City Council is playing hardball in its efforts to get things moving with the Oak Place development, one of the largest building project Gilroy has seen in five years.
Formerly called Oak Creek development, the project has been stuck in construction purgatory since grading was approved in April.
Following almost an hour of discussion, Council voted 4-2 Nov. 18 to approve the final map and property improvement agreement for the 26-acre, 237-unit Oak Place development located on Gilroy’s south side near the intersection of Luchessa Avenue and Monterey Road. Situated not far from the Gilroy Sports Park, the project would include 213 single-family homes and 24 condominium units.
With that, however, came an unprecedented stipulation that Council can exercise its “police power” of eminent domain if the developer – Los Angeles-based KB Home – does not acquire a piece of property that’s been blocking the construction of 63 units, as well as the needed installation of traffic improvements such as street widening and new traffic signals.
The property in question is the Suburban Propane facility located at 6300 Monterey Road and owned by Vince Giacalone, former chief executive officer of Giacalone Electrical Services, Inc. in Gilroy.
If KB Home fails to facilitate the purchase or relocation of the facility by March 17, the property improvement agreement as approved by City Council allows the City to obtain the property through eminent domain and bill the developer at a later date for related costs.
City Administrator Tom Haglund stressed that eminent domain would only be exercised in accordance with the Subdivision Map Act, which was approved by the State Legislature in 1954. The measure ensures certain traffic improvements are installed at proposed developments for the benefit of area residents.
“That provision is included in there as an acknowledgment, because if the City were to have to do that, the developer by virtue of this provision and the property improvement agreement is responsible to repay the City for any of it’s costs incurred through eminent domain,” Haglund explained. “So it’s in the best interest of the developer to certainly work as hard as they can within that 120-day time frame, as specified by the Subdivision Map Act, to obtain that property.”
Forward Planner with KB Home, Charles Hazelbaker, stipulated that they are not, in fact, currently negotiating for the Suburban Propane parcel. Negotiations are being handled by Michael McDermott, who originally sold the project to KB Home.
“It’s in our agreement with (McDermott) that he is to purchase that property,” Hazelbaker assured. “And from my understanding – we met last week – he is in the final stages of actually acquiring that property. They have a proposal together (but) I haven’t actually seen anything; that’s what I’ve been told.”
Hazelbaker’s insistence that everything is on track was not reassuring to Mayor Pro Tempore Perry Woodward. He pointed out that Skip Spiering, formerly a representative for the developer, told City Council he was closing on a deal for Suburban Propane back in 2011.
The deal never closed, despite the fact that McDermott has had every opportunity to acquire the parcel, according to Woodward.
“It would surprise me now if they were able to come to an agreement,” Woodward said. “I think it sets a very bad precedent if we were able to exercise the power to take this land of Suburban Propane at fair market value, now, given the history of how we got to be here. It troubles me.”
City Engineer Rick Smelser explained there are a variety of road and traffic signal improvements that need to be made before the construction of the 150th home takes place, as stipulated in the property improvement agreement.
In order for traffic improvements to take place, including a street widening project planned for the intersection of Luchessa Avenue and Monterey Road; the installation of new traffic signals; and modifications to existing ones at the intersection of Church Street and Princevalle Drive; Smelser said the Suburban Propane facility needs to be in KB Home’s possession.
From the City’s perspective, if that parcel is not acquired by the developer, the City can use eminent domain to ensure traffic improvements take place. And from KB Home’s perspective, that parcel is blocking the construction of 63 units.
“As far as the City’s concerned, we have a road improvement that has to occur,” Smelser said. “We’re just ensuring that the road improvement can be accomplished in the future when it’s needed by the development. What we’re doing is covering the City’s costs at this point.”
Councilman Peter Arellano disputed the notion that exercising eminent domain would be in the best interest of Gilroy, despite City Attorney Andy Farber’s assertion that Council has the right to make that call.
“I don’t like the idea of us helping the buyer,” Arellano said. “They were supposed to take care of this before they even broke ground and I don’t see it as defending or protecting the City at all. Even though we’re saying we don’t have to do it, we’re holding it over their heads that that is a possibility. I don’t like that, I don’t want that and I’m not going to vote for it.”
“We’re playing right into (the developer’s) hands,” added Councilwoman Cat Tucker, who was vocal about her disdain for essentially helping the developer get a leg up in the negotiation process.
Mayor Don Gage reiterated that stance.
“We don’t like to use eminent domain for anything,” he maintained. “We’re not in the business of getting (the developer) out of their problems – it’s their problem and that’s not what we do. They walked into this with eyes wide open.”
Hitting on the fact that the City and the developer have discussed this ad nauseum over the years, Gage is frustrated at the recurring drama but said he’s not “too worried about it.”
“Here it is down the road and it’s not done,” he said. “If they don’t develop it, somebody else will. They should have done their homework on this a long time ago.”
At the April 4, 2011 City Council meeting where the Oak Place development was last discussed, Spiering previously told Council the developer had forged an agreement with Suburban Propane. He said it was in the developer’s best interest to “get rid of it as fast as possible,” but the deal was never finalized. Multiple requests for comment from KB Home corporate communications director, Craig LeMessurier, were not returned by press time.
KB Home began grading the development in April of this year, after specific approval was granted by the City. Construction has come to a complete standstill since then, however.
“The developer can continue to negotiate with propane up until the time that the property is actually needed for the street widening,” Smelser said. “Only then will the City have to step in and purchase that property, but that could be years from now. The timing is unknown, but the developer will build that out as they build homes and several improvements will kick in. It’s really dependent on how fast the developer wants to build out his developments.”
The first homes to be built will be model units, showcasing the developer’s varied design layouts. This includes two-story, single-family homes with three-to-five bedrooms. Projected floor plan sizes vary from 1,800 to 2,400 square feet and the homes are built to order.
KB Home wouldn’t release the projected price of the houses, but Coldwell Banker Realtor Lisa Cassara previously estimated that people will be forking out around $500,000 to stake a claim in Gilroy’s southward expansion.
