HomeMy WebLinkAboutCity Council Meeting - Council Workshop - Minutes - 10/03/2000 i COUNCIL WORKSHOP MINUTES
OCTOBER 3, 2000
COUNCIL PRESENT: President Leona Orr, Sandy Amodt, Tom Brotherton, Tim Clark,
Connie Epperly, Judy Woods, Rico Yingling
STAFF PRESENT: Brent McFall, Dena Laurent, Jacki Skaught, Fred Satterstrom, John
Hodgson, Charlene Anderson,May Miller, Jackie Bicknell
PUBLIC PRESENT: Geoff Graham, Chris Miller, John Santana,
The workshop was called to order at 5:04 PM.
Director of Operations Brent McFall said that King County yesterday had unanimously agreed to
provide the City of Kent with a loan of up to $10 million of Community Development Block
Grant Interim Funds at a 4% interest rate for a period of up to 30 months to acquire property in
the Downtown Redevelopment Project. They were very enthusiastic about the ability to help
Kent, and about the notion that this really was exactly what they had in mind when it came to
urban cores and urban centers.
Mr. McFall introduced Geoff Graham, from Hunter Interests, who was to report some of the
beneficial impacts of what a redevelopment project like that could mean to the city and the
revenue and business activity that could be generated on the site. He said Geoff and his firm had
. worked on a number of downtown redevelopment projects, either as consultants to cities or
developers, and in some cases as the developers themselves. They are very familiar with this
market and kind of activity and bring a wealth of knowledge and experience.
Geoff Graham said there was a void in the market situation in South King County and thus an
opportunity to create that true urban center and pedestrian friendly environment. He commended
the City in its commitment to building up the downtown where there is already a library and a
Fanner's Market. But probably the one weakness now with the downtown is there aren't a lot of
evening users or reasons to come in the evening, and there's a great opportunity to draw the 18 to
35 year old crowd, which is always a key for retail, into the downtown. So one of the things that
we really want to see happen on the Borden site is the entertainment focus orientation. Very few
cities have the opportunity to have a transit center coming online with parking structures next to
a large undeveloped land mass which you can acquire and control and where you can be part of a
partnership.
Currently, the Borden site is probably generating under$50,000, about $48,000 or something
like, that in property taxes. A Mixed Use Development is projected with a residential component
of about 175 to 275 market rate units. Those could be condo's or high-end rental brownstone
types of development and, at a conservative estimate of about $16.4 million in property value,
would generate about$47,000 annually in property tax. The food and beverage retail
entertainment component is projected to be about $26.8 million. A key component of that
probably is a cinema, which would be a very strong anchor and would be another$77,000
annually. The third component is office space that would be another $10 million in value for
Council Workshop, 10/3/00 2
about 100,000 square feet of space and bring another$29,000. That's looking at a total private
• sector investment on the Borden property of about $53,000,000, conservatively(that could easily
go up to $75 million), and is about $154,000 dollars annually in property tax. A pretty
significant jump of$100,000.
In addition, the City has already invested in some land that was for a performing arts center or
other type of development. We're recommending that be rolled into this whole development,
and a hotel and conference center complex be another development as part of that. The hotel
would likely be in private sector though we haven't figured out quite how the conference center
portion would be funded. A 225 room hotel would probably be ideal— something similar to
Courtyard by Marriott or the DoubleTree at Southcenter. That would bring about another
$75,000 in annual property tax revenues. Now we're up to about $231,000 as a new revenue
source to help retire the debt. In addition, there would be probably$57,000 in local lodging tax
and your one percent from that new hotel, and so that's another revenue source. Sales tax hasn't
been calculated yet as it's harder to measure exactly until there's some feedback from the private
sector of how much retail and what type of retail would be there. But based on typical
conference center spinoff spending, it's about $7 million dollars for this type of facility in the
downtown if you have the proper type of retail mix there. A 14 screen cinema would probably
bring in 800,000 up to a million new people into the downtown and that typically would translate
to about$3.9 million dollars in food and beverage spending and about $3.1 million in the retail.
So that's a significant new chunk that's going to be coming into the downtown, not only spent in
the new urban core but also spilling over into the existing buildings. That will eventually, as
more pedestrian traffic comes into downtown, cause property values to go up and property taxes
. as well. There should be a significant incremental change five years down the road.
The other big impact is on the housing market, both within the urban core and the adjacent areas.
When a transit facility is brought in that'll take you into downtown Seattle in 22 minutes, it will
become much more attractive to live there, especially if a pedestrian friendly environment is
provided where they can get off the train, go home, pick up groceries without getting in the car,
go out to dinner with the kids, and have a night for entertainment. That is a lot more appealing,
and people will pay higher rent models for that type of atmosphere. That's why Borden is so
critical and that the entertainment mix is there because it helps the conference center hotel and
makes it more appealing—makes the urban housing more appealing and certainly is going to
drive additional demand into the existing urban core.
Then there is the multiplier fact. A lot of times, when looking at measuring economic impact,
you take every dollar spent and look at how it's respent in the local economy. Certainly in the
age of the internet it's harder to measure,but typically, for every dollar spent, it's reproduced at
1.41 times in the local economy, and especially with Kent's wholesale base, I think you might be
capturing even more than that. Other types of economic impacts will certainly be realized in
addition to what's been outlined so far. So, you're looking at about a$53 million dollar private
sector investment. If you invested $11 million dollars, that's a ratio of 5 to 1. So, it looks very
favorable even if you were to absorb the whole land cost, and you'd probably say, Whoa, there's
no way we're just going to give the land away. I recommend, as the next step, to go out and
formally test the private sector in a two step process. The first step is called an RFQRFI:
Request for Qualifications and Interests. That will prescreen potential developers and what their
Council Workshop, 10/3/00 3
thoughts are about what they think could work, and that'll give us another piece of the equation.
• That will then be narrowed down into a feed process where we'll be looking to hammer out a
formal development partnership with whoever is selected.
Rico Yingling asked how much of the $7 million dollars in new retail would actually be new to
the community and how much would just betaken from other retail. Geoff Graham said that is
called the substitution factor or the sub zero gain. One of the real advantages and pluses is that
this is going to draw a lot of demand from outside Kent that's not coming here now. There's a
huge void in South King County. Where do people go for entertainment now? Is it the mall or is
it going back down to Seattle or someplace like that. We think you can become a center for that
and draw people from Federal Way, Renton, Auburn, all around. So I think it's going to be a lot
of new spending into downtown, and Kent as a whole. Certainly, you probably substitute some
of its span up on the hill, or wherever,within your own downtown situation,but I think it's going
to be very minimal, maybe 15-20%, that would have already been spent in the local economy.
Certainly any spending from the conference center is going to be all net new because that's
people that are coming from California, Vancouver, wherever it might be. There will be some
local demand,but it's going to be more related to weddings and banquets and stuff like that
which is probably leading the market place right now because there isn't suitable facilities, or at
least a large amount of them, in the area.
One of the real challenges you will be faced with as a group is getting multiple proposals back.
One might say, Okay, I'll pay you back $11 million dollars of the land and you're going to get a
$35 million investment, and maybe not quite the density you want and the quality. Another
. developer might come back and say I'm only going to give you $2 million dollars,but you're
going to get this, I'm going to do this, this, and this and it adds up to $70 million. So you're
going to have to weigh those costs versus benefits and look at the whole picture, not just the
simple transaction of the cost of the land. We do numerous projects like that and it's always
very difficult to go back to the taxpayers and say, I paid $17 dollars and I just sold it for$4 bucks
a square foot,but when you look at the big picture and how it raises the whole tide for
downtown, you look at the fiscal and economic benefits, it might make a lot more sense to take
$2.00 instead of the $15 per square foot. So that's going to be part of our job and your staffs to
help advise you that this makes much better sense of your economic situation.
One of the other things we're working on right now is designing the civic center complex so
cultural arts and performing arts events could take place there in the evening time. My vision is
that you would have a high tech conference center that focused a lot on training, and within that,
when you have that type of center you usually have at least one tier amphitheater, sometimes two
or three, and they can be designed so that in the evening times you can have local arts groups put
on performances and that would be an ideal match to your conference center because you
provide entertainment for the conferees in the evening. So that's something we'd like to look at
as a possibility.
Other key elements you've got to consider is a strong linkage of the Borden site into your
historic core. Two great assets are being planned—two parking garages by the two transit
agencies, and they can't serve as barriers between the two. If the consumer comes in and
• perceives that the Borden site and the parking garage is the end of downtown and never comes
Council Workshop, 10/3/00 4
into the historic core, you lose a lot of the economic benefit. So, we recommend creating a really
. strong visual link between the two somehow, and a pedestrian link as well. I know there's a
traffic signal plan in there, which will help a lot. The traffic along Smith will be important
because you're making this huge investment and you want to do things right to create the type of
environment and the vision that you have. All too often we have to come back into urban
environments and correct mistakes that were made. A parking garage has huge blank walls, and
they can really be deadened blocks that otherwise would have been valuable assets. So, having
first floor retail or some active use along there is important. The other thing that's very
important is to create a civic identity within this development and that can be done with a piazzo
or some type of informal gathering place—the town green whatever that might be, and that might
be a public sector investment where you hold back a half acre of land that sets the stage and
creates value for development around it. That's kind of your charge as stewards of this
development, to ensure amenities are developed for your consumer base.
Sandy Amodt asked how long it usually took for the developers to buy back the land that a city
had purchased. Geoff Graham said it depended on the methodology used to develop. The City
could act as a master developer, and as demand warranted and the right type of project came by,
could sell off parcels. The idea there might be that we take a little up front but we're creating
value down the road. We may only get half of the value up front but then a second parcel might
be worth $30 a square foot where we only paid$17. We land bank. We do that a lot in our
residential developments. We hold back the best parcel—the waterfront or whatever—and
develop inward first to create value on our real valuable pieces of property after we've created
that atmosphere. So that's one option. Another option is to select a master developer who is
• going to take the whole thing. We create a deal and he brings in all the necessary components—
residential developer, retail, etc., and breaks up the different pieces. That's probably my
preferred way and less risky for you. But there's all different ways—you could be a partner in
the property and be an incentive partner as well (if certain retail lease rates were realized, they
would have to pay you more). Or, the City could actually lease the space and be the landowners
the whole time. That's another option, and it gets a little more complicated especially with
Washington State law, but it could be a way to see the deal.
The two major incentives are the land and the parking garages. Those are two things that
developers are always saying, if you can get me that I can come into that urban environment.
Those two things are typically huge barriers to just going out and doing a raw land deal out in the
suburbs. One of the big advantages you have in this marketplace is land really is at a premium
and it's very hard to assemble the type of site that you guys have there now. Brent McFall added
that the City could probably turn the property for something more like a typical suburban office
park, but it wouldn't create that sort of urban core downtown revitalization that has been a
Council priority for many, many years. He said that in order to get the project actually pulled
together and the right developer selected with the right elements in the development proposal, it
would probably be a year or two process. Geoff Graham continued by saying the one thing he
would not be flexible on was that major entertainment component, or the idea of putting people
on the streets in the evening, because you've got a great collection of primary uses—reasons to
come downtown during the day but they're not there in the evening when we study markets.
When you add that evening, it just strengthens everything tremendously, especially for
• restaurants and retail,because you've added a new market segment.
Council Workshop, 10/3/00 5
In response to Rico Yingling's question about how key the convention center and hotel were,
Mr. Graham said it could come at the same time,but if you plunked it down before the
entertainment was developed, there would still be the question of what people would do in the
evening. The market appeal would be lost. Secondly, we'd lose a lot of our ability to capture the
economic spinoff. We don't have those facilities there that leaks out into other communities.
And that's important for the cinema development too. If you don't have the complimentary
retail and food and beverage around it, we're not going to capture that development either. You
go out here to any of these suburban cinema developments, they have big parking lots. People
come in and park their car and they leave. There's no people walking to restaurants and stuff
like that and that brings us to the point of competitiveness from a similar perspective. A lot of
people are concerned that that market is overbuilt, but our experience is saying that if you put it
in a unique environment, it will be vastly superior to the competitors.
Mr. Yingling asked how much control the City would have over what gets built in that kind of an
area. Geoff Graham said the City owns the land—that's the key aspect—and will be able to
select a developer based on whether they will enter into a public/private partnership agreement.
We can cite like uses that we have envisioned for the site,but it will be a theme and certainly we
have to be flexible and based on the market of what can be built there. I've seen big anchor
department stores and my feeling are that they are not as strong an economic generator as a
Cineplex. Based on some informal talks with developers, I think we're going to get a pretty
strong response and certainly given the market conditions and the opportunities.
• Sandy Amodt asked if there would be any tax or fee increases on the citizens for the purchase of
the property. Geoff Graham said that based on projections,he was pretty comfortable saying
that there would not be. You're basing revenue on property tax, occupancy tax, and sales tax,
and certainly with a lot of spending coming from outside as well. You would not be looking at a
tax on your citizen base. Brent McFall added that the work done at the staff level and the
analysis that Geoff had done would say that the increased revenue generated by the redeveloped
site combination of sales and property tax,primarily, would be sufficient to cover the land cost.
If the decision was to give the land away, assuming there were no legal challenges to do that, in
order to stimulate the development(we're going to buy all the parcels we need to acquire for a
total of about $12 million dollars and then turn it over cost free to the developer to do the
project) the revenues that we generate from that project would be sufficient to cover the land
cost. And the city's return on investment is factored differently than a private developer's is
factored.
Something that hasn't been mentioned is the other side of the railroad tracks. I see tremendous
potential going over on that side as well for grocery stores and other stuff as a second phase.
That's going to be a whole other economic weight that wouldn't happen if you didn't do the
Borden property, and a whole other new increment of taxes and property values increase,
especially as that residential base gets built up.
Rico Yingling inquired how the road improvements would get paid for. Brent McFall said that
part was subject to negotiation. One of the options would be that the city install the public
10 infrastructure—roads, utility lines, that sort of thing—at city expense. Typically, in a private
Council Workshop, 10/3/00 6
development the city requires the developer to bear those expenses, and that's sort of the other
extreme—it can all be laid off on the developer. Or something could be negotiated in the
middle. One of the reasons that Geoff's firm is so beneficial to the City is that they have had a
lot of experience at being creative in those very kinds of things that sometimes, ultimately, are
the final straw that makes the deal work.
Sandy Amodt requested some before and after photos or copies of projects similar to Kent's to
pass around to citizens and the community to see what they thought about it. Mr. Graham said
he could probably have his slides converted to photos or just send slides and let Council print
them out.
The workshop adjourned at 6:05 PM.
•
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220 4`b Ave. South,Kent,98032
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