Property rezoned for townhome project

Even though city hall and developers agree that a nearly four-acre empty lot just outside the downtown Morgan Hill boundary should be developed, and a builder is ready to start the construction process, the city’s strict growth control and affordable housing policies might prevent that from happening any time soon. 

The city council voted unanimously Wednesday to grant a rezoning for the property at the corner of West Dunne Avenue and Church Street to allow a planned development. The developer of the property, City Ventures, plans to build a 43-unit housing development which includes 35 attached townhomes and eight detached small-lot homes. 

Council member Rich Constantine said based on tentative plans presented at the meeting Wednesday the project appears to be “a model” development for that area, but he and other council members did not want to violate the affordable housing exemption policy they enacted over a year ago. 

The property is empty and overgrown with grass. It is bound by Dunne Avenue, Church Street, Myrtle Avenue and the Southern Pacific railroad tracks. 

What the council did not approve, however, was a request by the developer to extend the deadline by which the builder must start construction, and take advantage of a waiver of the builder’s affordable housing requirements. City Ventures has to start construction by Sept. 30 in order to gain the waiver, which expires on that date. The waiver was instituted for all developers with construction plans in the works in 2010, and allows the builders to opt out of their “below-market-rate” requirements. The policy was enacted in response to the sluggish housing market, and the financial difficulty of building and selling the lower-priced homes. After Sept. 30, builders who have not started construction have to pay a fee to the city to opt out of their BMR requirements.

Phil Kerr, vice president of development for City Ventures, said he is ready to proceed. He pleaded with the council to either cut City Ventures some slack on the BMR waiver deadline, or implore staff to process his permit applications and fees with haste so he can start building by Sept. 30. The council declined to give Kerr a reprieve on the BMR requirements because doing so would a precedent that might suggest to future applicants that the rules can be broken. 

Kerr noted the property falls adjacent to but outside the “downtown” boundary established by the 2008 voter-approved Measure A initiative. That policy was intended to encourage the construction of 500 housing units downtown that are not subject to the city’s strict growth control ordinance and affordable housing requirements. Kerr said that makes little sense, as the property is across the street from the downtown, and the proposed project consists of a “sellable” product – two-story homes within walking distance of shopping, dining, and public transportation options. 

“It’s essentially in the downtown,” Kerr said after the council meeting. 

The developer did not mince words when he told the council that he is at the mercy of city hall in meeting the preferred deadlines. 

“We’re paying $2.5 million in city fees. The city gets an additional benefit from undergrounding all the utilities,” Kerr said. “What (the city’s current policy) says is you’re better off developing sprawl. You’re incentivizing developers to develop on the fringe. We have worked diligently to invest money in downtown Morgan Hill. We’re trying to do that.”

Kerr added that his current development agreement with the city requires him to start construction by Dec. 31. 

The Measure A boundary roughly identifies downtown as the area bound by Dunne, Del Monte, Main avenues and Butterfield Boulevard. Just west of the City Ventures property, the boundary snakes around the property that houses Taco Bell and includes the Dollar Tree shopping center. City manager Ed Tewes said the shopping center was included in Measure A because, at the time, a developer proposed to build a mixed-use project at the site. 

Longtime Morgan Hill builder and Dividend Homes president Dick Oliver suggested the council redraw the Measure A boundary to include the City Ventures property, but such an action would require another vote by the voters. 

Mayor Steve Tate was particularly reluctant to approve the item without amending the deadline and waiver. He asked the council and city staff multiple times if there was a way to allow City Ventures to be exempt from the BMR requirements even if they can’t start building before Sept. 30, without setting a precedent that would encourage future developers to make the same request. 

“I’m really afraid of losing this project,” Tate said. 

Assistant city manager Leslie Little said the staff could sit down with the developer and start working on the paperwork “as quickly as possible.” 

Kerr noted the council’s refusal to change the BMR waiver deadline or his development agreement does not immediately kill the project, but it forces the builder to go back and examine the project more closely. 

“We’ve got some additional work to do, over the next couple weeks to see how quickly we can turn around, and the city can turn around” his permit applications and fees, Kerr said. 

Some residents in the area of the project attended the meeting Wednesday to voice their concerns with the proposal. Eva and Patrick Joice, who live on Church Street, wondered how the project would affect parking for special events such as the Mushroom Mardi Gras. Many people now use Church Street for parking for such events, and the lot that City Ventures has proposed building on is used for parking for those events as well. 

“There’s going to have to be a parking lot there somewhere,” Patrick Joice said.