Navy Land May Be an Albatross for San Diego : Development: Restrictions, costs, environmental issues and outside demands are killing once-promising plans for the site.

When the federal government announced last year that it would close the Naval Training Center near downtown San Diego and turn the base over to the city, it seemed at first blush that the 520-acre site would prove ideal for development.

It was easy to envision luxury hotels, yacht clubs and high-priced housing on the bay-front property--the sort of development that generates big tax dollars for cash-strapped cities such as San Diego. One prominent real estate consultant estimated the land’s value at $500 million--nearly $1 million an acre.

Today, eight months after the base’s last recruit was graduated, the optimism has faded. Developers and city officials have come face to face with a sobering list of restrictions, costs, environmental issues and outside demands that could make conversion of the base to civilian use the most lengthy and costly of any installation in California.

In September, City Architect Michael Stepner gave real estate developers and brokers his grim assessment that the property was “worth less than zero. . . . Technically, it qualifies as blight.” Converting the base could take 20 years or more, he said.

Stepner now says he exaggerated for effect--but he made his point.

Officials maintain that sales and leases of base land and taxes on the property won’t be enough to pay for redevelopment. And that has left the city wondering how the conversion will be financed. One method being considered: forming a redevelopment district three times the size of the base.

San Diego’s problem exemplifies the struggle communities statewide face as they seek ways to reuse former military bases productively. Of California’s 66 military bases, 22 have been closed or realigned since 1989, among them Long Beach Naval Station and the Tustin and El Toro Marine Corps air stations.

More bases could soon be shut; a final round of base closures is to be announced no later than March 1. Among those in jeopardy are the Marine Corps Recruit Depot in San Diego (adjacent to the Naval Training Center) and Los Angeles Air Force Base in El Segundo.

The most immediate economic impact of base closures has been loss of payroll, tourism and contracts. The financial loss in San Diego alone will be $100 million a year once the Navy, which still uses the training center for advanced classes, vacates the property for good in 1997.

Base redevelopment creates its own set of financial burdens. San Diego expects to sink enormous amounts of time and money into converting the base. But it may not recover those costs for decades, because the revenue-generating possibilities for commercial development are so limited and so painstaking to realize.

Likewise, Tustin officials--looking to redevelop the 1,620-acre air base there after the Marines depart next year--say it may take $300 million just to bring utilities and roads up to modern standards to accommodate the educational, industrial and commercial uses envisioned. Finding the money won’t get any easier in the wake of Orange County’s bankruptcy filing.

“In general, when planning groups start to work on a base, they tend to assume that they are getting a blank slate--that this is an open field, that they can do whatever they want,” said Bernard Frieden, associate dean of architecture and planning at the Massachusetts Institute of Technology.

“As they get into it, they discover that’s not the case,” said Frieden, who is studying base closures. “The process is closely regulated . . . and requires huge investments in infrastructure.”

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In San Diego, the process is also being watched closely by residents of the adjacent upscale neighborhood of Point Loma. They want to preserve the area’s “low impact” traffic profile and will fight anything that smacks of high-density development.

The base is zoned a “future urbanizing area”--meaning San Diego voters will have to approve any reuse plan.

In an interview, Mayor Susan Golding said it was too early in the process to predict what the redeveloped base will look like. The 28-member panel she appointed to oversee conversion is taking a deliberate approach, partly because of the profusion of outside agencies and groups--ranging from the homeless to the Postal Service--clamoring for a piece of the land.

Under terms of the federal McKinney Act, municipalities taking over closed bases are required to make a portion of the property available for housing the homeless, though a recent revision of the law allows cities to comply by dedicating off-base property to shelters.

The Navy has complicated the process by making a “close to 11th-hour” request for 120 acres of the base for housing--acreage in the part of the base most desirable for commercial housing development, Golding said.

There also are severe restrictions on the kinds of new buildings that can be put on the property, which is bordered on one side by San Diego’s airport, Lindbergh Field. The jet traffic imposes a 30-foot height limit, and aircraft noise means that much of the base is unsuitable for residential use.

A big part also is within state tidelands, which means certain kinds of development--including housing--are prohibited. The least tern, an endangered species, nests on the bay-front portion of the base, so that area is off limits to developers as well.

Then there is the toxic waste problem in two areas of the base. Although the Navy is obligated to pay for cleaning up, that process could delay reuse of the affected areas for years.

The federal government also must pay about $1 million toward planning costs. But the rest of the costs for conversion must be borne by the city or the users who ultimately occupy the redeveloped site.

Perhaps the most daunting costs relate to upgrading the training center’s infrastructure--roads, sewers and power, water and telephone lines. The base has been exempt from most building and safety codes since construction began in the 1920s. Upgrading many of the 297 buildings simply won’t be worth the cost.

“Calling it a Catch-22 is pretty apropos,” said John Fowler, vice president of Rick Engineering, the firm the city hired to evaluate the cost of improving the facilities. “You have all these desires, relatively few commercial opportunities and lots of investment required. So the trick and subtlety will be to try to balance all these competing needs and proposed uses with generating revenue to support the investment.”

Not all base closures around the state have caused financial headaches. State officials say the conversions of the Presidio and Ft. Mason in San Francisco have been relatively painless. But San Francisco was able to turn both bases over to the National Park Service, which is under no requirement to upgrade buildings to modern codes.

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Though San Diego seems headed toward forming a redevelopment district as a means of converting the naval base to civilian use, the city might consider turning the base over to the park service if the costs prove overwhelming, said Assistant City Manager Tim Johnson.

“Realistically, this piece of property is the single most constrained piece of property among all the bases in California,” said Johnson, who oversaw the conversion of two military bases in Sacramento.

The costs and complexities of base conversion prompt Kenneth Leventhal & Co. partner Robert J. Starkman, who has studied the economic impact of closures, to urge cities with bases to pull out all the stops to hang on to the military.

“While reuse is beneficial, it doesn’t have the same impact as the original military user,” Starkman said. “Nothing is going to be as good as the military if you want to retain those economic benefits.”