2 Housing Projects Full of Asbestos, Mayor Says : City Hall: O’Connor, who opposes purchase of the buildings, cites a draft report that estimates the city would have to pay $5 million to clean them up.

Mayor Maureen O’Connor said Wednesday that levels of asbestos in two controversial housing projects are much worse than previously believed and pose the potential of “major liability and major problems” for the city.

O’Connor said she had asked City Atty. John Witt and the attorney for the San Diego Housing Authority to evaluate an environmental report that indicates the city may be liable for up to $5 million in “asbestos abatement” at separate units in Clairemont and Rancho Penasquitos.

The properties in question are the Penasquitos Gardens in Rancho Penasquitos and Mt. Aguilar Apartments in Clairemont, which the San Diego Housing Commission agreed to purchase earlier this year from Alvin Malnik, a Florida attorney with reputed ties to organized crime.

In January, the San Diego City Council voted, 6 to 2, to issue $38 million in bonds to purchase the low-income housing projects, despite O’Connor’s warning about “the sleaze related to the . . . transaction.”

During council debate in January, O’Connor compared Malnik to Iraqi leader Saddam Hussein and former Panamanian dictator Manuel Noriega. She later retracted her comments at the urging of Councilwoman Judy McCarty.

Only Councilman Bruce Henderson sided with O’Connor in opposing the deal with Malnik, with Councilman Wes Pratt and former Councilwoman Linda Bernhardt saying the combined 816 units provided necessary housing for the poor.

At a hastily called press conference late Wednesday afternoon, O’Connor said she had heard about the findings of the environmental report, prepared by Clayton Environmental Consultants, from an “anonymous citizen” who telephoned her Tuesday night and that “the story checked out.”

“Originally, when I raised questions with the housing commission, I was told that there was minimal exposure (to asbestos), but it appears the draft report is saying it’s not minimal--in fact, it’s saying just the opposite,” O’Connor said angrily. “And I’ve been advised that (removal of the asbestos) could cost upwards of $5 million.”

O’Connor said she had asked the attorneys involved “to see where we are as it relates to the purchase of the property.”

She said she also has asked for a special meeting of the housing authority Monday to try to resolve the issue.

“We’ve got a real serious problem here,” she said. “We paid $38 million for 800 units that appear to have significant asbestos exposure, and if we don’t do anything, we’ve just bought ourselves a major liability and a major problem.”

O’Connor said the asbestos is “in the tiles, in the roofs, in the floors and on the walls,” adding that “children are living in that environment right now.”

Malnik could not be reached for comment late Wednesday, but John W. Wood, the lawyer for the housing authority, said the sale, which is in escrow, would be thoroughly reviewed.

“This creates a legal question and raises the issue of potential long-term liability,” Wood said. “Can the city get out of the agreement? That’s just one of the things we’ll have to look into.”