Long one of the fastest growing commuter suburbs in the San Joaquin Valley, the City of Tracy is about to see a dramatic reduction in development.

Because of a growth-limiting initiative approved by voters in 2000, and the city's implementation of that initiative, housing development in Tracy is likely to drop by 80% to 90%, and might not return to a higher level for nearly a decade.

It's a stunning turn for the growth-friendly city just over Altamont Pass from the Bay Area. And it's a turn that worries the development and business communities.

“It could have been addressed a little bit more rationally,” Tracy Chamber of Commerce Chief Executive Officer Mike Schmidt said. “Sometimes I think we're our own worst enemy. The City of Tracy didn't listen when the citizens were screaming about the pace of growth.”

That pace has been rapid for the western San Joaquin County city. In 25 years, Tracy's population has quadrupled to nearly 80,000. For years, growth was essentially unchallenged. But the growth wars started during the mid-1990s. Twice voters rejected growth-control ballot measures before approving Measure A in November 2000. The initiative was complex, but the major thrust was to place a 600-per-year cap on both “residential growth allocations” and new housing building permits. At the time, the city was permitting the construction of more than twice that many housing units, nearly all of which were suburban-style, single-family homes for people commuting to the Bay Area.

With Measure A in place, the battle then moved to implementation. Siding with developers, city officials insisted that Measure A had no impact on vested projects. So the city continued to issue large numbers of both residential growth allocations - which allow a developer or landowner to apply for a building permit - and actual building permits.

However, the city is counting residential growth allocations and building permits for vested projects in a 10-year average, which Measure A permits so long as the average does not top 600 per year. The vested projects are nearing build-out. Still, after awarding residential growth allocations in excess of 1,200 per year for four years - and building permits in excess of 1,200 for five years - the city was faced with making a drastic reduction to reach an average of 600.

This year, the city made available only 100 residential growth allocations (RGAs), which the city's Growth Management Review Board awarded in March. The board also gave seven RGAs to projects that vested before Measure A's adoption, and 10 RGAs to an affordable housing project, for a total of 117. Developers sought a total of 270 RGAs.

Until this year, the city awarded RGAs based on a project's entitlement status, explained Senior Planner Vicki Lombardo. In January, however, the city amended its growth management ordinance to change the RGA criteria.

“We have this competitive process that we didn't use to have before,” Lombardo said. Entitlement status remains a factor. But the city also ranks projects based on location - infill projects, especially in the downtown, are favored - affordability, housing type - multi-family wins over single-family - and project design. The method is comparable to methods used in the approximately 50 other cities in the state that have similar residential caps.

Nevertheless, developers who have been working in Tracy do not like the city's new system. The Building Industry Association (BIA) of the Delta has been lobbying the city to modify its growth management ordinance, and has been urging the state Department of Housing and Community Development to reject the city's draft housing element because of the new limitations.

“To go from 1,000 units down to 100 units, what you are going to see is an economic meltdown for the city,” contended John Beckman, government affairs director for the BIA of the Delta. “Even building at 1,000 units a year, the demand is outpacing the supply.”

The builders' organization insists that Measure A did not apply to vested projects; therefore, the city should not count RGAs awarded to those projects in meeting the average of 600 RGAs and building permits.

“If you remove that one component, it's a moderately acceptable ordinance,” said Beckman, who insisted the group is trying to compromise. “We're the building industry and we're saying it's OK to place a cap of 600 units from now on in the City of Tracy.”

However, Mark Connolly, a Tracy attorney who wrote Measure A, said developers have only themselves to blame.

"The city and developers chose to build 1,200 homes per year," Connolly said. "The developers sued to do it, and the city sided with the developers. Measure A has acted exactly as intended. Had the city chosen -- which it had the legal right to do -- to slow down to 600 homes per year beginning in 2000, then we would be building 600 per year. Since the city and developers got gluttonous and built 1,200 per year, we are now going to slow down to 250 per year to let us deal with our lack of schools, parks, open space, jobs and excessive traffic. "

The BIA argues that limiting development to, essentially, 100 infill units per year means Tracy will not be able to meet its fair share of the regional housing need. So far, the state has not approved Tracy's draft housing element, which must explain how the city is going to meet its fair share.

City officials, however, point out that Measure A allows up to 150 additional RGAs annually for projects that are fully affordable - 12.5% affordable to very low- and low-income residents, and 87.5% affordable to moderate-income people. If the city receives additional applications for affordable development, the city has the authority to move the projects forward, Lombardo said.

Of the 270 RGAs that developers sought this year, nearly all applications were for market-rate, single-family houses. That probably is not surprising considering that the median price for a house in Tracy is nearly $550,000, roughly double the median price when voters approved Measure A.

However, developers that specialize in affordable housing are starting to shop around for land in Tracy, said Ellen Gripp, manager of the city's Community Development Agency. One problem, though, is that most available properties are too large, she said.

“There is substantially more interest, and I'm seeing myriad developers,” said Gripp. Still, traditional, market-rate developers have followed through with few affordable housing applications to date, she said.

The Chamber's Schmidt worries about a local economic downturn striking Tracy during the next year or two. Schmidt, a former banker, figures that construction of a new housing unit generates $200,000 for the local economy. Using a conservative multiplier of three, construction of 1,000 units means $600 million for the local economy. Thus, a 90% reduction in housing construction could equate to a hit of half a billion dollars for the local economy.

Schmidt, however, puts some of the blame on city officials. For years, he said, they refused to listen when residents complained about the pace and type of growth in Tracy. Instead of putting modest limits on growth and encouraging development of multi-family units and “step-up” units that locals could afford, the city allowed rapid development of large homes aimed expressly at Bay Area commuters, Schmidt said.

“We haven't built any affordable housing. We haven't built any senior housing,” said Schmidt. “We haven't built any housing for our internal workforce.”

The city hoped that by providing housing for Bay Area workers, the city could encourage Bay Area businesses to relocate to Tracy. Thus far, however, Tracy has drawn little besides retail stores and warehouses (see CP&DR Economic Development, November 2001).

Tracy's loss might be a gain for nearby jurisdictions. San Joaquin County and northern Stanislaus County remain the primary relief valve for Bay Area growth pressure, even though the commute on Interstate 580 over Altamont Pass has become one of the region's worst. And Tracy's neighbors are not only growth-friendly, but they have actually approved large-scale projects that have only begun development. For example, the 16,000-unit Mountain House project in unincorporated San Joaquin County is less than 10% built. The City of Lathrop has approved nearly 20,000 housing units since early 2003.

Assuming its current policy remains in place, Tracy may not return to 600 RGAs a year until 2013, Lombardo said. Some people hope to raise the number by 2011, but because building permits lag RGAs, and because Measure A places a cap on both, 2013 is more likely, she said.

Victoria Lombardo, City of Tracy Planning Division, (209) 831-4620.
Ellen Gripp, City of Tracy Community Development Agency, (209) 831-4630.
John Beckman, Building Industry Association of the Delta, (209) 235-7831.
Mike Schmidt, Tracy Chamber of Commerce, (209) 835-2131.