Municipalities are starting to rely more frequently on private development companies to lead the redevelopment efforts within their boundaries. With limited budgetary resources, local governments are taking a collaborative approach which appears to be a win-win-win situation for the community, its’ residents, and private developers. Each key participant provides important pieces to the redevelopment puzzle.

Within the last month, the City of San Diego (CA) approved five innovative projects that will become demonstration projects of the city’s smart-growth campaign. San Diego is calling its smart-growth strategy the “City of Villages.”

San Diego’s City of Villages (COV) concept started taking form in 2001. In June 2002, following the completion of an Environmental Impact Report, the COV Growth Strategy was incorporated into the community’s 2002-2004 economic development strategy that was adopted by the City Council in October 2002..

The COV strategy is designed to promote development that mixes residential housing, retail, educational, and civic uses to spur employment all within a “walkable” community with easy access to transit routes.

Pilot Villages
On February 10, the San Diego City Council approved the five demonstration projects that are meant to encourage other developers and communities to create similar neighborhood centers.

“We are very pleased that the selection process is complete and has resulted in such creative approaches to village development,” said Planning Director Gail Goldberg in a http://www.sandiego.gov/cityofvillages/pdf/pilotvillages/040212pvsapproved.pdf  press release. “The Pilot Village Program has already achieved one of our original goals, which was to demonstrate how communities can come together to create neighborhoods they are proud of.”

The five project titles are: The Boulevard Marketplace – or the Mid-City Transit Interchange Project (MCTIP); Mi Pueblo; North Park; The Paseo; and the Village Center at Euclid and Market.

“Each project has a unique flair that will draw people to their community and inspire the building of other Villages throughout the city,” predicted Goldberg. “We are excited about the contribution that these Pilot Villages will make to San Diego’s richness and texture as a cosmopolitan city of the future.”

Collaboration and Incentives
San Diego’s initiative represents an emerging trend for communities and developers. This is especially true in areas hit by budget crunches at the state and local level where the community recognizes the need to continue or spur development to increase economic opportunities.

While the local government entity may not be able to bring any cash to the table, they are in the position to provide some other critical ingredients. First, the municipality can provide the developer with short- and long-term incentives that can result in a more favorable opportunity to finish the project with a profit by reducing the financial risks. Likewise, the governmental body is in the position to expedite regulatory processes due to the fact that the project’s goals and concepts, including unique or adapted zoning situations have already been discussed, agreed to, and implemented.

As for the developer, he will typically provide virtually all of the capital financing. Of course, this will usually be assisted with federal, state, or miscellaneous grants/loans as available based upon the type and scope of the project. The developer also assumes most, if not all, of the financial risks and liability.

The residents of the current community also play a significant role and will enjoy the benefits of the finished project along with the new residents that will directly benefit. Usually, the motivating factors to put together a redevelopment project can be summarized with three goals: improve a blighted/depressed area; create affordable housing; increase the tax base. All three of these factors should have a positive impact on the residents.

In San Diego, the Pilot Village projects are eligible for a number of incentives, including:

• Priorities on infrastructure upgrades or replacements

• Deferral on collection of fees

• Council Policy 900-12 Business Industry Incentives 

1.      The City Manager or his designee may exercise administrative discretion to authorize one or more of the following incentives:

a.       The provision of assistance in securing required City permits and approvals;

b.      the provision of due diligence assistance in advance as a potentially valuable project is under consideration, and the provision of preliminary reviews;

c.       The expediting of required Development Review Department permits;

d.      Crediting up to 45% of sales or use taxes paid by the business against City business license taxes and/or development related fees, or rebating up to 25% of sales or use taxes paid by the business, if such sales or use taxes constitute previously uncollectable revenue to the City and the business pays its sales or use taxes to the State Board of Equalization properly reporting San Diego as the situs of sale or use, consistent with the provisions of the Business Cooperation Program (Resolution R-288034); and/or

e.       Reducing water and sewer capacity charges by $1,000 per equivalent dwelling unit (Resolution R-287543).

2.      The City Council must approve any one or more of the following incentives:

a.       Reimbursing all or a portion of City permit processing fees. Development Impact Fees, Facilities Benefit Assessments, Housing Impact Fees, Water/Sewer Capacity fees; fees collected pursuant to Developer Reimbursement Agreements, and/or costs of public improvements that are a required condition of the development, from future revenues to the City generated directly from the project after the City’s receipt thereof;

b.      Rebating all or a part of the City’s portion of real and personal property taxes paid to the County Assessor levied on real and personal property related to the project’s manufacturing process after the City’s receipt thereof, consistent with the provisions of authorizing the state law (Calif. Rev. & Taxation Code, Section 5108 et. seq. and 51298 et. seq.); and/or

c.       Providing tax-exempt bond financing through issuance or approval of Industrial Development Bonds, Non-Profit Bonds, or Enterprise Zone Bonds, pursuant to Council Policy 100-12.

• Funding sources such as handicapped access, rebates on property taxes, and revolving loan funds

• Assistance related to policies and regulations on the undergrounding of utilities, affordable housing, and Community Development Block Grants.

The Development Process
Interestingly, the five projects in San Diego’s initiative are each structured a differently. A couple have been initiated and submitted by local neighborhood community groups, others are partnerships, and one is even a university foundation. The project teams are as diverse as the projects and neighborhoods they will be focused upon.

Andrea Skorepa, President & CEO of Casa Familiar, is the leader of the approved Mi Pueblo project that was submitted by The San Ysidro Partnership.

“Our project is located along the historical commercial core of San Ysidro Boulevard,” explained Skorepa. “It is a relatively old area that has been flat in recent growth, but one with very good potential. We are located in a business improvement district, which really spurred the opportunity for us to become one of the initial Pilot Villages.”

Gary Weber’s firm, GRW & Associates, consults with the El Cajon Boulevard Business Improvement Association that submitted the Boulevard Marketplace, or MCTIP, project. He relates that the inclusion into the Village Project is a culmination of nearly 40 years of transitional planning.

“MCTIP (Mid-City Transit Interchanges Project) activities are a result of a planning process that has occurred over the last 25 years,” explains Weber. “We knew then that the dynamics of this area would be greatly affected and contingencies were made. In some instances, taking action requires years of planning before implementation. This is one of those situations.”

The MCTIP project is located in the area with the highest residential density in San Diego and is also mostly an impoverished area. Compounding the situation is that the major transportation artery bisects what was once a cohesive neighborhood.

A concession made by the governmental agencies when I-15 was being constructed was that an entire block of the freeway would be covered to allow for development to occur on top of the freeway. It is the only such arrangement in California.

According to Weber, individuals from numerous associations and organizations have been working on the planning of the redevelopment of this area for a number of years. The affiliation with the Village Project provides a couple of new opportunities for those involved in the MCTIP redevelopment.

This San Ysidro Partnership is comprised of multiple organizations, including Casa Familiar, a 501C3 community service organization.

Another organization involved in the San Ysidro Partnership is the San Ysidro Business Association. This association is comprised of businesses that own property in the development area and are willing to invest in the future success of the project. It is a legal entity where the property owners can act together and pool resources, similar to the more familiar Main Street organizations throughout the country.

The for-profit developer of the Mi Pueblo project is JER & Associates of ????, Virginia.

While the local residents and businesses expect to receive tangible benefits from the redevelopment, so does San Diego. With less than ten percent of the city’s 331 square miles vacant or available for development, this is the manner in which the community hopes to accommodate the population growth and development needs that are forecast – predominantly through effective and innovative redevelopment and infill with mixed-use planning and design.

Weber also cited another hopeful result of the Village Projects. “I believe it will show, at least in our project (MCTIP), that you can achieve additional affordable housing along with a mixed-use infill development project that is tucked into a high density environment and provide a significant improvement to the residents of the entire area.” SLDT