Like many merchants in downtown San Diego's East Village, former city councilman Tom Hom didn't know he was skating on such thin ice by doing business there.
Hom thought he might benefit from the construction of the Padres' proposed ballpark a block away, but sometime in late 1997 or early 1998 the boundaries were re-carved to include his Farmer's Bazaar and Western Metal Supply buildings.
On learning of that change via news reports, Hom realized the ice was dangerously fractured. Being inside the ballpark's borders meant his retail and real estate enterprises would crash through the bureaucratic cracks. The East Village had been designated a redevelopment district in 1992, empowering the Centre City Development Corp. (CCDC) to buy land at any time, move businesses, and, if necessary, seize property by condemning it.
Like some other small business owners standing in the ballpark's way, Hom not only is a Padres fan but he also is surprisingly magnanimous about the concept of improving the neighborhood. However, the chances of agreeing with the CCDC about the value of his property and business are remote. "It's a wide disparity," Hom said.
On Tuesday, June 1, San Diego City Council was scheduled to condemn nearly a dozen parcels, giving the property owners and their tenants 90 days to vacate. (As of press time on Tuesday, the vote had not occurred.)
Several of the landlords -- including Hom; architectural designer Michael Fillipponi, whose family owns the Artplex and United Fastener buildings; and Edward Plant, owner of the behemoth San Diego Refrigerated Services Inc. -- said the CCDC's offers to buy were too low. The offers, they said, represented about 60 percent or less of October's appraised value.
Similar action for another 20 parcels, outlined by J and K Streets and Seventh and Tenth Avenues, is expected this summer. The third and final round of real estate acquisition is expected in January, assuming the city follows through in securing $225 million in bond financing for the ballpark. As David Duea, owner of Fire Etc., awaits what he expects to be a "lowball" offer from the CCDC, his frustration grows. Until he receives money from the city, Duea said, he can't build, buy or lease a warehouse for the fire trucks and related emergency equipment he sells. Duea estimates he needs at least $1.5 million to duplicate Fire Etc. in what he calls "a lousy location" miles elsewhere, but he worries he won't receive sufficient compensation from the CCDC. "How would you like to buy something with no budget? How would you like to buy something with no time frame for need? How do you buy something to replace something you don't want to sell?" he asked, recalling how he mortgaged his home 24 years ago to buy parcels in the East Village. "We're being screwed, and they don't have the courtesy to tell us how bad or when."
Many businesses that lease space are also frozen by uncertainty. Typical is Mark Kenney, president of United Fastener Co., which sells nuts, bolts, rivets, screws, concrete anchors, drill bits, and saw blades used in commercial construction, marinas, and boats. If he relocates within downtown in an effort to retain customers, Kenney's rent will double or triple. If he leaves downtown for affordable space, he'll lose customers. Eateries and retailers nearby are wrestling with the same troubling options. The CCDC's maximum rent differential of $10,000 over two years would last less than six months, Kenney predicts, and he doesn't think he would be made whole for having to restart his business from scratch. "I'm getting depressed because I have no place to go."
The CCDC follows state laws in compensating businesses and residents uprooted by redevelopment projects. Some form of reimbursement is available for the real estate, moving expenses, higher rent elsewhere, lost rent from tenants leaving, and "good will," which equates to revenue and profit decreases resulting from relocation. Disagreements on the adequacy of compensation are already augmenting the workload of San Diego's small cadre of lawyers -- about two dozen -- who are versed in condemnation proceedings and eminent domain. The complexity of such law and a seething sentiment of unfairness are driving some East Villagers to seek legal help.
Plant said he had no intention of hiring a lawyer. Instead, he cooperated with CCDC officials since late 1997 by providing them copies of financial statements, tax returns, and other confidential documents -- all in the spirit of relocating San Diego Refrigerated Services in a timely fashion. When he received the CCDC's written offer on April Fool's Day, his reaction was, "You've got to be kidding! They're not offering me as much for my whole business as they give to the average ballplayer for a year!" At that point, Plant asked other business owners for names of lawyers. It appears his only recourse may be making a claim for good will within condemnation proceedings, a legal maneuver that could take two years or longer. Some lawyers say the CCDC could be challenged for inappropriately acquiring properties after having struck a premature deal with the Padres, team owner John Moores, and his company, JMI. A lawsuit filed last month accuses the agency of illegally acquiring real estate before completion of an environmental impact report.
David N. Allsbrook, the CCDC's manager of contracting and acquisitions, said the agency's "land assembly" efforts in the East Village are necessary and consistent with past activity in the neighborhood, including the drafting of a prior EIR in 1992. If a ballpark weren't built, he insists, the land would be used for housing and retail outlets -- thus justifying demolition of buildings, which is scheduled for fall.
San Diego lawyer Louis Goebel, who specializes in eminent domain law, said, "If financing for the ballpark fails, we may see an expanse of bare dirt surrounded by chain-link fences." Although Allsbrook boasts of the CCDC's ability to successfully move those affected by condemnation and the agency's low litigation rate -- "only 10 percent" -- he acknowledges that business owners in a redevelopment district operate amid perennial uncertainty and face tough decisions once the city decides to seize property. Allsbrook even concedes that of the 69 businesses and 27 residents to be ousted by the ballpark, or possible lack of a ballpark, San Diego Refrigerated Services may be the most difficult to move. It appears impossible, given Plant's unusual circumstances.
Since the CCDC approached him in late 1997, Plant repeatedly informed the agency he would need at least a year and $15 million to rebuild his freezers elsewhere. That estimate did not include land costs. Finding a site with similar access to the harbor, railroad tracks, and highways would be no small task. Plant claims the city reassured him his needs would be met.
When pressed about Plant's requests, Allsbrook said, "I'm not sure a year is what he requires. I can't get into a debate about that." Allsbrook said the CCDC offers fair market value versus potential value that accounts for future development. However, the affected landowners say the offers fall woefully short of not only what is fair, but also what it takes to replace their property or business. The CCDC offered Plant $8 million.
With less than three months to defrost his big fridge and hand the keys to the city, Plant is scrambling to find alternative storage for 15 million pounds of frozen food: beef, chicken, strawberries, oranges, tomatoes, pizza, other packaged goods. "I have about 3 million pounds of fish that I don't know what to do with." On a daily operating basis much of the inventory ends up with customers, recognizable names such as Nabisco and General Mills. The stash includes 40,000 pounds of fish consumed weekly by Sea World's wildlife.
The smell of fish is so intense at San Diego Refrigerated Services, it creates an invisible wall around the building and permeates Plant's office. The company's inability to relocate on short notice may seem obvious to a visitor, but apparently not to CCDC. San Diego Refrigerated Services' cavernous storerooms require temperatures as low as 10 degrees below zero, racking up a monthly electricity bill of $30,000.
"I couldn't tell Ed to move nine months ago," Allsbrook said. "I couldn't tell him until I was authorized to make an offer."
Meanwhile, Plant says San Diego Refrigerated Services has lost some customers, 13 million pounds of strawberries, and a few employees to Innovative Cold Storage Enterprises Inc., which opened near Otay Mesa in April. One of those employees, Doug Gadker, is the new competitor's general manager. "This was built to take advantage of a growing need for cold storage in San Diego and compete with Los Angeles," Gadker said. "We're not out to hurt Ed."
Because San Diego Refrigerated Services is the only operation in San Diego to process fish and store it in frozen blocks of ice without packaging, that business is likely to migrate to Los Angeles or overseas once the city pulls the plug. "That's a unique part of Ed's company," Gadker said, referring to what cold storage operators call "nude block freezing." "Part of me will go down with that building."
A few of the 100 customers dependent on San Diego Refrigerated Services, such as Rob Van Riter, are likely to fold. And, like Tom Hom's 200 mini-storage clients, they aren't on the CCDC's lists of displaced businesses and residents. Van Riter started Raven Foods Corp. in November to catch and export sardines, mackerel, and squid. Without the crucial middle step of freezing, Van Riter said, his plan to build a $1 million enterprise is ruined.
"The whole damn thing is illegal if you ask me," Van Riter groused. "The Padres and the ballpark aren't even a publicly run deal, and they're pushing the little guys out."
But pushing out the little guys is an inevitable consequence of eminent domain laws, which give government broad powers to set aside the interests of a few to serve "the greater good." Goebel likens redevelopment to a fast-moving train that is rarely derailed. Unfairness is inherent in the process, the lawyer said, and the plight of merchants in the ballpark's path is typical.
In a strategy applied throughout East Village, the CCDC tried to persuade tenants who lease space from Hom and Plant to move even before the property was condemned. If successful, that tactic could deprive the landlord of precious cash flow and would seem to devalue the real estate, but it's legal. It could also hamper renters' chances of pursuing a claim for "good will" losses later. Allsbrook says the departure of tenants would not result in lower real estate prices. And, he says, the CCDC would reimburse landlords for rent lost between the time the agency moves a tenant and takes possession of property. "There are two separate tracks: land acquisition and relocation. They coincide," Allsbrook said, so both property owners and their tenants vacate the premises simultaneously.
At the same time, the CCDC makes sure property owners prepare environmental assessments of their parcels and remove any contamination. The reports alone cost thousands of dollars and seem punitive -- suddenly required just as landlords must grapple with lost rent, the logistics of moving, and what they perceive to be low offers.
The CCDC has identified three underground storage tanks at San Diego Refrigerated Services. If Plant doesn't excavate them by June 15, the agency will impose fines ranging from $500 to $5000 a day for each tank.
The demand for clean-up is legal under the Polanco Act, which the CCDC supported ten years ago after getting stuck with a $2 million bill to decontaminate marina property. "We probably use this tool more than any other redevelopment agency in California," Allsbrook said, noting the CCDC has sent Polanco Act notices to about 55 property owners in the East Village.
Few are spared as the CCDC advances its ambitious timetable. To be preserved are four buildings listed on the San Diego Historical Site Board's registry of landmarks, including the Carnation building in which the CCDC has invested money. But six other structures on the registry remain in the wrecking ball's shadow.
While San Diego Refrigerated Services' two large warehouses lack the architectural style to make the registry, they represent a bit of local history about to be swept away by bulldozers.
One warehouse, built in 1890, was the original San Diego Ice & Cold Storage. It now houses the company's six tenants, mostly food and produce vendors. The other warehouse, built in 1922, contains the huge, 20,000-square-foot freezers; refrigeration compartments; machinery for quick freezing; and compressors the size of tree trunks. It is a work environment like no other, where Plant's 25 employees must don the company uniform of parkas, woolen hats, and gloves to enter storerooms lined with ice crystals.
The five-story chute on the building's exterior reminds visitors that the company made blocks of ice until 1950. Bunny MacKenzie, of Coronado, is among old-timers who remember using such chunks to keep food cold in old-fashioned iceboxes. The iceman delivered weekly.
As the fourth owner of San Diego Refrigerated Services, a business he bought in 1982, Plant seems destined to become the departing iceman. He will retreat to a much smaller cold storage facility his son operates in National City and will continue managing a refrigerated warehouse owned by the Port of San Diego. Despite the impending destruction of his flagship enterprise downtown, Plant does not come across as a complainer. The veneer of cheerfulness masking his depression makes Plant sound as though he could be an advocate of the city's eminent domain rights. "I'm really for the ballpark because it's going to be good for San Diego in the long run," he said. "But I feel I was betrayed."