Santa Barbara City Planning Commission Puzzled by Paseo Nuevo Proposal

The plan to redevelop Paseo Nuevo shopping mall was blasted by members of the City of Santa Barbara’s Planning Commission on October 9, during what could be the commission’s only chance to review the project before the City Council considers approving a development agreement in December.

While the City Council will decide whether to go forward with the current plan — which includes 233 units of market rate housing built on the Macy’s side of the mall and 80 units of affordable housing built on a city parking lot on the opposite side — the members of the Planning Commission had plenty of pointed questions and comments about the proposal.

Commissioners appreciated the plan to bring housing downtown and were supportive of the inclusion of affordable housing, but the board had a long list of comments and concerns over the current proposal.

They called the project “ill-defined” and were unsatisfied when questions about the developer’s financial feasibility were met with vague answers from city staff explaining that details were not being released to the public because they were the developer’s proprietary information, though the documents were viewed and verified by city staff who were bound by nondisclosure agreements, according to City Administrator Kelly McAdoo.

Planning Commission Chair Lucille Boss summed up the commission’s comments, criticizing the city’s plan to enter a development agreement with AllianceBernstein, a billion-dollar investment firm that became the accidental owner of a large portion of the mall after the previous owner defaulted on a loan in 2022. Boss said the city’s plan to transfer publicly owned land (the city owns the parking lots and the land under the mall) could be perceived as a free gift for an unsubstantiated return.

“It appears to be helping a private company recover a loss, and that’s not a public purpose,” Boss said.

City staff explained that the transfer of city-owned property — valued at more than $32 million — was part of a complicated negotiation process. If the city didn’t enter into the development agreement with AllianceBernstein, there’s a risk of no redevelopment at the mall for the next 40 years. By transferring the city-owned property, the project would be able to include a larger portion of affordable housing and the city could expect a tax revenue bump with hundreds of new residents living downtown.

Commissioners said the project felt rushed and lacked much of the usual detailed documentation. Commissioner Lesley Wiscomb expressed her frustration with the project, asking why city staff never formally pursued putting it to the voters to decide whether the city could amend its charter to allow for a 99-year lease at that location to give the city more options.

City Administrator McAdoo said the subject had never been brought up in the three previous meetings with the City Council. If the city did pursue a ballot measure, the delay would likely kill the project, McAdoo said.

Commissioner Brian Barnwell was vehemently opposed to the project. “This sounds like we’re desperate, and we’re making a rush to judgment,” he said. “We’re responding to things that have been thrown at us rather than planning, and it’s deeply disturbing to me …. I just don’t think these details have been ironed out.”

Commission Chair Boss also criticized the location of the affordable housing, which is proposed to be built over City Lot 2 in a partnership with the Housing Authority. Boss said the low-income housing’s location near an alleyway was “not dignified.”

Housing Authority Executive Director Rob Fredericks spoke during the meeting, sharing his support for partnering with the city to build the affordable housing portion of the project while also being blunt about his concerns regarding the current plan. 

Fredericks said that 80 units was achievable but could force the units to be much smaller. He suggested a more moderate approach of 50-60 units. He also noted that, even with the donated land, the project would not be fully covered by tax credits, and he suggested the Alliance Bernstein be financially responsible to make up the gap of $8-$10 million to cover construction and partial demolition of the city parking lot.

The project does not require another review with the Planning Commission. The commission’s comments and suggestions will be forwarded to city staff and the City Council, which is expected to consider the development agreement on December 2. 

The city and Alliance Bernstein will be hosting two open house meetings this Wednesday, October 15 (6-7:30 p.m.), and Thursday, October 16 (noon-1:30 p.m.), at 707 Paseo Nuevo, near the Nordstrom building. The meetings will include info on the architectural design and plans for affordable housing.