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After last week’s concept review hearing by the Boulder Planning Board, the potential to develop Diagonal Plaza — one of the city’s most blighted and underutilized retail districts — is stronger than it’s been in years.

But despite optimism, the same barriers that have scared off investors and retail site selectors remain a thorn in Boulder planners’ and developers’ sides.

With its mishmash of owners and zoning designations, the blighted Diagonal Plaza shopping center has proven to be one of the city’s most challenging redevelopment sites. (Boulder planning documents / Courtesy image)

Past development-incentivization efforts at the site include the creation of an Opportunity Zone within a 2.5-square-mile tract stretching from 28th to 55th streets and Arapahoe Avenue to the Diagonal Highway.

The OZ program, which has been controversial in Boulder, is aimed at updating the nation’s tax code to unlock the reinvestment potential of capital gains and direct that capital to the communities that need it most. So far, no one has attempted to use the program at Diagonal Plaza.

Late last year things began looking up when initial paperwork was filed with Boulder planners to turn a shuttered Sports Authority and other underutilized parking lot space at 3320 28th St. into affordable and workforce housing.

That project, a partnership between Boulder Housing Partners, Trammel Crow Co. and Coburn Partners, is currently making its way through the city’s preliminary review and approval process.

The developers and city leaders have two options to consider: The first option includes 177 workforce apartments within five buildings and with 9,942 square feet of amenity space, a shared deck and a clubhouse, and 58 permanently affordable apartments, according to Boulder planning documents.

The second option matches the first but includes additional residential units with approximately 195 workforce apartments and 64 permanently affordable apartments. It also includes a fourth story on one of the buildings with an additional roof deck.

One of the major issues relates to the property’s zoning classification, under which open space requirements would allow the construction of only 56 new residential units on the site — hardly enough to make a dent in the city’s housing affordability crisis, Boulder planner Elaine McLaughlin said during last week’s hearing.

“It’s a pretty unusual circumstance” in which certain rezoning criteria appear to clash and could necessitate consideration of altering zoning designations and city code, she said.

That’s a lengthy process that has been attempted in the past and one that Boulder resident and former City Councilman Macon Cowles discouraged during a public comment session.

“The overlap of utility easements, conflicting rights of way, the difficulty of drainage and engineering issues, and divergent interests of 15 property owners make this a very difficult site,” he said. “No area planning can change that.”

“The community is impatient about this site,” and bureaucracy and endless planning will doom the project again, Cowles added.

It appears that the parties involved with the proposed Diagonal Plaza redevelopment understand the complexity of their task and are thinking outside the box.

According to Coburn principal Bill Holicky, planning for the project started in the reverse of most other development proposals.

Typically, developers will try to fit a project into a specific zoning designation. In this case, city planning leaders encouraged the developers to design a project that best fits the space and the needs of the community and work backward on a way to make it conform to land use codes.

“We kind of abandoned proposals for this zone or that zone; we’re not pushing any of that tonight,” Holicky said.

Instead, the focus is a discussion over “is this a good vision?” he said. “If it is, how do you accomplish it?”

Last week’s concept review is simply the first in many steps on the path toward development. There will be many more public hearings and approval or recommendation votes by the Planning Board and City Council as the project progresses and evolves.

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