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Chula Vista is hoping to goose investment in its underdeveloped west side by lowering the costs of building west of the I-805 freeway.
This fall, the City Council is expected to vote on a proposal to allow residential developers to put off for up to 30 years paying the fees they’re charged to improve things like roads and parks in the communities surrounding their projects.
The hope is that’ll be enough incentive to attract developers to the area.
The west side of Chula Vista stands in stark contrast to the part of the city east of the 805. While the east side is filled with new homes, landscaped roads and walking trails, the west side contains trailer parks and the city’s oldest homes – some are remnants of the time when the west side was filled with lemon orchards, and much of the housing was built for workers employed by the aircraft manufacturing plants that used to occupy the bayfront.
“There’s been no real market established in the western part of Chula Vista,” said Kelly Broughton, Chula Vista’s planning director.
For years, building new homes and apartments on the west side of Chula Vista didn’t pencil out for developers because they couldn’t charge enough for the end product to turn a meaningful profit, stagnating growth and furthering the divide between the east and west sides.
“The cost of development is the same between the east side and west side. But the demographics are markedly different,” said Kevin O’Neill, a former Chula Vista planning commissioner and one of the developers of the Stone Creek Casitas, a project of 97-market rate apartments on Chula Vista’s west side. “The rents you can attain on the east side allow you to build a nicer project and the lenders are more likely to lend to projects there.”
But the city’s new proposal, if passed, would allow developers to not make any payments toward standard fees charged on new projects for 10 years. During those 10 years, the fees would accrue interest. After 10 years, the developer would have 20 years to pay back the fees and interest.
That 10-year mark is significant, because that’s often when developers can re-finance loans after construction.
Broughton said the plan is meant to give developers more upfront equity.
“We think it will bring development to the west side,” he said.
When Stone Creek Casitas came forward, the developers worked out an agreement with the city delay paying fees on the project. That grew into the broader policy the city’s now proposing.
O’Neill said his project would have owed roughly $2 million in fees, not including separate payments that would go toward sewer, water and schools.
But the idea comes with tradeoffs.
One concern is that this strategy might hurt future homeowners, because the fees would eventually be paid off by whoever owns the property. If someone buys a home that was built under this agreement, the fee would eventually be added to their property taxes.
“It certainly doesn’t fix the problem,” O’Neill said. “But it shows the city of Chula Vista is trying to think creatively.”
Broughton said every few years the city re-evaluates these fees, but lowering them means making compromises.
For example, right now the city has a rule that there should be three parks for every 1,000 residents. If the city decided to lower the number of parks required per thousand people, it would lower the cost, but at the expense of building fewer parks.
And by delaying when these fees are paid, the city will also be delaying when the services that are meant to be provided with them will be delivered to area residents.
Nonetheless, Juan-Pablo Mariscal, of the developer Mar Group, said he thinks the plan will work, and that Chula Vista will become one of the most promising areas for developers to target if the measure is approved.
The Mar Group just finished one project on the west side and is in the process of building two more.
“With this new strategy, the city of Chula Vista is becoming more competitive with all the cities in the county,” Mariscal said. “Now you have a better environment towards development. Before fees were too expensive.”
Presently, Chula Vista’s development fees are more expensive than some communities in San Diego that developers could choose to build in instead.
“At the end of the day, as developers, we’re looking to do great developments as fast as possible at the lowest cost,” Mariscal said.