DATE: April 19, 2022
TO: Christine Daniel, City Manager
FROM: Charles S. Bryant, Community Development Director SUBJECT: Study Session – Marketplace Redevelopment Project Parcels A, B And F
RECOMMENDATION
Staff requests that the City Council consider this staff report and provide input by responding to the questions posed under the section “Issues to be Considered”.
BACKGROUND
Marketplace PUD/PDP
On August 5, 2008, the City Council approved the Marketplace Redevelopment Project Planned Unit Development /Preliminary Development Plan (PUD/PDP). Between February 2015 and June 2016, the Planning Commission approved a number of Final Development Plans (FDPs) and a subdivision map to allow for a grocery store (Parcel C1); realignment of Shellmound Street; creation of 62nd Street, 63rd Street, and Market Drive; construction of three residential buildings (Parcel A, Parcel C2, and Parcel D); a parking structure with ground floor retail (Parcel B); and the redevelopment and expansion of Christie Park (Parcel E).
The grocery store building (Parcel C1) and the realignment of Shellmound Street and creation of 62nd and 63rd Streets and Market Drive, two residential buildings (Parcel C2 and Parcel D), and Christie Park are now complete.
The last set of approvals were completed for Parcel B. The first FDP (FDP5-001) for Parcel B was originally approved on June 23, 2016, which accommodated parking with ground floor retail. This parking garage was to provide parking for existing commercial uses that have been served by previous surface parking lots (Parcel C) and are being served by existing surface parking lots (Parcel A). Subsequently, the applicant proposed to replace this FDP for Parcel B with a new FDP to accommodate 150,000 square feet of Research and Development (office/lab) space in addition to ground floor retail space and 565 parking spaces (FDP18-001). This was approved by the Planning Commission at its January 24, 2019, meeting, thereby rescinding FDP15-001 previously approved in 2016. This decision was appealed by Wareham Development. On January 21, 2020, after a year of project modifications and hearings, the City Council then approved a slightly different proposal accommodating the same amount of office/lab space.
The one remaining site in the PUD/PDP without an approved FDP is Parcel F, at the northwest corner of Shellmound Street and Shellmound Way. The PUD/PDP calls for this to be developed with a one-story, 3,500 square foot retail pad. No FDP application for this site has previously been submitted or approved.
Existing Entitlements at Marketplace Parcels A, B, and F. Currently there are two existing entitlements at the Marketplace that have not yet been built: a residential project accommodating 167 units on Parcel A, and a Research and Development building accommodating 150,000 square feet of office/lab uses with 15,700 square feet of ground floor retail space, and 500 parking spaces on Parcel B. As stated above, there are no entitlements for Parcel F beyond the PUD/PDP.
It should be noted that the PUD/PDP shows a residential tower on Parcel A (then called the “Shellmound Building”) above ground floor retail, but the conditions of approval allow this to be converted to other permitted uses, including Research Services (i.e. Research and Development). However, Condition III.A.1.d. stipulates that “(i)f the Shellmound Building tower is not residential, then FDP shall include at a minimum 10 townhomes above the retail in the general location shown on the Plans.” Thus, the PUD/PDP requires Parcel A to contain a minimum of 10 residential townhouse units. The existing entitlement for 167 residential units on Parcel A fulfills this requirement.
Development Agreement
On December 1, 2015, the City Council adopted Ordinance No. 15-010, approving a Development Agreement (DA) for the Public Market Project (also known as the Marketplace Redevelopment Project). The DA had previously been reviewed and recommended for approval by the Planning Commission on June 25, 2015.
The DA covers a variety of topics, one of which is affordable housing. Specifically, Section 7.1 of the DA stipulates that Parcel A shall include 18 affordable units, including eight low-income units and ten moderate income units. This requirement was based on 11% of the 167 dwelling that were approved to be constructed on Parcel A.
In addition, Section 7.1 of the DA further states that “(u)nless the City finds compelling reasons to the contrary, the affordable units shall be dispersed throughout the development, the mix and type of affordable units shall be proportionate to those of each individual parcel, and the affordable units shall be comparable with the design of the base level market rate units in terms of appearance, materials and quality of finishes.” Combining this DA requirement and the PUD/PDP requirement mentioned above, Parcel A is required to contain at least 18 affordable residential units, and at least 10 townhouse units. There is nothing in either the DA or the PUD/PDP to prevent these requirements from being combined so that the 18 affordable units could include the 10 townhouses, with the remaining eight units being apartment flats. As noted above, eight of the affordable units must be affordable to low-income households, and ten must be affordable to moderate income households. In addition, these 18 affordable units are intended to be dispersed with market rate units on Parcel A.
Change in Ownership
The Marketplace PUD/PDP was sold to New York-based Oxford Properties in the spring of 2021. On April 9, 2021, the new owners of the Marketplace site applied for a new FDP to replace the existing entitlements on Parcels A and B and provide for development on Parcel F. This proposed FDP (FDP21-001) includes three buildings on Parcels A and B comprised of an eight-level 322,744 square foot Research and Development building, a four level, 83,434 square foot Research and Development building with 7,460 square feet of ground floor retail space, and a seven-level parking garage accommodating 883 parking spaces. In addition, 18 affordable residential units are proposed on Parcel F.
This new FDP proposal was reviewed by the Planning Commission on October 28, 2021, followed by a City Council study session on November 2, 2021. (See Attachment 1 for excerpts from these FDP plans.) City Council Study Session Comments
In general, the City Council expressed support for the architecture and the proposed connection to the pedestrian bridge over the railroad and offered suggestions to improve bicycle and vehicle flow, including protective bollards that would prevent people from parking on the delivery lane. However, the City Council also expressed concern about the lack of housing units proposed compared to the currently entitled project and questioned the appropriateness of Parcel F for a residential project.
During the November 2, 2021 study session, the applicant indicated that construction of the previously-entitled 167-unit residential project is not economically feasible at this time, and, in acknowledgement of the City’s need for affordable housing, suggested a potential contribution to the City for affordable housing in lieu of providing the proposed affordable units at Parcel F, and suggested the amount of this contribution could be $12,600,000. The City Council expressed openness to discussing this concept further and directed staff to negotiate the amount of a potential monetary contribution from the applicant.
Wareham Comment Letter
This study session was originally scheduled for April 5, 2022. On the evening of April 4, 2022, attorney Matthew D. Francois of Rutan & Tucker, LLP, on behalf of their client Wareham Development, submitted a comment letter on the project (“Wareham Letter”). Staff requested that the City Council continue the study session to April 19, 2022 to provide staff an opportunity to review and consider the points raised in the Wareham Letter, and the Council agreed to do so. Upon review, it appears that the points raised in the Wareham Letter are similar to the arguments raised in their previous 2019 appeal of the Research and Development building on Parcel B (FDP18-001). The Wareham Letter also alleges that the proposal “violates the State Housing Crisis Act and related laws that prohibit a local agency from eliminating housing from or downzoning sites where housing is an allowable use.” The “zoning” of the site is the PUD/PDP, which allows development of up to 674 residential units, of which 482 have now been built. The PUD/PDP does not mandate any particular minimum or maximum density or number of units for individual parcels, nor does it mandate the construction of any housing on any particular site, except for the 10 townhouse units required to be included on Parcel A, as noted above. Applicant’s proposal does not change the zoning (which still allows “up to 674 units”), but it will require a PUD/PDP amendment to move the 10-unit townhouse requirement to Parcel F. Accordingly, the residential capacity within the PUD/PDP will remain the same. The overall “zoning” will remain “up to 674 units,” and the requirement for 10 townhouses will be preserved as well. The project thus would not result in a net loss of potential housing units (see further discussion below under “Preliminary Development Plan Modifications”).
DISCUSSION
Since the November 2, 2021, City Council study session, staff has engaged the applicant to negotiate a potential monetary contribution in lieu of providing the 18 affordable units required by the DA.
In addition to the Affordable Housing Impact fee required under current regulations ($1,997,872), Oxford is now proposing an additional payment of $15,002,128 to be made to the City’s Affordable Housing Fund, for a total of $17,000,000. Of the $17,000,000; $1,997,872 would be paid at building permit issuance and $15,002,128 would be paid prior to the issuance of the first Temporary Certificate of Occupancy for the proposed research and development buildings. The table below outlines the components of the fees and contributions proposed by the applicant:
Required Affordable Housing Impact Fee
Use
Proposed Sq. Ft.
Fee per Sq. Ft.
Subtotal
Research & Development
406,178
$4.83
$1,961,840
Retail
7,460
$4.83
$36,032
Additional Contribution
$15,002,128
TOTAL
$17,000,000
In total, the applicant’s proposed contribution to the City’s Affordable Housing Fund would equate to nearly nine times the amount of Affordable Housing Impact fees that would normally be required for the research and development/retail project proposed for Parcels A and B.
If the applicant were to build the previously entitled residential project on Parcel A, including affordable units as required by the DA, no affordable housing impact fees would be required for that project. If the applicant were to build a 167-unit market-rate residential project on Parcel A without any affordable units, the Affordable Housing Impact Fee for that project would be $31,823 per unit, or $5,314,441. At 167 units, the applicant’s additional payment of $15,002,128 calculates to $89,833 per unit, or 2.8 times the current fee if 167 market-rate residential units were to be built on Parcel A.
Using construction cost data from similar projects, staff estimates that the applicant’s cost to construct the 18-unit residential building would be $11,090,000, inclusive of soft costs and fees.
In summary, the applicant proposes to pay the Affordable Housing Impact Fee as required for the Research and Development Project, which is required by the City in order to mitigate the impact of adding employees and their attendant demand for affordable housing.
Further, the applicant proposes to pay an additional $15,002,128 in exchange for the City agreeing to amend Section 7.1 of the DA to remove the requirement that Parcel A shall include 18 affordable units. The City Council is asked to provide feedback to the applicant and staff on these proposals.
Development Agreement and Preliminary Development Plan Modifications Development Agreement Modifications. The DA and PUD/PDP will require amendments to accommodate the changes described above. Specifically, Section 7.1 of the DA identifies Parcel A as the site of a residential building and requires 8 low- and 10 moderate-income affordable housing units, which represent 11% of the total 167 units previously proposed for Parcel A. The DA would need to be modified to show no residential development at Parcel A, and to provide for a monetary contribution as outlined above. Pursuant to Section 10.2 of the DA, any changes that relate to permitted uses of the property or monetary contributions by the Developer shall be deemed a “Major Amendment” of the DA.
Preliminary Development Plan Modifications. In addition, the reference to a minimum of 10 townhomes in Condition III.A.1.d. of the PUD/PDP will need to be modified. As noted above, this condition stipulates that “If the Shellmound Building tower is not residential, then FDP shall include at a minimum 10 townhomes above the retail in the general location shown on the Plans.” To ensure that the project does not result in a net loss of potential housing units, the requirement for 10 townhouse units should be moved from Parcel A to Parcel F. To accomplish this, the condition could be reworded as follows: “If the Shellmound Building tower is not residential, then FDP shall include at a minimum of 10 townhomes above the retail in the general location shown on the Plans shall be included on Retail Pad #1.” (“Retail Pad #1” was how the PUD/PDP referred to what is now called “Parcel F”.) Note that this would not require construction of housing on Parcel F at this time, or as part of the currently proposed FDP, but would preserve the ability to construct at least 10 units of housing on Parcel F in the future.
Both a Major Amendment to the DA, and an amendment to the PUD/PDP, require passage of ordinances, which require notice and public hearings before the Planning Commission and City Council.
ISSUES TO BE CONSIDERED
Does the City Council agree with the proposal to amend the PUD/PDP to transfer the requirement for 10 townhomes from Parcel A to Parcel F? Does the City Council agree with the applicant’s proposal to pay $15,002,128 in exchange for removing the DA requirement to construct 18 affordable units on Parcel A? Fiscal Impact
This study session has no direct fiscal impact. If the City Council is interested in the applicant proceeding with a project that includes the proposed monetary contribution in lieu of developing affordable housing on Parcel A, the City would receive $1,997,872 in Affordable Housing Impact Fees and $15,002,128 to the City’s Affordable Housing Fund prior to issuance of a Temporary Certificate of Occupancy for the first Research and Development building developed as part of this FDP.
CONCLUSION
After hearing a presentation from the applicant and receiving public comment, staff requests that the City Council provide input on the issues noted above and any other issues identified by the Council.
PREPARED BY: Miroo Desai, Senior Planner
Chadrick Smalley, Economic Development and Housing Manager.
APPROVED AND FORWARDED TO THE
CITY COUNCIL OF THE CITY OF EMERYVILLE:
________________________
Christine Daniel, City Manager
ATTACHMENTS:
1. Excerpts from September 2, 2021 FDP Plans
2. Wareham Comment Letter Dated April 4, 2022
Study Session - Marketplace Parcels A, B and F
City Council Meeting | April 19, 2022
City of Emeryville
CALIFORNIA
MEMORANDUM