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12 Empty Acres Deliver $817 Property Tax Thanks to City Council Indecision

You read that right. There are 12 acres of developable land in Santa Clara that are delivering, collectively, $817 in property tax to the City’s general fund — 575 Benton and 90 N. Winchester (The Agrihood).

That’s instead of tens and likely hundreds of thousands that could be helping to close the City’s $34 million deficit from developments approved years ago but that were stalled by City Council micromanagement, indecision and infatuation with urban development fads.

A little history first.

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By capping property taxes at 1.5 percent of sale price, 1979’s Proposition 13 limits ways cities can keep pace with increasing costs to provide services — cities only receive about 10 cents on every property tax dollar.

Redevelopment and new construction not only increase the property tax base, they also generate other revenues in the form of permits, parks and school fees, jobs, and sales taxes from new businesses. The bottom line is that development and redevelopment is a principal way for cities to keep up.

 

575 Benton St.  — Still Paying Taxes at 1979 Rates  

Santa Clara residents can be forgiven for drawing a blank on 575 Benton. It’s the eminently forgettable 5.7-acre site that’s home to an ugly blue warehouse surrounded by chain link fence and barbed wire on Benton and The Alameda.

Originally, the mixed-use project was proposed by Irvine in 2016 with 450 apartments, subsequently reduced to 385 apartments, with 10 percent affordable units.

The Council sent it back to the drawing board twice to reduce the number of apartments and increase the number of affordable units. Finally, Irvine backed out of the project, saying that because of the landowners’ — the family of former Council Member Jim Viso* — lease terms, the project wasn’t economically feasible.

Prometheus picked up the project, proposing the same mixed used development, but now with only 355 apartments.

Currently, 575 Benton is assessed at $570,291 and the current tax bill is $8,174. That’s $817 to the City of Santa Clara’s general fund.

A 2016 agenda report estimated the benefit of the development project to the City at least at $108,288 annually — a 13,000 percent increase — and possibly as much as $160,000.

The project would also deliver $12.9 million in one-time fees and community benefits.  Santa Clara Unified School District would see a one-time boost of $2.2 million, with $942,694 in recurring revenue for the district.

 

90 N. Winchester — The Greatest Project That Never Was

The Agrihood is Santa Clara’s own Field of Dreams and owns the distinction of winning an award without ever being built.

The story starts in 2006 when the state sold the 17-acre former Bay Area Research and Extension Center, BAREC, as surplus land. The City bought roughly six acres below market price on the condition Santa Clara build 165 low-income apartments on it.

SummerHill Homes bought the rest to build the housing tract on Worthington Circle.

The deed for Santa Clara’s parcel was held by the City’s Redevelopment Agency. When the state shuttered redevelopment agencies in 2011 and “clawed back” their assets, the City’s parcel was caught in a wrangle between the City and the County.

When the City regained title, the prospective builder had backed out. In 2014, the City started considering other projects — all had to include the low-income housing — because the original project wasn’t financially viable anymore.

The new idea added market rate housing and commercial to the property.

Enter San Jose resident and former Santa Clara pizzeria owner Kirk Vartan.

Vartan led the 2006 opposition to any development on the site; proposing that the City create an organic farm on the entire 17 acres. But the City didn’t have the cash to buy BAREC, even were the Council inclined.

In 2014 the City announced it was looking for alternative proposals for the empty six acres, and Vartan was back with a smaller version of the urban farm, the Win6Village Agrihood.

The Agrihood was a “multigenerational village” with “artisan shops, studios, and open-air market” surrounding a 1-acre farm, with aerial walkways over Stevens Creek Blvd.

The Council fell in love with the Agrihood and in 2015 signed a development agreement with CORE, albeit without aerial walkways.

The land sale would bring the City $15.5 million — the City paid about $4 million for the parcel — which was to subsidize construction and ultimately to be repaid to the City.

Things were on track until December 2016 when Vartan and his supporters stormed City Hall demanding that the project be halted. “This is not the concept I put forth,” Vartan said. “This is not the direction of the concept I put forth. Take a breath on this one. If we take the time, we can do something pretty extraordinary on this site.”

By the next Council meeting, Gillmor was saying the layout of the property wasn’t what she envisioned.

CORE’s project was remanded to the drawing board with a City-hired design team and, on Vartan’s recommendation, hired Manhattan-based consultants, Project for Public Spaces, for $120,000 worth of “place-making.”

In its latest incarnation the Agrihood has a performance space, an outdoor kitchen and restaurant, a workshop, a community building and an event plaza.

The only revenue the parcel has ever delivered to the City was from a 2017 short-term parking agreement with Westfield Valley Fair for overflow parking for $20,000 a month. With a new garage and a pandemic, it’s unlikely Valley Fair will be looking for overflow parking this Christmas.

It’s hard to gauge what the ongoing tax revenue from the Agrihood would be because of the tax credits for affordable housing. However, in addition to 165 senior apartments and 160 mixed income apartments, the development includes 36 market rate townhomes.

At current prices, each of those units will sell for around $1 million. That’s an assessed value of roughly $50 million — at least $50,000 annually to the City’s general fund, which is 100 percent more than Santa Clara is getting now. And that doesn’t include property tax on the retail space in the project or the market rate apartments.

But financial loss isn’t bad enough, the City Council has put the City in peril of losing the entire parcel by dragging out development.

The land purchase from the state stipulated that development begin on the site by 2017. The state isn’t under any obligation to continue that deadline indefinitely.

If this seems unlikely, back in 2007 one of the arguments for approving SummerHill’s proposed development was that, if the City made the 17-acre site “undevelopable” by refusing the zoning change, the state could still build on the property — for example, a courthouse or a DMV office — and Santa Clara would have no say.

*Viso is the Councilmember who made the 1960 motion to raze downtown.

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1 Comment
  1. Ed Richards 4 weeks ago
    Reply

    I have often wondered why Kirk Vartan had such pull with the City Council. He has been interfering with Bayrec since it was leveled. It would be best if he went to San Jose Council and messed with them. If the Council majority would pay attention to business and quit suing every Tom Dick and Harry the City would be better off.

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