San Jose’s Economic Development office has mysteriously authored a Memorandum that would permanently reverse 25 years of land use planning in the city.

Billed as an “Economic Emergency Amendment” to the North San Jose Area Development Policy, the memo calls for a massive development of one million square feet of retail space, 2,000 hotel rooms, and 8,000 residential units. The memo is signed off on by Paul Krutko, the city’s economic development point man, and is accompanied by a resolution, dated June, 2009, to be sent to the City Council.

If the development described in the 37-page memo were to come to pass, it would dwarf Santana Row, which has less than 500,000 feet of retail and a fraction of the residences and hotel rooms. It would likely drive business and visitors to the North First Street corridor around highways 101 and 880—and away from Downtown. That’s precisely the opposite direction the city has been moving since the early 1980s.

Former Mayor Tom McEnery, the architect of the Downtown-centric plan, sees this new proposal as a return of the bad old days, when the Fairmont Hotel was destined for the airport and the Arena for Alviso. “This seems to desert the concept that has served San Jose well for decades,” he told the Fly today. “And leadership is not about saying yes. Often it’s about saying a word politicians are loathe to use: No.”

The memo, prepared by Joe Horwedel, San Jose’s Director of Planning, Building and Code Enforcement, is excerpted here:

EXECUTIVE SUMMARY

The proposed Policy Amendment and Neighborhoods Plan will significantly further the City’s goal of promoting job growth and creating a center of innovation within the North San Jose area, while also building positive residential neighborhoods and creating a high quality environment for both employees and residents.

These documents are based upon an extensive and cooperative Taskforce process and have the support of residents, business owners, property owners and developers. Staff is bringing forward three documents for Council consideration: an Amendment to the North San Jose Area Development Policy, an Amendment to the North San-Jose Traffic Impact Fee Ordinance and the North San Jose Neighborhoods Plan. Together these documents are intended to further strengthen the City’s vision to intensify and develop North San Jose as a key employment center, while also incorporating successful new residential neighborhoods and providing amenities for the benefit of both the area, s residents and employees.

The content of these documents ultimately represents five years of staff work and stakeholder participation. Key elements of each document are summarized in the following, analysis.

To date, the City Council has approved sixteen rezoning requests for residential proj ects within the Policy area, providing for the development of up to 8,900 new residential units, 22.8 acres of new neighborhood parkand, and up to 107,000 square feet of mixed-use neighborhood serving retail space. In addition, since adoption of the Policy, permits have been approved by the City for the development of up to approximately 1.5 million square feet of office space and for the development of approximately 270,000 square feet of stand alone retail space.

BACKGROUND

On April 22, 2008, the City Council formally accepted the Guiding Principles developed by the North San Jose Neighborhoods Planning Taskforce and provided direction to staff to continue work on the North San Jose ImplementationStrategy and the North San Jose Urban Design Guidelines. Staff from multiple City departments and the Redevelopment Agency, with the assistance of an urban design consultant, have been working since then to draft these documents.

At Council direction, the North San Jose Neighborhoods Taskforce was reconvened on October 2, 2008 in order to review the draft documents. Staff presented the draft North San Jose Urban Design Guidelines and a draft Implementation Strategy to the Taskforce. The Taskforce endorsed these draft documents and provided further input which is being incorporated into the documents for Council consideration. The draft documents were also presented to a group of North San Jose property owners, business owners and developers who provided additional comments which will be addressed by staff.

PROPOSED AMENDMENT

On November 18, 2008 the City Council directed staff to devise a process for the expansion of Phase 1 to allow for an additional 500 units to receive entitlement on a temporary basis above the cap of 8,000 residential units, as set forth in the North San Jose Area Development Policy.

On December 16, 2008, the City Council gave direction to staff to 1) explore adequate provisions to ensure the delivery of affordable residential units within North San Jose consistent with City goals for affordable housing, 2) evaluate the possibility of including a shortened timeframe for the reservation of residential units, 3) draft an “Economic Emergency Amendment” to allow for the reservation of a maximum of 500 additional residential units within Phase I for any project(s) that meet certain criteria, and 4) return in spring 2009 with a strategy establishing priorities for redistribution of Phase I units of expired permits.

ANALYSIS

The proposed Amendment and North San Jose Neighborhoods Plan are intended to supplement and provide implementation tools for the North San Jose Area Devdiopment Policy (Policy), the General Plan and other policies related to the development of the North San Jose area. Together these documents establish a policy framework for the intensification of North San Jose as a key employment center for the City.

In 2005, the City Council adopted the North San Jose Area Development Policy with the goal of allowing and encouraging the intensification of North San Jose as a jobs center. Subsequently, the City Council organized a taskforce of North San Jose residents, property owners, business owners, developers and other interested parties who met from August of 2007 through March of 2008.

This Taskforce produced a set of Guiding Principles which were accepted by the City Council. Staff has been working with developers in North San Jose since June of 2005 to develop projects that implement the overall vision for North San Jose as expressed in the Policy and reinforced in the Guiding Principles. Through this experience, staffhas received additional input from developers related to the content of the Policy. This experience has also prompted other ideas as to how the Policy might be amended to achieve other City goals, particularly the production of affordable housing within the Policy area.

REGIONAL/LARGE SCALE RETAIL AND HOTELS

When initially adopted, the Policy only supported the development of neighborhood-serving commercial retail projects intended to support the planned expansion of industrial and residential uses within North San Jose. The Policy currently provides capacity for the development of up to 1.7 million square feet of local-serving retail which is not subject to the Traffic Impact Fee; and up to 26.7 million square feet of industrial office capacity subject to a Traffic Impact Fee. The Policy does not currently provide capacity for large-scale retail development and hotel uses which could generate additional traffic trips and further potential impacts.

Following an expressed interest by the development community and input of the North San Jose Taskforce, staff has subsequently reconsidered the significant social and fiscal benefits of the development of large-scale retail and hotels within North San Jose and is now recommending that the Policy provide capacity for these uses.

AFFORDABLE HOUSING

The proposed Amendment also incorporates a requirement that within each Phase of new residential development at least 20% of the units available (e.g., 1,600 units out of 8,000 units) be developed as affordable housing units.

NEIGHBORHOODS PLAN

The Neighborhoods Plan is intended to act as a performance strategy that documents the work of the North San Jose Neighborhoods Taskforce and serves as a supplement to the North San Jose Area Development Policy. The Neighborhoods Plan incorporates the Taskforce Guiding Principles, the Parks Plan approved by the City Council, and additional performance standards for the development of retail, parks, trails, libraries, schools and other public facilities to support both residential and employment uses within the Plan Area. The draft Neighborhoods Plan also includes a Plan diagram which illustrates the potential locations of these amenities.

NORTH SAN JOSE NEIGHBORHOODS PLANNING TASKFORCE

The contents of the Implementation Strategy that were reviewed by the Taskforce have now been incorporated into either the proposed Policy Amendment or into the proposed Neighborhoods Plan.

The most significant change to the Implementation Strategy requested by the Taskforce was to rewrite the Retail section to more fully express the goal of using retail to make North San Jose a special place. Related to this, Taskforce members discussed the importance of public art as a means of giving North San Jose an identity and asked that this be further developed in either the Implementation Strategy or the Design Guidelines. The draft Implementation Strategy was revised to include sections that address these concerns, and that text has been transferred into the proposed Amendment or Neighborhoods Plan as appropriate.

DEVELOPMENT ACTIVITY UPDATE

All 8,000 residential units available in the first phase of the North San Jose Area Development Policy have been reserved with the issuance of Planned Development Permits. One additional Planned Development Permit is currently pending for an additional 460 units. However, due to the current economic conditions, each of the market rate developers has indicated that it will be at least 18 months before they will be able to move forward with a building permit. Moreover, as noted above, no additional projects are seeking to move forward at this time.

Until such time as additional residential units are available for development under Phase 2, properties that do not receive a residential unit allocation in Phase 1 may continue to enjoy the uses currently operating on the site or may apply to develop the site with uses allowed under a zoning designation that corresponds to the underlying General Plan designation (typically Industrial Park, Light Industrial or Combined Industrial/Commercial).

The approved rezonings, if implemented, will result in the conversion of approximately 150 acres of land from industrial use to residential use. The Policy allows for the conversion of up to 285 acres as part of the addition of 32,000 new housing units within North San Jose. This conversion significantly enables the industrial intensification by addressing regionat traffic issues and by providing for the expansion of retail and other amenities within the Policy area to serve both employees and residents.

EVALUATION AND FOLLOW-UP

As a follow-up to the December 16, 2008 Council direction, staff oposes the following strategy for establishing priorities for the redistribution of Phase I units of expired permits. The earliest PD permits will expire in late June this year (Legacy and Kerley Charities).

Another small group of permits will expire later this year (Nov./Dec.) with the majority of permits expiring in the spring of 2010. Some permit holders have provided staff with documentation of their diligent efforts towards completing implementation of their entitlements. Other permit holders have not recently been.in contact with staff and in some cases the companies have downsized substantially, or no longer exist. Staff proposes to grant an initial time extension to January 31, 2010 for those permits set to expire in 2009 utilizing the current extension process already allowed by the Zoning Ordinance. The granting of the time extensions would align the expiration cycles of many of the approved permits, provide staff additional time to assess permit holder progress and intentions, develop appropriate criteria for granting additional time extensions for Council review, agendize any necessary code changes.

In the next 90 days staff will be conducting an outreach effort to all permit holders of record to compile current project progress information which will be used to develop criteria for time extensions for existing projects. It will also give staff the ability to determine whether some projects are not able to proceed. A standard set of key milestone achievement questions will be provided to each permit holder. Milestone examples would include, but not be limited to, property ownership by a residential developer, executed parkland agreement, parkland purchase or dedication, final map recordation, site clearance, Building Permit P!an Check status and Public Works improvement plans status. This information will be used to determine the overall progress to date as well as the potential number of units available for redistribution (if any). It would also contribute towards the development of criteria for a “round two” prioritization.

The goal is to reward those developers that have invested in their projects so that they are “shovel ready” by extending their permits for up to two years to allow them to preserve their permit entitlements while not unnecessarily locking up the residential capacity for projects that are no longer active or the developer has made no progress. The need to accommodate the affordable units in each phase, as well as the current “over approval” of Phase I will require that some number of the inactive permits be allowed to ultimately expire.

POLICY ALTERNATIVES

Alternative #1: An alternative to dropping the Economic Emergency Amendment at this time would be to move forward with its adoption and extend the expiration date beyond July 1, 2009 for some set length of time, such as another six months or a year.

Pros: A draft of the amendment has been prepared and could be revised with a new date.

Cons: The current amended version of the Policy would need to be revised and brought back to the Council at a later date. Reason for not recommending: There is no apparent demand for the additional 500 residential units at this time and the project prompting the Economic Emergency Amendment is not proceeding at this time. The expansion of Phase I for non-affordable units would delay implementation of later phases.

PUBLIC OUTREACH/INTEREST

Criterion 1: Requires Council action on the use of public funds equal to $1 million or greater.

Criterion 2: Adoption of a new or revised policy that may have implications for public health, safety, quality of life, or financial/economic vitality of the City.

Criterion 3: Consideration of proposed changes to service delivery, programs, staffing that may have impacts to community services and have been identified by staff, Council or a Community group that requires special outreach.

For questions please contact Darryl Boyd, Principal Planner at 408-535-7898