The Valley Transportation Authority has spent years developing a plan to create new, vibrant communities around transit hubs, especially at a time when BART is expanding its reach in Silicon Valley.

On Tuesday, the San Jose City Council will hear a report highlighting VTA’s major goals for Phase II of BART’s Silicon Valley expansion project, just weeks after a vital agreement between the two regional agencies has been authorized, and the first phase of the expansion — the 10-mile BART extension to Milpitas and Berryessa — is in the testing phases.

City officials will discuss a plan to create more housing of all types and a strong job market around two vital future BART stations, one in downtown and the other on 28th Street in the Little Portugal neighborhood.

“VTA’s BART Silicon Valley Phase II extension through Downtown San Jose and Santa Clara presents an extraordinary opportunity to sustainably organize Santa Clara Valley’s future growth around the future BART stations,” wrote city Planning Director Rosalynn Hughey and Transportation Director John Ristow in a memo to city leaders. “High demand for housing of all types, a strong job market, and new transit options provide the essential ingredients for developing (transit oriented communities) that are equitable, walkable and thriving places.”

VTA has rolled out its plan with the release of a “playbook”– a draft outlining the agency’s recommendations for each station to encourage the development of “transit oriented communities,” transforming the areas around the stations into transit friendly, walkable jobs hubs.

The playbook plan for the future downtown BART station aims to create nearly 16,000 new homes, with nearly 3,200 of them affordable. The plan for the 28th Street/Little Portugal station calls for 7,800 new homes, with nearly 2,000 affordable units. The plans also concentrate retail at ground levels and office uses closest to the BART station.

“At a time when the Bay Area is in a dire housing crisis, high-density housing near our public transportation infrastructure is an effective solution for helping to ease housing woes, increase transit ridership and reduce greenhouse gas emissions,” said Vince Rocha, senior director of housing and community development at the Silicon Valley Leadership Group. “The playbooks provide a map for leaders to plan for smart growth for the future of San Jose and its residents.”

Despite agreeing with the plan’s goals, San Jose officials voiced concern with the level of resources and staffing required to implement some of the recommendations. Finding the financing tools to fund the projects poses a number of challenges, according to city officials, including implementing VTA’s suggestion of using Mello-Roos tax revenue to support the construction of infrastructure, public amenities and services and affordable housing.

City officials propose identifying funding to pay for the resources and additional staff to implement VTA’s recommendations.

In a memo released late Monday, Councilmember Raul Peralez expressed worry that the plan conflicts with a new state law, AB 3194, which strengthens the Housing Accountability Act by limiting cities’ ability to require rezoning or reject housing projects that align with the city’s general plan. The new law prohibits rezoning projects to create a “value capture mechanism,” where public investment in a newly developed area can create massive increases in land value for private landowners.

Value capture is a type of public financing that is often used by local governments to fund public amenities and improvements. According to a new report from SPUR, San Jose’s current Urban Village plan in Alum Rock, which is where the proposed 28 Street/Little Portugal station is located, relies on developers to adhere to city requirements to provide funding for new amenities and infrastructure in the urban villages. The plan allows the city to withhold rezoning unless the developer provides specific public amenities for the urban village project. But under the new state law, this policy might have to change.

“While the (transit oriented communities) playbook illustrates wonderful and picturesque amenities that would benefit the community through a value-capture district, we need to be realistic with our community of what is achievable in this new landscape,” Peralez said. “I am cognizant that the nature of legislation is dynamic and subject to change at any point — nevertheless, it is important that we be transparent with our community.”

Peralez also said many small businesses, especially around the Alum Rock corridor, have suffered “devastating impacts” due to construction and development of major transit projects. The councilman last year asked VTA to study how BART’s extension will affect the small businesses in that corridor.

Peralez asked VTA officials to bring the results of the study to a council committee early next year, while city officials proposed VTA establish a “construction mitigation fund” to help small businesses affected during the construction period.

Contact Nadia Lopez at [email protected] or follow @n_llopez on Twitter.