Agenda packet — Capitola City Council, March 16, 2026 (part 2 of 2)

2. Sharrow Lanes
We also recommend revising Section 17.57.050.A.2.f to allow sharrow lanes on private streets regardless of whether they abut ground-floor commercial uses.

For projects of this scale and context—where portions of existing commercial development and surface parking will remain—it is impractical to require dedicated bicycle lanes or paths in all circumstances.

Retailers and property owners typically maintain control over pedestrian and bicycle circulation within private parking areas. Requiring dedicated bike lanes or paths through areas that interface with existing parking lots may create unnecessary operational challenges and safety concerns.

Sharrow lanes represent an appropriate and commonly used alternative to facilitate bicycle circulation while maintaining compatibility with existing site conditions.

At our Village at San Antonio project, sharrows were successfully implemented on private streets with both parallel and angled parking. However, sharrows were not used on streets that connected directly to or traversed through parking lots, as those conditions present too many potential conflict points between vehicles and cyclists.

Similarly, Class II bike lanes along streets that connect through retail parking lots are generally infeasible and potentially unsafe due to the number of vehicle turning movements. Allowing the use of sharrows in these circumstances would provide the City with a flexible and practical tool for bicycle connectivity without creating unintended safety issues.

3. Tier 2 & 3 Development Incentives
Finally, we recommend that the Tier 2 development requirements align with the minimum recommendations prepared by Keyser Marston Associates, which were presented to the City Council on February 23, 2026. Tier 3 can reflect Planning Commission recommendations.

Maintaining these thresholds is important to ensure the Tier 2 incentive structure functions as intended and encourages mixed-use development that includes a hotel component.

Planning Commission Recommendation CC Westman
Proposal
MGP Comment
Tier 1 Tier 2 Tier 3A Tier 3B SW Tier
2 SW Tier 3 Tier 2 Tier 3A Tier 3B
Density
Min. (du/acre) 20 20 20 20 20 20 20 20 20
Max. (du/acre) 48 48 53 53 53 53 48 53 53
FAR 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Perimeter Zone (ft)
41st Ave. 125 125 125 125 75 125 75 75 75
Capitola Rd. 125 125 125 125 75 125 75 75 75
Clares St. 125 125 125 125 125 125 125 125 125
Height (ft)
Perimeter Zone 55 65 65 65 75 (65) 55 75 75 75
Core Area 75 75 85 85 85 85 85 85 85
Open Space 5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Affordable Housing 20% 20% 20% 20% 20% 20% 20% 20% 20%
Min New Commercial (sf) 0 30,000 40,000 200,000 35,000 200,000 25,000 35,000 200,000 Min Hotel Rooms 0 85 125 0 120 0 85 120 0
Min Mtg Space (sf) 0 3,000 4,000 0 4,000 0 2,500 4,000 0 201
Item 5 A.

Ms. Herlihy
March 11, 2026

Page 3 of 4 ends

Hotel Keys
If a project is already required to include a hotel component, the incentive structure should allow the developer to build the number of rooms supported by market demand. Keyser Marston’s analysis suggests that 85 keys represent a feasible minimum consistent with an UpperMidscale hotel product.

There is no guarantee that an Upscale hotel product will be viable in this location. Tying minimum room counts to an upscale hotel prototype may therefore jeopardize the feasibility of the Tier 2 incentive structure.

Meeting Space
Similarly, requiring 4,000 square feet of meeting space may exceed what many hotel flags believe the market can support. Excess meeting space can result in lost rooms or the inability to secure a hotel flag.

Keyser Marston’s analysis indicates that approximately 2,550 square feet of meeting space for an 85-room hotel would be appropriate. This level exceeds typical meeting space ratios for uppermidscale hotels (10-15 sf per room for Upper-Midscale) and would allow a boardroom and smaller breakout space while maintaining operational feasibility.

New Commercial Space
The Keyser Marston report also indicates that 25,000–35,000 square feet of new retail demand is likely in the area. Demand is strongest for smaller food service spaces, which can be financially challenging to deliver due to modest rents, expensive construction costs and limited credit tenancy.

Given these conditions, 25,000 square feet represents a more realistic minimum threshold that still supports the City’s economic development goals keeping in mind the sales tax revenue in this Tier 2 structure will come from the hotel and the retail will be focused on placemaking.

Height and FAR
We support the proposed 75-foot perimeter height along 41st Avenue and Capitola Road, with 125-foot perimeter height along Clares Street, and a core height of 85 feet.

Additionally, we support the clarification that FAR calculations exclude parking garages, hotels in all tiers, and rooftop decks in Tier 2 projects, which will help ensure the FAR standard does not unintentionally constrain project feasibility.
202
Item 5 A.

Ms. Herlihy
March 11, 2026

Page 4 of 4 ends

Conclusion
We appreciate the City’s efforts to create a framework that encourages redevelopment while delivering meaningful housing, hospitality, and commercial opportunities for Capitola. The recommendations outlined above are intended to help ensure that the standards and incentives ultimately adopted remain economically feasible, market-responsive, and consistent with the City’s broader planning goals.

We look forward to continuing to work collaboratively with City staff and the community as these policies are finalized.

Sincerely,
Jamas Gwilliam
Managing Director
Merlone Geier Partners
203
Item 5 A.
204
Item 5 A.
205
Item 5 A.
206
Item 5 A.
207
Item 5 A.
208
Item 5 A.

B2 LEVEL 5
112' - 5"
B2 LEVEL 1 M
66' - 0"
B2 LEVEL 4
102' - 4"
B2 LEVEL 2
82' - 2"
B2 LEVEL 3
92' - 3"
5 7 9 12 15 17 19 21
B2 ROOF MAX
124' - 0"
C4 (25) C5 (24) C6 (23)

RESIDENTIAL PARKING

UNITUNITUNITUNIT
C1 (28) C2 (27) C3 (26)

BASEMENT E
53' - 6"
B3 LEVEL 5
114' - 5"
B3 MEZZ
73' - 6"
B3 LEVEL 4
104' - 4"
B3 LEVEL 1 P
64' - 0"

D E F H K M P S U V
2 A3.4.1

RESIDENTIAL PARKINGCOURTYARD/ POOL

RETAIL PARKINGRETAIL PARKING

UNITUNITUNITUNIT

RETAIL PARKING
R
B3 ROOF
124' - 4"
2 ASI 3
2 ASI 3
V.3
B1 LEVEL 1 E
63' - 8 1/2"
B1 LEVEL 4
101' - 5"
B1 LEVEL 2
81' - 3"
B1 LEVEL 3
91' - 4"
B1 LEVEL 5
111' - 6"
3 6 10 13 17 19 21
B1 ROOF MAX
122' - 6"
1 A3.4.1

MECHANICAL

FAN ROOM

UNITUNITUNITUNIT
R1 (31) R1 (31) LOADING LOBBY
DATE:JOB:DRAWN:CHECKED:

SAN ANTONIO ROAD & EL CAMINO REAL

MOUNTAIN VIEW, CALIFORNIA
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06.20.2011092700

BUILDINGSECTIONS
A3.4.2
FINAL GMP / CONSTRUCTION SET: 03.21.2012

SAN ANTONIO CENTER - MIXED USE
MERLONE GEIER PARTNERS & CARMEL PARTNERS A3.4.2 1/16" = 1'-0" 1 BUILDING-2 EW SECTION A3.4.2 1/16" = 1'-0"
2 BUILDING-3 NS SECTION
A3.4.2 1/16" = 1'-0"
3 BUILDING-1 EW SECTION

MARK DATE DESCRIPTION
2 03.21.12 VE / GMP
209
Item 5 A.

B2 LEVEL 5
112' - 5"
B2 LEVEL 1 M
66' - 0"
B2 LEVEL 4
102' - 4"
B2 LEVEL 2
82' - 2"
B2 LEVEL 3
92' - 3"
19 B2 ROOF MAX
124' - 0"
4 A3.6.1
B2 ROOF
122' - 4"

18.4 01
04C
0128
28 19
08 11
A4.1.2
B2 LEVEL 5
112' - 5"
B2 LEVEL 1 M
66' - 0"
B2 LEVEL 4
102' - 4"
B2 LEVEL 2
82' - 2"
B2 LEVEL 3
92' - 3"
B2 ROOF MAX
124' - 0"
B2 ROOF
122' - 4"
5 A3.6.1
2 A3.6.1
04C
01 19
08 0801
04C
01 B2 LEVEL 5
112' - 5"
B2 LEVEL 1 M
66' - 0"
B2 LEVEL 4
102' - 4"
B2 LEVEL 2
82' - 2"
B2 LEVEL 3
92' - 3"
B2 ROOF MAX
124' - 0"
B2 ROOF
122' - 4"
5' - 0" 1' - 8" 9' - 11" 10' - 1" 10' - 1" 10' - 1" 16' - 2" R Q.9 Q.7
3' - 6" 8"
B
A1A1
A1
C1
C
2B
1B
29 A4.2.5
5 Sim
9' - 0"
A4.2.6
13 A4.5.2
11 A4.4.6
3 A4.4.6
1 B2 LEVEL 5
112' - 5"
B2 LEVEL 1 M
66' - 0"
B2 LEVEL 4
102' - 4"
B2 LEVEL 2
82' - 2"
B2 LEVEL 3
92' - 3"
B2 ROOF MAX
124' - 0"
B2 ROOF
122' - 4"
5' - 0" 1' - 8" 9' - 11" 10' - 1" 10' - 1" 10' - 1" 16' - 2" 3' - 6" 8"
R Q.9 Q.7
B
A1
1A
A1
A1
C1
C
1A
1B
2B
5' - 6" 5' - 6" 5' - 6" 5' - 6"
A4.2.5
1 A4.3.1
9 A4.5.2
11 A4.4.1
1 B2 LEVEL 5
112' - 5"
B2 LEVEL 1 M
66' - 0"
B2 LEVEL 4
102' - 4"
B2 LEVEL 2
82' - 2"
B2 LEVEL 3
92' - 3"
B2 ROOF MAX
124' - 0"
B2 ROOF
122' - 4"
5' - 0" 1' - 8" 9' - 11" 10' - 1" 10' - 1" 10' - 1" 16' - 2" R Q.9 Q.7
C1
L1L1L1
B
2A
2B
2A
C
A4.4.1
12 Sim
A4.2.5
5 Sim
A4.3.1
5 A4.5.2
11 GENERAL NOTES:KEYED NOTES:LEGEND:

A. GENERAL CONTRACTOR TO VERIFY ALLDIMENSIONS AND CONDITIONS PRIOR TOCONSTRUCTION. CONFLICTS ARE TO BE BROUGHTTO THE ATTENTION OF THE ARCHITECT PRIOR TOSTART OF CONSTRUCTION.B. WHOLE NUMBER / LETTER GRID LINES REFERENCETO BASEMENT, LEVEL O1 AND MEZZANINE.FRACTIONAL NUMBER / LETTER GRID LINES REFERENCETO LEVELS 02-05.C. GRIDS AT RESIDENTIAL LEVELS 02-05 ARE TOCENTER LINE OF UNIT DEMISING WALLS, FACE OFSTUD AT CORRIDOR WALLS AND FACE OFSHEATHING AT EXTERIOR WALLS, U.N.O.D. NOT ALL KEYNOTES ARE USED ON ALL SHEETS.E. SEE PROJECT SUMMARY SHEET CS FOR BLDGS 1, 2 &3 FOR AVERAGE GRADE PLANE ELEVATION ANDMAXIMUM BLDG ROOF HEIGHT NOT TO EXCEED 60'F. ALL TENANT SIGNAGE FOR REFERENCE ONLY, N.IC.,TO BE PERMITTED SEPARATELY.G. SEE EXT WALL ASSEMBLIES ON SHEETS A2.0a andA2.0b FOR EXTERIOR ENVELOPE REQUIREMENTS MODIFIED CEMENT PLASTERSMOOTH FINISHMODIFIED CEMENT PLASTERSTANDARD FINISHCEMENTITIOUS COMPOSITEWALL PANEL - 24"EXTERIOR STONE CLADDINGSS WALL TILESMETAL WALL PANELFUTURE SIGN LOCATIONBY TENANT, N.I.C.

A
CEMENTITIOUS COMPOSITEWALL PANEL - 10"
DATE:JOB:DRAWN:CHECKED:

SAN ANTONIO ROAD & EL CAMINO REAL

MOUNTAIN VIEW, CALIFORNIA
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2 /2
0122:52:40PM

06.20.2011092700
WALLSECTIONS,BUILDING 2
A3.6.1
FINAL GMP / CONSTRUCTION SET: 03.21.2012

SAN ANTONIO CENTER - MIXED USE

MERLONE GEIER PARTNERS & CARMEL PARTNERS
A3.6.1 1/4" = 1'-0"
3 PARTIAL ELEVATION B2 NORTH, 2
A3.6.1 1/4" = 1'-0"
1 PARTIAL ELEVATION B2 NORTH, 1
A3.6.1 1/4" = 1'-0"
2 WALL SECTION B2 NORTH, 1
A3.6.1 1/4" = 1'-0"
5 WALL SECTION B2 NORTH, 1.1
A3.6.1 1/4" = 1'-0"
4 WALL SECTION B2 NORTH, 2
01 STUCCO, HARD TROWELED FINISH, TYPE 1
CHIFON
04C SS WALL TILE TYPE 3 LIC/TINI COLOR BLEND
BLUE
08 STOREFRONT WINDOW SYSTEM19 VINYL WINDOW28 LOUVERED VENT FINISHED TO MATCH

ADJACENT SURFACE
29 STRUCTURAL PARAPET BRACING

MARK DATE DESCRIPTION
210
Item 5 A.

Capitola Mall -
Retail & Hotel
Market
Overview
City of
Capitola
January 2026
211
Item 5 A.

Study
Area – Site
Radius
and Drive-
Time
Source: Esri Business
212
Item 5 A.

Population & Households
2025 - 2030
2025 2030 % Change
Capitola
Population
Households
9,598
4,574
9,410
4,548
-1.96%
-0.52%
5-mile Radius
Population
Households
120,724
49,549
120,273
48,870
-0.37%
-0.77%
Santa Cruz County
Population
Households
262,934
95,037
260,654
95,204
-0.87%

0.18%
Average Persons per Household
Capitola 2.11
5-mile Radius 2.37
Santa Cruz County 2.62
Population
213
Item 5 A.

Income
Income (2025) Per Capita Median Household
Capitola $65,271 $110,864
5-mile Radius $64,064 $101,409
Santa Cruz County $56,250 $110,320
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
Capitola 5-Mile Radius Santa Cruz County
Per Capita Income
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Capitola 5-Mile Radius Santa Cruz County
Median Household Income
Source: Esri Business Analyst
214
Item 5 A.

Income Distribution
Household Income
Distribution
< $25k $25k-$49k $50k-$99k $100k-$149k $150k+
Capitola 12% 11% 21% 20% 36%
5-mile Radius 10% 12% 27% 25% 26%
Santa Cruz County 11% 11% 22% 20% 36%
0%
5%
10%
15%
20%
25%
30%
35%
40%
< $25,000 $25,000-$49,999 $50,000-$99,999 $100,000-$149,999 $150,000+ Income Distribution
Capitola 5-Mile Radius Santa Cruz County
215
Item 5 A.

Age Distribution
Age Distribution Under 15 15 to 24 25 to 34 35 to 54 55 to 64 Over 65 Capitola 11% 9% 12% 27% 14% 27%
5-mile Radius 12% 13% 15% 25% 13% 22%
Santa Cruz County 14% 15% 14% 25% 12% 21%

47.6 City
Median Age 0%
5%
10%
15%
20%
25%
30%
Under 15 15 to 24 25 to 34 35 to 54 55 to 64 Over 65
Capitola 5-Mile Radius Santa Cruz County
216
Item 5 A.

Educational Attainment
No HS
Degree
HS Degree Some College College Grad
Capitola 9% 14% 32% 46%
5-mile Radius 6% 13% 30% 52%
Santa Cruz County 12% 15% 30% 44%
0%
10%
20%
30%
40%
50%
60%
No HS Degree HS Degree Some College College Grad.

Capitola 5-Mile Radius Santa Cruz County
217
Item 5 A.

Race & Ethnicity
Race & Ethnicity White Black AIAN AAPI Other / 2+ % Hispanic Capitola 68.0% 1.1% 0.9% 5.3% 24.7% 23.3%
5-mile Radius 67.1% 1.4% 1.0% 6.1% 24.3% 22.8%
Santa Cruz County 57.8% 1.2% 1.3% 5.1% 34.7% 35.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%
White Black American Indian
/ Alaskan Native
Asian / Pac Islndr Other / 2 or
more
Race Classification
Capitola 5-Mile Radius Santa Cruz County

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%
Capitola 5-Mile Radius Santa Cruz County
% Hispanic
218
Item 5 A.

Employment
– City
Trade,
Transportation &
Utilities, 23.2%
Leisure &
Hospitality,

20.0%
Construction,

14.1%
Education & Health
Services, 12.3%
Financial Activities, 9.7%
Professional &
Business Services,

7.6%
Other
Services,

5.4%
Retail Trade, 21.1%
Wholesale Trade, 0.8%
Utilities, 0.7%
Transporation &
Warehousing, 0.6%
Acc/Food Svcs, 18.0%
Arts/Ent/Recr, 2.0%
Healthcare & Social Assist., 10.7%
Education Svcs, 1.6%
Finance & Insurance, 5.3%
Real Estate, Rental, Leasing, 4.4%
Prof/Sci/Tech, 6.1%
Admin/Support/Waste
Mgmt/Remed, 1.4%
Public Admin, 4.0%
Manufacturing, 2.5%
Information, 1.1%
Other, 5.0%
Unclassified, 0.3%
219
Item 5 A.

Employment
– 5-Mile
Market Area
Education & Health
Services, 27.1%
Trade,
Transportation &
Utilities, 16.9%
Leisure &
Hospitality,

14.9%
Government,

9.9%
Professional &
Business Services, 8.7%
Healthcare & Social Assist., 14.8%
Education Svcs, 12.4%
Retail Trade, 11.9%
Wholesale Trade, 2.7%
Transporation &
Warehousing, 1.9%
Utilities, 0.3%
Acc/Food Svcs, 12.7%
Arts/Ent/Recr, 2.2%
Prof/Sci/Tech, 6.1%
Admin/Support/Waste Mgmt/Remed,

2.3%
Management, 0.2% Real Estate, Rental, Leasing, 3.2%
Finance & Insurance, 2.0%
Manufacturing, 4.7%
Construction, 4.3%
Information, 2.1%
Ag/Forestry/Fishing/Hunting, 0.2%
Other, 5.8%
220
Item 5 A.

Employment
– County
Trade,
Transportation &
Utilities, 23.2%
Leisure &
Hospitality, …
Construction,

14.1%
Education & Health
Services, 12.3%
Financial Activities, 9.7%
Professional & Business
Services, 7.6%
Other
Services,

5.4%
Retail Trade, 21.1%
Wholesale Trade, 0.8
Utilities, Utilities, 0
Transporation
Warehousing, 0
Acc/Food Svcs, 18.0%
Arts/Ent/Recr, 2.0%
Healthcare & Social Assist., 10.7%
Education Svcs, 1.6%
Finance & Insurance, 5.3%
Real Estate, Rental, Leasing, 4.4%
Prof/Sci/Tech, 6.1%
Admin/Support/Waste Mgmt/Remed,

1.4%
Public Admin, 4.0%
Manufacturing, 2.5%
Information, 1.1%
Other, 5.0%
Unclassified, 0.3%
221
Item 5 A.

Study Area –
CoStar
Mid-County Retail
Submarket
Source: CoStar
222
Item 5 A.

Retail Market - Submarket
Mid-County Submarket
Product Type Total Inventory
(sf)
SF Vacant Vacancy Rate Net Absorption
(sf)
SF Under
Construction
Market
Rent/mo
Malls 679,068 143,962 21.2% 6,643 - $2.35
Power Centers - - - - - -
Neighborhood
Centers
697,918 35,594 5.1% 9,757 - $2.52
Strip Centers 300,339 4,205 1.4% (222) - $2.56
General Retail 1,857,854 22,294 1.2% (7,015) - $2.74
Other - - - - - -
Total 3,535,179 206,055 5.8% 9,163 - $2.61
223
Item 5 A.

Retail Market - County
Santa Cruz County
Product Type Total Inventory
(sf)
SF Vacant Vacancy Rate Net Absorption
(sf)
SF Under
Construction
Market
Rent/mo
Malls 679,068 143,962 21.2% 6,643 - $2.35
Power Centers - - - - - -
Neighborhood Centers 2,863,945 137,469 4.8% 45,604 4,770 $2.31 Strip Centers 876,043 24,529 2.8% (222) - $2.32
General Retail 7,363,229 125,175 1.7% 1,021 - $2.22
Other 72,760 11,496 15.8% - - $2.38
Total 11,855,045 442,632 3.7% 53,046 4,770 $2.26
224
Item 5 A.

Retail
Market
Inventory
Market Inventory (sf)
2025 YTD
Capitola Mid-County Santa Cruz County
Total Retail SF 1,661,979 3,555,677 11,883,610
Net SF Leased 29,248 50,600 128,514
Net SF Built - 14,060 29,532
SF Under
Construction
- - -
225
Item 5 A.

Rent
Trends
Market Asking Rent /sf per Month
2019 2025 2029
Mid-County Submarket $2.32 $2.61 $2.82
Santa Cruz County $1.96 $2.26 $2.44
$2.32
$2.61
$2.82
$1.96
$2.26
$2.44
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Market Asking Rent
Mid-County Submarket Santa Cruz County
226
Item 5 A.

Retail
Rent
Survey
$2.62 $2.61
$2.26
$2.00
$2.10
$2.20
$2.30
$2.40
$2.50
$2.60
$2.70
5-Mile Market Area Mid-County Submarket Santa Cruz County Retail Lease Rates
227
Item 5 A.

Retail
Vacancy
Trends
Retail Vacancy Rate
2019 2025 2029
Mid-County Submarket 4.6% 5.8% 5.6%
Santa Cruz County 2.8% 3.8% 4.0%

4.6% 5.8%

5.6%

2.8%

3.8% 4.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Retail Vacancy Rate
Mid-County Submarket Santa Cruz County
228
Item 5 A.

Retail
Delivery &
Absorption:

Mid-County
Submarket
Net Retail Delivery & Absorption
Net Deliveries (SF Built) Net Absorption (SF Leased)
2019 18,072 48,900
2025 10,007 51,367
2029 (896) 2,278
18,072
10,007
(896)
48,900 51,367
2,278
(60,000)
(40,000)
(20,000)
0 20,000
40,000
60,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Net SF Delivered & Absorbed
Net Deliveries Net Absorption
229
Item 5 A.

Retail
Delivery &
Absorption:

Santa Cruz
County
Net Retail Delivery & Absorption
Net Deliveries (SF Built) Net Absorption (SF Leased)
2019 21,658 11,038
2025 21,690 145,116
2029 (2,215) (3,510)
21,658 21,690
(2,215)
11,038
145,116
(3,510)
(150,000)
(100,000)
(50,000)
0 50,000
100,000
150,000
200,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Net SF Delivered & Absorbed
Net Deliveries Net Absorption
Long tail of business
closures post-COVID
32k sf Ross (Capitola Convenience Center)
34k sf Crunch Fitness (Freedom Centre)
230
Item 5 A.

Retail
Property
Sales
Market Pricing Trends – Retail Property Sales Price (/sf) Mid-County Submarket Santa Cruz County
2019 $408.14 $336.05
2025 $437.88 $360.36
2029 $502.00 $410.89
$408.14
$437.88
$502.00
$336.05 $360.36
$410.89
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Retail Property Sales Price /sf
Mid-County Santa Cruz County
231
Item 5 A.

Retail
Property
Sales
Market Pricing Trends Capitalization Rate
Mid-County Submarket Santa Cruz County
2019 5.6% 5.8%
2025 5.7% 5.9%
2029 6.1% 6.4%

5.6%

5.7%

6.1%

5.8%

5.9%

6.4%

5.2%

5.4%

5.6%

5.8%

6.0%

6.2%

6.4%

6.6%
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Capitalization Rate
Mid-County Santa Cruz County
Capitalization Rate is the anticipated annual return on investment on an investment property. 232 Item 5 A.

Retail
Property
Sales
Survey
$416.38
$374.31
$288.73
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
5-Mile Market Area Mid-County Submarket Santa Cruz County Average Retail Property Sales Price /sf
233
Item 5 A.
• Retail Surplus: Retail sales in an area
greater than the anticipated spending by area
residents. Customers are traveling into the
area to purchase this good/service.
• Retail Leakage: Retail sales in an area below
than the anticipated spending by area
residents. Customers demand is not being
met by existing establishments. Demand
exists in the area for businesses providing
this good/service.

Retail
Surplus/
Leakage
234
Item 5 A.
-$300,000,000
-$200,000,000
-$100,000,000
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
1 Mile Radius 3 Mile Radius 5 Mile Radius
Retail Sales Surplus (+) / Leakage (-)
Furniture & Home Furnishings Stores Electronics & Appliance Stores Bldg Materials, Garden Equip. & Supply Stores Food & Beverage Stores Health & Personal Care Stores Clothing & Clothing Accessories Stores Sporting Goods, Hobby, Book & Music Stores General Merchandise Stores Miscellaneous Store Retailers Food Services & Drinking Places Retail
Surplus/
Leakage
Source: Claritas
Local demand for
General Merchandise
stores (e.g. Costco,
Target) are being met
outside the market
area.
235
Item 5 A.

Retail Space Demand (sf)
1mi Radius 3mi Radius 5mi Radius
Furniture & Home Furnishing - 12,264 30,229
Electronics & Appliances - 22,179 39,995
Clothing & Accessories - 73,862 -
General Merchandise 112,468 539,762 -
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1mi 3mi 5mi
Retail Space Demand (sf)
Furniture & Home Furnishings Stores Electronics & Appliance Stores Clothing & Clothing Accessories Stores General Merchandise Stores Retail Leakage –
Space Demand
Source: Claritas
Highest demand is for General
Merchandise stores within 3-miles of
Capitola Mall.

This demand is met by a
Costco 3.7mi away in Santa
Cruz
Electronics & Appliances and Furniture
& Home Furnishings demand persists
236
Item 5 A.

Broker
Perspectives –
Market
Overview
• KMA reached out to over 20 brokers active in the local market area to gain insights into current and future commercial opportunities at the Mall. • Retail demand is modest Countywide– vacancies are low, but so are rents
• Santa Cruz County is perceived to be a seasonal market, with greater summer sales.
• The Mall is well-situated for redevelopment. 41st Ave is a regional retail destination that draws visitors from across the County.
• Local brokers are skeptical of retail demand at the site. • Brokers recommended mixed-use development with high residential density and some food service tailored to the site plan
237
Item 5 A.

Broker
Perspectives –
Retail Product
• Market demand greatest for small
space
• Unfortunately, small space is
financially more challenging to develop
• Limited interest from national and
regional tenants for large space.
238
Item 5 A.

Broker
Perspectives –
Tenant Types
• Food service is a highly desirable retail
use for the site.
• Development types demonstrating
potential include:
• Small cafes with outdoor seating
• Indoor/outdoor food hall with live
entertainment programming,
• Quick-serve restaurant.
239
Item 5 A.

Broker
Perspectives -
Challenges
• Mall area and County as a whole have
low daytime populations, which can
prove challenging.
• Smaller local tenants may not have
strong credit.
• Limited national/credit/larger scale
retail demand.
240
Item 5 A.

Broker
Perspectives –
Development
Patterns
• Hotel – Existing demand. Development
would support retail. Likely mid/select
service property type.
• Residential – The large number of
proposed residential units will support
retail at the site and across the region.
• Mixed-Use - Highest and best use for
the site, with many brokers citing
Santana Row as an example the site
could replicate.
241
Item 5 A.

Study Area –
CoStar
Santa Cruz /
Scotts Valley
Hospitality
Submarket
Source: CoStar
242
Item 5 A.

Study Area –
CoStar
San Jose / Santa
Cruz Hospitality
Market
243
Item 5 A.

Hotel
Performance –
Occupancy
Occupancy
2018 2022 2025
Santa Cruz/Scotts Valley Submarket 71.7% 64.1% 67.6%
San Jose/Santa Cruz Market 76.7% 62.6% 67.5%

71.7%

64.1%

67.6%

76.7%

62.6%

67.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%
2018 2019 2020 2021 2022 2023 2024 2025
Occupancy
Santa Cruz/Scotts Valley Submarket San Jose/Santa Cruz Market 244
Item 5 A.

Hotel
Performance –
Occupancy
Projection
Occupancy
2025 2029
Santa Cruz/Scotts Valley Submarket 67.6% 67.0%
San Jose/Santa Cruz Market 67.5% 66.0%

67.6%

66.0%

67.5%

67.0%

63.5%

64.0%

64.5%

65.0%

65.5%

66.0%

66.5%

67.0%

67.5%

68.0%
2025 2026 2027 2028 2029
Occupancy
Santa Cruz/Scotts Valley Submarket San Jose/Santa Cruz Market 245
Item 5 A.

Hotel
Performance –
ADR
Average Daily Rate (ADR)
2018 2022 2025
Santa Cruz/Scotts Valley Submarket $189.90 $204.34 $195.76 San Jose/Santa Cruz Market $196.60 $162.96 $181.71
$189.90
$204.34
$195.76
$196.60
$162.96
$181.71
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
2018 2019 2020 2021 2022 2023 2024 2025
ADR
Santa Cruz/Scotts Valley Submarket San Jose/Santa Cruz Market Average Daily Rate (ADR) is the average price guests pay per night for a hotel room. 246
Item 5 A.

Hotel
Performance –
ADR Projection
Average Daily Rate (ADR)
2025 2029
Santa Cruz/Scotts Valley Submarket $195.76 $199.00
San Jose/Santa Cruz Market $181.71 $189.00
$195.76
$199.00
$181.71
$189.00
$170.00
$175.00
$180.00
$185.00
$190.00
$195.00
$200.00
$205.00
2025 2026 2027 2028 2029
ADR
Santa Cruz/Scotts Valley Submarket San Jose/Santa Cruz Market 247
Item 5 A.

Hotel
Performance –
RevPAR
Revenue Per Available Room (RevPAR)
2018 2022 2025
Santa Cruz/Scotts Valley Submarket $136.16 $131.03 $132.36 San Jose/Santa Cruz Market $150.73 $102.06 $122.73
$136.16
$131.03 $132.36
$150.73
$102.06
$122.73
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
2018 2019 2020 2021 2022 2023 2024 2025
RevPAR
Santa Cruz/Scotts Valley Submarket San Jose/Santa Cruz Market Revenue Per Available Room (RevPAR) is calculated as follows: Average Daily Rate * Occupancy 248
Item 5 A.

Hotel
Performance –
RevPAR
Projection
Revenue Per Available Room (RevPAR)
2025 2029
Santa Cruz/Scotts Valley Submarket $132.36 $131.00
San Jose/Santa Cruz Market $122.73 $128.00
$132.36
$131.00
$122.73
$128.00
$112.00
$114.00
$116.00
$118.00
$120.00
$122.00
$124.00
$126.00
$128.00
$130.00
$132.00
$134.00
2025 2026 2027 2028 2029
RevPAR
Santa Cruz/Scotts Valley Submarket San Jose/Santa Cruz Market 249
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Hotel
Performance –
Submarket
Occupancy
Santa Cruz / Scotts Valley Submarket Occupancy
2018 2022 2025
All Hotels 71.7% 64.1% 67.6%
Luxury & Upper Upscale Hotels 69.1% 62.1% 68.2%
Upscale & Upper Midscale Hotels 75.6% 68.5% 71.5%

71.7%

64.1%

67.6%

69.1%

62.1%

68.2%

75.6%

68.5% 71.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%
2018 2019 2020 2021 2022 2023 2024 2025
Submarket Occupancy
All Hotels Luxury & Upper Upscale Upscale & Upper Midscale Luxury Hotels: Four Seasons, Ritz Carlton, St. Regis, Chaminade, La Bahia Upscale: Marriott, Sheraton, Hilton
Upper Midscale: Courtyard by Marriott, Fairfield Inn & Suites, Hotel Paradox
250
Item 5 A.

Hotel
Performance –
Submarket
ADR Santa Cruz / Scotts Valley Submarket ADR
2018 2022 2025
All Hotels $189.90 $204.34 $195.76
Luxury & Upper Upscale Hotels $231.63 $291.88 $267.81
Upscale & Upper Midscale Hotels $178.28 $176.87 $172.20 $189.90
$204.34
$195.76
$231.63
$291.88
$267.81
$178.28 $176.87
$172.20
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
2018 2019 2020 2021 2022 2023 2024 2025
Submarket ADR
All Hotels Luxury & Upper Upscale Upscale & Upper Midscale 251
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Hotel
Performance –
Submarket
RevPAR Santa Cruz / Scotts Valley Submarket RevPAR
2018 2022 2025
All Hotels $136.16 $131.03 $132.36
Luxury & Upper Upscale Hotels $160.00 $181.33 $182.59
Upscale & Upper Midscale Hotels $134.84 $121.14 $123.09 $136.16
$131.03 $132.36
$160.00
$181.33 $182.59
$134.84
$121.14
$123.09
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
2018 2019 2020 2021 2022 2023 2024 2025
Submarket RevPAR
All Hotels Luxury & Upper Upscale Upscale & Upper Midscale 252
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Event Space Trends
National
Metting Space per Guest Room Typical Total for a 150-room Hotel
Upper Upscale 50 – 75+ sq. ft 7,500 – 11,000+ sq. ft
Upscale 20 – 40+ sq. ft. 3,000 – 6,000 sq. ft
Upper Midscale 5 – 15 sq. ft 750 – 2,250 sq. ft.

Santa Cruz / Scotts Valley Submarket
Rooms Meeting Space (sf) Meeting Space (sf) /Room
Minimum 54 990 12
Median 128 2,600 23
(Weighted) Average 122 4,027 30
Maximum 178 9,210 72
Source: CBRE, EventPipe
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Event Space
Trends
• Meeting rooms are generally categorized by capacity, but physical footprint varies based on set-up (theater-style vs. boardroom)
• Boardroom (8-12 people): 250 – 400sf
• Upscale: Usually have permanent boardroom tables
and high-end AV.
• Upper Midscale: Often a “flex” room with a standard
table
• Small Breakout (20-40 people): 500 – 800sf
• Common in both segments for team training or small
workshops
• Large Meeting Room/Junior Ballroom (100-150
people): 1,500 – 2,500sf
• Found frequently in Upscale hotels. These are often
divisible by a “partition” wall
Source: Hotel Online
254
Item 5 A.

Findings
• Population is projected to contract
throughout the region.
• Capitola has high incomes, education
levels and median age
• The largest employment sectors
include Retail Trade, Accommodation &
Food Service, and Construction.
255
Item 5 A.

Findings
• Retail vacancy rates are healthy with
modest rents in the market area.
• Rents projected to increase 8% over
next five years, with vacancy rates
remaining stable
• Limited retail market area development
with 11,500 SF of new commercial
construction during past 5 years. The
market area is projected to see a net
loss of 5,700 SF of retail space by 2029.
256
Item 5 A.

Findings
• Three-mile retail leakage is
primarily General Merchandise
(Costco, Marshalls, World Market,
etc.).
• Five-mile shows no leakage, indicating
greater market is in balance.
• Mall repositioning will likely benefit
Target and additional general
merchandise on site is challenging.
257
Item 5 A.

Findings
• Food Service industry weathered
pandemic well and continues to
expand.
• Site residential will enhance demand
for Food Service (i.e. restaurants) and
Food & Beverage (i.e. grocery stores)
• Quantitative analysis and broker
feedback indicates challenging retail
environment.
258
Item 5 A.

Findings
• Opportunities likely limited to smaller
tenants, primarily food & beverage
• Modest amount of new retail demand for
site reflecting current and future market conditions.
• Retail demand likely ranges from 25,000 –
35,000 SF. Only 11,500 SF was delivered
over the past 5 years.
• Financial feasibility will be challenging
due to modest rents, non-credit tenants
and smaller spaces
259
Item 5 A.

Findings
• Average occupancy of higher quality
hotels (Upper Midscale+) in submarket
approaches 70%
• Average ADR of higher quality hotels
exceeds $200 per night with a $145
RevPAR
• Modest amount of meeting space in
local hotels.
260
Item 5 A.

Findings
• Without a brand or operator, hotel
performance is difficult to project.
• Assuming a strong operator and brand, a
hotel on Site could hypothetically exceed
market average
• Hypothetical performance assuming a
10% - 20% premium over the market area average would suggest a RevPAR of $165 to $180 per key with 25 – 30 SF of meeting
space per key
• Meeting space in hotels likely range from
25-30 SF per key, indicating up to 2,550 SF for an 85 room hotel and 3,900 SF for a 130 room hotel
261
Item 5 A.
262
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1 Herlihy, Katie ([email protected])
From: Kevin Maguire <[email protected]>
Sent: Wednesday, February 25, 2026 10:20 AM
To: Herlihy, Katie ([email protected]); Westman, Susan; Gerry Jensen; Goldstein, Jamie ([email protected]); Melinda Orbach; Clarke, Joe; Margaux Morgan; City Clerk
Subject: [PDF] Capitola Mall – Fiscal Balance, Retail Replacement, and Objective Standards Attachments: Capitola Comparison Table and ODS.pdf
Dear Mayor and Councilmembers,
Thank you again for the time and seriousness each of you has brought to the Mall zoning discussion.

After reviewing the City’s adopted budget, ACFR, prior 41st Avenue studies, and the recent staff reports, I would like to respectfully raise several structural questions that I believe are critical to long-term fiscal sustainability and balanced redevelopment. (@Katie how can we view the full Kosmot report and the Keyser Marsten reports)

1. Retail Replacement vs. “New” Retail Demand
The Mall site currently contains approximately 537,000 square feet of retail space in active use, supporting dozens of businesses and serving as a major regional sales tax generator. The Keyser Marston analysis references 25,000–35,000 square feet of new supportable retail demand along 41st Avenue.

There is currently 60 out of 77 potential business at the Mall right now. Excluding Sears/Spirt: 115,000; Macy's 101,000; Target 98,120; Kohls 75,000. Occupied space is 147,849. With about 40,000 square feet of available space.

Can the City clarify whether that figure was intended as incremental new demand in addition to existing supply, or as replacement for the current Mall footprint? If redevelopment reduces retail from over 500,000 square feet to a minimum of 35,000–40,000 square feet, that represents a profound shift in land use and revenue structure.

Given that sales tax comprises roughly 46% of General Fund revenues, the retail-to-residential balance is not simply a design issue — it is a structural fiscal issue.

2. Fiscal Modeling Transparency
Before final zoning standards are locked in, it would be helpful for the public to understand:
 Assumed rent levels and valuation assumptions for projected housing units  Estimated annual property tax yield per unit
 Sales tax projections under different retail replacement scenarios  Service cost assumptions tied to population growth
 Phasing assumptions for construction-related revenue shortfalls  20-year fiscal modeling scenario. Projected long-term fiscal impact at full buildout.  If Housing increase service demand, how will the city align revenue to avoid structual deficits?  Clarity on the 50% reduction in needed police resources? 264
Item 5 A.
2  Based on the City of Capitola regular employee salary chart, only the City Manager, some MidManagement, Chief of Police, and Department heads could afford Market rate rents.

The budget narrative notes future structural imbalances related to pension growth. It is therefore essential that Mall redevelopment strengthens, rather than destabilizes, the City’s long-term fiscal position. (pension growth and employment costs will continue to rise with more headcounts, inflation and trying to pay a quality wage)

3. Mixed-Use Balance and Phasing
If hotel and commercial uses are critical for fiscal resilience, are there phasing mechanisms that ensure meaningful commercial and hotel components are delivered alongside, rather than after, large residential phases?
Additionally, current conference space programming (4,000 sq ft | aprox. 65x60 feet ) appears modest relative to regional competitors such as The Grove at the Santa Cruz Boardwalk (20,000 sq ft). If the goal is meaningful TOT growth, this component may warrant reevaluation.

Comparison to Santana Row, with an equal footprint of 42 acres. is home to ~615 luxury rental apartments, ~219 privately-owned condominiums, more than 50 shops, ~30 restaurants, A movite theatre, Spas and salons. Santana Row functions as a walkable retail/dining hub, not just apartments above shops.

The Hotel Valencia Santana Row has ~215 rooms. And Office / Other User, there is ~ 1 million+ sq ft of office space in Class A buildings adjacent to Santana Row, which integrates daytime employment with retail and residential.

4. Objective Design Standards as Guardrails
With ministerial pathways likely to apply, objective standards become the City’s primary tool for shaping outcomes. Other California cities have used measurable standards to protect community character and fiscal balance. Capitola may wish to consider:
 Minimum average unit size requirements
 Required percentage of 2- and 3-bedroom units (see attachment)  Retail frontage and minimum commercial depth requirements  Mandatory plaza or public open space minimum square footage  Phasing triggers tied to infrastructure certification  Height step-backs above defined street edges
 Commercial heights of 18 feet floor to floor, maybe compromise on internal streets down to 14 feet. 18 Feet is the standard; many major restaurants and commercial spaces require 17-20 feet.

These standards must be measurable, clear, and legally defensible — but they are essential if the City is to guide this transformation responsibly.

Our goal is to understand housing compliance. And to ensure that redevelopment strengthens Capitola’s fiscal durability, preserves commercial vitality, and protects long-term service capacity. 265
Item 5 A.
3 This site will shape our City for generations. Thoughtful calibration now will prevent difficult consequences later.

As most of you know, I am born and raised here. My grandparents moved here in 1965. On my father's side, they have been in Santa Cruz since the 1940's. And I would love for my children to live here, my friends that are teachers to live here.

Thank you for your leadership and for continuing to engage in these complex issues.

Best,
Kevin Maguire
266
Item 5 A.

Visual Comparison Table
Current vs. Proposed Conceptual Scenarios
Category Current Mall Tier 2 (Conceptual) Tier 3 (Conceptual Upper Range)
Acres ~37–42 ~37–42 ~37–42
Retail Sq Ft ~537,000 25,000–40,000
minimum
35,000–40,000
minimum
Number of Retail
Businesses
59+ (more incl.
anchors) ~12–18 estimated ~15–20 estimated
Housing Units 0 ~1,200–1,400 ~1,700–2,000+
possible
Population Impact
(est.) N/A 2,000–3,000 3,000–5,000+ depending on mix
Conference Space N/A ~4,000 sq ft ~4,000 sq ft
Major Sales Tax
Driver Yes Significantly reduced Significantly reduced
Primary Revenue
Shift Sales tax dominant Property tax shift Property tax dominant “Sales tax = 46% of General Fund revenue”
267
Item 5 A.

Examples of Strong Objective Design Standards in California Here are real-world examples where cities used measurable standards in large redevelopment areas:

San Diego – Complete Communities
• Required minimum commercial frontage percentages
• Required minimum active-use ground floor depth
• Objective step-back requirements above certain heights • Affordable housing incentives tied to additional FAR
Mountain View – East Whisman Precise Plan
• Required minimum 10%–20% 2+ bedroom units in large projects • Required average unit size minimums in certain subareas • Retail frontage requirements along key corridors
• Measurable block-length maximums
San Jose – Urban Village Plans
• Ground floor commercial depth minimums (e.g., 50 feet) • Required pedestrian paseo spacing
• Measurable façade articulation intervals
• Minimum public open space square footage per unit
Santa Monica – Downtown Community Plan
• Required percentage of family-sized units
• Height step-backs triggered at defined feet
• Mandatory ground-floor transparency percentages
Redwood City – Downtown Precise Plan
• Required hotel incentives tied to additional height
• Retail activation requirements along primary streets
• Maximum building length before façade break
268
Item 5 A.

How Capitola Could Adapt This

1. Unit Mix (Objective + Measurable)
• Minimum 25% of units must be 2+ bedrooms
• Minimum 10% must be 3-bedroom units
• Minimum average unit size of 850–900 sq ft (if legally vetted) This controls population density per acre without reducing unit count.

2. Affordable Housing Lever
• Require higher affordability percentage for 100% residential projects • Offer height/FAR bonus only if hotel or meaningful commercial included Tilt economics toward mixed-use.

3. Retail Protection
• Minimum commercial square footage per phase
• Ground floor commercial depth of 40–60 feet on primary streets • Required active frontage on at least 60–75% of perimeter

4. Phasing Triggers
• Infrastructure certification before occupancy of each 300–500 unit increment • Commercial delivery before final residential phase
• Public safety staffing ratio trigger

5. Building Form Controls
• Step-back above 55–65 feet on perimeter streets
• Maximum building length before 40–60 foot articulation break • Minimum public plaza of X square feet per acre
269
Item 5 A.

Mayor Morgan & Council Members
Capitola City Council
420 Capitola Ave,
Capitola, CA 95010
March 11, 2026
Dear Mayor Morgan & Councilmembers,
On behalf of the over 8,500 hospitality members of UNITE HERE Local 19 and the 60,000 members of the Monterey/Santa Cruz Building and Construction Trades Council, we write to express the importance of ensuring responsible development in the Capitola Mall Development Project. Our members are excited about a project that can respond to the housing crisis and bring more economic development and tax dollars to Capitola. However, we urge the Council to hold off on approving the proposed Zoning Code Amendments on Monday, March 16th as there are still many conversations to be had regarding how this development will be beneficial to the community and the City.

As the City prepares to enact significant changes to its Zoning Code, it risks depriving itself of the tools that are currently in place to ensure responsible development of hotels. One critical concern with the proposal is that it would make hotels permitted by right, eliminating the conditional use permit requirement.

The current conditional use permit requirement allows the City Council to ensure consistency with the general plan and attach conditions of approval to achieve that.1 It also allows for community engagement with the public hearing requirement and maintains necessary oversight to make sure that hotel developments would not be “detrimental to the public health, safety, and welfare.”2 These existing requirements were set in place to ensure responsible hotel development in Capitola. This is especially important because hotels potentially bring significant numbers of low-wage jobs to the city and increase the already-high demand for affordable housing.

The proposed Zoning Code Amendments go beyond the stated goal of supporting housing, providing significant incentives for a hotel while also stripping away the City’s current permitting oversight. These revisions were made for “increased flexibility for Hotel development” in response to comments from the property owner and the City’s desire to 1 17.124.070. Findings for Approval. Chapter 17.124 USE PERMITS, Capitola Municipal Code. https://www.codepublishing.com/CA/Capitola/#!/Capitola17/Capitola17124.html#17.124 2 Ibid.
270
Item 5 A.
incentivize hotel development.3 The proposal includes many incentives for hotel development, including the higher allowed FAR and the more than doubling the maximum height.4 Given these aforementioned incentives, it is not necessary for the City to impose further restrictions on its own power to ensure responsible hotel development by eliminating its conditional use permitting for the hotel, all while maintaining conditional use for residential development. Staff cited that maintaining the residential conditional use will “enable the City to ensure a mall redevelopment project that complies with objective standards and CEQA and minimizes potential community impacts.”5 Why should these standards not be applied to hotel development in the Zoning Update?
We ask the City Council to hold off on passing the current proposal until conversations have been had about how this development will be beneficial for the community, including with the hotel’s permitting. The developer has not yet submitted a proposal for the hotel, so reducing its permitting requirements as an incentive without knowledge of what the hotel proposal is would risk streamlining the process of careless hospitality development.

The current Zoning Code Amendment proposal should be adjusted so that hotel use continues to require conditional use permits, allowing the City to continue working towards community-oriented development in Capitola. The city should retain its discretion in considering the impacts of hotel development on the community. If the City is to allow a hotel project, it should require a study to ensure that it will not create a negative impact on the community or exacerbate the shortage of affordable housing.

We recognize that the hotel development is important to the City’s budget and we are aligned with City goals of developing a project that is beneficial for the City, the community, and the workers at this project. We hope you will take the time on Monday to maintain strong guardrails to ensure that the future project is consistent with this goal. We are happy to work with you and the developer before then to continue this conversation.

Thank you.

Sincerely,
3 Special City Council Meeting Packet. February 23, 2026, pg. 29, https://mccmeetings.blob.core.usgovcloudapi.net/capitolaca-pubu/MEET-Packetf6877abf2c3f421784777cab1a307b39.pdf 4 Ibid. Pg. 27 & 53.
5 Special Planning Commission Meeting Agenda. October 30, 2025, pg. 14 https://mccmeetings.blob.core.usgovcloudapi.net/capitolaca-pubu/MEET-Packetc57df39de501436788b0c69c9c743eff.pdf 271
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Enrique Fernandez
Business Manager
UNITE HERE Local 19
Casey Van Den Heuvel
Chief Executive Officer
Monterey/Santa Cruz Building and
Construction Trades Council
272
Item 5 A.

Capitola Mall Zoning Code Amendments
City Council
March 16, 2026
273
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 ▪ Part 1: Project Background
▪ Part 2: Additional information on:
– Merlone Geier Partners 2/23/2026 letter
– Merlone Geier Partners 3/15 letter
– Items identified by City Council on 2/23/2026 meeting Presentation Overview
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CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 What is a Housing Element?
Long range plan which identifies:
▪ Housing Needs
▪ Housing Constraints
▪ Goals, Policies, and Objectives
▪ Housing Programs
▪ Sites Inventory
275
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 ▪ Updated Housing Element adopted 2024
▪ Housing Element programs require Zoning Code
Amendments
▪ Zoning Code amendments: adopted in 2024
▪ Residential Multifamily (RM) zone amendments:
adopted in September 2025
▪ Mall Zoning Code amendments: in process
Housing Element Background
276
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Capitola Mall Zoning Amendments:
▪ Align with Housing Element Sites Inventory
▪ Implement Program 1.7 (Shopping/Commercial
Center Redevelopment)
Housing Element Background
277
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CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 ▪ The Housing Element must identify adequate sites to
accommodate regional housing needs allocation (RHNA)
for 8-year planning period
▪ Capitola’s 2023-2031 RHNA:

Housing Element Sites Inventory
Income Level Percent of Area
Median Income
RHNA
Units Percent
Extremely Low Up to 30% 215 16%
Very Low 31% to 50% 215 16%
Low 51% to 80% 282 21%
Moderate 81% to 120% 169 14%
Above Moderate More than 120% 455 34%
Total - 1,336 -
278
Item 5 A.
2023-2031 Housing Element
Sites Inventory Map
Identified Site
279
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Sites Inventory
Location Housing Units
Entire Block 1,777
MGP Properties 1,126
Housing Element Sites Inventory
280
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Housing Element
Programs 1.6 & 1.7

1. Develop land use policies to facilitate shopping center redevelopment with a strong sense of urban design cohesion

2. Establishes Capitola Mall as all properties between Clares St, 41st Ave, and Capitola Rd.

3. Building height up to 75 feet for Mall Redevelopment

4. Define “Mall Redevelopment” to mean a mix of uses
including residential and retail/commercial components

5. Exclude parking garages from project FAR calculations

6. Adopt objective development standards to facilitate mall redevelopment
Requirements
281
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 By-Right Approvals
▪ SB 35 (2017)
▪ AB 2011 and SB 6 (2023)
Other Limitations
▪ Housing Accountability Act
▪ Housing Crisis Act (SB 330, 2019)
▪ Builder’s Remedy
State Housing Laws Requirements
282
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 ▪ Municipal Code Title 17: Zoning Code
▪ General Plan Land Use Element
Current Amendments
283
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 ▪ October 23 City Council reviews workplan
▪ September 11 City Council adopts modified streamlined workplan ▪ October 2 Planning Commission (PC) Work Session
▪ October 8 Community Meeting
▪ Oct & Nov Stakeholder Meetings
▪ October 30 PC Work Session
▪ Nov 19 PC Work Session – Partial draft
▪ December 4 PC 1st Draft
▪ February 5 PC 2nd Draft – Recommend to CC
▪ February 23 CC 1st Draft - Continued
▪ March 16 CC 2nd Draft
Meetings & Public Outreach
2026 2025
284
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Land Use Element Amendment
▪ Mall property has maximum FAR of 2.0 for
residential and mixed-use development in
compliance with objective standards.

General Plan Amendment
285
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 ▪ Merlone Geier Partners 2/23/2026 letter
▪ Merlone Geier Partners 3/15 letter
▪ Items identified by City Council on 2/23/2026 meeting Presentation Part 2
286
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Deviations
and Density
Bonus
Density
Calculation
Internal Street
Requirements
Street
Frontage
Improvements
Existing
Parking Lots
Hotel Street
Presence
Project
Phasing
Perimeter
Zone
Tiers
Ground Floor
Commercial
Height
Bike Lanes
MGP 2/23 Comment Letter
287
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Tiers
289
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Tiers 1
100% Housing Development
No Commercial
Must be allowed on Regional Commercial site
pursuant to California State Law
290
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Tiers 2 & 3
Zoning
Incentives
Community
Benefits
Retail
Meeting Space
Hotel
Housing
Parking
Density
Floor Area
Height
291
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Tiers
Tiers 1 2 3A 3B
All PC MGP SW PC MGP PC MGP SW
Min. Density
(du/ac)
20 20 20 20 20 20 20 20 20
Max Density
(du/ac)
48 48 48 53 53 53 53 53 53
Perimeter Zone
41st Ave. (ft) 125 125 75 75 125 75 125 75 125
Capitola Rd. (ft) 125 125 75 75 125 75 125 75 125
Clares St. (ft) 125 125 125 125 125 125 125 125 125
Perimeter
Height 55 65 75 65 65 75 65* 75 55
Core Height 75 75 85 85 85 85 85 85 85
Open Space 5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Affordable
Housing
20% 20% 20% 20% 20% 20% 20% 20% 20%
Commercial sf 0 30k 25k 35k 40k 35k 200k 200k 200k
Hotel Rooms 0 85 85 120 125 120 0 0 0
Meeting Space sf 0 3k 2.5k 4k 4k 4k 0 0 0
292
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Tiers Tiers 1 2 3A 3B
All PC MGP SW PC MGP PC MGP SW
Min. Density
(du/ac)
20 20 20 20 20 20 20 20 20
Max Density
(du/ac)
48 48 48 53 53 53 53 53 53
Perimeter Zone
41st Ave. (ft) 125 125 75 75 125 75 125 75 125
Capitola Rd. (ft) 125 125 75 75 125 75 125 75 125
Clares St. (ft) 125 125 125 125 125 125 125 125 125
Perimeter
Height 55 65 75 65 65 75 65* 75 55
Core Height 75 75 85 85 85 85 85 85 85
Open Space 5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Affordable
Housing
20% 20% 20% 20% 20% 20% 20% 20% 20%
Commercial sf 0 30k 25k 35k 40k 35k 200k 200k 200k
Hotel Rooms 0 85 85 120 125 120 0 0 0
Meeting Space sf 0 3k 2.5k 4k 4k 4k 0 0 0
293
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Minimum Hotel & Meeting Space
Tiers 1 2 3A 3B
All PC MGP SW PC MGP PC MGP SW
Hotel Rooms 0 85 85 120 125 120 0 0 0
Meeting Space 0 3k 2.5k 4k 4k 4k 0 0 0
KMA - Capitola Mall Retail and Hotel Market Overview:
• Hotel may exceed market average revenues with a strong operator and brand
• No recommendation on specific room count
• 85-room hotel - typical and likely supported by market demand • 25 – 30 sf of meeting space per hotel room
294
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Minimum Hotel & Meeting Space
Tiers 1 2 3A 3B
All PC MGP SW PC MGP PC MGP SW
Hotel Rooms 0 85 85 120 125 120 0 0 0
Meeting Space 0 3k 2.5k 4k 4k 4k 0 0 0
Hotel Rooms Meeting Space Supported by KMA*
85 2,125 – 2,550
120 3,000 – 3,600
125 3,125 – 3,750
*25 – 30 sf of meeting space per hotel room
295
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Minimum Commercial Area
Tiers 1 2 3A 3B
All PC MGP SW PC MGP PC MGP SW
Commercial
Minimum sf
0 30k 25k 35k 40k 35k 200k 200k 200k
KMA - Capitola Mall Retail and Hotel Market Overview:
• Mall properties continue to have strong redevelopment potential • Residential & hotel help overall retail environment within block • Retail demand strongest in food and beverage, smaller tenants • New retail development between 25,000 and 35,000 sf
296
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Fiscal Analysis
297
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Fiscal Impact Analysis $
Estimates incremental change to City revenues and
expenditures generated by development application
Tool for City to understand impacts and plan mitigation to offset any projected negative fiscal impact
100% Affordable Developments exempt from FIA
Cannot be used as basis to deny or reduce density
298
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Why is City Considering
Fiscal Impacts?
299
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Tiers – Fiscal Analysis
Tiers 1 2 3A 3B
All PC MGP SW PC MGP PC MGP SW
Max Density
(du/ac) 48 48 48 53 53 53 53 53 53
Units 1,256 1,256 1,256 1,326 1,326 1,326 1,326 1,326 1,326 Commercial 0 30k 25k 35k 40k 35k 200k 200k 200k
Hotel Rooms 0 85 85 120 125 120 0 0 0
Meeting Space 0 3k 2.5k 4k 4k 4k 0 0 0
Revenue .5M 1.5M 1.4M 1.9M 2.0M 1.9M 2.0M 2.0M 2.0M
Cost 1.2M 1.2M 1.2 1.5M 1.3M 1.3M 1.3M 1.3M 1.3M
Economic
Impact -750k 300k 200k 500k 700k 600k 700k 700k 700k
300
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Fiscal Analysis: Tier 2
▪ Mall Revenue $1.5M
Sales Tax, TOT, Property Tax,
Motor Vehicle In Lieu, Gas Tax,
Secondary Economics, etc.
▪ Mall Expenditure $1.2M
2019 cost per person ($785)
with decrease demand for
Police and Public Works,
adjusted for inflation
▪ Net Fiscal Impact $270k
2019 FIA (Kosmont) Cost: $785
Less 50% Police & 75% Public Works: $504
Plus 29% Inflation
2026 Updated Cost $650:
$1,225,509
1,966,830
- 470,552
$1,496,277
New Revenue
- Lost Existing Revenue
Net Revenue
1,496,277
- 1,225,509
$270,768
301
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 PC Tier 2 Fiscal Analysis:

Household Size
Household Size (1.5 persons)
- Net new Revenue $1.5 million
- New Expenditures: $1.2 million
- Net impact: $270k
Household Size (2.1 persons)
- Net new Revenue $1.67 million
- New Expenditures: $1.71 million
- Net impact: -$40k
Changing
household size
by 0.6 people
impacts net
project impacts
in each Tier by
approximately
-$300k
302
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Example allocations of additional
Tier 2 Mall $1.5M model revenue
Shown for example purposes only - not specific staffing proposals. Future decisions regarding service levels would be subject to future City Council action, City service needs, and actual City revenues
▪ 50% increase in Police patrol force, or
▪ 100% increase Public Works Crew, or
▪ Mix of new Officers, PW Crew and outreach
staff
303
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Perimeter Building Height
304
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Perimeter Building Heights
Core
Area
Perimeter Zone 75 ft
Perimeter Zone 125 ft
Perimeter Zone 75 ft.

Perimeter Zone 125 ft
Perimeter Zone:
125 feet from
Clares St
75 feet from
41st Avenue
Capitola Rd
305
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Perimeter Building Heights
Tiers 1 2 3A 3B
All PC MGP SW PC MGP PC MGP SW
Perimeter
Height
55 65 75 65 65 75 65* 75 55
Core
Height
75 75 85 85 85 85 85 85 85
MGP: Request to increase perimeter height to 75 feet
306
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Perimeter Building Heights
307
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 75 feet
Perimeter Building Heights
308
Item 5 A.

Tier 1: 55 feet
Tier 2 & 3: 65 feet
309
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Ground Floor Commercial
310
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Ground Floor Commercial
MGP: Reduce ground floor height, measured floor to
floor, for non-restaurant and hotel uses to 16 feet
Original Code: 18 feet floor to floor minimum
Intent of High Ceilings:
▪ Flexibility of Tenant Space
▪ Market Competitiveness - Retailer specifications
▪ Natural light and better storefronts to attract and
retain quality tenants
▪ Expect less commercial but require higher quality
311
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Ground Floor Commercial
Structural Floor
Mech/Elec/Plumbing
Finish Ceiling
18’ Floor to Floor
16’ to Bottom of Structure
312
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Ground Floor Commercial
Section: 17.57.050.F.2.c.1 (Ground Floor Height)
c. Commercial Ground-Floor Design (Excludes Hotels). The following standards apply to both vertical mixed-use and stand-alone commercial buildings.
(1) Ground Floor Height. For all required new commercial space required for a Tier 2 or Tier 3 project, the ground level shall have minimum 16 feet clear from the ground floor to the bottom of the structure above. See Figure 17.57-9. This minimum ground floor height standard does not apply to commercial space provided in excess of the required new commercial minimum.
313
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Bike Lanes
314
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Bike Lanes
MGP: Allow sharrows throughout project
Draft: Bike lanes required on all internal streets,
except sharrows allowed in front of commercial uses.
315
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Bike Lanes
46 acre block / 31.5 owned by MGP
Today: No streets, no bike lanes, no housing
In future: Most dense neighborhood in Capitola
General Plan “As a long-term vision for Capitola Mall,
support the addition of a new interior street within
the mall property lined with sidewalk-oriented retail,
outdoor dining, and pedestrian amenities. This new
street should be connected with the existing street
network surrounding the Mall property to enhance
mall access for all modes of transportation”
316
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Bike Lanes
Staff Recommendation:

No changes to Planning Commission
recommendation.
▪ Continue to require bike lanes on new internal
streets.
▪ Limit sharrows to areas in front of commercial
only.
▪ Deviation section of code would apply and provide
flexibility if warranted.
317
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Bike Parking
Required Bicycle Parking
Land Use Short-Term Spaces Long-Term Spaces
Multifamily
Dwellings and Group
Housing
10% of required
automobile spaces;
minimum of 4 spaces
1 per unit
Nonresidential Uses 10% of required
automobile spaces
1 per 20 required
automobile spaces for
uses 10,000 sf or
greater
Long Term Parking – Must be secured.

Secured: Storage room, fenced area with gate, viewed by attendant or security camera, visible from employee work area. 318
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Bike Parking
Staff Recommendation: Review multifamily bike
parking requirements citywide with next zoning code
updates.
319
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Project Phasing
Step 1:

Deed restrict on parcel w hotel and/or commercial
Step 2 Options:
▪ Certificate of Occupancy Phasing, OR
▪ Annual fee payments
320
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Project Phasing
Option 1: Certificate of Occupancy Phasing
Phase Building Permit Timing
1 First Multifamily Residential Building Permit Upon Entitlement 2 First Multifamily Residential Certificate of
Occupancy and/or
Second Multifamily Residential Building Permit
Issuance
Upon issuance of
building permit of Tier
2 qualifying
hotel/commercial
3 Second Multifamily Residential Occupancy With Tier 2 or Tier 3 qualifying hotel
and/or commercial
certificate of
occupancy
321
Item 5 A.

CAPITOLA MALL ZONING CODE AMENDMENTS CITY COUNCIL – 02/23/2026 Project Phasing
Option 2: Annual Fee Payments
(1) Tier 2 or Tier 3 project enter a contract to pay an annual fee to the City per market rate unit for
which a Certificate of Occupancy has been issued.
(2) Fee amount calculated during the entitlement
within the Fiscal Impact Analysis in a form
approved by the City Attorney.
(3) First payment due one year after the issuance of
Certificate of Occupancy, and annually thereafter.
322
Item 5 A.

Staff Recommendation:
1) Adopt a resolution amending the General Plan Land
Use Element;
2) Introduce for first reading, by title only, waiving
further reading, an ordinance amending Capitola
Municipal Code Title 17: Zoning; and
3) Adopt a resolution authorizing submittal to the
California Coastal Commission for the certification of
an amendment to the Local Coastal Program.
323
Item 5 A.

Capitola City CouncilMarch 16, 2026

Capitola City Council
March 16, 2026