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MASTER DEVELOPMENT PLAN REVOCATION AND DEVELOPMENT AGREEMENT TERMINATION FOR THE OPEN WINDOW PROJECT
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RECOMMENDATION
It is recommended that the Planning Commission adopt a resolution recommending the City Council approve:
1. A resolution for Revocation of the Open Window Project Master Development Plan (MDP); and
2. An ordinance Terminating the Development Agreement (DA) for the Open Window Project.
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Summary
On February 23, 2016, the City Council approved an application filed by Ten Space (Developer) for the Open Window Project, which proposed mixed-use development for revitalization and redevelopment of 11.88 acres and is comprised of 51 properties within an approximately 15 square block area of Downtown Stockton (Attachment A).
A Master Development Plan (MDP) was also approved to provide additional allowable land use and development standards for new construction The MDP standards were intended to work in conjunction with the existing zoning and design standards and the current General Plan that was in development at the time of the Project's approval. As MDPs require a Development Agreement (DA) for their implementation per Stockton Municipal Code (SMC) Section 16.140.060.C, the Project included a 10-year Development Agreement (DA) to ensure certain protections and rights for the Developer to develop the Open Window Project. A major milestone obligation of the DA was to construct 300 residential units during the initial 10-year term. As of 2021, only 34-units have been constructed within the Project boundary.
Over the course of this year, Staff has been actively engaged with the Developer for Open Window Project to discuss DA compliance and the Developer’s desires to sell property and propose Project amendments to reflect changes in the housing market. On October 18, 2021, the Developer submitted a letter requesting to Terminate the DA and MDP (Attachment B).
Staff has reviewed the DA terms and compared the MDP with current standards, and determined that there is minimal benefit in the DA or MDP for the City and greater community. Staff recommends a mutual Termination of the DA and revocation of the MDP as requested by the Developer. Since the City Council is the approving authority for DA and MDP modifications and terminations, Staff recommends that the Planning Commission approve a recommendation to City Council to revoke the MDP and terminate the DA for the Open Window Project in accordance with the Stockton Municipal Code and the DA Terms.
DISCUSSION
Background
On February 23, 2016, the City Council approved a Mitigated Negative Declaration, Open Window Project Master Development Plan, and Development Agreement between the City and Open Window Project, LLC (also known as Ten Space). The Open Window project proposes revitalization and redevelopment of 11.88 acres and comprises 51 properties within an approximately 15 square block of Downtown Stockton. The Project is a mixed-use development concept that includes high-density residential, commercial, and industrial/art studio land uses. Up to 1,034 residential units were proposed to be constructed, primarily built at higher densities as part of apartments or other multi-family developments. The project also included construction of up to 200,000 square feet of retail space, 90,000 square feet of commercial space, and 110,000 square fee of industrial/art studio space. These spaces could be built as stand-alone developments, or combined in a mixed-use format with residential uses, as noted above.
Present Situation
Due to existing market conditions and unresolved issues with DA compliance, the Developer has requested the revocation of the Open Window Project Master Development Plan (MDP) and termination of the Development Agreement (DA) for the Open Window Project. The revocation and termination would remove specific development obligations and timing, revert the project site's development standards from the MDP to existing Zoning and design standards, and allow the Developer to transfer property to new owners without an obligation to amend any legal agreements or report to the City for each transaction.
STAFF ANALYSIS
The proposed actions have been reviewed per the policies of the General Plan, Stockton Municipal Code (SMC), and terms of the Development Agreement.
Environmental Clearance
The Project is exempt from CEQA according to CEQA Guideline Section 15061(b)(3) (General Rule) of Title 14 of the California Code of Regulations. Under the general rule exemption, a project that has no potential for causing a significant effect on the environment is exempt from further CEQA review. The proposed Project terminates the Development Agreement and Master Development plan, which are regulatory standards and will not result in a physical change to the existing project properties. Future development of the site will continue to rely on existing General Plan and commercial zoning that does not expand or intensify the previously approved uses.
The proposed amendments will have no environmental effects beyond those which were previously analyzed under the Project Mitigated Negative Declaration (MND) or the General Plan Environmental Impact Report (EIR) adopted after the MND. Staff has reviewed the request and did not find any evidence that there exists a reasonable probability that the Project will have an adverse impact on the environment. Thus, the proposed amendments are exempt from further CEQA review.
Revocation of Master Development Plan (MDP)
The SMC Section 16.108.030 provides a process for revocation of previously approved applications, permits and entitlements that is inclusive of a Master Development Plan. Revocation essentially has the effect of terminating the Plan. SMC Section 16.108.030(B) allows revocation if one of the listed findings can be made by the appropriate Review Authority for MDPs. The following two findings for revocation can be made in a positive manner:
Finding (B)(i)- Circumstances under which the permit or entitlement was granted have been changed by the applicant to a degree that one (1) or more of the findings contained in the original permit can no longer be made in a positive manner.
Staff Analysis: The Applicant has indicated the current housing market is increasingly competitive and somewhat cost prohibitive. Potential housing builders are not finding benefits in the existing DA or MDP; and
Finding (B)(vi)- There is a compelling public necessity.
Staff Analysis: Since the project’s approval, the City has extensively updated its General Plan and zoning standards. Because of this update, the development and business allowance previously allowed under the project approval are in some case more restrictive than what current regulations allow. Since the project’s intent was to streamline development consistent with the plan, the intent is no longer a benefit for the applicant or City. Therefore, the revocation is necessary to encourage new development within the project boundary.
The DA and MDP were approved in 2016, before the adoption of the current General Plan and before significant changes had been made to the City's Development Code. Because of this, Staff reviewed the MDP against current standards and determined the differences between the MDP and current zoning was minimal for allowable uses and design. In addition, as the DA and MDP's approval was based on the potential community benefits from project completion, since the Open Window Project cannot be completed as approved, the MDP holds no added benefit beyond typical development review. Future development projects would have to adhere to all City standards and required fees. The City's General Plan Environmental Impact Report would be analyzed again, which proposed density and intensities beyond the Open Window Project Mitigated Negative Declaration. Historical and environmental studies used for the approval of the Open Window Project can still be used for future projects, and new Projects would have to comply with the City's downtown Design Standards and the current Commercial-Downtown (CD) zoning.
While the conditions of approval have not been violated, as of 2021, the Applicant has been found to be in noncompliance with the terms of the DA. This includes the inability to purchase City property and sell the property within the DA boundary to others with City notification or assignment agreements to transfer DA responsibility to the new owners.
As the MDP does not require enhanced design features or allowances beyond current standards, the MDP does not provide added benefit to the City and will not impact allowable uses or standards for future projects in the MDP boundary. The Revocation of the MDP will not result in a physical change to the project area, as all future projects will still have to comply with all federal, state, and local standards for health and safety. The Project will maintain its Commercial General Plan designation and Commercial Downtown (CD) zoning, as new development will be subject to the City's existing design standards. Because of this, Staff recommends approval of the Applicant's request, and mutually revoke the MDP through the City's Revocation process per SMC Section 16.108.030.
Termination of the Development Agreement (DA)
The initial term of the Development Agreement (DA) is 10 years and is scheduled to expire on March 25, 2026. The Agreement provides the Ten Space certain protections and rights to develop the Open Window Project. In exchange, the City benefits from the redevelopment and creation of new residential housing units and commercial space within the Project in the Downtown. On October 22, 2020, the Stockton Planning Commission found the Applicant to be in substantial compliance with the obligations of the DA, except for a few building permits that were not completed and five properties were sold to other owners without City consent or assumption agreements for the new owners to acknowledge the terms of the DA.
Since the 2020 compliance review, approximately fourteen additional properties have been sold without assumption agreements, and the Option Agreement for the purchase of City property has been terminated. Throughout the 2021 calendar year, Staff and the Applicant have been working towards achieving DA compliance and discussing possible MDP amendments to reflect changes in the housing market and demands from potential developers. As consensus could not be reached on amendments to the DA and MDP, on October 18, 2021, the Applicant submitted a Termination request for both the DA and MDP. Termination of the DA would allow the Applicant to market and develop the Project without the exising DA construction timeline obligations and to remove the DA and MDP from title to allow the sale of properties.
City staff has analyzed the terms of the DA and concluded that the Termination of the DA would not diminish the ability for the project area to be developed per the General Plan goals for Downtown or even the vision of the MDP itself. The DA does not require enhanced fees or improvements, or civic amenities beyond current standards, nor does it require specific construction to be built. Since the DA does not have any added benefit to the City and will not impact allowable uses or standards for future projects in the DA boundary, Staff recommends the Planning Commission approve a recommendation to City Council to terminate the DA. Unlike the MDP Revocation request, there are no specific findings for termination of a DA.
Public Comments
A virtual neighborhood meeting was held on November 8, 2021, to discuss the proposed Mutual Revocation and Termination by the Applicant and City per 16.88.025 (Review Procedures). Notices for the meeting were mailed to all property owners within 300 feet of all subject sites (Attachment C). Six residents, the Developer, and city staff attended the meeting. No questions or comments were raised by attendees about the proposed request.
Notice for the City Council meeting was published in the Record, and a mailed notice was sent to all property owners included within the DA boundary and within 300 feet of the subject sites at least ten (10) days before the hearing, in accordance with SMC Section 16.88.030. To date, Staff has not received any comments from the public on this Project.
Attachment A - Location Map and Aerial Photography
Attachment B - Termination Request from Applicant
Attachment C - Community Outreach Meeting Notice