Why I think the City Council made the right decision on Meriam Park.

We trust markets to balance supply and demand, or we don't.

I am not an expert on land use, but I accidentally know much more now than I did 10 years ago.  When I considered what Dan Gonzales was asking for it raised many questions. One question was how was Meriam Park relevant to what is currently happening with Valley’s Edge, and how does that compare with the older battle over the Canyon Oaks development?

First, I’ll cover what was said at the council meeting, and then I’ll explain why I concluded, after some reflection, that the city council did the right thing.

City Council Public Hearing on Meriam Park

At the 11/7 council meeting, a public hearing was held to consider the reduction in the number of units in the Development Agreement (DA) at Mariam Park, from the original 3,200 to 2,300 units reported in the CEQA report (https://ceqanet.opr.ca.gov/2005072045/7) to 1,667, a 27% reduction (633 units) in the revised plan (using 2,300 units to measure the reduction.)  This does not include the 180 ADU units (small units above garages). In 2023, the California Legislature passed a law allowing ADUs to be sold as condos and banned all owner-occupied requirements by 2025. Why these market units are not counted is another question.

Since the DA requires 15% of the units to be “affordable” (those making 60% or less of the median income for the region can afford their units with only 30% of their income) the reduction also reduces affordable units by 95.

The original DA was approved in 2007 and has been revised 5 times since then.  Last night additional revisions were being proposed, which were recommended for approval by the planning commission and city staff.

Meriam Park claims to be based on the planning philosophy called “New Urbanism,” which encompasses “an interconnected street network, rear alleys, attention to the shaping of public spaces, and mix of uses to reduce reliance on the automobile and encourage walking, and a variety of housing types,” according to the staff report.

Addison Winslow’s and Smart Growth’s opposition to Valley’s Edge is based on a demand that that specific plan is not “new urbanism” enough and should be killed by voter referendum.  One of their arguments is that Valleys Edge requires modification of the General Plan.  They do not mention that Mariam Park also required similar routine refinements of the general plan in several of the five previous revisions to the DA.

After some purpose-designed questions from the dais about how they cannot “force” a developer to build the approved number of units and asserting voting “no” would have no legal effect, the developer Dan Gonzalez rose to explain the change.

His first statement was that the original plan was “overly zealous” and was a “best-case scenario” requiring “lots of things” to happen for it to work.  Before he acquired the project, the RDA (Rural Development Agency) had pulled a $50 million grant that pulled “the wind right out of the sails” of the project.

That was coupled with a recession, which I assume means 2008.  With that, “everything changed.” That is when Gonzales “picked up the project.”  I have to guess that was around 2010 or so. Perhaps one of you Chico historians can clarify that for me.

“I look at Chico, what it needs, the market conditions, and in my opinion, it needed an economic development model, where we would build a commercial area with sustainable, walkable, around the commercial where they work, and the branch out into lower density.”

It is not clear to me what he means by “sustainable,” but like “diversity” it never hurts to work it in.

“That’s what I did.  I master-planned it, it seemed very easy on paper.”

“What have we got at this point?  We have a new model.”

“When I started building mixed-use, no bank would loan to us, so I personally financed all of the mixed-use so we could get it going.”

“Once we got it stabilized, we were able to have it financed by a bank, but still at a very low loan-to-value ratio. At this point, we’re having trouble getting insurance on it.”

“There is a reason no one builds these types of developments. I know why.”

Addison Winslow asked him if anything was preventing him from building higher density.

“Nothing in the DA prevents us from building higher density. It’s a balance.  What does Chico want, what does Chico need, and how much high-density can it take, and what is reasonable?  We are not a Portland or San Francisco.  I tried to get into that area, but you still have to give them a little bit of space, and have diversity in living.”

“The number one thing I think we are lacking in Chico is diversity of living situations.  We go multifamily or we go affordable housing.  There’s nothing in the middle, which is what I build. I build workforce housing, right?  So if you can get out of affordable housing, then you have a place to land.  That’s what I shoot for.”

Addison can always be counted upon for a speech, and here is what he had to say.

“Mariam Park is the only development that we require an affordability requirement.  We don’t otherwise require affordable housing as a condition for subdivisions.”

“It’s unfortunate that Mr. Gonzales has found he cannot sell housing of that high density because we really do need to use that kind of plan to build enough to address our housing needs.” 

“What Meriam Park has been doing, however, is transitioning what is possible in Chico. As Mr. Gonzales said, he could not get funds, banks in Portland and San Francisco are more willing to loan on these kinds of projects, but it’s considered that Chico is not a safe place to do this. I think it is important that developments like this happen, so we can progress towards being able to sustain a kind of building that is addressed by New Urbanism. My heart is a lot closer to that than anything else we have going on, and just by being there, building out, opens up the possibility for other developments, so we don’t have to look at large tracts of land nearby the city as the only thing feasible here is very low-density homes for very high-income people.”

“What Meriam Park is doing is inviting more diversity into the community, creating a space where you can walk to get the things you need, that the jobs that are being provided can actually be occupied by people living in the development. That is not something we are seeing in other large development proposals in this town.”

“So, I’m happy to support him going forward with this, although I also more affordable housing could come out of the plan, and that finance for affordable housing, for mixed-use was more available than it is in our area.”

Thinking the situation through.

Going into the meeting, I had some questions, and after hearing Gonzales and Addison speak, I had a few more.  We are fortunate to have three planned development projects to compare, Valley’s Edge, Meriam Park, and Canyon Oaks, representing the beginning of the planning cycle, end of planning, and mature build-out.

New Urbanism

I’ll begin with the idea of “New Urbanism”, a planning philosophy that seems to be the guiding principle of the original Meriam Park plan and also cited as a failure of Valleys Edge as justification for why the upcoming referendum should stop it in its tracks.

In the staff summary, New Urbanism includes the following elements:

• interconnected street network

• rear alleys

• attention to the shaping of public spaces

• mix of uses

• reduced reliance on the automobile

• encourage walking

• a variety of housing types

When comparing the three developments, we notice a progression.  Canyon Oaks was a planned development that was also opposed vehemently by the “no growth” contingents, who cited the “gated community” for the wealthy, including a golf course, and the environmental hazards of tearing up the land.  It was completed years ago, the houses are all sold, and it has become a barely noticeable feature of our community.  The sky did not fall, as predicted.  Meriam Park was planned almost three decades ago, with the first approved plan in 2007.  Valley’s Edge was started sometime around 2008, and that plan was approved in 2023.

Canyon Oaks could hardly be called a model for New Urbanism. It is a gated community, golf course, and homes sell in the millions.  But apparently, it was needed and demanded, because the houses were built and someone bought them and those people live in Chico.

First Tom DiGiovanni, and then Dan Gonzales developed the plan for Mariam Park around New Urbanism, the opposite of the “tract home” concept popular since the 50s. It ticks all the boxes.

Valley’s Edge, designed by Bill Brouhard, also incorporates all the elements of New Urbanism.  Why the difference in attitude between the two is a mystery.

Gonzales said his goal was to build “workforce housing”, as “somewhere to land” when moving up and out of the “affordable housing” market.  This implies the truth of what I’ve been saying, that those who consume affordable housing want to get out as soon as they can afford it, but can’t do it unless there is the economic opportunities to prosper, and a diversity of housing to graduate into.

Gonzales called this “diversity living” and what I understand him to mean is a full spectrum of housing types and price points.  He sought to fill a gap he saw in the market, something that any good entrepreneur looks for. I did not hear him say that every development in Chico should mirror Meriam Park. Rather, his development was meant to fill an unmet need.  That is the way market economies work.

Once he acquired the project, he found that banks refused to fund it.  Recall that the original plan called for three-story apartments, a “live-work” concept that envisioned a reduced need to venture outside of Meriam Park, since living, working, and recreation were all part of the mix, all within walking distance of one another.

On the question of why the reduction of density became necessary, Gonzales admits there is a limit to how much density a community will accept. Communities have different preferences, and as he says, Chico is not an urban location like Portland and San Francisco. People need “a little bit of space.”  Therefore, he took out all the third stories in his apartments.

Housing Stock versus Housing Demand

High-density and low-income housing is an essential part of the housing mix in any community.  Youth providing housing for themselves for the first time, adults holding low-skilled/low-paying jobs, and those who are old or disabled, often prefer apartments, because of affordability and/or convenience.  But there is a limit to how much “high density can (Chico) take,” according to Gonzales.  

The only way to test just how much to build is to put it out there and see what happens.  But that is a risky business, since building housing is a very expensive endeavor, and the worst nightmare of any developer is to build houses that no one wants.  Empty housing brings the entire market down.  Those who do own the house they live in want to see the value increase, and empty houses around you don’t do that, not to mention the bankrupt developers it leaves behind.

Addison also gives us the narrative he prefers about Valley’s Edge, comparing it unfavorably to Meriam Park because, according to Addison, in Valley’s Edge “the only thing feasible here is very low-density homes for very high-income people.” Is that true? Is that really what the specific plan specifies? Has Canyon Oaks been a disaster for Chico?

Narrative versus reality

When I spoke at the meeting, I raised some of these questions. I said I was confused. Do we have a housing crisis or not?  Do we need affordable housing or not?  Do we want to encourage infill, or not?  Is this “New Urbanism” a workable model, or not?

Think about what it takes to create a planned development like Canyon Oaks, Mariam Park, and Valley’s Edge.  Someone or a group with sufficient capital and knowledge identifies an opportunity to develop a planned housing development.  The first thing is to buy the land.  That investment continues to cost the investors right up until the time most of the planned housing units are sold. It is a tremendous long-term financial gamble. It requires capital and lots of it.

Once the land is secured, the planning process begins.  I don’t know how long it took Canyon Oaks, but we know that Meriam Park's plan was first approved in 2007, so the planning process must have started years earlier. In the case of Valley’s Edge, planning for that development has just been completed after a 15-year planning process.  No building has yet begun, and once it is, will take 20-40 years to complete.  That would be around 2043-2063.  Let’s say the planning process takes 10-20 years, all the while, money is going out the door.

Once building begins it may be another 20 years (in the case of Meriam Park) or more before the development is a fully implemented reality. How do you know what to build if it takes 20-40 years to implement? What will sell in a market that far in the future?

You guess. It may not be a wild, uninformed guess, but it is a guess. You may increase your odds of guessing right by making sure your planning process is as close to consumers as possible.  But you never know until you put the “for sale” sign on what you have built and it sells to a real housing consumer.

At the beginning of the process, you plan between the best and worst-case scenarios.  You start with the largest number of units that can be approved by land-use laws, and you jump through the CEQA (California Environmental Quality Act) hoops for a project that has the maximum allowed impact on the environment. In the case of Mariam Park, that was originally up to 3,200 units.

16 years later, reality has set in.  Beyond the issues with financing and insurance, as real houses and mixed-use structures appear, sell, and are occupied, we all learn about reality versus the narrative.  No one is smart enough to know what market conditions will exist 10, 20, or 40 years from now.  Developers who began investing that long ago didn’t either. They guessed, they planned, and they implemented the plan.

By now, Gonzoles has a real sense of what works, what doesn’t, and what sells in his development.  Overall, it is clear that he was right, his development fills a niche, a consumer need.  But some limits also have to be recognized as real. This is not Portland or San Francisco, he reminds us, and there is a limit to the amount of density Chicoans will accept.  As a businessman, Gonzales lives in the real world, not the theoretical world of narratives about housing by those who have no skin in the game.

In a free-market economy, the producer and the consumer are always testing each other, and the result is always a balance.  If we build too much of something, it sits empty.  If we build too little of something, we don’t fill the demand.  For something that takes several decades to produce, that is a risky game.

I’ve concluded that Dan Gonzales was accurate when describing his journey with Meriam Park.  He started with a plan that was “overly zealous” but if everything worked out just right, it was possible.  Over the years, he has seen the reality of supply and demand.  He took the normal risks all developers take, but he also took on something more. 

He dared to try to fill a gap that he saw in the market and learned that banks didn’t share his vision. Fortunately, he had the means to finance the early stages himself and was able to “prove the concept” such that banks eventually came tentatively to the table.  The marketplace Meriam Park has found is a balance between supply and demand, innovation, and consumer preferences. 

Based on my experience, the people living in Meriam Park love it there.  It is not for me.  But that’s the beauty of market forces and the “invisible hand” of supply and demand.  I will never be able to afford a home in Canyon Oaks.  I’m too old to hold out that hope for myself.  I am making the best decision for housing within my means and tastes. That is the way it should be.  I was frustrated in 2016 to find the inventory of choices was too small.  I didn’t find exactly what I had in mind.  That is the way it always goes.

Planned developments are one of the most civilized processes in our society, and we’re getting better at it all the time, which is the real meaning of “progress.”  It is also one of the riskiest investments.  Taken all together, it is proper that the city government, and the citizens, remain flexible and responsive to emerging market demands and realities. 

You either trust markets, or you don’t. If you don’t, you presume to call the shots from the outside based on what one “thinks” should be done.  You believe in centralized, planned markets, and demand everyone stick to the plan, no matter the consequences. Addison reveals his economic philosophy when he says how “unfortunate” it is that high-density units didn’t sell, because “that’s what we need.” How does he know with certainty what we need, or what people want?

If you trust markets, then you allow them to operate, to define what we need and want. It is fine to set boundaries, and we do that, perhaps overdo that through the planning process, including CEQA.  But when it comes to producing something with a multi-decade planning cycle, best let the final word rest with those who have the most skin in the game, the developers who invest, and the consumers to buy.  Eventually, the market will find a balance, and instruct us as to what the housing realities are.

The bottom line for the Meriam Park revision is, that is what was done.  It was the right thing to do and should serve equally as a guide for the right thing to do for Valley’s Edge.

https://chicovalleysedge.com/the-plan-overview/