San Diego Audit Identifies Errors in Faulconer Real Estate Transactions



When Kevin Falconer was mayor of San Diego, his administration did not follow best practices or due diligence, spending hundreds of millions of dollars on property purchases, a city audit showed.

An audit released Thursday, reported by the San Diego Union-Tribune, examines four real estate transactions totaling $ 230 million the city has concluded under Falconer. The auditors wrote that “a serious lack of policy and oversight has resulted in the City skipping or missing key steps in the acquisition process,” and that the Falconer administration missed or misrepresented key information.

Falconer, a Republican, held office from 2014 to 2020 and is now running for governor in the upcoming recalled election of Democratic governor Gavin Newsom. He points to his record in San Diego, the nation’s eighth largest city, as proof that he is ready to lead a state of 40 million and its huge economy. Two of his Republican rivals pointed to audit as a political issue for Falconer.

Much of the audit focused on a building known as 101 Ash Street, which the city bought with the intention of using it as a consolidated office for city employees. But the city only used the property for weeks after the asbestos was discovered, Union-Tribune reported.

The audit accuses the Faulconer administration of not fully informing the city council and the public about the property. City council officials told the council that only $ 10,000 would be needed to renovate the building, but auditors estimated that city contractors later calculated that it took $ 115 million to renovate and improve the building.

According to Union-Tribune, Falconer’s administration also relied on real estate expert Jason Hughes, who had no contract with the city and received $ 9.4 million from the seller of two properties, including Ash Street, after consulting with the mayor. The auditor accused Falconer’s administration of working with Hughes without signing a city contract that would reveal his economic interests.

John Burke, a spokesman for Faulconer, called the execution of the deal “flawed” in Friday’s audit statement, but blamed Hughes for “playing both sides of the deal.” He said Faulconer has stopped property payments.

Falconer “continues to fully support the city’s ongoing efforts to hold accountable those who improperly profit from taxpayers,” Burke said.

According to a Union Tribune attorney, Hughes made clear his intentions to receive the money. But in June, San Diego City Attorney Mara Elliott filed a claim for pecuniary and punitive damages, saying he had not reported the payments to the city council. The city wants to terminate leases and return $ 44 million.

Hughes’ lawyer Michael Attanasio did not immediately respond to a message asking for comment on Friday.

The administration of Democrat Todd Gloria, the city’s current mayor, has accepted some of the auditor’s recommendations aimed at improving oversight of real estate transactions, but rejected others, the newspaper said.

The audit found problems with three other real estate transactions in the city, including an indoor parachute complex once owned by one of Falconer’s political supporters, which the mayor recommended the city buy.

Businessman John Cox, another Republican who participated in the recall, said the information contained in the check should be labeled corrupt by the Falconer administration. Cox made his comments Friday protesting the GOP’s eventual endorsement of the race and arguing that Falconer is not the party’s best choice to fight Newsom.

“Mr. Falconer’s work with real estate and other issues as mayor of San Diego will certainly bring a treasure trove of negative advertising campaigns,” he said.

Likewise, former Congressman Doug Ose said, “The Democrats are going to tie this building to his neck and set it on fire.”


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