant Capital Partners.

The San Diego Padres have a 25% ownership stake in Tailgate Development, which is planning a massive mixed-use project called East Village Quarter on the 5.25-acre site.

A lawsuit filed by nonprofit Project for Open Government alleges that the city’s sale of the site violates the city charter, the city’s municipal code, the state’s Surplus Land Act and the California Environmental Quality Act (CEQA).

At a hearing last week, San Diego Superior Court Judge Katherine Bacal ruled that the city violated CEQA when it approved the Tailgate Park sale without preparing an environmental impact report (EIR) or properly documenting why the state-mandated EIR was not needed, the San Diego Union-Tribune reported.

In April 2022, the San Diego City Council approved a disposition and development agreement (DDA) for the sale of Tailgate Park to Tailgate Development, a deal that obligates the buyers to redevelop the site with up to 1,800 residential units, including no less than 270 units for low- and middle-income families.

The East Village Quarter project envisions a cluster of mid- and high-rise residential buildings with 50K SF of retail and office space, a public park and 1,200 public parking spaces.

In 2020, the city rezoned the eastern half of the Tailgate Park site from Mixed Commercial to Ballpark Mixed Use District to match the zoning of the west half of the site and prepare for redevelopment. At the same time, the city added an addendum to an EIR for its Downtown Community Plan, concluding that the rezoning was consistent with the EIR and there were no new significant impacts.

In its lawsuit, the Project for Open Government said the substantial number of residential units planned for East Village Quarter was not contemplated in the earlier EIR and that the city was required to prepare an EIR specifically for the project.

The city and the development team maintain that the prior environment assessment considered residential density and that the Tailgate Park development is not a new project, as defined by the CEQA.

In her tentative ruling, which will be finalized at a hearing in December, Bacal rejected the city’s argument.

“The DDA proposes at least 1,710 residential units to be built on the property,” the judge wrote. “Adding these residential units would appear to cause a direct physical change in the environment, on a property that previously was identified for mixed commercial zoning that did not contemplate at least 1,710 residential units.”

The lawsuit also is challenging the sale price for the site, alleging that the city is selling the land for less than fair market value, which is illegal under the city charter.

The city-owned site of Tailgate Park, a four-block parking lot bounded by 12th and Imperial avenues, and K and 14th streets, is leased to the Padres through the end of 2043 for use as a parking lot and special event space.

The property was appraised at $76M in 2021, but its fair market value was set at $35.1M to reflect the cost of replacing 1,060 parking spaces—as the city is required to do per the terms of its lease agreement with the Padres—a cost estimated by the appraiser to be $40,000 per space, the Union-Tribune reported.

The lawsuit alleges that the $40M discount for replacement parking is an illegal gift of public funds because the Padres are already being compensated in the form of title to the property in a deal with does not require the MLB franchise to make annual rent payments to the city, the report said.