The developer of a downtown Morgan Hill residential project that will realign the oddly shaped intersection of Depot Street, Church Street and Dunne Avenue is hoping to begin construction by the end of this year.
The project, proposed along Depot Street at the site of Hale Lumber, consists of 49 multi-family units and 3,000 square feet of office space on a 2.29-acre property. Morgan Hill-based Latala Group is the developer of the project.
A key element of the project is the realignment of Depot Street, which has been identified as a goal in city planning documents for more than a decade. The project will reroute the southern end of Depot Street with two slow, sharp curves through what is now the parking lot of the city’s Community & Cultural Center, and line up Depot with Church Street at its existing intersection with Dunne Avenue.
“This project was designed with our community and our downtown in mind,” Paul Latala of the Latala Group told the city council Sept. 1. “Being from here, we care about the end result, and that’s what drove this project with staff and community input, to make it work for all sides.”
A mixed-use project with a Depot Street realignment were first proposed at the site of Hale Lumber in 2017. In January 2019, the Latala Group acquired 49 housing allotments through the city’s residential development control system and entered into a development agreement with the city.
But at the Sept. 1 Morgan Hill City Council meeting, council members were split on whether the project should proceed in its current form as the city’s share of the cost has more than doubled.
The Latala Group requested the increased contribution from the city as a result of cost increases for materials and labor, as well as inflation, in recent years. The developer also asked the city for an extension on its development agreement due to the Covid-19 pandemic and restrictions on work activities.
The council approved the requests on a 3-2 vote, with Council members Yvonne Martinez Beltran and Rene Spring in dissent.
Specifically, the city’s share of the project is now increased from $900,000 in 2019, to about $1.9 million. These costs—some in the form of credits to the developer—are related to the realignment of the public road as well as improvements to the intersection and CCC parking lot.
Much of that increase is due to rising construction costs, but there are also additional expenses “previously not accounted for in the original cost estimates,” says a city staff report. One of these is the need for further environmental review of the project, which was not anticipated in 2019.
Spring was against the Latala project when it was first proposed years ago, largely because he thinks the Depot Street reroute is unnecessary and poorly designed. The increasing share of the city’s cost solidified his “No” vote at the Sept. 1 council meeting.
“Now they’re coming back and asking for another (approximately) $1 million? I find it outrageous,” Spring said. “There is no way we should invest more into this ill-designed street realignment project.”
He added that he has no issues with the design or density of the residential and office portion of the project.
Martinez Beltran also raised concerns about the increasing costs.
But the majority of council members think the Depot realignment is adequately designed and the project will add important improvements to the city’s downtown.
“It’s unfortunate that more money has to be spent but the benefit we are getting from this project, I think, outweighs the cost,” said Mayor Rich Constantine. “We are getting a road realignment that is in our (long-term) General Plan, that we need to do” for traffic circulation and safety improvements.
City staff said the project will not result in any loss of parking for the CCC. All parking spaces for future residents and guests of the Latala project will be located within the residential/office portion of the development, on the east side of Depot Street.
The 3,000-square-foot office component will be purchased by the city. This space will be used as a nonprofit services center, according to city staff.
The council on Sept. 1 also agreed to a cost-sharing agreement with Latala to place the public utilities underground in the project area. The estimated total cost for utility undergrounding is $138,000.
City officials have long identified the Hale Lumber property as a key site for future development of residential and complementary uses to complete the modern vision of downtown Morgan Hill.
The lumberyard has been in its current Depot Street location since 1945, according to Hale Lumber owner Bob Hammond. Hammond’s father, Joseph Hammond Sr., purchased the business in 1960, and Bob has worked there ever since.
“I think it’s a well needed change for the city to get Depot Street realigned,” Hammond said of the Latala project.