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SR-10-13-2015-8A City Council Report City Council Regular Meeting: October 13, 2015 Agenda Item: 8.A 1 of 10 To: Mayor and City Council From: David Martin, Director, Planning and Community Development , Planning and Community Development Subject: Update on Status of Downtown Specific Plan and Anticipated Approach to Negotiating Community Benefits Recommended Action Staff recommends that the City Council prioritize completion of the Downtown Specific Plan “DSP”; establish a predictable community benefits package for all Development Agreement projects being processed pending the adoption of the DSP; and provide priority Development Agreement processing for projects primarily providing housing until comprehensive standards are implemented with the adoption of the DSP. Executive Summary This report provides an update on the schedule for consideration of the Downt own Specific Plan, a summary of the status of the currently pending Development Agreement applications and staff’s anticipated approach to negotiating a predictable community benefits package for mixed-use housing projects processed prior to the adoption of the DSP. Background In the wake of the repeal of the Hines Development Agreement, it has become increasingly clear that the practice of negotiating project by project community benefits has and continues to generate significant community opposition. Development Agreements, which must be individually negotiated, can serve to undermine public trust that consistent standards of appropriate urban design and mitigation of negative environmental impacts are being applied to all applicants. Controversies o ver individual projects and the cumulative impacts of project by project planning have fueled controversy and resident mistrust in the consistent application of the core values of the community embodied in the Land Use and Circulation Element (LUCE) adopte d in July 2010: 2 of 10  Preserve Existing Neighborhoods: The highest priority of the community was the preservation of the existing character and scale of Santa Monica’s neighborhoods.  Manage Traffic and Congestion: There is a compelling need to proactively manage congestion, reduce automobile dependence and enhance alternative modes of transportation.  Preserve the City’s Unique Character: The community identified the necessity of maintaining and enhancing the City’s unique attributes, ensuring the creation of a “sense of place” and preserving the City’s historic resources.  Create Housing Choices for All: The City must continue to ensure that residents have a range of housing choices to meet the needs of people of all ages and income levels.  Increase Open Space and Connectivity: Additional usable open space and vital community gathering places are necessary, as are safe, walkable and bike - friendly environments and easy connective “green” paths and routes.  Provide Community Benefits: Change must result in a better Santa Monica for everyone—contributing directly to the community’s core needs, particularly the creation of new affordable and workforce housing opportunities and healthy, complete neighborhoods.  Ensure a Sustainable Santa Monica: Planning must ensure that the community of today thrives without compromising the ability of future generations to meet their own needs. With the adoption of the new Zoning Ordinance, the Bike Action Plan, the Bergamot Area Plan (BAP) and the pending consideration of the draft DSP, the City is now on 3 of 10 track to create a more predictable, transparent and pro-active approach to citywide planning in keeping with the original spirit of the LUCE. In addition to the Zoning Code revision and other plans adopted since 2010, the L UCE called for the preparation and adoption of a new DSP, a Pedestrian Action Plan and a Memorial Park Neighborhood Plan. With the completion of the Zoning Ordinance, staff is focusing on a robust and open public process that would bring a revised draft of the DSP to the City Council for its consideration by June 2016. The Pedestrian Action Plan and Memorial Park Plan are also underway and are anticipated to be completed by the end of 2016. While working to complete the major policy planning efforts undert aken since the adoption of the LUCE, planning staff has continued to process Development Agreement applications in accordance with interim zoning ordinances then and now in effect. On February 12, 2013, Council approved a framework for prioritizing the pro cessing of pending Development Agreements to ensure that staff and decision -makers’ time was devoted to the processing of projects consistent with the communities goals and priorities. Since that time, Development Agreements have been approved for three housing projects (two of which include retail uses) with a total of 462 units, two mid - priced hotels, a new science building at Crossroads School, a new auto dealership and a 12 screen cinema at Santa Monica Place. The Hines project was also approved and later rescinded by the Council after citizens gathered sufficient signatures for a referendum on the project. Three additional mixed-use housing projects containing a total of 264 units have been reviewed and recommended by the Planning Commission. In June of this year, the City Council adopted the new Zoning Ordinance that went into effect on July 24, 2015. The new Zoning Ordinance established a process for Tier 2 projects that allow projects within certain prescribed development standards to be processed through a Development Review permit that is acted upon by the Planning Commission and only reviewed by the City Council on appeal. Community Benefits for these Tier 2 projects in the form of additional affordable housing and increased impact fees are established in the Zoning Ordinance and are not subject to individual 4 of 10 negotiation. Consistent with the LUCE, projects that exceed Tier 2 standards, with some exceptions, require Development Agreements. As part of the Zoning Update process, the City Council reduced the areas in the City in which the LUCE authorizes Tier 3 development and/or modified the type of projects that can seek this level of development. Discussion Downtown Specific Plan The draft DSP has been available since February 2014, and the Plann ing Commission will hold a study session on the draft plan in early November. The Draft Environmental Impact Report (DEIR) for the DSP is scheduled to be released for public review in December. Following the public review period for the DEIR, the draft DSP will return to the Planning Commission for formal review and recommendation to Council in March 2016, and will then proceed to Council for its consideration, anticipated by June 2016. Because the recently adopted Zoning Ordinance does not cover the area within the Downtown Core boundaries, that area is subject to Interim Zoning Ordinance Number 2490 (CCS) (“IZO”) until the DSP is adopted. The IZO requires a Development Agreement for all projects over 32 feet. There are currently 22 Development Agreement applications pending in the area covered by the DSP. These include two City projects (4th/5th and Arizona and the 4th Street Arclight Cinema), four hotel projects and 16 mixed-use residential projects. Of the 16 pending mixed -use projects, six are not being negotiated at this time either because they do not meet the priority processing standards established by the City Council or the applicant has not actively pursued approval of the project. It is anticipated that the DSP would include provisions similar to the Zoning Ordinance for Tier 2 projects within the plan area and would also include a non -negotiated Development Review permit process for Tier 3 mixed-use housing projects up to a certain size, to be determined in the DSP. Such Tier 3 projects would r equire an enhanced, but prescribed package of community benefits in the form of additional 5 of 10 affordable housing and impact fees, above and beyond what would be required for Tier 2 projects. Until the DSP is adopted, it cannot be determined how many of the p ending projects would be subject to either a Tier 2 or a Tier 3 Development Review permit. However, staff anticipates that, as currently proposed, some projects would be processed through a Development Review permit, and others may be redesigned or reduce d in size in order to fall within the Development Review permit standards and therefore avoid the Development Agreement process. Unlike the remainder of the City in which Tier 3 projects generally must be processed by a Development Agreement under the LUCE, no such limitation applies in the Downtown Core. Thus, whether and the extent to which these projects should be processed by Development Agreement or through some other mechanism is a Council policy determination, subject to the legal considerations described later in this report. Gateway Access Master Plan The scope of the DSP covers the entire area described in the LUCE as the Downtown District. While the majority of the Downtown area consists of a regular grid street pattern, well integrated into the rest of the City, the southern portion of the area, between Colorado and the freeway, consists of irregular parcels that were created when the interstate freeway was constructed in the early 1960’s. The scar left by freeway construction has imposed a wide, noisy and unsightly barrier between the historic Downtown and the Civic Center. The design of the 4 th/5th Street Freeway off-ramp has created a congested bottleneck that frequently backs up onto the Freeway itself and creates a dangerous and unfriendly snarl of traffic at the gateway to both our Downtown and Civic Center. In recent years, various ideas have been envisioned and proposed for redesigning this dysfunctional access, including the potential for decking over the Freeway and/or building a flyway that would allow southbound traffic to connect directly with Olympic Drive. There is also the potential for creating new peripheral parking that would lessen Downtown traffic congestion from both Santa Monica’s visitors and Downtown workforce. 6 of 10 Because of the unique configuration of this area and the access challenges created by the proximity to the freeway, staff is recommending the creation of an “Access Gateway” master plan in order to assess the unique issues and site configurations. This fo cus on this key gateway to Downtown would be based on the overall principles in the Downtown Specific Plan and would be incorporated into that framework upon completion. A comprehensive examination of the access issues, development potential and community benefits of future development of this area will allow for the consideration of major infrastructure improvements including the capping of a portion of the freeway and reconfiguration of the 4th Street freeway off-ramp. As currently envisioned, the master plan area would include the three properties bordered by Colorado Avenue on the north, the freeway on the south, 5th Street on the east and Ocean Avenue on the west. There is currently a Development Agreement application pending for the Wyndham Hotel property, and staff has had recent discussions with the owner of the Sears property regarding potential redevelopment of the portion of the site surrounding the historic Sears building. The third site within the boundaries of the plan area is the City owned TOD site adjacent to the Expo line terminus station. In keeping with the principles outlined in this report, a comprehensive approach to public planning of future infrastructure investment and appropriate development standards is preferable to project by project consideration of individual parcels. Recommended Approach to Development Agreement Processing Even with the Tier 2 processing standards contained in the Zoning Ordinance and the anticipated Development Review permit with standardized community benef its anticipated in the DSP, some projects would still be processed through a Development Agreement. Staff is recommending that the City establish a more predictable package of community benefits for mixed-use housing Development Agreement projects in order to provide transparency and certainty in the process. The list of community benefits would include a higher amount of affordable housing and increased impact fees. However, the 7 of 10 scope of this effort must be guided by legal principles. Development Agreements are individually negotiated on a case-by-case basis. Subject to consistency with the general plan, the City has broad discretion in determining whether to enter into a Development Agreement and the terms of that Development Agreement. The determination of the appropriate package/range of community benefits is similarly established on a case-by case basis. The assessment of appropriate level of community benefits has varied and been dependent on such factors as the nature and type project, level of development, its location, identified community needs, and whether the benefits are provided by other Development Agreements (to avoid undesired duplication). Because these agreements are the result of voluntary negotiations between the City and a developer, any exaction of a monetary or property interest as part of these agreements is not subject to the legal standard established in Nollan v. California Coastal Commission and Dolan v. City of Tigard. Under Nollan and Dolan, the government may condition the grant of a land use permit on the property owner’s provision of an exaction only when the government demonstrates that there is an “essential nexus” and “rough proportionality” between the required exaction and the projected impact of the proposed land use. Thus, community benefits which are individually negotiated as part of a Development Agreement would not need to meet heightened scrutiny even if characterized as an exaction. However, Nollan/Dolan would be implicated if the City were to establish fixed exactions that had to be part of each Development Agreement and were not subject to individual negotiation. Consequently, if the community benefits were characterized as exactions, the City would have to demonstrate a reasonable relationship between both the intended use and amount to the deleterious public impact of the development. In general, an exaction involves divesting a developer of either money or a possessory interest in property. Examples of exactions include development fees, dedications (transfer of an interest in real property to a public entity for the public’s use), and required expenditures for onsite or off-site public improvements. In contrast, land use 8 of 10 regulations such as use restrictions, on-site affordable housing, open space provisions (not dedicated to public use), design features, aesthetic regulations, and general development standards (e.g., height, FAR, number of stories) are not exactions and are subject to a very deferential standard of review. Uniformity in land use regu lations would not raise the same legal concern, although it could result in a reduction in the City’s discretion over the project, particularly if it is a housing project. While every Development Agreement that the City has processed since 2013 has been individually negotiated, recently concluded Development A greement negotiations between staff and the respective applicants have resulted in community benefit packages that are similar in the range of the benefits provided. Variations in community benefits have largely reflected the relative size of the proposed developments and the type of uses contemplated. The range of benefits negotiated for these recent projects include an increased amount of affordable housing with the majority of the units at 50% AMI, affordable housing availability for disabled households, increased open space, reserved public parking, community meeting space, local hiring, a high level of environmentally sustainable design, enhanced impact fees, aggressive transportation demand management strategies and monetary contributions to early childhood initiatives, historic preservation and the Big Blue Bus. Some of these benefits would be characterized as exactions and others as land use regulations. Staff anticipates following a similar approach in standardizing the community benefit packages for future Development Agreements in order to simplify the process to the extent possible and to provide transparency in the Development Agreement negotiation process. With Council direction, staff would establish a proposed list of community benefits, obtain Planning Commission input on the proposed list, and return to Council in early 2016 with a recommended package of community benefits. 9 of 10 Pending Development Agreement Applications There are currently 28 Development Agreement applications that have been filed Citywide. Of the 28 pending applications, ten are not presently being actively processed, either because they do not meet the priority processing guidelines established by the City Council or the applicant has not pursued approval of the application, which leaves 18 “active” pending Development Agreement projects. Since the completion of its review of the Zoning Ordinance, the Planning Commission has reviewed and recommended approval of three mixed-use housing projects including 1415 5th Street, 1560 Lincoln (Dennys site) and 1601 Lincoln (Norms site). Two of these projects are scheduled for City Council review on October 13th and the other one (Norms) is scheduled for City Council on December 8th. Only one other Development Agreement project is likely to come before the City Council before the adoption of the DSP: 500 Broadway, a mixed-use housing project has been pending for several years and has a draft EIR currently out for public review. Staff will continue to process Development Review permits for pending mixed -use housing projects. These include a 27 unit project at 3008 Santa Monica Blvd. that recently converted from a Development Agreement application to a Development Review permit application and a 100% affordable project at 1626 Lincoln Blvd. Staff also recommends that the City continue to actively process four City-related projects including two mixed use projects that are primarily housing and are involved in the land acquisition for the fire station #1 on 7th Street. The other two are the proposed 4th Street Arclight Cinema project and the proposed 4th and 5th and Arizona project. However, none of these are likely to come before Council prio r to the completion of the DSP and in both cases the City controls the underlying land. 10 of 10 Following the adoption of the DSP, staff will review the remaining pending applications and assess their compliance with the adopted plan. Projects that do not fall within the parameters of the plan would have to be revised to comply with the plan. The only alternative to compliance with the DSP would be to seek an amendment to the newly - adopted plan. Any amendment of the plan would require Planning Commission review and City Council approval. Financial Impacts and Budget Actions There is no immediate financial impact or budget action necessary as a result of the recommended action. Prepared By: David Martin, Director, Planning and Community Development Approved Forwarded to Council Attachments: