Capitola City planning staff and consultants told the Planning Commission on Oct. 30 that draft zoning-code amendments for the 46-acre Capitola Mall block will replace the current discretionary community-benefit review with objective standards tied to eligibility criteria, including on-site affordable units and a minimum amount of new retail.

The change is being proposed to implement the city's housing element and the sites inventory that assigns the mall parcel a capacity of 1,777 dwelling units. Staff said the amendments would let projects that meet objective standards and the eligibility rules proceed through a streamlined review rather than the existing multi-step incentive process in chapter 17.88 of the zoning code.

Staff planning consultant Matt Noble said the approach responds to Housing Element Program 1.7, which calls for objective standards so projects meeting those standards may be approved without the historically discretionary findings required for community-benefit incentives. "So, tonight's meeting is a study session to go over some important policy questions related to the Capitola Mall zoning code amendments," Noble said during the presentation.

Why it matters: the mall block sits between 40 First Avenue, Capitola Road and Clance Street and totals roughly 46 acres. It is split into multiple parcels and owners; the portion owned by Merlone Geier Partners is about 31.5 acres and includes roughly half of the mall's existing 640,000 square feet of retail. The housing-element sites inventory identifies a total capacity of 1,777 units for the block, allocated across income tiers; staff said projects seeking increased height/FAR on the mall would have to provide the on-site affordable units identified in the inventory to be eligible.

Major decisions and disputes

Height: staff recommended a 75-foot maximum derived from the housing element, while the major property owner/developer asked for an 85-foot maximum tied to five-over-three construction limits and fire/life-safety efficiencies. Merlone Geier representative Jamis Guilliam told the commission that "the reason why I wanted to clarify the 85 foot ... is that is the height limitation to not trip a high rise designation for a building," and argued an extra story can materially affect feasibility.

Floor area ratio: staff described the housing-element baseline as 2.0 FAR for redevelopment projects (excluding structured parking). Merlone Geier requested an additional 0.5 FAR to support commercial and hospitality uses; staff's site analysis concluded a 2.0 FAR could accommodate the housing-element unit totals, a roughly 150,000-square-foot hotel and substantial commercial while leaving additional floor area for other uses. Commissioners asked staff to return with alternative drafts (including the staff-recommended 2.0 and an alternate split that would reserve 1.75 FAR for residential and 0.25 FAR for commercial/hotel flexibility) so the commission could compare tradeoffs.

Parking: the zoning code's current multifamily parking minimums were reviewed (transcript summary of existing code: roughly 1 space per unit up to 500 square feet; 1.5 for 501' 750 square feet; 2 for units larger than 750 square feet). Merlone Geier proposed lower ratios (for example, 1.0 spaces for studio and one-bedroom units and ~1.2 average for larger units). Staff recommended retaining the existing minimums as a baseline and allowing a reduced requirement on project-specific evidence, subject to a parking-demand study with city peer review. Advocate Ralph Assonnenfeld told the commission it would be a mistake to "overpark" the mall because high parking requirements discourage family-size units.

Commercial/placemaking requirement: staff recommended keeping the long-standing mixed-use requirement so redevelopment includes new commercial and public open space; consultants and some public speakers argued that large mandatory ground-floor retail requirements often do not pencil in current market conditions and recommended a smaller, curated placemaking footprint. Architect Ryan Call and others suggested studying a compact retail/placemaking zone in the 25,000' 40,000-square-foot range (an acre to an acre-and-a-half) that could host restaurants, programmed open space and kiosks rather than requiring large amounts of vertical retail across all buildings.

Fiscal-impact analysis: staff proposed requiring any mall redevelopment application to include a fiscal-impact analysis prepared by a qualified consultant (and peer-reviewed by the city) that identifies net annual impacts on city revenues and costs and any recommended mitigations. A legal commenter observed that state housing laws (including the Housing Accountability Act and related statutes) constrain denial of projects that meet objective standards, but several commissioners still favored having fiscal estimates available for transparency and negotiation.

Permits and objective standards: staff proposed a hybrid approach. Because of the scale and operational impacts of large residential projects, staff recommended keeping a conditional-use-permit (CUP) path for residential applications so the city can attach conditions addressing impacts such as circulation, public services and noise. For hotels with conference facilities and many restaurants, staff suggested the zoning-code amendments could rely on sufficiently specific objective standards to allow approval without a CUP. City legal staff advised that the city should maximize objective standards where feasible because statutory protections for housing projects limit the applicability of subjective findings.

Public comment and community concerns

Public speakers generally supported housing and acknowledged the opportunity the mall presents for jobs as well as homes, but they urged careful attention to parking, infrastructure costs, transit access and preserving usable public open space. Ralph Assonnenfeld, identified in the record as an advocate with Santa Cruz EMP, asked the city "to not overpark the mall" and urged removal of discretionary hurdles. Janine Roth (identified in the record as Santa Cruz EMB) called for stronger transit and cycling connections and suggested parking ratios of 1.0' 1.25 per unit to encourage family-size units located near a transit hub. Resident David Fox asked who would pay for the infrastructure upgrades and said the scale of the proposed development would significantly increase local population if fully realized.

Next steps

Staff said it will publish proposed zoning-code amendments and draft objective design standards the week of Nov. 10, with a special Planning Commission hearing scheduled for Nov. 19. Staff asked for commission direction on the main policy choices and will return with draft ordinance language, design diagrams showing retail/placemaking footprints, and fiscal analysis options for the commission to review before sending a recommendation to City Council.