Transit Village developers say San Carlos’ refusal to reduce the number of required below market rate units may cause them to pay millions of dollars in fees instead which will do nothing toward meeting the city’s desire for affordable housing.
San Carlos adopted an ordinance in 2010 establishing new fees unless a developer provides at least 15 percent of units below market rate. On Monday night, Legacy Partners asked the City Council to drop the requirement to 10 percent but was tentatively denied by officials who said they saw no evidence the ordinance would make the project financially infeasible.
But Jeff Byrd of Legacy said San Carlos’ “unusual” ordinance is a more burdensome requirement than other Peninsula cities and that deciding now is “putting the cart before the horse” because the project’s final size has yet to be determined.
The original proposal called for converting a 10.53-acre strip of land within the existing Caltrain station into eight four-story 407,298-square-foot buildings with 280 apartments among a mix of 23,797 square feet of offices and 14,326 square feet of retail space. The project would also include 667 parking spaces and a new Transit Center on 4.29 acres.
But to appease east side residents worried about height and shadows, Legacy submitted new scaled-down plans with fewer units on the top story. While other cities allow greater density in return for affordable units, Byrd said Legacy doesn’t have that option.
“It just makes it impossible for us to deliver that level of affordability and pushes in the direction of the fees,” Byrd said.
Councilman Mark Olbert was surprised Legacy didn’t then present a detailed financial analysis as evidence that the 15 percent mark was too high.
“They did make some assertions but didn’t show us anything,” Olbert said.
A July 2013 feasibility study cited by the city showed that 280 units are feasible.
Councilman Ron Collins called the city’s ordinance “a little aggressive” but said that is because not pricing out those in the lower and moderate income ranges is imperative. He suggested that SamTrans, which owns the land, should possibly become involved because as a public agency it has an “absolutely moral,” if not legal, obligation.
“There’s room for a deal here and we’re not going to cave to being lowballed,” Collins said.
Councilmembers think Legacy may respond in court to challenge the constitutionality of the requirement but Byrd said the real worst-case scenario is the Transit Village being built without any affordable units.
“Well pay the fee but that doesn’t help with affordable housing,” Byrd said.
The impact fee for the project is approximately $7.93 million. Fifteen percent of the market rate project is 42 units.
Although they differ on just how much affordable housing should be in the Transit Village project, both Legacy and the city agree it is preferable there than elsewhere because the development is located on El Camino Real near transit. The in-lieu fee would also leave the city needing to find a site for affordable housing elsewhere and undergo its construction or renovation.
The Transit Village is the first significant project to come to the city since the 2010 ordinance although smaller developments have been granted waivers, said City Manager Jeff Maltbie.
The tentative denial gives city staff time to strengthen the language of its denial and a formal decision should be made at the Sept. 9 meeting, he said.
Once denied, Maltbie said Legacy has a few options including a lawsuit or trying to work with the city further.
“I wouldn’t be surprised if there’s some more back and forth. There is still a long way to go,” Maltbie said.
The City Council has certified the project’s environmental impact report and it is next headed back to the Planning Commission for consideration of the development’s merits.
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