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San Bernardino’s efforts to redevelop the former Carousel Mall property have taken another turn, this time in the form of a lawsuit.
The developer the city hired to undertake that monumental task, and later dismissed, has filed a lawsuit in San Bernardino County Superior Court charging the city with breach of contract.
San Bernardino terminated its agreement with San Bernardino Development Co. “unilaterally” and with no warning, nearly one year ago, according to the lawsuit filed March 28.
Developer San Bernardino Development Co. – a partnership of Renaissance Downtowns USA and ICO Real Estate Group – claims it has lost millions of dollars as a result of the city’s action.
“The city of San Bernardino has been mismanaged and exploited by politicians and self-interested staff for decades, leaving the city-owned Carousel Mall property vacant and abandoned and the surrounding downtown area to suffer a depressing legacy of disrepair,” the lawsuit reads.
The 44-page legal action, which seeks unspecified damages and a jury trial, offers a blunt assessment of San Bernardino’s negotiating tactics, alleging that the city never intended to comply with the exclusive negotiating agreement it signed with San Bernardino Development Co. in September 2021.
Instead, San Bernardino officials “controlled and manipulated the [negotiation] process in bad faith for their own ends,” and at the expense of the development team and the residents of San Bernardino.
Ultimately, the split between the city and the developer originated with San Bernardino’s legal disputes with the state of California regarding its efforts to rehabilitate the 46-acre downtown site next Interstate 215.
One year ago, state officials accused San Bernardino of violating several state laws during its site redevelopment efforts, starting with its submission of incomplete and inaccurate documents to the State Department of Housing and Community Development.
That agency helps develop housing practices and building codes. It also oversees economic and community development programs, according to the department’s website.
State law required San Bernardino to declare the former mall site surplus land and negotiate with two affordable housing developers who were interested in building there.
Instead, San Bernardino officials began negotiating with the development team, then selected them several months before submitting the surplus land declaration to the housing/community development department.
The department then withdrew its approval of the project, and gave San Bernardino 60 days to correct the problems the department had identified in the proposed project. Ultimately, the city cancelled the development agreement and paid San Bernardino Development Co. a $100,000 severance fee.
San Bernardino never intended to negotiate seriously with the development team, despite having an exclusive negotiating agreement with it, the suit alleges.
“City officials controlled and manipulated the process in bad faith for their own ends by systematically misleading the state housing agency, obstructing the negotiations [and] delaying key milestones,” the lawsuit states. “[City staff] refused to provide mandated updates to the city council and the community, including progress reports prepared by [the] San Bernardino Development Co.”
The lawsuit also alleges that city officials negotiated with other developers regarding the Carousel Mall property while its exclusive negotiating agreement with the San Bernardino Development Co. remained in place, a violation of state law.
“Ultimately, the web of deceit by city staff and elected officials led to a notice of violation from the state Department of Housing and Community Development,” the lawsuit reads. “The project was riddled with corruption from the beginning, and was ultimately sabotaged by city staff and elected officials for their own personal and/or financial gain.”
All of this was done “at the expense of the citizens of San Bernardino and San Bernardino Development Co.,” the lawsuit claims.
Reviving the Carousel Mall site remains one of San Bernardino’s top priorities, and it will remain so regardless of the outcome of the San Bernardino Development Co.’s lawsuit, said Jeff Kraus, city spokesman.
“Redevelopment of such a complex site is challenging,” Kraus said in a prepared statement. “Cities like San Bernardino enter into exclusive negotiating agreements to do just that—negotiate. The exclusive negotiating agreement was specific and clear… the city never promised or guaranteed San Bernardino Development Co. that it would enter into a final [development] agreement.”
The negotiating agreement contained a clause that detailed exactly how much money San Bernardino would owe the development team if a deal wasn’t reached.
“When we arrived at the point where a deal could not be made, the city terminated the negotiating agreement,” Kraus said. “It was very unfortunate that the city and San Bernardino Development Co. could not reach a final agreement to move forward with the project.”
Because the matter is pending litigation, city officials would not comment further, Kraus said.
The former shopping mall – demolition was completed last year – began as Central City Mall in 1972. It was renamed 19 years later, roughly the time it started to lose traffic, when a children’s carousel was installed on its lower level.
Several attempts at reviving the property failed, including adding office tenants. By the early 2000’s, all of the mall’s anchor tenants had left, with only a handful of specialty tenants remaining.
Carousel Mall shut down permanently in 2017, and soon became a gathering place for homeless people and the scene of multiple fires, much to the dismay of local fire officials.
The former mall became a public health hazard, which put even more pressure on the city to have it removed. But developing a retail-residential-office on the massive downtown property remains the city’s top priority, according to Councilman Theodore Sanchez.
“Downtown has to be revived, and fixing the Carousel Mall property is a big part of that,” said Sanchez – who represents the district in which the Carousel Mall was located – in the summer of 2022. “If we don’t San Bernardino will shrivel up and die. Other cities will devour us.”
