.Housing Split Stalls Scotts Valley Development

Sometimes when residents talk vaguely about ideas for a Town Center near the intersection of Mt. Hermon Road and Skypark Drive, you might think they’re describing Camelot, some utopian summit that everyone will be able to enjoy.

But once you get to the details—like how to make the finances work and how much housing to actually build—the whole concept quickly starts to seem more like a house of cards. And so maybe it shouldn’t come as a shock that the cornerstone of Scotts Valley’s Town Center, a much-discussed housing and commercial development plan 20 years in the making, is getting put on hold again.

That cornerstone is the 14-acre Scotts Valley Town Green proposal, where developers hoped to build new storefronts with housing and shared community spaces. The overarching vision was to build the kind of cultural hub that city leaders had been dreaming up for decades. But now, a coalition of developers handling the heavy lifting says it’s no longer in contract with the cities of Scotts Valley and Santa Cruz—each of which owns a portion of the underlying land.

And just like that, it’s back to the drawing board for a project that seemed like it was finally gaining momentum.

Doug Ross, one of the project principals along with Owen Lawlor and Chris Foley, says that one of the tipping points in the decision was a major cost increase associated with cleaning up  environmental hazards on the site, such as benzene and arsenic. That increase caused the price of the overall project to climb.

The latest Town Center news comes after the developers spent months organizing community meetings to gather input on their proposal and make adjustments to their original design. One topic that kept coming up was how much housing should be part of the mix, highlighting tensions around growth in the city of 11,600 residents.

“The project that evolved for us, which reduced the housing component and maintained the original retail, did not have enough revenue to offset the costs,” Ross says.

GROWING PAIN

Before the project fell through, Scotts Valley Mayor Jack Dilles already knew that new housing development might come across as jarring to some longtime residents.

“Part of the issue here is we’ve had very little growth for 10 years,” he says. “We’ve built almost nothing. So, when the community starts seeing homes being built—and they are being built right now—it’s a change, especially for people who moved here in the last 10 years. They’re not used to seeing that.”

The slow pace of building in Scotts Valley, and other communities like it, has added to tension as rents and home prices climb increasingly out of reach. To counteract anemic building rates, Gov. Gavin Newsom has pushed for the state to build 3.5 million homes by 2025.

Scotts Valley, for its part, has started to become more transparent about how much housing it’s permitting. Dilles is right to say that the town is now building. Most of the new homes, however, are on the pricier end.

For the first time in years, Scotts Valley released a public report in April on its progress toward housing goals set by the state and the Association of Monterey Bay Area Governments.

The target number of housing units for Scotts Valley to add from 2014-2023 is 140, which state guidelines also say should be spread across income levels. Scotts Valley has permitted 125 units to date, 115 of which have been for above-moderate income housing. Scotts Valley has not permitted any housing in the very-low income level, according to city data, and it has permitted only three at the low-income level.

One of the most vocal groups to raise concerns about the Town Center plan was Citizens for Orderly Growth, or CFOG, a reincarnation of a Scotts Valley group from the 1980s.

Although CFOG representatives did not reply with a comment, the group states on its website that, “For years, we have consistently stated the importance of maintaining our unique small-town feel while creating a place where locals and others would come to hang out or meet up with a friend for coffee or a meal.”

The site says that CFOG isn’t against the project, but rather that its members believe the development should have less housing.

Local housing advocates contend that the Town Center is exactly the kind of spot where new construction makes sense, says Evan Siroky, founder of Santa Cruz YIMBY, which stands for “Yes in My Backyard” and is one of a growing number of pro-housing YIMBY groups nationwide. The spot is close to transit, retail and community spots like Skypark.

“I get where they are coming from,” he says of those concerned about preserving the community character, “but there is such a huge need for housing and people are really struggling. Why is it so important for a town to keep a small-town feel if this is causing a lack of opportunity and the housing crisis to go up?”

Siroky adds that, “It’s a total misplacement of priorities in the greater scheme of things.”

COMMERCIAL SPACE OUT

For developments like the Town Center, Dilles prefers an emphasis on building commercial space, rather than building housing.

“One of the challenges with housing for me is that—I don’t have a nice number—but I know that housing, in my opinion, costs more in services than we receive in taxes,” says Dilles, who comes from a background in government finance.

Proposition 13, approved by voters 40 years ago, capped the amount of property taxes that homeowners pay, even if home values increase. Then in 2011, Gov. Jerry Brown raided some local property tax dollars when he axed redevelopment agencies. On top of that, Dilles says Scotts Valley sees an especially low cut of its own property tax, getting just 6.5%, because it’s historically been a more rural community. Particularly in Scotts Valley, the set-up encourages leaders to focus on building commercial properties, which offer more tax dollars, Dilles says.

Decisions about how to portion out growth in Scotts Valley come as the city faces a $1 million structural deficit. The city has a sales tax that is set to expire in March 2022 as well. If that tax is not renewed, the deficit will rise to $2 million annually, Dilles says.

Scotts Valley is also in the process of updating its general plan, which it hasn’t done since 1994. Having that completed would help inform decisions about Town Center and every other project being proposed in Scotts Valley, Dilles says.

TOWN GREEN DREAM

The city adopted a specific plan for the Town Center in December 2008, envisioning it as a “mixed-use node that will become the heart of the city.” That was shortly before the bottom fell out of the economy. Some development has progressed along portions of Town Center, like a recently opened drive-thru Starbucks along Mt. Hermon Road.  

Before being put on hold, the total amount of housing proposed for the Town Green had already been whittled down from around 310 to 220 units. It would have included 50 affordable units.

The changes developers made in response to concerns expressed by the community may not have made everybody in Scotts Valley happy, Ross says, “but I think the objective people would agree that we have modified our plan in response to those community meetings.”

Further cutting the housing component of the proposal, which included around 25,000 square feet of retail space, would have made the project difficult financially, according to the developers. The only way to justify the improvement costs on the land would have been to have housing to support the retail, Ross says.

What happens next with the land, Ross says, is ultimately up to the cities of Scotts Valley and Santa Cruz.

“In our community outreach, we made some decent progress,” Ross says. “My sincere hope at the end of the day is this project goes forward in one way, shape or form, because I think it would be a very important element to Scotts Valley.”