Lights Out for Midtown Master Developer

Santa Fe City Council voted unanimously to mutually end an exclusive negotiation agreement with Midtown campus master developers KDC/Cienda Partners during a special meeting Thursday evening. 

It's been exactly a week since the city announced it had received a letter from the Dallas-based developer asking to exit the agreement due to COVID-19 and significant infrastructural problems on the site.

The pressure to do something with the campus now hangs over the last year of Alan Webber's term as mayor as the city continues to battle the economic and social impacts of the pandemic. Meanwhile, the city still has $32 million in debt on the 64-acre property and is paying $1.7 million every year it stands largely vacant.

Still, the current setback doesn't mean the city has to go back to the drawing board completely.

The termination of the exclusive negotiation agreement with KDC/Cienda does not end the Request for Expressions of Interest process that the city started in 2018, because the ENA was not a binding contract to purchase the property, staff said at the meeting. Instead, the ENA gave KDC/Cienda 12 months to complete various assessments of the site before beginning any negotiations about the development and sale or lease of the property.

As Councilor Carol Romero-Wirth explained Thursday night, "This was just an opportunity for the developer to really get their hands on the site and do so exclusively because they had met all the criteria for being the strongest applicant with the strongest vision."

This means that the city has options:

• return to the previous phase of the RFEI process and move forward with the plan submitted by the second-best master developer;
• go back to an even earlier stage and request new proposals;
• or scrap the process completely and consider other options such as the outright sale of the property.

Economic Development Director Rich Brown said Thursday staff will reconvene the city's initial evaluation team to take a second look at the other master developers' proposals and return to the council on Feb. 24 with its recommendations for how to proceed.

Starting Feb. 4, he promised, the team will provide bi-weekly updates and a monthly public presentation.

In the meantime, the city has convened multiple cross-departmental teams to evaluate and develop strategies to address KDC/Cienda's findings about the condition of the campus.

During its assessment KDC/Cienda found that "the campus's infrastructure is incomplete and obsolete and may require $30M of public subsidies," the developers stated in the letter to the city.

The letter also stated that the campus would need significant rezoning before development and major infrastructure upgrades; presented access issues from surrounding neighborhood streets; and included areas of unspecified contamination that could require the city to obtain a brownfield designation for the site.

Brown tells SFR by phone  the contamination is likely an asbestos dump that has been there for decades and that neither the city nor the previous educational institutions that occupied the campus saw as a threat to public health.

Brown says a brownfield designation might actually be beneficial for the city.

"A brownfield designation would give the space more advantage for grant funding, opportunity zone funding, et cetera," he says, adding that the city is currently beginning a thorough environmental assessment of the area.

Such an assessment could take up to six months. Many of the other things the city must now do to get the site closer to being "shovel read," such as rezoning, also take a considerable amount of time and could delay negotiations about future development.

KDC/Cienda's Midtown team included a bevy of local partners such as small local developers, nonprofits including Homewise, the Santa Fe Community College and the University of New Mexico.

On Thursday,  Daniel Hernandez, a consultant hired to oversee the RFEI process, assured council members that all of these local partners were still interested in working with the city on whatever plan emerges, even if it takes time.

Allan Affeldt, one of the top three master developers selected in the RFEI process and the only one based locally, tells SFR he's still in the game but has some reservations.

Despite the impacts of COVID-19, the overarching concept for the master plan proposal he submitted more than a year ago "still makes abundant sense," though some aspects, such as the need for office space, will likely be different after the pandemic.

"We are generally interested, but we've got to see what the city's going to do," he says. One big question is how the city plans to pay for all the needed improvements to the campus, many of which, says Affeldt, have been apparent from the get-go.

He'd also like to see more public involvement in the project moving forward.

"The city is going to have to change their approach," says Affeldt. "It's going to have to be much more transparent, much more engaged in the community because that's the only way you're going to get the necessary support to pay for things like infrastructure and parks, and all the things that make that project worth doing."

In a conversation with SFR via phone, Councilor Mike Garcia shared similar sentiments.

"I think when you look at spaces like Fogelson [library] that is a jewel for the community, we have to be really real and honest with the public about how much money and resources we need to go into renovating and updating and modernizing that space," he says. "I think those are questions and conversations that we need to have with the community."

On Thursday, Webber said the city has asked the Legislature to appropriate funds for the redevelopment of the Midtown property.

"We are hoping we will get assistance from capital improvements from the state," said Webber.

Most council members agreed that public engagement must be a top priority going forward, no matter what approach the city takes.