City Hall has suspended talks with a developer over a proposed project at 4th and Arizona, known as The Plaza at Santa Monica, over concerns the project could violate a newly expanded state law governing surplus government property.
City Attorney Lane Dilg recommended temporarily halting negotiations while staff seek further guidance on the Surplus Land Act after being told the terms of the proposed lease might be in violation of the state law.
California’s Surplus Land Act requires public land be prioritized for development of affordable housing and the law was expanded this year to broaden its reach. According to the City Attorney's Office, there are three questions raised by the expanded law.
Is the property surplus land?
Prior to January of this year, the parcels would not have been considered surplus land as the law allowed for development on public property for commercial uses. However, those rules were revised and the allowed uses of public land have shifted.
Is the property exempt?
The act has an exemption for property that has been part of an exclusive negotiation process and while exclusive negotiations were a part of the Plaza project, it's not clear if it would currently qualify for the exemption.
Is a lease the same as a sale?
Under the law, land is subject to the rules if the agency that owns it is "disposing" of the land. That often means the land is for sale and would no-long be owned by the city. However, the Plaza project is a long term lease of 99 years and regulators have said that might be equivalent to a sale for determining if the act applies.
The Plaza at Santa Monica would cover several parcels of publicly owned land on Arizona between 4th and 5th street. The project would include ground floor retail, a hotel, office space, a cultural center, outdoor space and housing.
At the Feb. 25 Council meeting, Dilg said her office proactively reached out to the developer in December and the Department of Housing and Community Development (HCD) in January about the expanded laws impact on the Plaza project.
“In response to the City’s request, HCD has initially opined that entering the proposed 99-year ground lease for this property would constitute a disposition that could trigger the requirements of the Surplus Land Act,” she said. “While the City reserves its rights with respect to interpretation of the Surplus Land Act, the City also acknowledges that HCD is the state agency responsible for providing guidance on and initially enforcing the Surplus Land Act.”
Noma resident Nancy Coleman spoke at the meeting where she questioned if the project would be subject to the expanded Surplus Act.
"There is no definitive issue right now," she said. "It’s just that when you have those kinds of new legislation and a piece of city owned property, it’s important to have at least a look-see at it and I’m really glad they decided to do that."
Coleman and other residents have been concerned about the privatization of the public property and the scope of the proposed project.
If the final decision does bring the Act into play, it wouldn't automatically prevent the Plaza project from moving forward. However, the rules would require an expanded process for determining who could develop the property with additional layers of state approval.
"We think it's a favorable sign that the city’s concerned at this stage about following the law and not just skirting it," said Diana Gordon with Santa Monica Coalition for a Livable City. "The city attorney is up on the amendments that make it clear the city cannot go forward now and lease this public land without considering public uses. You cant just put a private development on it before you consider public uses the public needs and wants. And we think that the city will conclude http this project isn’t right for our public land, and a luxury hotel and commercial office space is the last thing we need. We retained counsel after notifying city and developer a few weeks ago that among deficiencies we did not think could be cured were city and developer not complying with the act. It’s a good preliminary step for city, but advocates of this project will be doing everything they can to keep going. This two month period is not for compliance, but to figure out if there’s some way not to comply."
Council accepted Dilg's recommended the city suspend negotiations pending additional information from state regulators with a projected update no later than April 28.
