Relinquishment of SR-75 Kickstarts Transformation of Palm Avenue

Kimberly Heaton

In September 2016, Governor Brown signed Assembly Bill 1500, enabling the California Transportation Commission (Caltrans) to relinquish State Route 75 (SR 75) to the Cities of Imperial Beach and San Diego.  The portion of SR 75 - Palm Avenue - that runs through the City of Imperial Beach is one of two major commercial corridors in the City.  

The City hired Keyser Marston Associates, Inc. (KMA) to identify the advantages and disadvantages of the relinquishment from an economic and financial perspective. If the City were to proceed with the relinquishment, then the City assumes the financial responsibility for its operations and maintenance.   KMA teamed with transportation consultants, Chen Ryan Associates, to complete this evaluation.

KMA evaluated the likely financial benefits, including potential increases in property and sales tax revenue to the City on an annual and long-term basis.  KMA also analyzed the post-relinquishment benefits to the City in terms of land use and traffic control.  With KMA's study, the City was able to weigh the cost/benefit relationships of the SR 75 relinquishment.  The City ultimately decided to take control of SR 75 / Palm Avenue.  

An important aspect of the City assuming local control is that it paves the way for a less complicated development process.  Growth along Palm Avenue corridor had long been stunted, as any new development proposals had to obtain approval from not only the City but Caltrans as well.   The City has already received interest from multiple developers, and officials now anticipate several new development applications.  With the City having sole control over the corridor, strides can be taken toward making the Palm Avenue corridor a more pedestrian and bike-friendly area.

Breakwater Town Center's Hampton Inn & Suites Under Construction 

Prior to the relinquishment of SR 75, the City identified the development potential of an approximately 4.0-acre site at Palm Avenue and 9th Street, to catalyze growth along the corridor.  In March 2009, the City released a Request for Proposals/Qualifications (RFQ/P) for the Site and selected Sudberry Properties, Inc. as the Developer to develop the property.  The Developer proposed to build a two-phased town center project known as the Breakwater Town Center, which replaces an older, obsolete retail center and repositions this location as a gateway to the City.  The first phase of the project was completed in October 2017 and includes 45,000 SF of retail space with a mix of national and local lifestyle retail tenants and restaurants, anchored by a national grocery store chain.  During the first phase of development, KMA assisted the City in the developer selection process, pro forma analysis, and completing the Section 33433 Summary Report to convey the Site to the Developer.

As of January 2019, the second phase of the Breakwater Town Center is under construction.  The second phase includes a 4-story, 100-room Hampton Inn & Suites with "beach modern" architecture.  The Hilton-branded hotel includes a pool, fitness and business centers, and a breakfast/lounge area.  With respect to this second phase, the City and Developer entered into a Transient Occupancy Tax (TOT) sharing agreement to provide an economic development subsidy for the project.  For this phase, KMA provided real estate advisory services to the City related to the structuring of the public / private transaction, quantified the necessary public assistance required for project feasibility, and completed the Economic Development Subsidy Report.