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Civic San Diego advances allocation of $15M in tax credits

In the midst of increased scrutiny and recent high-profile resignations at Civic San Diego, the agency’s board members voted this week to advance the process to allocate more than $15 million in federal tax credits to support two projects.

The members, who make up the board of a Civic San Diego subsidiary that distributes the credits, gave their initial backing to funding development of a planned co-work space in Normal Heights and helping a local job-training nonprofit serve more young adults.

The actions came just five days after a board member filed a lawsuit seeking clarification from the court about whether the powers delegated to Civic San Diego by the city pass legal muster, one of several issues raised in the suit.

The votes also came after the resignations of Andrew Phillips, the agency’s chief financial officer and chief operating officer, and Cynthia Morgan-Reed, a board member.

Both resignations are effective May 1.

A City Council panel is also exploring how it can increase city oversight of the agency’s subsidiary that oversees the distribution of millions of dollars in federal tax credits.

Civic’s Economic Growth and Neighborhood Investment Fund board supported moving forward with due diligence, including lining up the underwriting, for allocating new markets tax credits to assist the two projects.

The board voted to support funding a creative and shared office space for a 29,500-square-foot property at El Cajon Boulevard and 37th Street.

Michael Lengyel, a senior project manager at Civic San Diego, said he expects the project will require a $9 million tax-credit allocation.

The nine-member board voted 5-0 to in favor of moving ahead with the effort led by Grasshopper Development LLC. Four members were absent from the vote.

The board also voted to begin due diligence to provide tax credits to help Urban Corps of San Diego free up capital to reinvest into its programs and services.

The additional funds would be a result of the nonprofit replacing an existing $2.3 million mortgage on its Jefferson Street property with a $1.3 million note.

Lengyel expects Urban Corps to require a $6.5 million allocation of tax credits.

The vote to support funding the project was 5-0, with Vice Chairman Rich Geisler recusing himself because of a working relationship with Urban Corps and three members absent from the vote, Lengyel said.

Lengyel said he expects to seek final board approval for allocating the tax subsidies to support the Urban Corps project in the early summer, and late summer or early fall for the shared office space project.

The fund’s advisory board had voted in March in favor of the two projects receiving tax credit allocations.

Civic San Diego President Reese Jarrett said the recent resignations, lawsuit and calls for more oversight of the agency were no reason for Civic to hold off on supporting and moving forward with new projects.

“We are focused on performing the activities that we have been charged with, which is continuing to provide economic development activities in our neighborhoods, and we have no intention of slowing down,” Jarrett said.

Phillips’ resignation became public this week.

He told The Daily Transcript he accepted a job as vice president of public institutions for the western division of Jones Lang LaSalle.

“It was a career-enhancing opportunity that popped up I couldn’t turn down,” said Phillips, who had been at Civic San Diego in its various forms for 11 years.

Asked about recent events involving the agency, Phillips said they didn’t factor into his decision to leave.

“There are circumstances going on here, but this corporation has been through it before,” he said.

Board member Morgan-Reed, an attorney at Higgs Fletcher & Mack, submitted her resignation April 10.

She said recently becoming a first-time mother and her busy career were the reasons for her decision.

“After being on board for four years, I felt it was time for new blood and new energy, and time to refocus on my career and my family,” said Morgan-Reed, former board chairwoman.

Her letter of resignation to the mayor came the same day fellow board member Murtaza Baxamusa sued Civic San Diego and the city in San Diego Superior Court.

Baxamusa said he unsuccessfully tried for two years to get answers from Civic and city officials about whether the powers delegated to the corporation are legal, so he turned to the court to determine whether the scope and oversight of Civic San Diego is proper.

Morgan-Reed said she was unaware of the suit when she sent in her resignation, and said it is “unfortunate when litigation arises in any context.”

“Director Baxamusa always had good input and asked good questions,” Morgan-Reed said. “I know Civic staff and myself, as chair, tried our very best to address his questions and give him the information he requested.

“I don’t know where the breakdown occurred,” she said. “Perhaps he was never going to be satisfied with the information we gave him.”

The Civic board met in closed session Wednesday during a special meeting to discuss Baxamusa’s lawsuit. Jarrett said there was no reporting out from the closed session.

The Civic president also had high praise for Phillips and Morgan-Reed.

Jarrett called Phillips “an institutional asset that will be significantly missed,” though he said he was supportive of his decision that will enhance his career.

He also said Morgan-Reed's “passion and dedication to Civic San Diego” will be missed.

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