Don’t try to back the City of Santa Barbara into a corner.

That’s what the Santa Barbara City Council told the development team behind the plan to redevelop the Paseo Nuevo mall.

Despite threats from AB Commercial that it wanted a do-or-die vote on the mall, the council took no action Tuesday night and instead directed the developer to come back with a plan to build more affordable housing.

“We deserve better than what is before us tonight,” said Councilwoman Kristen Sneddon, who led the charge against the developer.

Sneddon, during a tense moment inside the City Council chamber, looked directly at the AB Commercial team seated in the second row and called them out publicly for what they said in private.

“Our partners looked me in the eye, as I am sure they did with others, and said, ‘If you don’t pass this deal, we’re going to leave it fallow like we have done with two other projects in Los Angeles right now, and that’s just the reality,'” Sneddon said.

She said regardless of whether the threat was real, “it is not the way to build a partnership.”

Going into Tuesday night, the city wanted to give away the land at Paseo Nuevo to AB Commercial, a New York investment firm that owns the leases to the mall. The land alone, along with a portion of annual property tax, is valued between $32 million and $39 million.

AB Commercial and The Georgetown Company want to build 209 market-rate apartments and 24 affordable housing units at the site of the former Macy’s building. The housing plan, however, keeps shrinking. Initially, AB Commercial had proposed 500 units, then it was lowered to 233 market-rate and 80 affordable on City Parking Lot 2.

The city, however, negotiated behind the scenes to allow AB Commercial the option not to build the 80 affordable units, and instead build only 24.

Sneddon and other council members said the situation kept changing and the public was left out of the process.

“I don’t feel I have the transparent information,” Sneddon said.

Several of the council members expressed concern about giving away the land to AB Commercial in order to make the housing development economically viable.

Sneddon said that each time she has seen the project, “it has become worse.”

“This deal needs to pencil for the people, not just AB,” Sneddon said.

Councilwoman Meagan Harmon said the process has not been transparent and that council members and the public have been left out in the cold.

“We, the council, the community, we really have not been brought along with what we see today,” Harmon said, “and I think this conversation is a result of that.”

She said the council has not had the opportunity to weigh in on the specifics.

“As a result, what we are hearing is deep community concern about and the questioning of the level of transparency around this deal,” Harmon said.

It is unclear whether AB Commercial will follow through on its threat to put the mall into fallow status after the council didn’t approve the land giveaway.

Although the council took no formal action regarding the mall, it did direct staff to form a two-person committee to meet with staff about the mall project going forward. All of the council members except for Mayor Randy Rowse expressed a desire for more affordable housing as part of the project.

Some members want as much as 25% of the units to be set aside for affordable housing. In addition, the council said that the city staff, AB Commercial and Shopoff Realty Investments, the owners of the former Nordstrom building also at the mall, need to fix a so-called “reciprocal easement agreement.”

The agreement states that all three parties must agree on a housing plan. Shopoff has a separate project to build 112 units at the site of the former Nordstrom building. The council members said they didn’t want to move forward until the three entities agree on a housing plan.

The council, at the request of Sneddon, also directed staff to research a proposed ballot measure that would extend the length of a lease of city-owned land beyond 40 years. One of the reasons that AB Commercial wants the land under the mall for free is because it cannot finance a loan for only 40 years. A 90-year-lease for the mall, however, with loan repayment amortized over that period of time, would make the deal easier.

Councilman Oscar Gutierrez raised the question of giving the mall back to the Chumash, since it was their land originally. He directed staff to put down on paper what the process would be to take such an action.

Most of the public speakers Tuesday night opposed the project as currently proposed. Architect Brian Cearnal spoke at the meeting. He said the apartments should be built throughout the mall, not just on one giant corner.

“You are being asked to transfer all the land, including Parking Lot 2, to AB Commercial, who in turn proposes to concentrate all new development in this behemoth along Ortega,” Cearnal said.

In a dramatic moment, Cearnal then showed a rendering of the housing project, which stands at 88 feet, superimposed on top of the Santa Barbara County Courthouse. The housing project towers over most of the courthouse buildings.

“I think that says it all,” Cearnal said.

Councilman Eric Friedman said he was optimistic that a deal eventually would come. He told the AB Commercial team that they learned quickly what Santa Barbara is all about, and that it won’t be backed into a corner.

“We have to have trust with the three partners,” Friedman said. “We have to have the public’s trust, and the only way to do that is to keep moving forward and get these issues resolved one after the other after the other until we get to a place, honestly, where within three years we might be able to move forward on housing construction.”