Faced with the potential demise of a highly anticipated 430-acre commercial and residential project, the City of Marina has added more than $80 million worth of subsidies and incentives to a deal with developers. In the recently approved deal, the city also reduced the developer's workforce housing obligations and agreed to cover half of water connection fees.

Because of the crash of the housing market crash, the developers of The Dunes on Monterey Bay revealed in November 2007 that the project was in jeopardy and asked the city to renegotiate various agreements. A new deal fell apart in January when the Fort Ord Reuse Authority (FORA) declined to subsidize the project. In August, the City Council unanimously approved the new deal with at least $106 million in redevelopment subsidies despite requests from residents for more time to review and comment on the arrangements.

Since then, the city's arrangements with Marina Community Partners LLP (a collaboration of Shea Properties, Shea Homes and Centex Homes) has become an issue in this fall's campaigns for mayor and City Council. Mayoral candidate Bruce Delgado, a former councilman who narrowly lost a 2004 bid for mayor, complained about "giving away 30 years worth of property taxes and debt service." He argued that the deal will cost the city about $200 million, and said, "It's not worth $200 million to Marina to build now what's going to be built in two or three years anyway."

But Mayor Gary Wilmot defended the deal to the Monterey County Herald. "We're going down the path and delivering to the citizens what they wanted," he told the newspaper. "We are in the process of basically pulling together a city."

"The revised deal is needed to meet some primary objectives of the city," Marina Development Services Director Doug Yount asserted. "It keeps the project moving forward, especially the economic development component."

"It was not just a matter of continuing forward now, it was a matter of whether it was going to forward at all," Yount explained. "There are a whole lot of projects where the developer has just walked out the door." If that were to happen in a small market such as Monterey County, a new developer might not materialize, he said.

Yount also said there is no debt service involved because, under the deal, the city's redevelopment  agency will provide subsidies only as The Dunes generates tax increment. The agency will not front the money, he said.

Marina is a city of about 19,000 residents located on Monterey Bay a few miles north of Monterey. Marina's fortunes were strongly tied to the adjacent Fort Ord Army base. When Fort Ord closed in 1994, Marina and its neighbor Seaside got slammed by the loss of thousands of civilian and military jobs. However, the base reuse process resulted in those cities receiving more than 2,000 acres apiece of the former military base. Today, former Fort Ord land composes about half of Marina's territory.

Redevelopment of the 28,000-acre base (the majority of which is designated as open space or parkland) has been highlighted by the opening of California State University, Monterey Bay during the mid-1990s. Today, the 1,400-acre campus is home to a student body of 4,000 and growing. Other redevelopment efforts have been less successful. A few housing projects have been completed but the vast majority of the planned 6,000 housing units on the old base remain just that – planned. "They are pretty much stopped at the present time," said Steve Endsley, FORA's director of planning and finance.

Several of the large reuse projects are located in Marina, including the 1,050-unit Marina Heights, and the 700-unit Cypress Knolls senior housing project. The largest of all, however, is The Dunes on Monterey Bay, which was originally called University Villages. Approved in 2005, the project calls for 1,237 single-family and multi-family housing units, a 368,000-square-foot regional retail center, a pedestrian-friendly promenade lined by a wide mix of uses, two hotels, offices and 21 acres of parks. Anchored by Target, REI and Kohl's, the retail center opened shortly before last Christmas. But developers halted early grading for a hotel, offices and residences at about the same time because local housing prices had already fallen by nearly 20%.

Under the original deal, the city agreed to provide Marina Community Partners with $29.3 million from the redevelopment agency's low- and moderate-income housing set-aside fund. In exchange, 20% of the housing units were designated as affordable, and another 10% were designated as "workforce" housing affordable to households making 120% to 150% of median income.

The new deal greatly sweetened the pot. According to Yount, staff reports and City Council resolutions:

•  The redevelopment agency will provide all of its non-housing tax increment generated by The Dunes project through 2030 – estimated at $58 million – to the developers.

• The agency will also direct an estimated $18 million worth of low/mod housing funds from elsewhere in the redevelopment project area to The Dunes.

• The land sales price was cut from $48 million to $43 million.

• The number of workforce housing units was reduced from 124 to 62.

• 100 proposed live-work units next to the promenade may instead be constructed as regular townhouses.

• Fees for connecting to the Marina Coast Water District system will be split 50-50, with the redevelopment agency using tax increment generated after 2030 to pay its share.

City officials contend the deal is still a winner for Marina and other public agencies. The city expects to get $34 million in sales tax and another $41 million in hotel tax through 2030, plus $70 million in tax increment between 2030 and 2045. The county, the local school district and FORA will continue receiving their full shares of tax increment as required by law. The new deal sets a lower threshold for developers to share "additional profits" with the city. And at full build-out, the project will provide 4,700 permanent jobs — roughly equal to all the jobs currently in town – and about 300 units of below-market housing.

Yount said the redevelopment agency's investment will pay off in $1.5 billion worth of new development. Plus, he said, the redevelopment subsidy is entirely dependent on the project going forward. "If they don't build anything, they don't get any increment," he said.

"The quality of the project remains the same. You can't swap out housing for something else. You can't get rid of the mixed-use character. You can't get rid of the arts and cultural district," Yount said. "We are implementing the base reuse plan."

Still, Endsley said FORA declined the city's request for direct financial participation in The Dunes.

"We were not able to do that, not because we don't support the project and wish it well, but because those tax increment dollars have never been used in that way," Endsley said. "We can't afford to invest in individual projects." Instead, FORA is putting money into infrastructure that provides for the overall base reuse.

LaVonne Stone, who heads the Fort Ord Environmental Justice Network, expressed dismay at what she considers an inadequate commitment to affordable housing at The Dunes and other reuse projects.

"You've got land, and you've got money, and you've got people moving in all over the county. But the little people who lost jobs and were affected by the closure of the Fort Ord are ignored," Stone said.

Originally, housing advocates, including U.S. Rep. Sam Farr (D-Carmel), pressed for 50% of new units on the old base to be affordable. But city and county officials resisted, and it now appears about 20% of new units will be available at below-market prices (see CP&DR Local Watch, January 2006).

Mayoral candidate Delgado, a Green Party member, also decried the cut in affordable housing at The Dunes, as well as design issues. He described the regional commercial center as "a big-box shopping mall" that could have been built anywhere.

Construction of the next phase of The Dunes, including the promenade, a hotel and some housing, is scheduled to resume this month, according to Yount.

Doug Yount, City of Marina, (831) 384-7324.
Steve Endsley, Fort Ord Reuse Authority, (831) 883-3672.
Bruce Delgado, candidate for mayor, (831) 384-1376.
LaVonne Stone, Fort Ord Environmental Justice Network, (831) 582-0803.