After a decade of consideration, the Capitola City Council reached a pivotal point on Monday, unanimously approving zoning amendments for the Capitola Mall site, putting in motion a process that could radically change the area. The vote allows a developer to begin submitting project plans for a major redevelopment.
Jamas Gwilliam, managing director for San Francisco-based Merlone Geier Partners (MGP), the mall’s owner, told Lookout there is currently no timeline or target date for a project application, but that the company recognizes the effort’s importance to the city.
“We’ve got to figure out a lot of things,” Gwilliam said. “Our main priority is making sure that the operating businesses can operate extremely well and we can provide them with the best environment.”
The five-member council was initially set to vote on the amendments in February, but decided to delay the vote to take more time evaluating a list of last-minute requests from MGP. Those largely included technical changes, but also had a request to plan for 25,000 to 35,000 square feet to ensure it’s financially feasible. The council approved three “tiers” of development sizes for a developer to work within to plan a project.
One tier is a residential-only development, allowing 75-foot buildings within the “core area” where the mall and parking lots sit, and about six-story buildings in the perimeter zone, which is the buffer area between the mall site and the surrounding streets. That will be a 75-foot buffer along 41st Avenue and Capitola Road, and a 125-foot buffer on Clares Street, where there are more residential properties. Within the core area, the Kohl’s store, adjacent parking lots, as well as a section of the main mall and parts of the parking lots around it, are not being considered for housing due to lease terms and parking agreements.
The second tier allows for an 120-room hotel and 85-foot buildings on the main site and up to 65-foot buildings in the perimeter zone, with an exception for a hotel to go higher, along with 3,600 square feet of hotel meeting space and 35,000 square feet of commercial space.
The third tier is a commercial-only scenario, with no hotel, and a much higher 200,000 square feet of commercial space. The building height limits mirror the second-tier limits.
The council also approved a condition that Vice Mayor Gerry Jensen proposed, requiring commercial floor area to be occupied by active, publicly accessible commercial, cultural or entertainment uses open to the general public. That includes restaurants, retail, food and beverage businesses and other visitor-serving uses. Membership-based uses such as gyms or fitness centers will not count toward the minimum required commercial floor area.
Before voting, Jensen expressed some concern that the reduction of retail space could mean fewer jobs, and that a new hotel could prompt the state to change the transient occupancy tax distribution formula, dealing a blow to the city’s general fund. He also spoke about the difficulty of planning for a future project without any conceptual design.
“It is now time for Merlone Geier, our committed partner, to take the feedback they have heard tonight and return with a project that not only meets their needs, but truly reflects the needs of our city, our neighbors and our county,” he said.
The city has been considering redeveloping the 50-year-old Capitola Mall site for about a decade. In 2019, MGP proposed a project that would have reimagined the aging retail center into a mixed-use development with 637 homes and 339,000 square feet of commercial space, but the plans never materialized.
Capitola officials identified the mall site as vital to meet a state mandate to permit 1,336 new housing units by 2031. In 2024, the city updated its general plan to allow buildings up to 75 feet tall and a floor area ratio of 2.0, which means that a building’s total floor area can be up to twice the size of the total lot area it’s situated on.
The city needed to update the mall site zoning code to fulfill the commitment it made in the most recent general plan. The new zoning goes beyond the state mandates to allow at least 1,777 units on the mall site except for on the Target and Kohl’s properties. The idea was originally to plan for fewer units, but the state said it would not be economically feasible, as the city was proposing 65% of the units in the low- to moderate income range and 35% at market rate. It adjusted the proposal to 80% market rate and 20% affordable, adding more market rate units, to make it pencil out.
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The city also needed to approve objective design standards for the site, which dictate the form, design and layout of the buildings and the development. This means everything from street width to landscaping, building height and open space dimensions. Zoning code updates for the mall site are also necessary to allow mixed-use housing development in compliance with the city’s housing element.
Public comment Monday was brief. Several speakers representing Unite Here Local 19, a union that represents employees in hotels, restaurants, sports arenas and more, raised concerns that a new hotel could bring more low-income workers to the area and exacerbate the housing crisis. Other commenters said they were worried about the financial toll the city could incur if the development doesn’t generate enough revenue.
The council will vote on a second reading of the amendments at a later meeting.
FOR THE RECORD: This story has been updated to reflect that the second tier includes a hotel with 120 rooms, not 85.
Source: LookOut Santa Cruz
