June 25, 2020
Last Tuesday was a big day for residents. After receiving SMCLC’s letter threatening legal action, the City Council postponed hearing staff’s request to resume negotiations with the developer of the huge, unpopular project on public land at 4th/5th and Arizona.
This postponement will allow the City Attorney to advise the Council on the legal risks the City faces should Council attempt to keep moving forward.
The law we cited to the City in our letter, the Surplus Land Act, is very clear. City staff lacked the authority to extend any “exclusive negotiation agreement” with the developer or enter into a new one without City Council approval. This means the City must now declare the property surplus and either put it out for bids as a park or affordable housing or hold it for public uses.
It’s unfortunate that the staff report did not reveal these facts or discuss the relevant law, and that residents had to hire our own lawyers to advise the Council of the risks of proceeding.
This issue will now come before Council July 14th. It’s up to all of us to convince the Council to end negotiations with this developer and to retain the land as public land. Your personal emails are very important. There are over 500 pages in the record already in support or opposition to this project. When you write, individually and with passion, it shows a level of commitment to defeat this project that can’t be replicated. So thank you and keep writing (put Plaza at Santa Monica in subject line and email to firstname.lastname@example.org). We will be in touch before the next crucial hearing.
Of interest is this letter of support from former City Manager Rick Cole -
Honorable Mayor and Councilmembers:
I know the last two months have been eventful and stressful for you and the City organization. Please know that you have my support and prayers in these challenging times.
I have shared my concerns about the 4th and Arizona project in the past. I reiterate them because the staff report lacks a definitive recommendation. I understand and appreciate that reluctance. But I hope you will consider candid professional perspective on the real issues at stake.
With so much change, only inertia recommends proceeding with business as usual for the City-owned parcels at 4th and Arizona. It's time to chart a new and better course.
In a very different era a decade ago, the City undertook a careful and deliberative process to shape future redevelopment plans for the site. The Council in 2013 chose a development team that proposed a project that promised to address the Council’s priorities for the site: public open space, affordable housing, cultural space, public parking and enhanced City revenue. It also offered a bold, even “iconic” architectural design.
Over time, the project has changed and so has the community and the economy. The development team has shifted from one deeply anchored in our local community to investors whose only direct development experience is in market rate housing, the one use not proposed for this site. The affordable housing has become an option – with cash payment to substitute for on-site development. Additional public parking is no longer either a cash cow or an economic necessity, but increasingly a use at odds with the City’s climate action and mobility goals as well as long-term fiscal solvency. The original cultural use proposed for the project has been incorporated instead into Santa Monica Place. Even pre-recessionary pro forma projections slashed the expected return on the City’s investment. The “iconic” architectural design is already dated, a costly exercise in misguided municipal self-image that is out of character with Santa Monica’s historic Downtown. Finally, the “layer cake” promise of privatized public open space falls far short of the potential to enhance Downtown’s appeal in a time of profound retail retreat. Experience has shown that well-administered Downtown public space can be an enduring draw for residents and visitors alike. The awkwardly shaped ground-level and rooftop spaces in this project fly in the face of that urban design wisdom.
The larger context has also changed. The Downtown Community Plan, while accommodating a project of this scale, made such development contingent on providing significant community benefits – which now are largely illusory. And the regulatory climate has dramatically changed as State decision-makers, regional agencies, the Santa Monica City Council and the public have confronted the profound problems of the regional jobs-housing imbalance (hellish commutes, high labor costs, economic and racial segregation, greenhouse gas emissions and gridlocked traffic). At the State, regional and local level, policies have shifted away from promoting additional commercial development in job centers like Santa Monica’s Downtown toward an emphasis on providing housing, particularly affordable housing.
Inertia is a powerful force. Councilmembers, staff and the development team are understandably loath to let go of what seems to be “a bird in the hand.” In times of fiscal stress, the developer promises of significant future revenue is understandably attractive. But how real is that prospect? I think it is a mirage.
In a polarized era where the City faces multiple political, social and economic challenges, devoting the time, effort and energy to seeing this project to completion is hardly a guarantee of success. The project as proposed faces huge obstacles to ever being built. It will likely have to eventually withstand the verdict of the voters, the courts and project lenders – and overcome skepticism from them all. Any one of those hurdles could prove to be the fatal flaw. In this time of severely constrained resources, there are clearly better opportunities to pursue to further the City’s vital Framework Priorities.
The reality is that the project components that are supposed to drive profits that can be shared by the City (retail, office and hotel) are all highly speculative not just in this moment, but going forward. People will continue to shop, work and travel. But there is strong evidence that changes accelerated by the pandemic will mean an oversupply of retail, office and hotel space for the foreseeable future. The cost of constructing the building’s unique design means that these new entrants will have to command a premium in a soft market. There is serious question about whether this project will get financed, let alone generate consistent long-term profits to subsidize programmed public space, cultural uses and substantial City revenue.
The lesser risk actually is to pivot. The safest choice is to abide by the revised terms of the Surplus Land Act. While the development team has persuaded the State Department of Housing and Community Development to reverse their initial skepticism about compliance with that law, the new finding is based on at best a technicality and at worst misrepresentation. HCD relies on an interpretation that the City had “a non-written ENA in place on September 30, 2019." This requires the invention of a new and problematic instrument – a “non-written” Exclusive Negotiating Agreement. Problematic because an ENA is not simply for the benefit of the private negotiating party – it is also a transparent public document setting the terms for negotiating the disposal of a valuable public asset. On what basis could an “unwritten” and unratified agreement exist? Who were the parties and what were the terms? Did staff have the authority to enter into such an unsigned agreement? If challenged in court, this convenient figment would quickly dissolve.
Perhaps our legal counsel will emphasize that the developer carries the burden of responsibility for defending this “unwritten” agreement as the basis to circumvent State law. If so, the next safest route is to resume negotiations with the existing development team to produce a project that substantially complies with the aims of revision to the Surplus Land Act by providing adequate on-site affordable housing.
There is compelling logic to this course. The developer has built urban housing. The City’s Downtown Community Plan emphasizes housing. Increasingly stringent State mandates require the City to demonstrate its ability to produce over 9,000 units of housing between 2021 and 2029, of which more than 6,000 must be affordable. The Council has consistently recognized the importance of compliance with these ambitious goals – and the key test of that commitment is on 2.57 acres of publicly owned land at 4th and Arizona.
The Council itself foreshadowed the need to weigh alternatives back in 2015 when it unanimously directed staff to analyze several alternatives to the project as modified at that time. Those alternatives point the way to producing a far more harmonious project at this site: harmonious with its surroundings, harmonious with the changed economic circumstances, harmonious with local and State housing priorities, harmonious with community sentiment and harmonious with the likelihood of actually being built.
A project at this important site should consist of a well-designed public space that can be programmed and administered to avoid the problems at nearby Reed Park; a mix of housing types that prioritizes affordable housing and includes moderate income units to provide workforce housing in a jobs rich location; and potentially a hotel to assist in the project’s financial viability and contribute to City revenue to support vital community service (sited on City-owned land, such a hotel could incorporate the Council’s desires for workforce protections for low-income workers). Such a project should incorporate these uses in compliance with the Downtown Community Plan and reflect the plan’s common sense urban design principles which are more consequential than fleeting perceptions of “iconic” architecture.
This path is most likely to result in positive economic return to the City, strengthening our Downtown core with a mix of needed new housing, an attractive public space and a new hotel.
I know this decision is not an easy choice to make. Ten years have gone into the planning of the project and the developer has acted in good faith. But changed circumstances dictate fresh approaches – in this as in so many other aspects of City government.
The proposed project is an anachronism. It is not a bird in the hand. It is an idea whose time has gone.