The company most actively involved in the redevelopment of downtown's west side is asking to change the terms of its agreement with the city for a third time.
Gadsden Co., which has an exclusive right to buy and develop land now owned by the city just west of the Santa Cruz River, wants to buy only a portion of the land for a planned Phase 2 of its project, and pay a price that will only partially cover its share of the cost of a streetcar line that will serve the area.
City Councilwoman Regina Romero said she's happy the project will move forward, create jobs and result in new affordable housing.
But Councilman Steve Kozachik is skeptical, saying the new plan is a tough sell.
The City Council will begin talks on the issue at its Tuesday meeting, with a decision not expected until early next month.
Gadsden partner Adam Weinstein said "we're working our tails off" to meet obligations under the agreement with the city.
Gadsden and the city signed an agreement five years ago for the company to buy and develop, in four phases, about 14 acres of city property west of downtown along the Santa Cruz River.
The agreement allows the land to be sold for about $3.3 million total, after about $2.6 million in discounts and credits. But if the developer reimburses the city for the construction of the streetcar tracks that loop through the property, the company could use those dollars as another discount against the purchase price.
Gadsden planned to develop apartments, a hotel and commercial buildings, but then the housing market collapsed.
When the developer missed deadlines for improving the property, the city granted an extension, and then allowed the developer to make changes to Phase 1 of the plan two years ago.
Gadsden bought a block of the land for $250,000 and developed Sentinel Plaza, a low-income apartment complex for seniors, meeting the Phase 1 performance benchmarks, Weinstein said. That earns the company the right to proceed to Phase 2, he said.
Gadsden must begin Phase 2 of the project in mid-May under the agreement, but it wants to change that agreement again.
Gadsden wants to pay about $795,000 for only a portion of the original Phase 2 land to build an affordable-housing project, according to a memo to the council from City Manager Richard Miranda.
That price would cover only part of the streetcar reimbursements.
The apartment projects, called West End Station, could be financed by HUD at $34 million under a pilot project for transit-oriented development, Weinstein said.
The project would have 236 apartments, ground-level retail shops and underground parking, he said.
The developer also wants to waive a requirement that the city spend more than $500,000 to bring an excavated part of the property to grade, Miranda wrote.
If both sides agree with the changes, the developer will have paid about $1 million to develop two projects and the city will have a $1 million security bond for Gadsden's future performance, he said in the memo.
The city also wants Gadsden to agree to combine Phase 3 and Phase 4 and begin them next year to get the overall project completed more quickly.
The issue will come to the City Council at a study session Tuesday.
Both Kozachik and Romero said the city should stick to the original agreement - at least for now.
Kozachik wants Gadsden to be ready to meet the May deadline. If the company isn't ready to meet the agreement, other private developers should have a chance to make proposals for the property's development, he said.
If the city changes the agreement again, Kozachik said city taxpayers will end up paying for the streetcar tracks Gadsden agreed to pay for.
Romero said the city is obligated to keep going with the development agreement and work with Gadsden, saying it would be ridiculous to rebid the project.
She said Gadsden is performing as well as expected given the difficult economy, even though the original dream hasn't been realized, and the partners have shown they care about the west side by "investing blood, sweat and tears" in the project.
Weinstein said a 2014 closing for the remainder of the land is doable, with Gadsden now in final negotiations with a boutique hotel partner and plans for a small grocery store, a theater and retail shops.
"Now that things are starting to recover we're starting to see quite a bit of momentum," he said.
Contact reporter Becky Pallack at firstname.lastname@example.org or 573-4346. On Twitter @BeckyPallack.