Half Moon Bay Council gets 'the ball rolling' on 555 Kelly agreement
- Coastside News
- Oct 25
- 6 min read
Many details still debated
Oct 17, 2025 Updated Oct 26, 2025
After 15 months of negotiations over the terms of a lease agreement with Mercy Housing for city-owned land at 555 Kelly Ave., the Half Moon Bay City Council heard public input on Thursday evening, Oct. 16, and then directed staff to begin drafting portions of the document addressing issues on which a consensus has been reached. While staff drafts those portions of an agreement, representatives of the city and Mercy will continue discussing unresolved issues and areas needing further mediation at future council meetings.
The meeting Thursday opened with Mercy Housing presenting their proposed solutions to issues that have been raised about parking, tenant selection, occupancy limits, the impact of various grant funds on project terms, and the use of ground-floor office space and community resources.
Councilmembers followed with an extended round of questions for the developer. Almost every aspect of the agreement faced scrutiny and will require further clarification from Mercy Housing. Certain topics drew more debate than others. Councilmember Robert Brownstone said that issues on which there is more consensus could be drafted into preliminary language and brought back to the council to “keep the ball rolling.”
Tenant selection is one of the more settled issues likely to get the first wet ink in the draft. Mercy Housing proposed prioritizing senior farmworkers in Half Moon Bay first, then those on the Coastside, and finally applicants from the rest of San Mateo County, with income eligibility determining final selection. The project would include 39 affordable units — 29 for households earning up to 50% of the area median income and 10 for those earning up to 30%. Each unit must have a resident aged 55 or older, and additional occupants must be at least 45, a spouse, or a caregiver. Children over 18 are only allowed if a disabled child or grandchild must live with the senior.
Some council members raised concerns about demand for the units, pointing to Stone Pine Cove farmworker housing where occupancy is just 35%. In a message to the council, San Mateo County Supervisor Ray Mueller clarified that all of the units at Stone Pine Cove are already assigned and have a waiting list, and that the low occupancy stems from move-in logistics rather than a lack of interest or restrictions. Mercy said similar projects usually receive about 10 applications per unit.
An agreement would stipulate that the city would enforce tenant preference through a local ordinance. Staff from the city and Mercy said they believe state grant funders would defer to local rules. The only federal funding secured — allocated by former Congresswoman Anna Eshoo for an ALAS-run community center—is already committed, and Mercy does not plan to pursue additional federal funds.
There was little debate over Mercy Housing’s proposed occupancy limits, which would cap each studio and one-bedroom unit at two residents and each two-bedroom unit at four, for a total of 86 residents. A revised unit mix of unit types—three studios, 34 one-bedrooms, and three two-bedrooms with one reserved for an on-site manager—would reduce the number of two-bedroom units while increasing one-bedrooms.
The issue that drew the most agreement from the council—but also the most dissatisfaction with Mercy Housing’s response—was parking, which will require significant additional work and is unlikely to be ready for inclusion in a draft agreement. Mercy’s proposal includes an 18-space parking garage inside the building, with two ADA-accessible spots and 32 bicycle spaces. A shared-use agreement under consideration would allow residents to use the 28-space lot at the Ted Adcock Community Center for overnight parking, with Mercy managing and sharing vehicle information with the city and Sheriff’s Office. In exchange, the developer has offered to reconfigure the lot at no cost to the city. The city is also in talks with San Mateo County about a similar agreement for the nearby Coastside Clinic parking lot, which could provide additional overnight spaces.
Mercy referenced studies from one of their other housing developments, and city staff cited an analysis that estimated, based on experiences at similar housing projects, that the total number of vehicles– about 24 to 32 – would be fewer than the number of units. Councilmembers Ruddock and Paul Nagengast, and several members of the public, pushed back. They argued that the actual number of vehicles could far exceed projections — estimating 80 to more than 100 — and warned that including a community space in the final design could significantly increase traffic impacts.
During public comment, residents described an existing “parking emergency” downtown and cited speeding cars on Kelly Avenue that frequently ignore stop signs. Some speakers proposed requiring Mercy Housing to purchase additional land for parking. Others questioned the feasibility of relying on bicycles, arguing that seniors are unlikely to use them as a primary mode of transportation.
Councilmembers Ruddock and Patric Jonsson urged the city to pursue “smart solutions” and partnerships to expand parking options. Brownstone and Ruddock emphasized the need to prioritize development of a citywide parking garage, while Penrose countered that, while creative parking solutions are important, they should not become a reason to stall a critical affordable housing project.
Another topic that will need further discussion between Mercy and the city before an agreement is reached are the actual terms of the lease of the land. In April, the city and Mercy approved an exclusive negotiating agreement proposing a 65-year lease, extendable to 99 years, at $1 per year. Mercy said the deal was meant to show site control, which would improve the prospects for grant applications.
Councilmember Nagengast questioned whether the city was locked into the current lease figure, noting that the land at 555 Kelly is worth at least $1 million. Several members of the public also criticized the proposed deal as one of the worst land agreements in city history, arguing that taxpayers should share in the project’s profits. Councilmember Brownstone countered that such deals are a standard practice and often the only way projects like this become feasible.
Councilmember Ruddock questioned the accuracy of the $42 million construction estimate offered by Mercy, particularly in light of recent tariffs, and raised concerns about the project’s long-term financial feasibility and potential city liability. While Mercy did not directly address the tariff issue, the developer said the estimate was current.
Ruddock also called for greater financial transparency, requesting that the council review the project’s operating expenses—a request echoed by Brownstone, who asked Mercy to present the operating budget at the next meeting.
In response to questions from the public and council about why funding has taken so long—with $21.4 million of the $42.4 million total reportedly secured so far—Mercy Housing’s Sarah Hollywood explained that state and county funding rounds occur only once a year and can each take up to a year to process. Mercy plans to apply for the remaining funding through low-income housing tax credits in mid-2026. If awarded, the project would be required to begin construction within 180 days.
Hollywood emphasized that Mercy and the city would not sign the lease until all project funding is secured. However, she noted that both parties would likely move forward with signing the housing disposition agreement—which would include the agreed-upon terms and project budget—beforehand.
Ruddock asked whether signing the housing disposition agreement would be considered a referendable action rather than an administrative decision.
“I am inclined to believe that it is legislative and therefore would be referendable,” said City Attorney Catherine Engberg. “I’ll say reasonable minds can differ on this, but based on the materials before me … I’d say it’s likely to be legislative and referendable.”
In August 2024, city staff and the city attorney determined that a petition with 1,179 signatures to put the fate of 555 Kelly on the ballot could not qualify because the council action the petition sought to overturn was administrative, not legislative. Staff concluded, based on Elections Code section 9237 and case law, that denying appeals of a Coastal Development Permit is not subject to referendum.
During public comment, a letter from Representative Josh Becker’s office was read into the record, expressing support for the project and urging the council to reach a timely consensus.