Activist group alleges city of Seaside is playing favorites with residential developers.

The pattern plays out to the point of cliché: A development is proposed, city officials rally for it, land-use activists push against it and a battle of economy versus environment ensues.

When it comes to one Seaside housing proposal on the former Fort Ord near CSU Monterey Bay, however, it’s the city that’s pulling back and an environmental watchdog group that’s gung ho.

Los Angeles-based homebuilder KB-Bakewell Seaside Ventures is proposing to build up to 505 houses on 50 blighted acres south of Gigling Road, the so-called “Surplus II” parcel. City staff, however, have reservations.

City Manager John Dunn says both the Seaside General Plan and the Fort Ord Base Reuse Plan call for mixed-use development at Surplus II, not the fully residential complex KB-Bakewell proposes.

“Entirely residential developments usually don’t pay their own way,” Dunn says. “The cost of servicing the area is usually greater than the revenue produced.”

The city staff report recommends the Seaside Successor Agency not approve an exclusive negotiating agreement, but rather give the developer an opportunity to add a commercial component.

Environmental group Keep Fort Ord Wild (KFOW), however, finds it ironic city staff would snub KB-Bakewell’s bid to build homes on urban blight – Surplus II is a wasteland of parking lots and abandoned buildings – and not a proposal to build three times as much housing on virgin Fort Ord land.

The city plans to annex more than 500 acres to accommodate Monterey Downs, a proposed equestrian-themed development with more than 1,500 homes.

“If the residential component is revenue negative, it seems there would be no point in Seaside pursuing the massive residential component of Monterey Downs,” KFOW spokesman Michael Salerno writes by email.

Dunn counters that Monterey Downs is a mixed-use development, suggesting the revenue generated by commercial components could make up for the city’s losses in providing municipal services.

Monterey Downs hasn’t been approved yet. City staff are waiting for an economic analysis commissioned by the developer; the draft environmental impact report is scheduled to go public later this month.

KB-Bakewell, Salerno notes, has a record of pulling off residential development in Seaside. But relations haven’t been entirely smooth.

In the early 2000s, KB-Bakewell (a partnership between The Bakewell Company and KB Home) built Seaside Highlands, a 380-unit housing development on Monterey Road. The city sold KB-Bakewell the 110-acre parcel, appraised at up to $115 million, for $6.8 million – but early promises for affordable units never materialized. Dunn says the city hasn’t analyzed whether Seaside Highlands is revenue-negative.

Developer Danny Bakewell, Jr., did not return multiple calls.

In late 2006, KB-Bakewell began negotiations with the city of Seaside to redevelop a blighted 5-acre parcel at Monterey Road and Coe Avenue into a 61-townhome complex with commercial space. That proposal evaporated when negotiations expired in 2008.

In addition to its bid for the Surplus II parcel, KB-Bakewell is proposing to develop 26 acres south of Lightfighter Drive into retail and restaurants.

The City Council will consider exclusive negotiations with KB-Bakewell at its Aug. 1 meeting.