The developers behind the controversial Paseo Nuevo redevelopment project now have the option to not build 80 affordable housing units on Parking Lot 2, and instead build only 24 at the site of the old Macy’s building.

The developers, AB Commercial and The Georgetown Company, had proposed 233 market-rate apartments at the site of the old Macy’s building and another 80 affordable units on Parking Lot 2. However, the city, in behind-the-scenes negotiations, is now offering them the ability to build only at Macy’s.

“The applicant in the disposition agreement has a couple of options,” said Tess Harris, State Street master planner. “There is an option in the agreement where they could build the affordable units at Parking Lot 2, or they could elect to build the required affordable units in the former Macy’s building and elect not to pursue Lot 2.”

The project then would have 209 market-rate units and 24 affordable units, which complies with the city’s 10% inclusionary housing ordinance. The developers could then choose whether they want to build at Parking Lot 2 at all.

“They could build the Macy’s site and open it with affordable units, then elect to either forgo the Lot 2 site, or they could elect to within five years move forward with the Lot 2 site and then transfer the affordable units to that site,” Harris said at a recent downtown parking committee meeting.

Although the disposition and development agreement for the mall is set to be formally released on Monday, the changes have buzzed throughout City Hall the past couple weeks. The City Council is expected to vote on the matter on Dec. 2.

If the developers eventually decide to build the affordable units, the people who rent the affordable units at the Macy’s site would either stay there or be asked to move to the new Parking Lot 2 units, Harris said.

Further tangling matters, even if the developers end up building on Lot 2, they have the option to build as few as 45 units there.

The new options for the mall’s development team mark a significant turn in what the public has been told up to now. The 80 affordable units had been a big selling point of the project and the main justification for the city to push for the deal in the first place.

Harris told Noozhawk that the change came as a result of discussion with the development team and city officials.

“We were hearing a lot of negativity about the Lot 2 development,” Harris said. “This provides an option.”

Parking Lot 2 is at 914 Chapala St. If that goes through, the crews would slice off a portion of the parking garage to build a four-story affordable housing building.

In public meetings so far, city leaders have contended that the mall is failing and that it needs to be re-envisioned. They have partnered with the mall’s leaseholders, AB Commercial, an investment firm, and The Georgetown Company, a developer, to re-envision the project.

The plan calls for the demolition of the old Macy’s store on West Ortega Street. In addition, the city wants to give away the land underneath Paseo Nuevo, and a portion of property tax revenue, at a total value of $32 million to $39 million, to the developers.

City Administrator Kelly McAdoo has repeatedly stated that giving away the land is the only way to incentivize the developers to the deal.

If the project goes through and the developers build on Parking Lot 2, the public would lose 186 parking spaces at the site. Underneath the Macy’s building, the public would lose 233 spaces because each apartment would have one parking spot reserved for a tenant.
The city is adding a few spaces to the lot, leading to a net loss of 204 spaces at Paseo Nuevo.

City officials believe that bringing housing units downtown will help re-energize State Street and boost the State Street Master Plan.