HomeMy WebLinkAboutPK18-260 - Supplement - YMCA at Morrill Meadows - Memo: Leasehold LET Calculations - 03/24/2021CITY OF KENT
PARKS, RECREATION & COMMUNITY SERVICES
Julie Parascondola, Director
220 4th Avenue South
Kent, WA 98032
Fax: 253-856-6050
PHONE: 253-856-5100
Memo
To: Julie Parascondola, Director PRCS
From: Brian Levenhagen, Deputy Director PRCS
CC: Huynh, Phung, Accounting Manager PRCS
Date: 03/24/2021
Re: PK18-260 YMCA at Morrill Meadows – Project Lease LET calculation
The City of Kent and the YMCA of Greater Seattle entered into a Lease/Leaseback agreement for portions
of the Morrill Meadows Park Property as authorized by state law for non-charter code cities established
under Title 35A, Revised Code of Washington (RCW).
Pursuant to RCW 82.29A and in accordance with the provisions of the Ground Lease Agreement and
related agreements between the City of Kent and the YMCA, the City –owned parcel (783080-0410) is
subject to state leasehold tax. The current rate is 12.84 percent, including the City rate of 4.0 percent
which is credited against the county 6.0 percent rate. The amount due is based on the fair market rental
value of the City owned parcel for the duration of time that the YMCA had dominion and control over
the City-owned parcel. The YMCA had dominion and control of 447,958 square feet of City owner
property from (June 29, 2018, through September 30, 2019).
Fair market rental value is the price at which a lease rate would be set between a willing buyer and a
willing seller with neither being under any compulsion to buy or to sell and both having reasonable
knowledge of relevant facts.
Morrill Meadows Park is a developed public park with various deed restrictions on development and land
use due to Washington State and King County grants that were used to acquire and develop significant
portions of the property.
In an appraisal by Donald K. Melton, Washington State Certified General Real Estate Appraiser (1100878)
that calculated the “highest and best use” value of 148,825 square feet of the Morrill Meadows Property
involved in the Lease/Leaseback agreement appraised for $1,350,000. This equates to a highest and best
use value of $9.07 per square foot and a value of $4,062,979 for the 447,958 square feet of the land
leased to the YMCA. Highest and best use for this property was determined to be single-family
residential development.
Page 2
The King County Department of Assessments lists Morrill Meadows Park as parcel number 783080-0410,
for a lot size of 918022 square feet the 2018 appraised total is listed as $1,083,000. This parcel is
significantly smaller than the total square footage leased to the YMCA but has a value of $1.18 per
square foot. The discrepancy of $9.07 vs $1.18 is due to the higher value representing a hypothetical,
“highest and best use” value and the lower value representing the actual value of the land as a public
park.
A common value for ground leases is 6% of the property’s value. Applying the $1.18 per square foot
value of park land in Kent to the 447,958 square feet of property leased to the YMCA, the land leased to
the YMCA is valued at $528,590.44. 6% of that value is $31,715 or $2642.95 per month.
The Project Agreement between the YMCA and the City of Kent had the YMCA responsible for 75% of
the project costs, which leads to the determination that the YMCA will receive 75% of the benefit of the
project and the City of Kent will receive 25% of the project’s benefit. This diminishes the value of the
lease by 25% and results in a monthly rental value of $1982.21.
The leasehold tax rate of 12.84% on $1982.21 a month equals $254.51 a month. The duration of the
lease was 15.07 months, so the total leasehold tax owed is $3835.55.
BL