ESCONDIDO — A downtown, city-owned parking lot is once again available for new residential development proposals after the city recently settled a lawsuit with the developer of a previously denied project at the site.
The settlement follows several years of litigation between the city and Touchstone MF Fund I, LLC, who first began discussions with the city in 2016 regarding a potential development known as the “Aspire” project in Lot 1, a municipal parking lot located across the street from City Hall at 137 Valley Pkwy.
In September 2018, the City Council approved a purchase and sale agreement plus joint escrow instructions for Touchstone to purchase the city-owned parking lot, which became effective a few months later. At the time, the purchase price for the property was $1.59 million.
Touchstone later proposed a six-story, 131-unit mixed-use apartment building, which a majority of the City Council denied in 2019. Soon after, the city and Touchstone disputed the developer’s ability to file applications for new projects.
In 2020, Touchstone filed a lawsuit against the city, and the city countersued, each alleging the other had violated their contracted agreements. The developer also claimed the city had violated state housing laws, including the State Density Bonus Law and Housing Crisis Act.
Both parties have been in litigation ever since, stalling any potential new development at the parking lot.
By a 4-1 vote, the council approved the settlement, which enabled Touchstone to work with another developer to submit a project application to develop the site. The settlement also increased the property’s purchase price to $1.82 million.
City Attorney Michael McGuinness said the settlement does not obligate the Escondido Planning Commission or City Council to approve future projects.
“To be clear, nothing in either document requires that the council approve any particular project, and we’re not going to consider any project or economic benefits as part of this item,” McGuinness said at the Dec. 13 council meeting. “This settlement is to allow another development application to be processed by another developer.”
Touchstone will assign KB Escondido LLC as the new developer of the property, which must apply within 90 days. The developer could submit more than one application during that time, McGuinness noted.
“We want to move things along and see what (the project) looks like,” he said.
Councilmember Consuelo Martinez voted against the settlement conditions because she felt the updated purchase price of the parking lot wasn’t enough.
“We could get a higher value for this property,” she said.
A representative of Filippi’s Pizza Grotto, located on Grand Avenue adjacent to the parking lot, said taking away parking Lot 1 would lead to the restaurant’s demise due to the lack of other parking in the area.