The Santa Barbara Planning Commission on Oct. 9 reviewed a conceptual proposal to redevelop the Paseo Nuevo mall that would demolish the former Macy’s building to build 233 market-rate rental units and would place up to 80 income‑restricted units on a portion of municipal Parking Lot 2. The commission voted by majority to forward written comments and recommendations to City Council as it continues negotiations on a disposition and development agreement (DDA).

The commission’s action was advisory; City staff described the DDA as a real‑estate transaction that would be considered separately by City Council. Kelly McAdoo, City Administrator, told commissioners the city has negotiated with the property owner for more than three years and that the DDA being negotiated would transfer underlying city-owned land to the developer if a set of closing conditions — including design approvals, financing, and covenants on affordable units — are met.

Staff said the project would remove about 115,000 square feet of existing commercial space (reducing current commercial floor area on the site from roughly 240,000 square feet to about 125,000), demolish the 135,000‑square‑foot Macy’s building, and replace it with roughly 233 market‑rate units. The project proposes 80 affordable units on Lot 2; staff and the applicant said 24 low‑income units would be required to meet a combination of the city’s AUD (Average Unit Density) rules and the state density bonus law. Patsy Price, the project planner, said the combined proposal yields roughly 56 units per acre and requests height waivers beyond the Central Business District standard (the proposal listed up to 75 feet at the former Macy’s site and up to 70 feet at Lot 2, though the applicant later said Lot 2 massing had been reduced in response to community feedback).

The plan includes changes to downtown parking. Staff reported Lot 1 (under the Macy’s footprint) now has about 572 spaces and would be reconfigured to about 600, with 233 spaces proposed for the market‑rate units and 47 allocated to a proposed new 20,000‑square‑foot retail market on State and Ortega. Lot 2 currently contains about 569 spaces; staff said the proposal would remove approximately 186 spaces there to accommodate the affordable building and leave about 383 spaces in the reconfigured Lot 2 structure.

The project team, led in the presentation by Duncan Patterson, design principal at Gensler, emphasized reusing the existing parking structures and creating smaller, pedestrian‑friendly paseos and retail spaces. "The days of department stores are over," Patterson said. "The way you make retail environments work today is foot traffic. You put people on the street and you put residential and you put other things." He showed massing studies, rooftop gardens and stepped terraces intended to break up building bulk, and said the team is targeting a new grocery anchor on State Street.

Public commenters and commission questions focused heavily on: the proposed land transfer and terms of the DDA; whether the city had evaluated alternatives (including a narrowly tailored charter amendment to permit a longer lease term rather than transferring fee title); the location, scale and financing of the affordable component; and loss of public parking. Rob Fredericks, representing the Housing Authority, said the authority “strongly supports the vision to reimagine Paseo Nuevo as a vibrant mixed use center” but warned that compressing 80 units into the Lot 2 parcel could “strain good design and limits light and open space.” He said the Housing Authority is prepared to develop and manage the affordable component if the lot could be conveyed in a way that ensures permanent affordability.

Citizens Planning Association President Mary Ellen Brooks told commissioners the city charter contains voter‑approved height limits and urged decision makers to respect that limit on city‑owned land. Resident and former city planner Pat Salie said the project is "precedent setting" and asked the team to study spreading housing across the site to reduce perceived height and massing on public frontages. Steve Johnson, who spoke remotely, urged the commission to require more detail for unit sizes and affordability before endorsing the concept.

Historic Landmarks Commission (HLC) feedback, presented by staff and reflected in minutes adopted by the HLC, asked the applicant to ensure "equal dignity and character" between the affordable and market‑rate designs, to study shifting massing away from the most visible public frontages, to break larger volumes into a collection of smaller forms, and to examine a mid‑block paseo on Ortega. Price told commissioners the HLC acknowledged the need for housing and downtown revitalization but asked for additional work on compatibility findings and El Pueblo Viejo design standards.

Commissioners pressed staff and the applicant on the DDA process and financial transparency. Several commissioners asked whether the city had considered a 99‑year lease option (which would require a charter change) instead of transferring fee title; staff replied that the council had not directed that path and that the DDA negotiations reflected prior council direction. Staff said outside consultants (Strategic Economics and Maxima Group) have reviewed the developer’s confidential pro forma, but the pro forma itself remains proprietary and was not publicly released as part of the concept review. Commissioners asked staff to provide clearer valuation and tax‑revenue estimates before Council action.

On procedure the city attorney and staff clarified that the DDA is a transactional document separate from land‑use approvals; design review (including HLC review) and any required environmental work must still occur. Staff said City Council is expected to consider the DDA before the end of 2025; if the council approves the DDA the project team anticipates submitting formal planning applications in late 2025 or spring 2026. Price noted two public outreach open houses scheduled Oct. 15 (6–7:30 p.m.) and Oct. 16 (noon–1:30 p.m.) and the project website for continuing input.

After more than an hour of deliberations the commission voted to forward a set of detailed comments and requests to City Council and staff that emphasize: (1) stronger design work on massing and compatibility with El Pueblo Viejo standards; (2) clarity about DDA terms and any public contributions or land value transfers; (3) a firm plan for where and how the 80 affordable units would be financed, built and preserved as permanently affordable (and consideration of transferring Lot 2 to an affordable housing entity); (4) clearer parking analyses showing the effect of removing Lot 2 spaces and long‑term downtown parking needs; and (5) expanded public outreach and financial transparency, including options raised by commissioners such as a narrowly tailored charter amendment to permit a longer lease term instead of fee transfer. The motion passed on a roll‑call vote of the commission.

Next steps: staff will incorporate the commission’s comments into materials transmitted to City Council ahead of the DDA hearing, continue negotiations with AllianceBernstein and interested parties on parking and reciprocal easement issues, and proceed with HLC design review and the planned public outreach. City Council is expected to consider the DDA later in 2025; the planning commission’s action was advisory and did not approve any land transfers or development permits.