Mountain View Voice

News - June 20, 2014

Delays could seal fate of Milk Pail

Developer Merlone Geier says referendum could kill San Antonio plans

by Daniel DeBolt

The July 1 City Council meeting, where Merlone Geier hopes to get City Council approval for its big San Antonio shopping center redevelopment proposal, is quickly approaching.

For over two years, the San Francisco-based developer has been pitching its plan for a 70,000-square-foot movie theater, 1,480 space parking garage, a seven-story hotel, a pair of six-story office buildings and new ground-floor shops around a public square designed with an eye towards "place-making" — all on a 9.9-acre portion of the San Antonio Shopping Center at the corner of San Antonio Road and California Street. It would replace the Ross, BevMo and several small properties on the corner, all of which Merlone Geier now owns — except for the Milk Pail market.

The project may not slide through very easily. The potential consequences for the Milk Pail market — which is facing closure without an agreement to lease parking spaces in the project or a workable deal to relocate the business— have drawn outcry from numerous patrons of the popular European-style open air market. Meanwhile, a group of residents concerned with the city's jobs-housing imbalance say they will seek a referendum on the project, putting it on the ballot for voters to decide on — but only if it is passed before a "precise plan" is done in December. That plan would consider larger needs in and around the shopping center, such as the need for park space, bike and pedestrian access and a school for the 600 kids expected to move to the area.

The City Council is holding a study session on the precise plan June 24.

Merlone Geier's Mike Grehl told the Voice on Monday that his company may pull the project if it appears the referendum would delay it, and would also halt its efforts to help the Milk Pail.

Grehl said that pleasing the referendum backers, who want housing added to the project, would mean delaying construction for two years so the state-required environmental impact report can be modified to study the impact of the replacing office space with housing units. Planning director Randy Tsuda disagreed, saying such a modification might take six to seven months if he were to "hazard a guess." Grehl said that estimate was "optimistic."

Merlone Geier may forgo phase two entirely and instead build a 175,000 square-foot big-box retail building along the the southern half of the site, as approved by the City Council a few years ago — and the Ross and BevMo buildings on the northern half would remain, to be leased to new tenants, Grehl said.

"As an investor and manager of money for people (our goal) is to mitigate risk and time," Grehl said, explaining why delays could kill the project.

Citing a significant lack of housing to accommodate job growth from companies including Google, Samsung and LinkedIn, the Campaign for a Balanced Mountain View wants to see the pair of six-story office buildings in the project replaced by housing. The group, which says it will collect signatures for a referendum, says the office buildings could add 2,000 employees to a city which already has a housing shortage and is suffering from serious gentrification from tech job growth.

"If the current plan is not stopped, then we'll need well over 2,000 new housing units just to keep the jobs-housing imbalance from getting worse," said Lenny Siegel, who is leading the Campaign for a Balanced Mountain View.

The referendum wouldn't be cheap, it is likely to require a special election next year costing the city $300,000, if residents gather the 3,400 or so required signatures.

The warning from Merlone Geier did not deter Siegel.

"Merlone Geier is trying to spin the consequences of a referendum campaign," Siegel said. "Like politicians, I expect them to change their tune once the voters have spoken."

Grehl said there was another possibility allowed under the current EIR: replacing the seven-story hotel with a six-story residential building with 150 units. Tsuda said that would also require a six- to seven-month long EIR modification.

Milk Pail in jeopardy

While Milk Pail owner Steve Rasmussen said he had not heard from Merlone Geier since February, Grehl said Merlone Geier continues to search for properties that the Milk Pail could move to, and hopes to line something up before the July 1 meeting in order to get Rasmussen's support for the project.

"The Milk Pail's fate and Milk Pail's future are completely outside the hands of things in my capacity to control." Rasmussen said Monday. "I continue to look for alternative sites that the Milk Pail could relocate to because of the enormous uncertainty of working with Merlone Geier. We are at the end game and it has come fast."

Rasmussen is hoping to get the City Council to require a shared parking arrangement with Merlone Geier, which the developer continue to resist. Without it, the Milk Pail will be forced to shut down when its current parking agreement expires in 2016, as it has only five parking spaces on site, and needs 22 to meet city requirements.

Rasmussen has hired lawyer Joan R. Gallo, who recently wrote a letter to city officials saying that "it would be perfectly legal to require parking adequate for the center to function as a whole and require that the developer make parking available to the Milk Pail at fair market value. The Milk Pail currently pays rent under its Parking License and would continue to pay for its use of the spaces. The decision not to require that developer to make parking available in this manner is strictly a policy decision."

Gallo points to several city agreements with property owners in the center, known as the WIRET agreement and the La Mancha agreement, that show precedent for such requirements, including one saying that property owners must be willing to lease spaces to adjacent owners at fair market value. Because of his understanding of the agreements, Rasmussen said in an email, "When we did our very costly remodel in 2007 that made our store 'like new', I expected that the likelihood that we would lose our parking was very remote."

Tsuda said that such agreements do not exempt the Milk Pail from providing its required amount of parking and City Manager Dan Rich has said it isn't the city's place to pick winners and losers in a conflict between two property owners.

If phase two does not go through, Grehl said Merlone Geier will not be extending the agreement allowing Milk Pail customers to use the Ross parking lot.

Email Daniel DeBolt at ddebolt@mv-voice.com

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