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Court Decision Could Throw Wrench in Plans To Redevelop San Diego Sports Arena

Judges Rule City Can't Remove Neighborhood Height Limit Despite Voters' Approval of Ballot Measure

By Lou Hirsh CoStar News December 16, 2021 | 10:41 AM

A court decision nullifying a 2020 ballot measure removing height limits in San Diego’s Midway District neighborhood could throw a wrench in plans to redevelop the city’s 55-year-old sports arena.

City officials are mulling their options after a San Diego Superior Court judge ruled Dec. 10 that the city should have studied the potential environmental impacts of taller buildings before presenting voters with a ballot measure, called Measure E, that was passed in November 2020. The measure called for removing a 30-foot height limit for projects built in the Midway neighborhood, about 5 miles north of downtown.

The measure was deemed critical to adding high-density housing, parks, entertainment and other long-sought amenities near the city-owned sports arena and other parts of the Midway enclave. The court ruling for now blocks the removal of the height limit in the district, where five development teams are vying to redevelop the aging sports arena and 48 adjacent acres of city-owned land. The San Diego City Attorney’s Office told local media it intends to appeal the ruling.

“In light of the ruling on Measure E, the city of San Diego is currently evaluating all available options,” city spokeswoman Nicole Darling told CoStar News in an email. “As it relates to the Sports Arena site, potential respondents to the city’s Notice of Availability were advised of the litigation and that, by submitting a response to the NOA, they were assuming the risk of committing resources toward redevelopment of the property,” Darling said.

Depending on what happens next on the legal front, the city and prospective developers may need to adjust their proposals to redevelop the arena site, possibly by deploying smaller mid-rise structures that could make it challenging to build housing at densities that make affordable units feasible.

“We were aware of the pending Measure E litigation when we assembled our proposal, but the court’s recent ruling adds additional uncertainty,” said San Diego developer David Malmuth, whose Malmuth Development is part of a sports arena development team led by national homebuilder Toll Brothers. “We are confident in the city’s ability to resolve the height issue in a manner that will enable our project to move forward should we be selected.”

The Toll Brothers team is competing against teams led by developers Brookfield Properties, Zephyr Partners, Monarch Group and ConAm Group. Each team includes developers of sports facilities and affordable housing.

The city announced earlier this week that two other proposals, led by developers Panacea Group and Cotterkey Investments, have been removed from consideration because they were not responsive to city conditions included in an October request for concept submissions. City staff will be making recommendations in early 2022 to the mayor and City Council from among the five proposals still in the running.

Ballot Measure ChallengedSan Diego voters last fall approved removing the Midway neighborhood from a long-standing city height limit of 30 feet for new buildings in a coastal area west of Interstate 5. But the results were challenged earlier this year by a citizen group called Save Our Access.

Superior Court Judge Katherine Bacal upheld the group’s contention that the city proposal to remove height limits in a coastal-adjacent area was subject to review standards under California environmental laws before being placed on the ballot, including a review of potential impacts of such a change in building regulations.

At stake is the development of elements around the sports arena that are expected to total more than $1 billion, as the city joins others in the nation looking to turn areas near older sports facilities into year-round generators of housing, entertainment and related tax revenue generators.

San Diego and other California cities are looking to boost the supply of housing that is affordable to low- and middle-income families, and the sports arena area figures large in San Diego’s plans to add at least 10,000 new housing units in the Midway neighborhood. It was not immediately clear what impact the court ruling would have on other projects that fall within the same planning jurisdiction, known as Midway-Pacific Highway. The area includes a planned mixed-use redevelopment of the U.S. Navy’s aging technology research complex about 3 miles from the sports arena site, now in the early stages.

Plans are in the works to replace the Navy facility, consisting largely of repurposed aircraft hangars dating to the 1940s, with a new office building to the west of I-5. Much of the remainder of the 70-acre military property would be sold to private developers or regional government for construction of some combination of apartments, offices, retail and possibly a regional public transit center.

Navy officials did not immediately respond to a CoStar News request for comment.

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