City seeks developers for prime downtown lots

Affordable housing and parking are top priorities for the growing city, but balancing demands while working within a limited budget is a challenge officials must ultimately face. With that in mind, the council appealed to the development community for ideas as well as how to finance them.

Monday’s meeting is a carryover for the council to discuss the variety of rough-draft proposals received by both nonprofit and for-profit developers.

“It’s really a unique opportunity. We’re very lucky that we have a lot of interest in the sites and it gives us greater ability to really think hard about what we want and achieve it,” said Deputy City Manager Kathy Kleinbaum. “I think we’re trying to proceed as carefully as possible because this is definitely a long-term decision.”

Submissions from the development community were initiated after the city issued a broad request for qualifications to generate ideas on how to balance its priorities for the sites late last year.

The requirements include at a minimum replacing the publicly-accessible parking spaces on the sites, as well as providing at least a modicum of affordable housing. Now the council is expected to flesh out options for the price and terms of working with a developer to transform the lots. The city is expected to offer the land — recently valued at up to $16 million — as well as other contributions to help finance the project. 

While no formal decisions will be made without first going through a public hearing process, it’s an important step in a decadeslong effort to build atop the sites purchased with redevelopment agency funds.

Colloquially known as the Worker Resource Center and former Kinko’s lots, the city bought the properties straddling Fifth Avenue for $5 million in the 1990s in part to provide for parking during demolition of the Main Street Garage and construction of a new garage and movie theater. After the governor dissolved redevelopment agencies in 2012, the city negotiated with the state to retain the parcels with the condition they must be redeveloped. The sites are currently being used as publicly-available surface parking lots and a nonprofit-managed resource center for day laborers.

A variety of redevelopment ideas from office space to soccer fields were originally thrown out. But public parking and the housing crisis were ultimately elevated as the best uses. Consultants have estimated the need for an additional 600 parking spaces to accommodate growing demand downtown. The lots at 405 E. Fourth Ave. and 400 E. Fifth Ave. currently offer 235 parking spaces that must be replaced, and more would be required for other associated uses on site.

Kleinbaum noted this is the last major downtown city-owned land that could accommodate another parking garage, while adding construction costs run between $25,000 to $60,000 per space. To build affordable housing units, the city is similarly expected to make a significant contribution to cross items off its wish list.

“It’s really a matter of what’s the most important, what can we afford, and what resources are available and what the greatest need is in the community?” she said, adding the city received a “broad range of proposals and I think it really demonstrated the financial picture of where [city contributions] are needed.”

Housing construction as a means to help offset the regional affordability challenges has been a top priority for San Mateo, and these lots have long been touted as a crucial means to that goal.

It’s not yet clear whether the development will be entirely dedicated to below-market rate units, or if the council will entertain proposals that just meet minimum state or city requirements. The council originally prioritized helping both low-income workers making 60 percent or below the area median income, as well as workforce housing for those making between 80 percent and 120 percent of the local average.

Constructing low-income housing can make a project eligible for tax credit financing, but it could entail local subsidies of between $100,000 to $200,000 per unit, according to an earlier staff report.

Some residents in the nearby Central Neighborhood have expressed opposition to an entirely below-market rate project. But primary concerns raised have been parking, density and traffic impacts associated with new developments along the corridor east of the Caltrain line.

Of the proposals received from the 10 developers, some suggested needing the city to contribute little other than the land, while others suggested meeting the council’s wish list might require $16 million, Kleinbaum explained. Ultimately, it will be a matter of trade-offs, she said.

The council’s discussion Monday is a continuation from last month and is being held in closed session as it is part of negotiations over possible terms, Kleinbaum said.

Interested developers include Eden Housing and Pacific Companies; Sares Regis; Windflower Properties; Bridge Housing and Bay Meadows master developer Wilson Meany; Raintree Partners and Anton Development Company; the Core Companies; MidPen Housing; Civic Partners; Urban Housing Communities; and Domicile 1 – EAH Housing and EBL&S Development, according to the city.

Kleinbaum said the council could take a range of actions following the discussion from instructing staff to move ahead with selecting a developer with which to exclusively negotiate to reissuing a more refined request for proposals for the site. With the clock ticking and the housing crisis heating up, she noted the goal is to pick a developer by the year’s end.

“This is a really critical opportunity, we’re not going to see this opportunity again. Anything we build is going to be there for a really long time,” Kleinbaum said, adding public input has been mixed thus far and the city will conduct further outreach as “we’re trying to make sure it’s the most beneficial to the community.”

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