City Council gave a resounding “no” to the Highlands developer who asked for an unprecedented $3 million to complete a long-awaited business district.

“I thought that was pretty outrageous,” said John Traeger, council president. “Nobody has asked for that kind of money before.”

The request would have come from the 2012 budget, which is being finalized next week. It would have made up about a tenth of the city’s total budget for next year.

The council is now waiting for Regency Centers to make its next move. So far it hasn’t presented a plan for what the Grand Ridge business district would look like.

It did, however, suggest including a plaza and about 1,700 parking spots for the 14 acres. Presumably the money would go toward making the development more walkable.

When first conceived, the land was supposed to follow an urban village  concept, which encourages people to walk to shops and drive less.

So far, the area has proven to be car dependent and there hasn’t been much retail, but there is still hope, Traeger said.

The economy, however, isn’t conducive to the urban village concept anymore, said Mark Mullet, a city councilmember and Highlands business owner.

“I think if left to its own devices, the market is going to do something that’s more like a strip mall,” he said, adding that to get the walkability vision, the city needs to ask first what it’s willing to invest.

Mullet would support giving a year’s worth of tax benefit to the development, which would be about $1.5 million, in exchange for structured parking and walkability.

Given a choice, he’d choose development now over waiting another five years for a more walkable development.

Timing is a major concern, because Regal Cinemas would likely pull out of the project if it can’t open by summer 2013. A theater is key in attracting high-quality retail, he said.

About nine out of ten city comments Mullet hears from customers at his Highlands pizza and ice cream shops are in regards to the need for more retail, he said. “It’s the single most important issue to everyone who lives there.”

Regency plans to work with the city to find a solution everyone can support, said Craig Ramey, senior vice president of the Regency Pacific Northwest division. He wouldn’t comment further on the plan.

The city council already approved a change to the development agreement that would allow for a gas station to be built alongside a grocery store. The council plans to continue to work with Regency.

When Regency presented its request in late November, city councilmembers were in deep discussions over $20,000 projects. The $3 million request was hard for them to even wrap their minds around, Traeger said.

The money would have had to come from allover the budget, from putting off transportation projects to cutting park funding and even maybe public safety dollars.

Finishing the business district in the Highlands is important, he said, “but you have to be realistic.”