Council OKs framework to continue negotiations on Paseo Nuevo redevelopment; staff asked to negotiate DDA, exempt Lot 2 from surplus lands act

The Santa Barbara City Council on Aug. 5 authorized staff to continue negotiations on a revised Paseo Nuevo redevelopment framework and adopted a resolution to exempt part of Parking Lot 2 from the California Surplus Land Act so the project can proceed to feasibility study and housing discussions.

City staff presentation and project summary

Laura Bridal, a planner in Community Development, told the council that AllianceBernstein (AB), which acquired the Paseo Nuevo properties after a borrower defaulted, has proposed a revised plan that retains most of the mall's in-line retail and community uses while demolishing the Macy's building to make room for housing and refreshed public spaces.

Under the plan outlined at the meeting, AB proposes:

- A new housing component on the current Macy's site with about 233 market-rate dwelling units; - A separate, stand-alone affordable housing project of roughly 80 units proposed for part of Parking Lot 2 to be developed concurrently with the market-rate work; - About 175,000 square feet of retail and food-and-beverage space that would include a specialty grocer at State and Ortega; - Retention of the Museum of Contemporary Art and Center Stage Theater uses in the mall core rather than full demolition of that central portion; and - A reconfiguration of parking: Lot 1 would be increased to an estimated 600 spaces with an allocation for retail and 1.0 residential space per housing unit; Lot 2 would be reduced to an estimated 383 spaces; Lot 10 would retain about 546 spaces for retail support.

Bridal emphasized the plan is a revised, more financially feasible alternative to an earlier, larger proposal AB offered in 2024 that would have required demolition of the entire center and substantially higher upfront foundation costs.

Why the city is involved and legal…