San Diego approves new process to remake sports arena site in Midway District. Here’s what has to happen next

The San Diego City Council approved a plan Aug. 3 to restart its effort to develop the 48-acre Pechanga Arena site in the Midway District.

The city envisions transforming the site into a major entertainment focal point with a new (or refurbished) arena, housing and retail. It approved a plan last year but that plan was scrapped by the state’s housing authority because it didn’t first offer the site to affordable-housing developers.

The City Council unanimously approved declaring the space around the arena as surplus land, which kick-starts the process to solicit affordable-housing developers. The distinction was necessary to appease the housing authority, which must now approve the new plan, but also was welcomed by council members who said it is an opportunity to create housing for low-income San Diegans.

“This is a sizable property with proximity to the trolley, coastal zone, shoreline parks, downtown and more,” Councilman Joe LaCava said. “This is a unique opportunity we must not squander.”

The 55-year-old Pechanga Arena is home to the American Hockey League’s San Diego Gulls and Major Arena Soccer League’s San Diego Sockers. The 16,000-seat venue also brings in concerts and other major events.

The city has envisioned the site since at least 2018 as a location for a new entertainment district because of its unique position near Mission Bay, San Diego International Airport, Old Town and San Diego’s beach communities. While much of the focus of the Aug. 3 vote was on housing, the city has made clear that its surplus land declaration was contingent on the sports arena being refurbished or replaced.

Brookfield Properties won a bid last year to remake the site with an all-new sports arena, 2,100 housing units, 590,000 square feet of retail space and five acres of public parks.

California’s Department of Housing and Community Development denied the project in June because it said it violated the state’s revised Surplus Land Act, which would require San Diego to first offer the property to affordable-housing providers, which must reserve 25 percent of housing units for low-income families. If the city did not restart the process, it could have faced a large fine — 30 percent of the final sale price of the land.

Though the department still must approve San Diego’s latest move, public officials saw it as a positive step in restarting the effort to remake the site. A timeline for when the new plan may be approved is not set, but the city’s Department of Real Estate and Airport Management said it expects the state to respond in two to four weeks. It will need to sign off on the total plan, not just the housing component, which includes the stipulation about a new sports arena.

If the state approves, the city would issue a notice alerting a list of affordable-housing developers, which would have 60 days to respond with their interest. State law says San Diego would then be required to engage in a 90-day negotiation period with all interested parties.

If no one responds or a deal cannot be reached, the city could solicit interest from the open market, with developers required to set aside 15 percent of housing units for low-income families.

Several housing advocates called into the council meeting during public comments to urge officials to maximize the space for affordable housing.

“The city should require more from a site with so much housing potential,” said Stephen Russell, president of the San Diego Housing Federation.

Council members were eager to require more affordable housing onsite, but it remains to be seen whether an affordable-housing developer would bid on a project with such a large scope. Councilman Sean Elo-Rivera said 25 percent affordable housing should be the minimum and the site should maximize its overall housing potential.

“We need to send a clear message to bidders that we expect the highest level of affordability,” he said.

The cost for a new arena is not clear. Brookfield’s proposal didn’t specify a price, but a rival development team that lost the bid, Toll Bros., estimated a new arena would cost $300 million to $600 million. It said the more expensive estimate was necessary only if the city wants an arena large enough to attract a franchise from the National Basketball Association or the National Hockey League.

Despite a different City Council and mayor now than when the process started, current leaders have expressed a strong desire to continue the plan. Mayor Todd Gloria has called the redevelopment of the site a “once-in-a-generation” opportunity to build a modern arena and create a project that prioritizes affordable housing.

The Brookfield contract was not signed and no formal commitment was made to build affordable housing.