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Up A Creek

[whitespace] No More Strip Malls
Edmund Lee

Capitola is strapped for cash, and Redtree knows it.

By John Yewell

THE CONTROVERSY over Redtree Properties' proposed Capitola Crossing retail and office complex on Bay Avenue is an argument over Capitola's past, not its future. Situated at the city's undeveloped gateway, opponents see the site as an opportunity to save something intangible, some part of the village charm and ambiance that brought them there in the first place, despite the malling of 41st Avenue. In that vision, they do not recognize what Redtree is proposing.

Redtree supporters have a much simpler argument. Redtree owns the property. They have made a reasonable attempt to accommodate community concerns. Approve the project and move on.

When it comes time to vote, council-members will have all sorts of facts and figures to consider, but there is also a special bit of political arithmetic for Mayor Stephanie Harlan and Councilmember Margaret Fabrizio to do. Twenty-four hours before they vote, the filing period for council elections closes. If opponents don't field credible candidates by then, Harlan and Fabrizio will not have to worry about voter wrath in November and may feel more free to support Redtree.

Will the council support Redtree? For one thing, the development agreement obliges Redtree to indemnify the city if it is sued for approving the project. Merits of the issue aside, councilmembers will be faced with a choice: Reject Redtree and be sued by them, or approve Redtree and be defended by them. Under the circumstances, it will be a courageous vote to buck colleagues, staff and the perilous momentum Redtree has gathered.

But there is ample evidence that Redtree has gone out of its way to bend the rules and manipulate the process to create that momentum. For example, after Redtree's lawyers were given an early look at the "administrative draft" of the environmental impact report, they fired off a 20-page memo to Capitola Community Development Director Kathy Molloy complaining that the EIR drafters were showing too much favoritism to the environment. The memo was passed directly from Molloy to Rod Jeung of EIP Associates, the drafters of the EIR. When the draft EIR was later released to the public, it had changed radically. Among the omissions: a three-page section that helped define the vegetation boundary along Soquel Creek to include a critical stand of willow and cottonwood growths, removal of which are the key to the project.

No one on the City Council seemed to notice.

Mayor Stephanie Harlan Tipping the Scales: Opponents of Redtree Properties' Capitola Crossing proposal hope Mayor Stephanie Harlan defies predictions and votes against the project.

A Creek Runs Through It

FROM THE BEGINNING, Redtree has contended that the success of the project depends on its size. The numbers, says Redtree general partner Doug Ley, don't work for a smaller project. The challenge from Redtree's perspective has been to fit enough square footage and the required parking spaces into a hodge-podge of parcels comprising the former Grimes property near the freeway, the present Mid-County Senior Center and the vacant Quintarelli building.

The presumption doesn't sit well with opponents. "[Redtree] says that the only viable thing for them to produce is this large-size project," says Katherine Sweet, a member of the citizens group Save Soquel Creek. "That's their problem."

What Redtree wants is a comprehensive solution, linking Nob Hill Foods with new construction and giving the area a unified, don't-call-it-a-strip-mall look. Moving the Senior Center and building a new one to accomplish that upped project costs with no return on that portion of the investment, so Redtree wants to squeeze every dime out of the remaining acreage. That means getting the buildings as close to Soquel Creek as possible, and that is a big problem.

Today, just about everyone in Capitola knows the word "riparian"--related to the banks of a stream. A 1996 Redtree design for the site, which was rejected by the council, was a riparian disaster waiting to happen. Construction was planned right up to a straight line drawn 35 feet parallel to the stream bank, obliterating the two stands of trees and undergrowth. It had rear parking, a rear loading dock, and the promise of extensive human encroachment and impact on fish and habitat.

The 1998 design is not that much of an improvement. The building footprints are turned slightly and a plaza is created. There is underground parking to replace the rear parking. But the 35-foot-from-the-bank rule was reaffirmed by the council, despite compelling evidence that the law was contorted to suit Redtree's needs.

Capitola's Environmentally Sensitive Habitats Ordinance seems straightforward to everyone but Redtree and the city staffers pushing the project. Section 17.95.030 (B) calls for "a minimum thirty-five foot set-back from the outer edge of riparian vegetation"--not the creek bank. The general provision of the law, section .010 (C), requires that the city maintain "maximum set-backs," while another portion of the ordinance requires that the definition of the edge of that vegetation be determined by a biologist. The EIR does that, and the accompanying maps include the two outcroppings of willows and cottonwoods that bulge into the Redtree site plans. Those two outcroppings present an even bigger obstacle than moving the Senior Center. The seniors could be bought off, but a thin green line of activists is making cutting a deal with Mother Nature more difficult.

Redtree's argument for the narrower set-back from the riverbank relies on a July legal opinion from then- acting city attorney John Barisone, who also acts as Santa Cruz city attorney. Barisone wrote that a 35-foot set-back applies to the edge of the vegetation, but only vegetation lying within something called the "riparian corridor," leaving vegetation outside the corridor vulnerable. This "vegetation within a corridor" approach, according to Molloy, is defined in the 1990 Soquel Creek Lagoon Management and Enhancement Plan. (Redtree and city staff are fond of omitting the words "Lagoon" and "Enhancement" in their memos and correspondence referring to the document.)

The lengthy plan is entirely about the lagoon, the downstream portion of Soquel Creek within the coastal zone below the Redtree property. It contains virtually no mention of the upper portions of the creek. But buried deep in the plan's appendix is the phrase "the riparian corridor encompasses the area from the top of one stream bank to the top of the other." Like everything else in the report, it applies to the lagoon, the area within the coastal zone. A September 28, 1988, memo from the Coastal Commission even helps make the distinction, mentioning the applicability of section 17.95.030 of the city's Sensitive Habitats Ordinance to the area outside the coastal zone.

But Barisone, Molloy and Redtree's lawyers seized on the phrase as the thin edge of a legal wedge to pry open the law.

Redtree argues that there is evidence that the city intended to apply the bank-to-bank lagoon definition of "corridor" and the 35-foot-from-bank set-back rule to the area upstream from the coastal zone. When the council wrote the ordinance it specifically applied the lagoon rules to a residential area immediately downstream from the Redtree property. Conspicuously, it did not apply those rules to the Redtree property, leaving the outer edge of the vegetation, including the willows and cottonwoods bulges, the line away from which Redtree should be building.

Nevertheless, Barisone's letter gave the city legal cover to extend the 35-foot-from-bank definition to allow Redtree to build closer to the creek. Barisone simply asserts that the definition of a "riparian corridor" along the Redtree property can be inferred from the lagoon study--even though no such definition exists, the ordinance doesn't ask for one and the language of the ordinance itself contradicts it.

Habitat and Humanity

IT MAY SOUND LIKE ARCANE legal double-talk to many, but the implications of the riparian vegetation debate for the project are dramatic. Under the "top-of-bank" set-back interpretation, the fire lane for building 3, for example, is 75 feet from the bank but encroaches 105 feet into the vegetation. Under the "edge of riparian vegetation" set-back rule, the entire project except for one wall of building 2 encroaches into the 35-foot set-back zone or the vegetation itself.

Without the cooperation of city staff and the City Council, Redtree would have been required to get variances for their project. As it is, the EIR requires Redtree to "mitigate" the impact on the riparian vegetation by replacing lost acreage on a one-to-one basis, and lost vegetation on a three-to-one basis. Redtree claims this will leave the riparian corridor in better shape than they found it.

But according to a memo from EIP Associates, quoted in a July 23 report to the council by Molloy, the mitigation measures will only reduce the impact to a "less-than- significant" level that is "preferable to a project which would not incorporate these aspects." Meanwhile, if you're a fish, the EIR pretty much gives up on your habitat, as if this project were driving the final nail into the coffin of a stream that was once home to the endangered Coho salmon and still supports the threatened steelhead trout.

"The loss of riparian and fish habitat from future cumulative development would be limited," the EIR reads, "since little remains and because of the ordinances in effect."

In addition to the fight over the riparian corridor set-backs, Redtree was also concerned about a section of the administrative draft EIR's analysis of project alternatives. Developers are required to submit alternatives to their original plan, but they have one huge advantage in this fight: They get to define the project goals, and then create the alternatives with those goals in mind. Savvy developers have learned to develop alternatives that are more environmentally friendly but that are ultimately incompatible with project goals. Naturally, that virtually guarantees rejection, stacking the deck in favor of the developers' original proposal.

The California Environmental Quality Act (CEQA) also requires that the EIR identify an environmentally superior alternative, and to Redtree's surprise, the ADEIR rejected its original proposal in favor of Alternative 2. That one avoided the riparian vegetation entirely, did not replace the Senior Center and would have resulted in fewer car trips.

"Alternative 2 would substantially reduce the significant biological impacts identified in this EIR," says the ADEIR. "Therefore, Alternative 2 would be the environmentally superior alternative."

After Redtree protested, the pro-environment language was reconsidered and ultimately removed from the final EIR. In the draft that reached the public, the original proposal was designated as environmentally superior.

According to Molloy's margin notes on the ADEIR, Redtree wanted to make sure the drafters understood that Alternative 2, although prepared by Redtree itself, clearly did not meet project objectives. On a table prepared for the purpose of comparing the alternatives with the project objectives as defined by Redtree, Molloy notes in several places that Alternative 2 is not compatible with those objectives.

For example, Redtree argues that its restoration plan for removing the riparian habitat is environmentally superior to Alternative 2, which leaves the area alone. Improving on Mother Nature's chaotic approach is the way to go, they believe, and meets the project goal of "restoration and enhancement of the presently degraded natural environment." Redtree will tear out about a third of an acre, removing non-native plants and replacing native species, and has promised to monitor the area for three years. But there is no guarantee that the non-native species won't return after that, and then the habitat buffer along the creek will be right back to where it started--only much narrower.

Fish and Games

'I CHALLENGE ANYONE," said Ley at a public hearing, "to articulate a riparian goal, a benefit to the habitat, a benefit to the wildlife, that is achieved by adopting the interpretation of the edge of cottonwood forest" as the set-back line for the project.

Perhaps if Ley and the EIR drafters who acquiesced to Redtree had been paying attention to the Department of Fish and Game, they would think differently of the matter.

State Fish and Game biologist Patricia Anderson has been trying to get the attention of Redtree and city staff since early last year. Anderson says she has "serious concerns" about the project, yet despite several letters she had until recently been unable to schedule a meeting with city officials. A meeting was finally set for July 30, but that was canceled by City Manager Dan Pincetich after a concerned citizen asked to be present. Another meeting is now on for Aug. 18, six days after the council votes final approval for the project.

"The City Council should not finalize the project until we meet," writes Anderson in an Aug. 6 letter to Molloy--advice the council is likely, again, to ignore.

According to Anderson, Fish and Game has problems with the set-back distance, the vegetation mitigation plans and the treatment of storm water runoff.

Anderson says the city and Redtree are endangering the health of the stream and its remaining fish population by adopting their interpretation of the Environmentally Sensitive Habitats Ordinance. "Avoidance means avoidance of all vegetation next to the creek. Landscaping is not an acceptable mitigation," wrote Anderson in her Aug. 6 letter.

Fish and Game requires a 3-for-1 replacement policy on vegetation and acreage on altered stream banks. In addition, increased storm runoff, which the new parking is bound to create, could require a "stream-bed alteration agreement" with F&G. Anderson has also reviewed Redtree's plans for grease traps and percolation systems to clean storm runoff before it enters the creek, and says they are insufficient.

In an interview with Metro Santa Cruz, Anderson sounded frustrated.

"The riparian vegetation is essential to a healthy functioning watershed," she says. Fish need tall canopies of mature trees to create a "cool air pillow" over the creek, she says, not landscaping. Dense shrubs clean the pollutants out of runoff before it enters the creek.

The National Marine Fisheries Service could also get involved and the Regional Water Quality Board may require a permit, but final authority rests with the Capitola City Council. Fish and Game Environmental Services Supervisor Carl Wilcox admits that, short of suing, there isn't much his department could do to stop the project if the city and Redtree choose simply to ignore his department, as they have done so far.

Traffic Traffickers

MAYOR HARLAN INSISTS she still has an open mind on the project, although she disparages opponents for complaining about the building's design and the impact on Soquel Creek. When asked if there is an issue that still concerns her, she answers without hesitation.


The traffic issue may yet emerge as the deal-breaker because the issue is so unsettled. Opponents commissioned their own traffic study, and it comes to radically different conclusions from the one done for the EIR. That study predicts 5,402 extra trips per weekday and 6,557 on Saturdays, meaning the project is likely to bring at least 2 million new car trips a year to Bay Avenue. The competing study, paid for by Jim Bowman, who owns a car wash on Bay surrounded by Redtree property, claims the increase will be 10,390 trips a day, or nearly double.

David Yazhari and his firm Multitrans, who did the study for Bowman, says the EIR underestimates future traffic and does not account for the long lines of cars he claims will result, and it relies on other faulty assumptions. The EIR, in turn, dismisses Multitrans' fears. The mitigation plans include two new traffic signals to be installed along Bay Avenue. But there is disagreement over whether they will be able to cope with the increased traffic flow or keep the level of service at acceptable levels.

Because traffic is related to the project's size, the traffic burden was a major factor contributing to the council's rejection of the first Redtree plan on Oct. 3, 1996. It was then that Councilmember Bob Garcia and other members--including Mick Routh, who went to work for Redtree as a consultant on the Capitola Crossing project within months of leaving the council--suggested that Redtree come back with a scaled-back project. Garcia asked that the 83,000-square-foot project be trimmed by 20,000 to 25,000 square feet.

Attorney Bill Parkin, who has been active in opposition to the Redtree project, summed up the feelings of his clients about the traffic question at one of the hearings. After all the smoke clears, he said, traffic engineers still talk about capacity, not livability.

Retail Cannibalization

BEYOND THE ARGUMENTS about traffic, environmental degradation, project size and politics, nobody knows if Capitola Crossing is needed or will succeed by any measure, economic, social or otherwise.

Buried deep in a document called "Responses to Comments" to the project's EIR, the city makes note of two studies that support the need for more retail in Santa Cruz County: a 1990 report by the San Francisco firm of Keyser Marston, which was updated in 1995, and the Sedway Group study of 1996.

The brief nine-page Sedway study, paid for by Redtree, provides no demographics or other support data for its conclusion that more retail is needed. It is the sort of report developers pay for to justify what they are already planning to do. The Keyser Marston study, as updated in 1995, concludes based on such factors as population growth and per-capita income that Santa Cruz County will be able to accommodate an additional 800,000 square feet of retail by 2005.

Keyser Marston based the projections on a county population of 264,000 by 2000. But state estimates for Jan. 1, 1996, showed just a 1 percent increase since 1990, to 242,000. The study also uses rosy per-capita income projections. Wages in Santa Cruz County have lagged 20 percent behind wages for neighboring Santa Clara County for the last decade or more, according to figures from the state Department of Economic Development, while local unemployment continues to stay high. According to the EDD, unemployment in Santa Cruz has averaged 8.4 percent each year for the last decade, as compared to 4.9 percent for Santa Clara County. Despite lower salaries and higher unemployment, housing and other costs of living remain high here.

All that means Santa Cruzans just don't have that much disposable income, which explains why it ranks just average--28th of the state's 58 counties--in per-capita retail spending.

Given the county's economics, it is no surprise that retail sales are not growing. Adjusted for inflation, Capitola sales tax revenue has grown just 1.3 percent since 1991. And despite opening hundreds of thousands of new retail square footage in recent years, retail employment in the county has remained flat since 1987. New jobs are not being created and new sales tax revenue--and therefore sales--is not growing. In the meantime, for every Toys R Us that opens a Kiddie World closes.

The problem is known as "retail cannibalization"-- adding retail capacity without a growth in sales to support it.

Even if one accepts the Keyser Marston assumptions, recent construction or plans on the drawing board already exceed that 800,000 figure, even if there are no further proposals between now and 2005, and excluding Capitola Crossing.

Since the Keyser Marston study was written, the county has added or has under construction over 500,000 square feet of new retail space, not counting Costco, which opened its 121,000-square-foot facility in 1994, or Browns Ranch in Capitola, a 128,000-square-foot center that opened in 1992. The new construction includes the 270,000-square-foot Overlook Center in Watsonville and the 120,000-square-foot Gateway Plaza at the intersection of Highway 1 and River St. In addition, another 400,000 square feet is on the drawing boards, including 200,000 square feet of new shopping in Scotts Valley at the site of the former airport and up to 100,000 square feet as part of the Beach Flats development.

Despite all this, Capitola continues to supply a disproportionate amount of retail space for the county. Despite having only 4.5 percent of the population, Capitola, with all its malls, accounts for 17.5 percent of the county's taxable sales. Do developers view the Capitola City Council as pushovers? Why do Capitolans shoulder most of the burden?

Kathy Molloy

Edmund Lee Prime Mover: Community Development Director Kathy Molloy has shepherded Redtree through the approval process.

Failure not an Option

THE ANSWER LIES in the way the city pays its bills. For 1997/98, about 55 percent of the city's $7.6 million budget came from sales tax revenues. Thanks to Prop. 13 in 1978, the city today earns more in parking meter fines than property taxes. According to figures from city treasurer Glenn Hanna, Capitola has been running an operating deficit of over $650,000 a year for the last seven years, and has been selling off assets to cover the difference. In 1992, says Hanna, the city had almost $5 million in its general fund. Today, that number has fallen to less than $100,000.

An internal budget analysis prepared by city staff and acquired by Metro Santa Cruz shows the city's budget projected to be in deficit every year for the next eight years. As the last large undeveloped space in the city, the city hopes Capitola Crossing will produce enough sales tax revenue to help balance its budget.

If the taxable sales figures of the last decade are any indication, it won't even come close. Based on industry estimates of sales per square foot, the project will produce at least $200,000 in sales taxes for the city, but those dollars will likely come at the expense of sales taxes elsewhere, some portion of which will be from within Capitola itself.

But whether the project is needed is immaterial to Redtree. "That's not our fight," Ley says. Redtree only cares that it will succeed. If it is at the expense of local businesses, so be it.

When finished the development, including Nob Hill Market, will total nearly 200,000 square feet, with 78,000 square feet of new retail. And it will come at a high price. Relocating the Senior Center alone in order to integrate the various elements of the project will cost Redtree a cool million. So when Ley says the company cannot construct a scaled-back version of the project, he is right in the sense that only a large project will meet the goal of supporting a 16-acre integrated design.

The issue of size loomed large in October 1996 when the Capitola City Council turned down the first design.

"Is it too big? I think it is for what we've got here," said then-Councilmember Routh.

"I think that the project is huge. I really think it is just too big for the site. The traffic is going to be a problem," said then-Mayor Margaret Fabrizio.

Whether the current project is bigger or smaller depends on how you interpret the numbers. In terms of new construction, the 1998 version is about 8,500 square feet bigger, most in new office, not retail, space. Redtree likes to subtract from that calculation the 10,000 square feet of the vacant Quintarelli building, which will be demolished. In addition, the Senior Center will be about 1,600 square feet larger, and about 500 feet is being added to the Nob Hill Foods portion of the complex.

Either way, the complex did not come close to meeting Garcia's 1996 request for a 20,000- to 25,000-square-foot reduction.

Been There, Built That

SOMEHOW, CITY OFFICIALS have turned a blind eye and a tin ear to all this evidence. At a packed public hearing July 29, local radio personality and former Capitola Book Cafe employee Eric Schoeck put it best.

"I remain concerned and puzzled," said Schoeck, "as to why the widespread, and to my layperson's ears compelling, objections on a wide variety of fronts ... don't seem to carry weight."

There is a sense among opponents that big money and persistence will win out in the end, even though attendance at the public hearings has run about 4 to 1 against the project.

"The whole process is designed to burn people out and camouflage the facts," says long-time opponent Barbara Graves.

The Redtree PR machine has attempted to marginalize opponents with characterizations like "shrill" and "strident." While Routh was conducting a series of meetings supposedly soliciting neighborhood input on the Redtree proposal, only polite critiques of the architectural design were allowed. Ironically, Routh himself had raised the issues of size, riparian law, traffic, the local economy and architecture as a councilmember in 1996, but during Routh's neighborhood meetings, the first four, according to opponent Bruce Daniels and others, were off limits to discussion.

"Because we were not willing to limit our interest to the aesthetics of the new design, the presenter [Routh] terminated the meeting," says Daniels of one neighborhood meeting.

Routh confirmed in a March 1997 newspaper article that known Redtree opponents were not invited to meetings.

"Everybody knows what their position is," Routh is quoted as saying. "So I don't know what else could be accomplished."

Lately, the City Council has provided ample opportunity for people on both sides of the issue to be heard. The question is, is anybody listening?

"So many people with so much time and energy showing up ... expressing their points of view does not make a shrill, loud minority," said Schoeck on July 29. "I have struggled against resentment of the developer for characterizing the wide-based, thoughtful and, yes, impassioned opposition to this as a shrill minority. ... That's not what my senses tell me."

Whose Goals?

'WE'VE BECOME a symbol of growth," Ley said in an interview. "But growth is more people. No one will live at Capitola Crossing." At the same time, no one knows who will lease there, either. The whole controversy got started over two years ago when word leaked out that Borders Books, a national chain, might become a tenant. The debate has since changed course a dozen times, and still no one knows who the tenants will be.

Ley says opponents have misrepresented the project. Redtree, he says, has addressed all the community's concerns and solved those that could be reasonably addressed within the goals of the project as Redtree defines them.

The question is whether Redtree's goals and the community's correspond. After years of pouring concrete, many Capitolans seem tired of seeing their city sold to the highest bidder. Democracy, they say, has given way to government-by-rapacious-developers, who have the time, cash and connections to outlast opponents.

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From the August 13-19, 1998 issue of Metro Santa Cruz.

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