San Diego taxpayer sues over transparency in 101 Ash St. proposal


San Diego's $250 Million 101 Ash Street Housing Proposal Faces Transparency and Conflict of Interest Questions

Ethics Concerns Mount Over Controversial Downtown Development Deal

SAN DIEGO — A $250 million proposal to transform San Diego's troubled 101 Ash Street building into affordable housing is drawing sharp criticism over transparency issues and potential conflicts of interest, with a public records lawsuit filed Monday challenging the city's handling of the deal.

The lawsuit, filed on behalf of city resident John Gordon, seeks access to key documents that were not available when the City Council's Land Use and Housing Committee unanimously voted to advance the proposal to the full council. The controversy centers on a 60-year ground lease with developers Create Dev LLC and MRK Partners Inc. to convert the long-vacant, asbestos-riddled office tower into nearly 250 residential units.

The Conflict of Interest Problem

At the heart of the controversy is Kelly Moden, who serves as both chair of San Diego's Planning Commission and president of Create Dev LLC, one of the two companies selected for the project. Former San Diego City Attorney Michael Aguirre, representing the plaintiff, argued that this arrangement represents an inappropriate conflict of interest.

"No city official should be entering into a contract with the city that's going to give them an economic advantage," Aguirre said at a Monday morning news conference outside the vacant skyscraper.

Create is described as "a one-woman shop, run by San Diego Planning Commissioner Kelly Modén, that specializes in multifamily housing." Moden was appointed to chair the Planning Commission by Mayor Todd Gloria in 2022, the same mayor who ultimately selected her company for the lucrative contract.

Financial Arrangements Raise Questions

The proposed deal's financial structure has drawn scrutiny from critics who question whether it provides fair value to taxpayers:

  • The city would loan the building's value of $45.6 million to developers through a seller's note, with 4% simple interest over 55 years, with no payments anticipated until year 15
  • The total $250.3 million conversion project relies heavily on $114.7 million in tax credit proceeds
  • The developer anticipates spending more than $1 million per unit and will pocket a $24.5 million fee

Former Coronado Mayor Richard Bailey, who has been monitoring the situation, noted that "the city is proposing spending over $1 million per unit to convert this 60-year-old contaminated office tower into housing, which is more than twice the amount per unit of luxury units just a couple blocks away."

Questionable Tax Credit Strategy

The financing plan depends on securing federal tax credits that may not be available. Aguirre said the city has already missed a deadline for low-income housing tax credits, and he questioned whether historic tax credits can feasibly be acquired, as 101 Ash St. is not a historic property.

The MRK-Create team is "banking on receiving $32.2 million in tax credits associated with historic properties even though 101 Ash St. is not a historic property." If developers are unable to procure the necessary tax credits or financing within 24 months, the city can void the deal.

Building Appropriateness for Housing

The suitability of the 58-year-old building for residential use is questionable given its troubled history and current condition:

Asbestos Problems: The building was evacuated in December 2019 following the discovery of substantial amounts of asbestos inside during renovation work. Workers were not informed of asbestos presence, and safety protocols were allegedly ignored during previous renovation attempts.

Structural Issues: Aguirre pointed out that "the building has a 40-year life, but it's a 60-year lease" and noted that "one of the most important issues is the ongoing maintenance cost of the building, which is about $2 million plus a year. This proposal now does not address all of the problems with electrical, HVAC, mechanical problems."

Cost to Taxpayers: San Diego taxpayers currently pay $6,575 daily ($2.55 million annually) to maintain the vacant downtown high-rise, not including legal costs from ongoing lawsuits.

Extraordinary Renovation Costs Raise Red Flags

The proposed $250.3 million conversion cost represents an unprecedented expense that dwarfs typical residential renovation projects and raises serious questions about fiscal responsibility:

Breakdown of the $250 Million Cost: The developer's financial model reveals staggering expenses: $40.1 million for asbestos abatement and interior demolition work, $67 million for the residential remodel, $18.5 million in labor costs associated with prevailing wage rates, $20 million in loan and interest charges, and a $24.5 million fee for the developer.

Cost Per Unit Analysis: The developer anticipates spending more than $1 million per unit, which is extraordinary when compared to standard renovation costs. For context, typical whole-house renovations cost $100,000 to $200,000, and even complete gut renovations cost $100 to $200 per square foot. The 101 Ash Street project would cost approximately $1,013 per square foot for residential conversion.

Comparison to Market Standards: Standard residential renovations typically cost $15 to $60 per square foot for basic updates, while complete gut renovations cost $70 to $150 per square foot. Even high-end residential conversions in expensive markets like Los Angeles cost between $100 and $400 per square foot, making the 101 Ash Street project costs two to ten times higher than typical residential renovations.

Office-to-Residential Conversion Challenges:

Plumbing Infrastructure: Converting office space to residential requires extensive plumbing work for kitchens and bathrooms in each unit. In expensive markets like New York City, plumbing typically ranges from $1,500 to $2,000 per fixture, with at least $5,000 required for a licensed plumber to install new lines for basic fixtures like sink, toilet, and bathtub. For 247 units with kitchen and bathroom plumbing, this could easily exceed $2-3 million just for basic plumbing infrastructure.

Electrical Systems: Rewiring a building can cost from $10,000 to $30,000 for residential properties, and installing new electrical panels ranges from $1,400 to $2,800. Converting an office building to residential requires completely rewiring for individual units, installing separate electrical panels, and meeting residential electrical codes - costs that could easily reach $5-10 million for a 21-story building.

HVAC Systems: Comprehensive HVAC system overhauls, including ductwork modifications and high-efficiency systems, can cost anywhere from $5,000 to $10,000 per residential unit. For 247 units, HVAC conversion costs alone could reach $2.5 million.

Asbestos Abatement Crisis: An expert analysis found that the city would likely need to spend $94 million on asbestos abatement and renovations, leading city officials to conclude that "Given the known asbestos and remediation requirements, the value of the 101 Ash building is virtually zero". The current proposal's $40.1 million asbestos abatement budget may be insufficient given the building's extensive contamination history.

Previous Cost Escalations: By August 2017, the original renovation price tag had ballooned from an estimated $10,000 "power wash" to $19 million, and the San Diego City Council later approved an additional $30 million investment for renovations in August 2018. This pattern of massive cost overruns suggests the current $250 million estimate may be unrealistic.

Safety and Code Compliance Issues: The building has existing safety violations including small floor penetrations that the Fire Marshall determined could increase fire severity, which remain unaddressed. Converting to residential use will require meeting stricter safety codes for multi-family housing, including fire egress requirements, which could add millions more to the renovation budget.

The astronomical renovation costs, combined with the building's problematic history and ongoing structural issues, suggest that 101 Ash Street may be fundamentally unsuitable for residential conversion at any reasonable cost to taxpayers.

Alternative Proposal Rejected

The city's decision becomes more questionable when compared to a rejected alternative. City officials and Gloria rejected a $10 million offer in October from a local businessman who planned to convert the controversial Ash property into 800 units for homeless housing. This proposal would have provided more than three times the housing units at a fraction of the cost, specifically targeting San Diego's most vulnerable population.

Transparency Concerns

The lawsuit challenges the city's approval process, noting that "City officials are attempting to approve the 101 Ash Street (disposition and development agreement) and ground lease and related documents while concealing their essential terms from public scrutiny."

Former San Diego City Attorney Mike Aguirre challenged the timing of the vote at the committee meeting, noting committee members were considering recommending the proposal to full council without viewing the ground lease document or the disposition and development agreement.

Political Connections and Past Controversies

The 101 Ash Street building has been a source of controversy since the city's original 2017 lease-to-own deal. In July 2022, the City Council approved a settlement with Cisterra Development, agreeing to pay the developer $86 million for the property after the building proved unsuitable for city workers due to asbestos contamination.

The city recouped an additional $9.4 million in March 2023 after suing Jason Hughes, the real estate broker on the original deal, who also pled guilty to a misdemeanor criminal charge of conflict-of-interest.

Mayor's Response

Despite mounting criticism, Mayor Todd Gloria's office defended the proposal. "Last week, the city council's land use and housing committee advanced a plan to transform the office building at 101 Ash St. into nearly 250 affordable homes for San Diegans who need them. This project should be celebrated by everyone," according to a statement from the mayor's office.

Bottom Line

The 101 Ash Street affordable housing proposal raises serious questions about government transparency, fiscal responsibility, and ethical conduct. While San Diego desperately needs affordable housing, the current proposal appears to prioritize developer profits over taxpayer interests and may not represent the best use of a problematic building that has already cost the city nearly $200 million.

The conflict of interest involving Planning Commission Chair Kelly Moden, the questionable financial arrangements favoring developers, and the rejection of a more cost-effective homeless housing alternative suggest that this deal may be another chapter in the ongoing 101 Ash Street scandal rather than its resolution.

Sources

  1. Gordon v. City of San Diego, Public Records Lawsuit, San Diego Superior Court, July 14, 2025
  2. Times of San Diego. "San Diego taxpayer sues over transparency in 101 Ash Street $250M proposal." July 14, 2025. https://timesofsandiego.com/politics/2025/07/14/san-diego-taxpayer-sues-over-transparency-101-ash-street-250m-proposal/
  3. KPBS Public Media. "Public records lawsuit filed over 101 Ash St. affordable housing proposal." July 14, 2025. https://www.kpbs.org/news/politics/2025/07/14/public-records-lawsuit-filed-over-101-ash-st-affordable-housing-proposal
  4. San Diego Union-Tribune. "San Diego selects team to convert 101 Ash St. into low-income housing." January 27, 2025. https://www.sandiegouniontribune.com/2025/01/27/san-diego-selects-team-to-convert-101-ash-st-into-low-income-housing/
  5. Times of San Diego. "San Diego City Council Advances Redevelopment of 101 Ash Street Building." January 27, 2025. https://timesofsandiego.com/politics/2025/01/27/san-diego-city-council-advances-redevelopment-of-101-ash-street-building/
  6. San Diego Union-Tribune. "San Diego ready to make a deal to turn 101 Ash St. into low-income housing." June 30, 2025. https://www.sandiegouniontribune.com/2025/06/30/san-diego-ready-to-make-a-deal-to-turn-101-ash-st-into-low-income-housing/
  7. KPBS Public Media. "Plan to turn 101 Ash St. into affordable housing moves to full San Diego City Council." July 2, 2025. https://www.kpbs.org/news/politics/2025/07/02/plan-to-turn-101-ash-st-into-affordable-housing-moves-to-full-san-diego-city-council
  8. FOX 5 San Diego. "San Diego's 101 Ash Street tower plans raise transparency concerns." July 2025. https://fox5sandiego.com/news/local-news/san-diego/san-diego-101-ash-st-builiding-concerns/
  9. CBS 8 San Diego. "San Diego moves forward with 101 Ash Street housing plan." July 2, 2025. https://www.cbs8.com/article/news/local/san-diego-closer-offloading-101-ash/509-9ff3a21d-bd5c-4595-829d-8da9c4f2069b
  10. San Diego Union-Tribune. "San Diego gives initial thumbs up to lease 101 Ash for low-income housing." July 2, 2025. https://www.sandiegouniontribune.com/2025/07/02/san-diego-gives-initial-thumbs-up-to-lease-101-ash-for-low-income-housing/
  11. OB Rag. "A Very Brief Reader Rant: 'City Planning Commission Head Kelly Moden Must Resign'." July 2025. https://obrag.org/2025/07/a-very-brief-reader-rant-city-planning-commission-head-kelly-moden-must-resign/
  12. OB Rag. "San Diego Planning Commission Head Building Her Company's 8-Story Monolith in Golden Hill 'Under the Radar'." December 23, 2024. https://obrag.org/2024/12/san-diego-planning-commission-head-building-her-companys-8-story-monolith-in-golden-hill-under-the-radar/
  13. OB Rag. "Company Led by Head of San Diego Planning Commission Selected for Redo of 101 Ash Street." January 2025. https://obrag.org/2025/01/company-led-by-head-of-san-diego-planning-commission-selected-for-redo-of-101-ash-street/
  14. NBC 7 San Diego. "City Officials Knew 101 Ash St. Was Riddled With Asbestos — So Why Were Hazards Ignored?" July 30, 2020. https://www.nbcsandiego.com/news/investigations/101-ash-street-riddled-with-asbestos-and-other-hazards-when-did-city-officials-know-and-why-were-they-ignored/2370929/
  15. Voice of San Diego. "101 Ash St." May 16, 2022. https://voiceofsandiego.org/101-ash-st/
  16. Wikipedia. "101 Ash Street." Updated January 29, 2025. https://en.wikipedia.org/wiki/101_Ash_Street
  17. KPBS Public Media. "San Diego settles over 101 Ash deal; DA files criminal charges." March 23, 2023. https://www.kpbs.org/news/local/2023/03/22/city-council-to-consider-settlement-with-hughes-over-101-ash-street-deal
  18. San Diego Union-Tribune. "I used to own 101 Ash Street. Here's what the city of San Diego did wrong." August 28, 2020. https://www.sandiegouniontribune.com/opinion/commentary/story/2020-08-27/commentary-i-used-to-own-101-ash-street-heres-what-the-city-of-san-diego-did-wrong

San Diego taxpayer sues over transparency in 101 Ash St. proposal

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