The city's good intentions to save a few dozen cheap apartments from demolition nearly ended up backfiring when plans for more than 200 new homes were thrown into limbo. One problem: Mountain View's public housing subsidies triggered prevailing wage rules, making the project financially infeasible.
In a long and messy Tuesday night meeting, the City Council ended up brainstorming ideas to preserve as much affordable housing as possible while performing a delicate balancing act between demands from developers, tenants, labor unions and other stakeholders.
At first glance, the proposal by Prometheus Real Estate Group was relatively straightforward -- build an upscale 226-unit apartment building on Villa Street a short walk from downtown Mountain View.
The twist was the Villa Street project was inextricably linked to a 48-unit apartment building about four blocks away on Mariposa Avenue. The Mariposa apartments are dilapidated and desperately in need of repairs, and the developer said it made sense to tear the whole place down. But there are 44 families still living there, so Prometheus officials proposed a trade. If they rehabilitated the Mariposa apartments, they asked the city to nix the 34 subsidized apartments they would be required to include at the Villa Street project.
When Prometheus first proposed the idea in June, it lead to a desperate scene as the predominately Latino families living at Mariposa implored the City Council to approve the luxury apartments. Parents described the run-down Mariposa apartments as their only option for staying in Mountain View. Children told the council they would be forced to change schools and lose friends.
Those families returned to the City Council on Tuesday and again urged the city to find some way to save their homes.
"We need diversity in Mountain View, and preserving these affordable units is a good way to preserve the people here in our city," said Fernando Romero, a city human relations commissioner who lives at the Mariposa apartments. "We've had a lot of projects where people had to leave their homes, and we don't want that to happen anymore."
While City Council members gave tentative support for the proposal in June, they stipulated that they needed to crunch the numbers to make sure that it balanced out.
At the Tuesday meeting, city staff reported the deal wasn't as good as it seemed. It would be about $8 million cheaper for Prometheus to fix up the Mariposa apartments instead of building 34 new affordable apartments, reported senior planner Matthew VanOosten.
Instead, he and other city planning staff proposed a "hybrid option" that would attempt to preserve affordable housing at both sites. If the city chips in about $8.2 million, then Prometheus might be willing to relinquish the Mariposa property while still building 17 affordable apartments at Villa Street. The 48 apartments at Mariposa would be managed by the affordable housing nonprofit Bridge Housing.
It was an idea immediately embraced by everyone at the dais, many calling it a "win-win." Councilman John McAlister beamed with pride, happy that his idea of having the city buy up older apartments was finally being taken up.
"Persistence pays off," he said. "I think this will be the start of many things we will do to prevent the removal of naturally affordable units."
Then the deal swiftly fell apart. Stepping up to the podium, Prometheus vice president Jon Moss warned that there are other looming factors that made it difficult to swap housing. In particular, he took aim at construction trade unions and the extra costs if the project has to follow prevailing wage rules. Just to fix up the Mariposa apartments would cost $2 million more, and if prevailing wages extended to the Villa Street project, it would make construction $40 million more expensive, he said. That would be a complete deal breaker and his firm would just scuttle the whole project, he said.
"If we're exposed to affordable housing requirements that could be anything under the sun, it'd be opening up Pandora's box," he said. "It's not inconceivable that labor could make the claim that prevailing wages should be mandated for the entire project."
Due to a 2013 ordinance, Mountain View requires that all affordable housing projects using city funds pay prevailing wages to all construction workers. As of 2018, state law imposes similar requirements. Prevailing wage rules can increase the public costs of low-income housing projects anywhere from 9% to 37%, according to a 2005 University of California at Berkeley study.
The city's hybrid plan to save affordable housing at Mariposa and Villa was acceptable in concept, Moss said. But he warned that dedicating city funds, even indirectly, toward the Villa Street project could mean it is also subject to the city's prevailing wage law. It was a risk that city attorneys eventually acknowledged was plausible.
At the meeting, Josué García of the Santa Clara Building & Construction Trades Council was asked repeatedly by council members if he would limit prevailing wage rules to only the Mariposa site. He explicitly avoided making any commitments, but he said he was willing to negotiate with Prometheus.
"We always negotiate in good faith. All I'm asking is for you to trust us," García said. "Wage theft and worker abuse continues to happen in this area. The city has more leverage here, and I suggest that you take advantage of it."
If the city couldn't make a deal work, Prometheus was content to just build the Villa Street project, Moss said. Left unsaid was the likely outcome that the Mariposa apartments would be razed and 44 families would lose their homes.
Council members, scrambling to keep any deal alive for the two sites, started spitballing ideas. Councilman Chris Clark proposed having the city foot the bill for the added prevailing wage costs. Other council members tinkered with different sets of requirements if Prometheus wasn't able to negotiate a deal with the labor unions.
Ultimately, the City Council decided to extricate any public funding from the project, essentially sidestepping the city's own prevailing wage laws. Council members tabled their discussion for about an hour as a team of Mountain View planners did the math for how much affordable housing they could expect without paying a dime from the city's coffers. City planners later reported that the city should require seven below-market-rate apartments at Villa in addition to rehabilitating the Mariposa homes.
Moss said he disagreed with the city's calculation, warning he would rescind the whole project rather than build the seven affordable units. Making a motion, Councilman Clark lowered the requirement to five affordable units, which the council unanimously approved.
As part of their decision, city officials are leaving open the possibility that Prometheus and labor representatives can reach a deal in the coming weeks over the prevailing wage requirements. If that issue can be resolved, city officials say they may be able to build more affordable units.