After nearly a year of legal wrangling, Gilroy city council has moved to settle with the developer of a 530-unit builders remedy project, clearing the way for the massive development.

If finalized, the settlement will dismiss a lawsuit that has long bedeviled Gilroy, pay out over $4 million to the city and put an end to a saga that seeped into the 2024 election with negative attack ads and saw city officials compared to “television gangsters.”

“This is a great way to develop this portion of the community that has been not just undeveloped, but unplanned for so many years,” said Gilroy Mayor Greg Bozzo, noting that the $4 million could be used at the discretion of the council for any of the city’s needs.

The saga began when developer, Gandolfi Investments, first applied in December 2023 and again in February 2024.

The application proposed a complex that would feature over 500 units of apartments and townhouses – 20% of which would be designated affordable housing for low income households – as well as clubhouses, parks, and resort-style pools on about 27 acres currently zoned for limited industrial use on the northern end of Gilroy.

Staff called both applications incomplete; however, Gandolfi argued the city’s opinion did not apply since the developer could exploit a subsection of state law known as builders remedy. Under the law, if a city is late to submit a state-approved housing plan, developers can skirt local zoning laws and propose housing projects of virtually any size, as long as a portion of the building includes affordable units.

Despite public comment asking for approval of the development, the city disputed whether the law applied, and in July 2024, the developer filed a lawsuit peppered with colorful assertions claiming that city officials owned adjacent parcels of land – a Mercury News review of nearby properties found no evidence of this claim – and comparing the former mayor to a “television gangster.”

The dispute even bled into the 2024 election. A committee connected to the company that owns Gandolfi spent $51,750 to send a flurry of negative ads and mailers against former Mayor Marie Blankley and spent $11,500 in support of Bozzo, according to filings prior to the November election — weighing in on a race that was ultimately decided by only 211 votes.

After months of closed-door negotiations, the city and the developer outlined the agreement to settle the lawsuit, which they discussed publicly for the first time at Monday’s City Council meeting.

The agreement would streamline the application process for the developer by clarifying certain requirements for the project and allowing Gandolfi to take a loan from the city to pay certain fees – effectively allowing them to delay payment. In exchange, the developer would pay the city over $7,000 dollars for every unit they opened, netting the city over $4 million if the project is completed. Additionally, the developer would pay to create a plan for the development of the area surrounding the complex.

After making some minor adjustments to the extent of the plan, the city voted unanimously to approve the deal.

Councilmember Terence Fugazzi called the saga a “very challenging project” for the city with “a lot of drama from lots of different sides,” but argued the negotiation netted the city some benefits that it wouldn’t have otherwise gained while helping develop an underdeveloped sector of Gilroy. “It’s an opportunity in that section of the city to have a smart way of potentially expanding by creating a new kind of master plan, a new way of looking at this area.”

Additionally, City Attorney Andy Faber admitted that state law had leaned more and more in favor of developers under builders remedy. “I think if we were to turn this project down at this point, we would entertain substantial legal risk.”

Both the city and the developer seem optimistic that the agreement can move forward, with the city expecting the agreement to be finalized in coming weeks.

“We’re very happy with the outcome and look forward to working with the city to achieve fantastic results,” said Eli Aizenman, Vice President of Development for Ten South, which owns Gandolfi, in a text message.