Council members authorized the developer of a proposed mixed-use affordable housing complex to seek tax-exempt bonds to fund construction. When that will start is dependent on the final outcome of an appeal filed by nearby homeowners. Courtesy rendering
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Tax-exempt funding OK’d for Pearl

SOLANA BEACH — A mixed-use affordable housing complex slated for South Sierra Avenue inched forward Aug. 24, more than two years after it was approved, when council members unanimously authorized the next step to fund the project.

The action is a requirement of the Tax and Equity Fiscal Responsibility Act that allows tax-exempt bonds to be issued by the California Municipal Finance Authority, created in 2004 to promote economic, cultural and community development by funding charitable activities in the state.

“I want to make it clear that in taking this action the city has no responsibility whatsoever financially, no liability associated with the issuance of these bonds,” City Manager Greg Wade said. “This is strictly on the side of the developer but this action is required.”

Developer Hitzke Development Corporation will seek $5.5 million in bonds to finance construction of the 12,920-square-foot complex that will include 10 housing units and commercial office space.

The city was required to hold a hearing before making its decision. No one asked to speak during the public comment period.

Hitzke has been working for five years to build the complex, known as The Pearl, on a 14,720-square-foot city-owned parking lot that would satisfy a decades-old legal requirement.

Solana Beach has been subject to lawsuits since the 1990s after City Council took action that closed a mobile home park.

Affordable housing advocates threatened litigation, claiming low-income units had been eliminated. Rather than go to trial, the city entered into what became known as the Perl settlement which, among other things, mandated the replacement of 13 affordable units.

Since then three have been provided.

Shortly after City Council members approved the Hitzke project in April 2014, nearby homeowners filed lawsuits claiming, among other things, that the city didn’t notice the final public hearing correctly and was giving away land that was given to the city for use as a parking lot.

They also questioned the process for the view assessment and environmental reviews.

The Pearl — a play on the name of the earlier lawsuit settlement — will include the required number of parking spaces for the residential and commercial components of the project and replace the existing 31 spots used for public parking.

In September 2015 a Superior Court judge sided with the city on all claims. The homeowners appealed and a final decision has not been made.

Councilwoman Ginger Marshall questioned whether it was prudent to move forward with financing while the project is being litigated.

Wade and the assistant city attorney said it is up to Hitzke to pursue the bond issuance and make decisions based on the outcome of the appeal.

“This is a very, very early step in the bond-issuing process, but we have to (move forward),” Ginger Hitzke said. “Time doesn’t stop for us.”

Hitzke said she still has not decided exactly when she will submit the bond requests.

“We can’t apply too soon or too late because we have to close the transaction within a few months of being awarded,” she said.

It has been about a year since the homeowners filed their appeal, with no word yet on a final decision from the judge.