The Mountain View City Council voted last week to block a proposed design for an office building at the corner of San Antonio Road and California Street.
The decision has the potential to create difficulties for the Los Altos School District’s 10th school site, which is nearby at the corner of California Street and Showers Drive. The design of the office building relied on purchasing development rights from the school district. These transfers of development rights, or TDRs, are a critical part of how the school district is planning to pay for the 10th site.
The city council voted 3-2 to deny a “gatekeeper application” from Merlone Geier Partners, the developer that owns the property, citing the large size of the structure. The building would have been eight stories with ground-level retail and office space above.
Even if council members had approved the gatekeeper, it wouldn’t have meant they were signing off on the development. Approving the gatekeeper simply authorizes city staff to consider the application.
Mayor Lisa Matichak and council members Margaret Abe-Koga and Alison Hicks voted to reject the application, while Ellen Kamei and Christopher Clark dissented. Lucas Ramirez and John McAlister both recused themselves, citing conflicts of interest.
However, the decision by the council doesn’t preclude the developer from coming back with a new design. In fact, Scott McPherson, executive managing director at Merlone Geier, said that is the plan.
“We remain committed to both the Los Altos School District ‘TDR’ program and the successful development of the corner of San Antonio Road and California Street,” McPherson said in an email. “Accordingly, we have plans to submit a revised Gatekeeper request incorporating many of City Council comments and clarifying matters in the City Staff report.”
The 230,000-square-foot office building the city council reviewed would have involved purchasing 150,000 square feet of development rights from the school district. It isn’t yet clear how many square feet would be purchased with a new design.
The school district plans to sell 610,000 square feet of unused development rights for a total of $79.3 million. The school site’s zoning allows for far more square footage than is needed to build a school, so the city agreed to allow the district to sell the right to develop those square feet elsewhere in Mountain View.
Merlone Geier’s planned purchase of 150,000 square feet of development rights would make it the largest participant in the TDR program. However, developers only pay the district after their projects receive final approval from the city.
Randy Kenyon, the district’s business director, said in an interview that the council’s denial of the gatekeeper was a “hiccup,” but that it won’t have a large impact on the purchase of the 10th school site.
“This whole transfer of development rights has risks, and we’re doing what we can to minimize the risks,” Kenyon said. “The sooner that the council gets projects in front of them for approval, the sooner the risks go away.”
With the status of Merlone Geier’s office building up in the air, the district is starting to look for other potential TDR buyers, in case a new buyer becomes necessary, Kenyon said.
The district has other potential buyers identified, but not enough yet to cover the full 150,000 square feet Merlone Geier had planned on purchasing.
Merlone Geier had originally submitted a proposal for the office building last year, but since then it acquired two more parcels of land, including the land where Milk Pail Market used to operate.
“We have agreed to acquire more TDR square footage than any other participant,” McPherson told council members last week. “We’re very excited about the prospect of having the school and the joint-use park adjacent to us, and we think that it will be a great addition to our neighborhood.”
The city of Mountain View has agreed to buy 2 acres of the school site from the district for $20 million, with plans to put a city park there. Mountain View will also contribute another $23 million for joint use of recreation areas at the school.
However, council members had concerns about the design of the building. Abe-Koga said she voted against the project when it first came before the council last year and only has more concerns now.
“To put another large box on the corner, to me, it just doesn’t fit in with what we have there,” she said.
Multiple council members also pointed out that an office building wasn’t in line with the council’s goal of building more housing.
“I feel like this sort of fundamentally is not the direction I thought the city was going,” Matichak said. “What we have been trying to do is add housing, and instead this is a large office building.”
However, Kamei and Clark both expressed concern that denying the gatekeeper had the potential to hold up the school site.
“I don’t want to do anything further to slow down the acquisition and the finalization so that things can get going,” Kamei said. “Because with the housing we are creating, we’re going to need further capacity and need another school.”
The sale of the $155 million school site is slated to close Nov. 13.
The district will receive the $43 million the city has agreed to pay before then, Kenyon said.
The district plans to issue approximately $79 million in what are known as “bond anticipation notes” next month, which will be repaid once the district receives the proceeds of the TDRs.
If for any reason the district doesn’t receive the full $79 million, the rest would be paid off with Measure N bonds, something the district wants to avoid.
The district will be issuing Measure N bonds next month to cover the $27.7 million net cost of purchasing the site, as well as for various other expenses.
Among those expenses is $5 million the district plans to receive from the Mountain View San Antonio Project to help cover the cost of the school site.
But that money won’t be received until after the sale closes, so the district will issue bonds to cover the cost in the interim.
Greystar, which is developing the Old Mill Safeway site across the street, will ultimately contribute $4 million of that. The district isn’t yet saying who is putting in the remaining $1 million.
The district also will issue additional bonds to cover various other expenses, including a $10 million line of credit the district got from Wells Fargo about five years ago to install new portables for Bullis Charter School.
The final bond total is still being worked out. Measure N funds also will be used to pay for constructing the school itself once the site is purchased.