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01-01-2023 Planning Commission Agenda Packet PLANNING COMMISSION REGULAR MEETING AGENDA City Hall – Council Chambers January 18, 2023 – 6:00 p.m. 1. CALL MEETING TO ORDER 2. ROLL CALL 3. APPROVAL OF MINUTES Planning Commission Meeting of December 7, 2022 and Special Meeting of December 14, 2022 4. PUBLIC COMMENT 5. COMMISSION BUSINESS Housing Action Plan Implementation Grant – Gap Analysis Briefing 6. STAFF BUSINESS Manager’s Report 7. NEXT MEETING February 1, 2023 - TBD 8. ADJOURNMENT Planning Commission meetings are held in-person. To request accommodation to attend or to provide public comment virtually, please contact Anna Lieck at 253-835-2601 or anna.lieck@cityoffederalway.com, no later than 5:00 p.m. on Tuesday, January 17, 2022. Commissioners City Staff Lawson Bronson, Chair Keith Niven, Planning Manager Vickie Chynoweth, Vice Chair Anna Lieck, Admin Assistant II Diana Noble-Gulliford www.cityoffederalway.com Tom Medhurst 253-835-2601 Tim O’Neil Anna Patrick Jae So Hope Elder, Alternate Page 1 of 32 Planning Commission Minutes December 7, 2022 PLANNING COMMISSION MINUTES City Hall – Council Chambers December 7, 2022 – 6:00 p.m. 1. CALL MEETING TO ORDER Chair Chenoweth called the meeting to order at 6:10pm. 2. ROLL CALL Commissioners Present: Diana Noble-Gulliford, Lawson Bronson, Tom Medhurst, Anna Patrick, Vickie Chenoweth. Commissioners Absent: Jae So, Tim O’Neil City Staff present: Planning Manager Keith Niven, City Attorney Kent van Alstyne, Senior Planner Jim Harris, and Admin Assistant II Anna Lieck. 3. APPROVAL OF MINUTES Commissioner Noble-Gulliford moved to approve November 16th, 2022 minutes as submitted. Commissioner Medhurst seconded motion. Unanimously approved. 4. PUBLIC COMMENT Mike Schwartz – Executive Director of Capital Projects for Federal Way Public Schools. Here to speak in support of the proposed code amendment. 5. COMMISSION BUSINESS Senior Planner Jim Harris presents Proposed code amendment to FWRC 19.220.040 - Pertaining to allowed maximum height for minor and supporting structures for School Use in the BC Zoning District Addresses Noble-Gulliford’s questions previously emailed about general height restrictions for the city. Mr. Harris reviews height restrictions for SF code. Commissioner Noble-Gulliford expressed concerns about specifics of the high school construction zone and heights of stadium lights affecting neighbors located to the west. Mr. Harris informed the Commission that a lighting expert would review proposed changes to allow any increases in height based on how the findings would affect adjacent areas. Commissioner Noble-Gulliford moves that item A is adopted in its entirety as submitted by staff. Commissioner Medhurst seconds the motion. Proposed Code Amendments Option A is unanimously approved. (a) If the planning commission determines that the proposal should be adopted, it may, by a majority vote of the entire membership, recommend that city council adopt the proposal. Commissioner Bronson – moves to close public hearing. Commissioner Medhurst seconds the motion. Public Hearing is closed at 6:31pm. 6. MANAGER REPORT Page 2 of 32 Planning Commission Minutes December 7, 2022 Mr. Niven presents Land Use and Transportation Committee slideshow for King County Affordable Housing Allocation. 7. NEXT MEETING December 14, South Station Subarea Planning Briefing 8. ADJOURNMENT Commissioner Bronson moved that the meeting be adjourned, Second by Commissioner Medhurst. Meeting adjourned at 7:40pm. ATTEST: APPROVED BY COMMISSION: _______________________________________ ______________________ ANNA LIECK, ADMIN ASSISTANT II DATE Page 3 of 32 Planning Commission Minutes December 14, 2022 PLANNING COMMISSION MINUTES City Hall – Council Chambers December 14, 2022 – 6:00 p.m. 1. CALL MEETING TO ORDER Chair Bronson called the meeting to order at 6:00 pm. 2. ROLL CALL Commissioners Present: Diana Noble-Gulliford, Lawson Bronson, Tom Medhurst, Anna Patrick, Vickie Chenoweth, Tim O’Neil Commissioners Absent: Jae So - Excused City Staff Present: Planning Manager Keith Niven, City Attorney Kent van Alstyne, Senior Planner Chaney Skadsen, and Admin Assistant II Anna Lieck. 3. PUBLIC COMMENT No public comment. 4. COMMISSION BUSINESS South Station Subarea Planning Briefing presented by Senior Planner Chaney Skadsen. Presentation of analysis results by Otak Consultant, Mandi Roberts. Principal Planning and Project Manager. Commissioner Chenoweth and Mandi Roberts discussed the continuation of preserving any natural areas currently included in the planning areas. This preservation would be facilitated by previously city identified areas as assets for future residents. Commissioner O’Neil inquired into how many acres does the city own in the proposed area, how it is zoned and how it will be utilized in the presented plans. Mr. Niven and Ms. Skadsen offered to provide an evaluation to the Commission with data for this request. Commissioner Noble-Gulliford inquired if sewers are available within the mapped subarea. Currently, there are existing public sewer systems along with some single-family systems to the south. Mr. Niven provided guidance for further questions about the substation’s location, stating that the City Council has already listed a preferred location for the station. Mandi Roberts provided data for employment, education and health projections for Washington State from 2020-2025 to 2025-2030 and how zoning considerations have been made for future mixed-use projects. Commission discussed mixed use codes, substation area boundaries and over-zoning. Mr. Niven clarified the long-term goals for code amendments to expand the potential use of land around the substation and proper land use. Page 4 of 32 Planning Commission Minutes December 14, 2022 Community members present at the briefing with comments: Ben Higerkin –Resident on 359th. Stated he is excited to see the transition of this project and would like for each station to have its own identity to give residents a reason to visit South Federal W ay. Mike Panzine – Executive Director of Maintenance and Operations for Federal Way Public Schools. Thanked the Commission and Staff for the invitation to the stakeholder meeting on behalf of the community and students. He is hoping that the Public Schools can partner with the Planning Commission and City to facilitate community growth for the benefit of their student’s future. 5. MANAGER REPORT HAPI – Briefing to come in the first meeting in January. 6. NEXT MEETING January 18th , 2023- TBD 7. ADJOURNMENT Commissioner Bronson moved that the meeting be adjourned. Commissioner Medhurst seconded. Meeting adjourned at 7:43pm. ATTEST: APPROVED BY COMMISSION: _______________________________________ ______________________ ANNA LIECK, ADMIN ASSISTANT II DATE Page 5 of 32 1 MEMORANDUM Community Development Department DATE: January 18, 2023 TO: Planning Commission FROM: Keith Niven, Community Development Director SUBJECT: Housing Action Plan Implementation Grant – Gap Analysis Briefing FINANCIAL IMPACTS: There are no financial impacts to the city besides staff time needed to manage and track the grant and consultant deliverables. Consultant compensations are funded through the Department of Commerce Housing Action Plan Implementation grant awarded to the city. BACKGROUND INFORMATION: The 2019 Washington State Legislature passed House Bill 1923, encouraging all cities planning under the Growth Management Act to adopt actions to increase residential capacity. In October 2021, the City Council approved the City’s Housing Action Plan which provides a strategic road map for actions to encourage housing production, greater housing diversity, and expand housing choices. The city applied for grant funding from the Washington State Department of Commerce to implement Housing Action Plan strategies and was successfully awarded the $100,000 Housing Action Plan Implementation (HAPI) grant. In February 2022, the city issued an RFP requesting proposals and following a competitive process, the city entered into a Professional Services Agreement with Heartland LLC, a Pacific Northwest firm specializing in real estate advisory investment and economic analysis. GRANT PROGRESS The objective of the grant is to implement HAP Strategy #5: Ensure that financial and regulatory incentives for mixed-income housing are effective, and Strategy #6: Review school impact fees on multifamily housing. Evaluate stagnation in multifamily housing development examining existing incentives and barriers to the production of new housing and proposing new incentives and process improvements that will facilitate a more balanced housing mix in the City while meeting policy goals. Grant deliverables include: 1. Evaluation of existing tools: Report on financial incentives and processes developed by the city to facilitate housing production. 2. Market evaluation: Multi-family development feasibility study (construction costs, land costs, and current rents) including a school impact fee analysis. 3. Gap analysis and remediation recommendations: Quantify impediments (financial and regulatory gaps/barriers) to housing development meeting 2044 housing target. Develop strategies the city can implement to address the identified gaps or barriers. Page 6 of 32 2 4. Implementation Prioritization: Develop schedule and pathway forward for remediation recommendations. 5. Develop Monitoring Program: Establish a program benchmark template to track the use and effectiveness of the city’s development incentive program. MEETING PURPOSE Heartland will provide a briefing to the Planning Commission reviewing deliverables 1-3 focusing on the Gap Analysis. See enclosed report. ATTACHEMENT Gap Analysis Executive Summary, December 2022 – Heartland LLC Page 7 of 32 1/18/23 City of Federal Way Housing Action Plan Implementation (HAPI) Page 8 of 32 EXECUTIVE SUMMARY 1/18/2023 2 Page 9 of 32 1/18/2023 Introduction: Project Overview §From the City Comprehensive Plan (Section 7.3): §The [Study Area] consists predominately of auto-oriented retail. Buildings are dispersed throughout the area and feature large surface parking lots. §The [Study Area] lacks any identifiable sense of a downtown or urban center. There is little, if anything, distinctive about it. §The character of the street environment is unfriendly to pedestrians in many locations. §Light rail is under construction and planned to begin serving the Study Area starting in 2025. This massive level of public investment is anticipated to be a ‘game changer’ in terms of new residential demand. §The City would like to build off the Housing Action Plan (HAP) done in 2021 and begin implementing the Plan. This work implements Objective 1: Promote new market-rate and affordable housing construction that expands housing choices and is inclusive to the community. 3 Page 10 of 32 Existing Conditions: Study Area Context 1/18/2023 §The Study Area is comprised of over 400 parcels totaling 686 acres. §The Study Area boundary was defined by the extents of three (3) zones (shown in the map to the right): Community Business (BC), City Center Core (CC-C), and City Center Frame (CC-F). §These zones allow for dense development and are being evaluated to understand how they can help the City meet desired housing targets and typologies. §The Study Area has two park and ride lots, and the transit center that is a part of the Sound Transit station development. §41% of the Study Area is within a 0.5 Mile Radius of the future light rail station (281 acres). §The Study Area is intersected by 16 transit routes* providing access through the City and the greater region. Zone Number of Parcels Total Area (Acres) BC 265 334 CC -C 64 173 CC -F 88 179 Study Area 417 686 *Transit routes: 181, 182, 183, 177, 187, 193, 901, 903, 402, 500, 501, 574, 577, 578, 586, A Line 4 Page 11 of 32 Existing Conditions: Land Use 1/18/2023 §Retail uses comprise 328 acres, or 48% of the Study Area, and represent the majority of the land use in the City Center zones. This retail segment is notably auto-oriented from our tour conducted on 7/14/2022 §Vacant land* is the next most prevalent land use designation by King County at 139 acres, or 20% of the Study Area. §Multifamily uses are primarily concentrated in the CC-F zone §Office is primarily spread across the BC zone Land Use Category Zone BC CC-C CC-F Total Industrial 3.0 0.0 0.0 3.0 Lodging 2.6 11.2 1.9 15.6 MF 10.5 2.5 36.8 49.7 Office 35.6 8.1 12.9 56.6 Parking 4.9 1.7 1.9 8.4 Retail 113.0 107.8 107.1 327.9 School 38.3 0.0 8.4 46.8 Vacant 98.6 33.9 6.7 139.2 Single Family 14.2 0.0 0.3 14.5 Utility/Easement 5.0 3.1 0.0 8.0 Other 8.8 4.4 3.1 16.3 Total 334.5 172.6 179.0 686.1 Industrial Lodging MF Office Parking Retail School Vacant Single Family Utility/Easement Other *Note: these land use classifications are derived from King County assessor data, which does not directly translate to the vacant and developable land identified in the buildable lands analysis. 5 Page 12 of 32 Existing Conditions: Multi-Family 1/18/2023 §The Study Area contains just under 2,000 multi-family (MF) units across 18 projects §Three (3) of the apartment properties have been converted to condominiums, and represent 8% of the MF inventory §52% of the MF units in the Study Area are senior housing §38 affordable units have been provided since 2008 through the inclusionary zoning program as noted* in parentheses below MF Category # Units # Properties Apartments 783 8 Condos 161 3 Senior Housing 1,015 7 Total 1,959 18 Arbor Woods Apartments Brier Woods Chelsea Court Park Apartments Steel Lake Plaza Trinidad South Vantage Point At Redondo The Argyle Apartments Willamette Court (Senior) Meridian Court (Senior) Senior City (3*)(Senior) Lake Village Apts. Madrona Park(Senior) Uptown Square (15*) Celebration Senior Living II (10*) (Senior) Celebration Senior Living I (Senior) MSC Veterans Housing Traditions at Federal Way (10*) (Senior) Multifamily Properties in the Study Area Apartments Condos Senior Housing 6 Page 13 of 32 Existing Conditions: Buildable Lands Analysis 1/18/2023 Zone Underutilized Area (acres) Vacant Area (acres) BC 12.0 73.0 CC-C 52.9 8.6 CC-F 21.7 7.1 Total 86.6 88.7 Zone Total Developable Area (acres) % of Developable Area % of Total Study Area Developable BC 85.0 48%12% CC-C 61.5 35%9% CC-F 28.8 16%4% Total 175.3 100%26% §Over 175 acres, or 26% of the Study Area, is classified as developable (either vacant* or underutilized) §The BC zone contains almost half of the developable area in the Study Area (48%), and consists largely of vacant land (73 acres). §Notable properties classified as developable/redevelopable include: §The Commons Mall (owned by Merlone Geier Partners) §The Former Ram Restaurant/Brewery §TC -3 aka the former Target (owned by the City) §The Sound Transit surplus properties §Hillside Plaza §Kitts Corner Heartland Buildable Land Analysis Methodology §Applied improvement ratios to each parcel (assessed improvement value / total assessed value) §Identified vacant ( imp. ratio = 0%) §Identified underutilized (imp. ratio <= 25%) §Removed parcels with ‘significant improvements’ (Assessed Improvement Values <= $2M) §Removed flagged parcels for land use, ownership or other factors that will likely preclude near-term development. 7 Page 14 of 32 1/18/2023 Community Business 19.220 City Center Core 19.225 City Center Frame 19.230 BULK AND MASSING Height (ft)•65’ •30' if within 100' of SF zone •70' -200’ •Additional height over base awarded subject to Director-approved streetscape amenities (e.g. benches, weather protection, water features, art, transit stops with seating, bike racks, etc.) •70' -85’ •30' if within 100' of SF zone •Additional height over base awarded subject to Director-approved streetscape amenities (e.g. benches, weather protection, water features, art, transit stops with seating, bike racks, etc.) Setbacks •20' if/where abuts SF zone, otherwise none •20' front and 5' side and rear if Senior, otherwise none. •Same as BC Min Density -None -Single-story buildings limited to 16,000 SF -None Open Space Requirement •150 SF/DU (100 SF/DU for Senior Housing) •Private open space, such as balconies, can count toward requirement if they are min 48 SF and 6' dimension •25% of the open space must be common area •Lobbies and atriums can count toward this requirement •100 SF/DU •Fee in Lieu can be used for up to 50% of requirement ($ @ discretion of Parks Director) •Same as CC-C Roof •Must be pitched/gabled unless rooftop open space •Same as BC •Same as BC Ground Floor •13' min •60% of ground-floor uses along primary street must be retail/non-residential •40% of ground-floor uses along other street-facing facades must be retail/non-residential •13' min •The entire ground floor must be utilized with retail space(s) •Per 19.05.070 “Ground floor” means the floor of a structure that is closest in elevation to the finished grade along the facade of the structure that is principally oriented to the street which provides primary access to the subject property. •Same as BC Regulatory Review: Zoning Code CC-C CC -FBC 8 Page 15 of 32 1/18/2023 Community Business 19.220 City Center Core 19.225 City Center Frame 19.230 OTHER Inclusionary Affordability (19.110.010) •Any project (incl. senior) 25+ DU must provide min 2 DU and max 5% of total affordable units @50% AMI for rent or 80% AMI for sale •Bonus density awarded @ 1 bonus unit for every affordable unit up to 10% max •Duration: For the life of the project •Same as BC •Same as BC MFTE (3.30)•None •CC-C and CC-F constitute the "Residential Target Area” •Projects in Residential Target Area are eligible for an 8y MFTE exemption (no affordability requirement) •12y MFTE exemption possible if 20% of units are income restricted to either low (80% AMI) or moderate (80-115% AMI) income households •Same as CC-C Opportunity Zones •Only the portions that are East of Hwy 99 between 304th and 312th •Everything East of Hwy 99, West of I-5, and North of 320th •Everything East of Hwy 99, West of I-5, and North of 320th PARKING MF (Stalls/DU)•EDU: 1.0 •Studio:1.25 •1 BR: 1.5 •2 BR+: 2.0 •For 100+ DU projects, min 25% of parking non-surface •Reduction possible through parking demand study •1.0/DU if not surface •1.7/DU if surface •Same as CC-C Senior •1.0/DU •Same as BC •Same as BC Ground-Floor Uses •Office/Medical/Dental/Professional: 1/300 •General Retail: 1/300 •Entertainment/Recreation Retail: 1/100 •Fast Food: 1/80 •Restaurant/Tavern: not specified •Same as BC •Same as BC CC-C CC -FBC Regulatory Review: Zoning Code 9 Page 16 of 32 Regulatory Review: Impact Fees 1/18/2023 Federal Way Auburn Kent Renton Fife Des Moines SeaTac School Impact Fee $15,073*$8,938 $2,458 $4,737 $2,839 $0 $0 Fire Impact Fee $0 $306 $0 $965 $0 $0 $0 Transportation Impact Fee $3,314 $2,302 $3,525 $6,717 $6,413 $5,315 $2,175 Park Impact Fee $0 $3,500 $2,451 $1,978 $1,300 $0 $0 Total Impact Fees $18,387 $15,047 $8,433 $14,396 $10,552 $5,315 $2,175 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Federal Way Auburn Kent Renton Fife Des Moines Seatac $/Dwelling unit School Impact Fee Fire Impact Fee Transportation Impact Fee Park Impact Fee The Growth Management Act cities can charge the following impact fees: §School Impact Fee §Fire Impact Fee §Transportation Impact Fee §Park Impact Fee The table and chart to the right compares the impact fees across comparable local jurisdictions. Impact fees are dependent on the type of development. The table/chart represents multifamily development fees per dwelling unit. Key Findings §School impact fees are set by the district but applied by the jurisdiction. This creates opportunities for misalignment in objectives §Impact fees can be refunded §School impact fee funds cannot be used to address existing deficiencies, only those pertaining to future growth §Some jurisdictions have fixed amount around how much these impact fees can increase, which reduces uncertainty for developers (Bellevue)*note: this fee was reduced to zero in Q2, 2022 10 Page 17 of 32 Minimum Density §Lack of a minimum density requirement risks perpetuating new low- density development that obstructs the City’s long-term goals for the Study Area and provides insufficient density to meet housing targets Ground Floor Requirements §BC requirements are hard to discern as there is no apparent map of principal vs. secondary streets or property frontages §CC -C appears to require retail on the entire ground floor, which is not market supportable. Also, projects need space for lobby area, back- of-house functions, etc. §Code appears to require currently that retail along Hwy 99 in the BC zone be a part of any project. Without a significant traffic- calming program, Hwy 99 will remain inhospitable for walkability, meaning new retail would remain auto-oriented. §Retail does not make sense ‘everywhere’ on the ground floor and cannot survive. City needs a thoughtful, curated plan for promotion of walkability where amenity retail can thrive under the support of proper infrastructure (traffic calming, parallel parking, wide sidewalks). §High retail requirements also drive higher parking requirements; code doesn’t allow retail parking exemptions on-site through assumed utilization of on-street parking. Regulatory Review: Findings 1/18/2023 Bulk and Massing §Lack of FAR-based code makes it challenging to quickly discern how big/how much is allowed to be built. §Setback requirement in CC-F zones may create challenges to stacked- flat construction. §Given how skinny BC zone is in places, the 30’ height restriction in the BC zone where it abuts single-family zoning could make redevelopment of those parcels infeasible. §The requirement for gabled rooftops should be reconsidered. §Opens space requirements vary between BC and CC zones. This requirement should be reconsidered. Inclusionary Affordability §There is no offsetting benefit to providing the affordable units in the study area since the subject zoning codes do not have a density/unit limitation. If this provision is going to remain, it should be rethought so there is a pool of offsetting incentives. §Per the City, affordable units created by the inclusionary zoning are not actively monitored for compliance §Alternatives approaches to mixed-income developments are not available (besides MFTE), a fee-in-lieu alternative would allow funds to be pooled and accessed by affordable housing developers that are more competitive securing additional funding sources needed (LIHTC, etc.) that provide deep affordability. 11 Page 18 of 32 Regulatory Review: Findings 1/18/2023 Multi-Family Tax Exemption (MFTE) §MFTE can only currently be used in the CC-C and CC-F zones. Application to the BC zone as well -at least for desired urban-level density project types -would improve redevelopment economics in that zone. Provisions in for the MFTE legislation are reviewed every five (5) years. Federal Way City Code Chapter 3.30 Parking §Current parking requirements in the BC zone work out to about 1.6 stalls/unit based on a conventional unit mix; comparable properties in nearby jurisdictions are closer to 1.0 stalls/unit Open Space §The City currently offers a fee-in-lieu program to satisfy up to 50% of residential open space (pursuant to FWRC 19.115.115 (4)). Offering a set fee-in-lieu amount ($/SF) alternative for all zones and allowing it to be applied to cover 100% of the requirement would allow funds to be pooled for creation of meaningful open space; essentially, a parks impact fee. Impact Fees §High impact fees signal that a city is anti-development. Prior school impact fee was higher for multi-family than for single-family. §While current school impact fees have been moved to $0, predictability is lacking about where they be set in the future. Stormwater §Currently, only CC-F and CC-C zones allow construction of underground vaults by right to manage on-site stormwater requirements. Consider extending to BC zone as well. §Of significantly more import, site by site obligation to manage stormwater challenges the goal of achieving urban-level densities; any opportunities to create a regional solution and recover costs through fees would be welcomed by developers. Code Sections Reviewed §1991-06-12 COFW Ordinance 91-099 §2005-06-16 COFW Ordinance 05-490 §2007-06-28 COFW Ordinance 07-556 §2009-06-11 COFW Ordinance 09-614 §2017-01-08 COFW Addendum to KC Surface Water Design Manual §2019-04-10 COFW Official Zoning Map §2022-07-19 COFW Revised Code (Sections 3.30, 19,110.010, 19.220, 19.225, and 19.230) 12 Page 19 of 32 Outreach: Property Owners & Developers 1/18/2023 DS Investment Group Developers/Property Owners§Generally emphasized the same items that we identified in our Regulatory Review §The City has a reputation as ‘anti-development’; prior adoption of the school impact fees indicated a lack of City interest in encouraging multi-family development and effectively served as a development moratorium. §Encourage the City to be: 1.Realistic in its vision for development –high-rise towers do not make economic sense currently 2.Flexible in its application of the code –general feedback is that the staff is less well- versed in applying the code to more dense multi-family projects than it is in permitting additional retail; some provisions as written may not be practical 3.Moderate in its ‘wish list’ for new projects –developers cannot afford to pay for additional bells and whistles under current land use economics 4.Entrepreneurial in considering targeted public investment in infrastructure (streetscape, open space) to help ‘set the stage’ in catalyzing new development. §Understand that the pioneers take the greatest risks; City should embrace an ‘incentive- oriented’ mindset to catalyze new development. If successful, economics may allow either (a) some incentives to sunset over time or (b) the imposition of density bonus/value capture for funding of public benefits. 13 Page 20 of 32 Outreach: Property Owners & Developers 1/18/2023 DS Investment Group Developers/Property Owners §There is a very limited geography regionally where stacked-flat condo product makes sense (Bellevue, Seattle, Kirkland, etc.). You need something special that makes people want to invest, such as views, water, amenities, in order to drive the prices you need to justify the product. §Condo liability, while a factor, is both a bigger issue for larger projects and due to recent reforms, less of an issue than in the past. §Willingness by a city to potentially cover the insurance premiums is helpful, every dollar helps, but it isn’t going to move the needle on deciding to do condos or not.It’s only ~1.0% of total project cost. §More near-term opportunities for townhome as an ownership product –encourage consideration of allowing that where it makes sense. §Using Bothell as an example, the City invested a lot of money into downtown to ‘set the stage’, which resulted in first in stacked flat apartment construction, followed by for-sale townhome product. Stacked-flat/podium condo product, however, has yet to be developed. 14 Page 21 of 32 RLV: How Do Developers Determine What They Can Pay For Land? he Appraisal of Real Estate, 12th Edition, Appraisal Institute, p. 315) 1/18/2023 Redevelopment ‘pencils’ when the RLV for future development exceeds the existing value in use of income property by an appreciable margin to compensate for development risk. 15 Page 22 of 32 RLV: Current Land Values –Determining the Hurdle Value 1/18/2023 •With Improvements: ~$50 PSF •Vacant: ~$20 PSF •With Improvements: ~$55 PSF •Vacant: ~$15 PSF *Despite averages, data set shows land sale values can vary considerably depending on income in place and owner expectations Source: Costar Land/Property Sales ID Adj $/LSF Zoning Status Sale Category Sale Date LSF 1 $57 CF Under Contract Property Sale -38,768 2 $50 CC-F Active Property Sale -433,858 3 $137 BC Active Property Sale -10,890 4 $65 BC Active Property Sale -20,909 5 $70 BC Under Contract Property Sale -39,561 6 $87 CC-C Active Land Sale -23,087 7 $15 BC Under Contract Land Sale -206,910 8 $9 BC Active Land Sale -896,050 9 $99 BC Sold Property Sale 9/9/20 5,057 10 $93 BC Sold Property Sale 2/8/21 9,148 11 $103 BC Sold Property Sale 6/8/21 13,159 12 $136 BC Sold Property Sale 6/17/21 21,344 13 $57 CC-F Sold Property Sale 9/1/20 25,700 14 $52 BC Sold Property Sale 7/2/20 36,669 15 $57 CC-F Under Contract Property Sale -38,768 16 $70 BC Under Contract Property Sale -39,561 17 $37 BC Sold Land Sale 2/25/22 60,548 18 $35 BC Sold Property Sale 12/11/20 87,991 19 $130 BC Sold Property Sale 8/16/21 114,563 20 $99 BC Sold Property Sale 9/7/21 126,760 21 $18 BC Sold Land Sale 5/14/21 132,858 16 Page 23 of 32 RLV: Current Rents 1/18/2023 §Current rents average $2.08 PSF §872 SF average unit size §Densities of 20-30 units/acre §Varying vacancy by project –likely indicative of management approach than market Comparable Summary Units Unit Mix Unit Count Unit Avg SF Ask Rent PSF Ask Rent Unit Studio 0%1 750 $1.94 $1,453 1BR 33%470 667 $2.19 $1,460 2BR 52%753 927 $1.98 $1,837 3BR 15%216 1,126 $2.21 $2,488 100%100%1,440 872 $2.08 $1,811 Source: Costar 17 Page 24 of 32 RLV: Example/Prototype Rents 1/18/2023 §Prototype rents are ~35% higher than current rents §Parking ratios are lower than current code requirements §Ground-floor retail requirements are lower than current code requirements §All participate in MFTE, with exception of the Platform §No inclusionary zoning requirementsSummary of Example/Prototype Projects Unit Type Unit Mix Unit Count Unit Avg SF Ask Rent PSF Ask Rent Unit Pkng Stalls/Unit Retail SF S 8%84 520 $3.23 $1,678 1.02 3,1781 BR 71%723 665 $2.93 $1,953 2 BR 19%192 1,035 $2.56 $2,646 3 BR 2%16 1,287 $2.37 $3,055 TOTAL/ AVERAGE 100%1,015 733 $2.84 $2,079 Source: Costar Note, Additional Breakdown of these projects in AppendixImages sourced from CoStar 18 Page 25 of 32 RLV Modeling: BC Zone Example Scenario 1/18/2023 §No changes, models existing code, but using market prototype rents §Addition of MFTE, 12-year program tested §Removal of Inclusionary affordability requirement §Parking ratio reduction §Retail reduced to 1:1000 §Residential reduced by 25% §Retails space required reduced 50% §Off-site stormwater treatment SCENARIO VARIABLES 1.1 Base Scenario 1.2 Code Adj MFTE Y/N No Yes Inclusionary Housing Y/N -Yes No Parking Ratio Residential (Stall/unit)1.6 1.2 Parking Ratio Retail (Stall/1k SF)3.33 1.0 Parking Typology Structured Structured Impact Fees Current Current BC/CCF –30’ height limit in proximity to SF No No Ground Floor Retail Requirements 0.25 of floor plate 0.125 of floor plate Onsite Stormwater Management Yes No Market Rent Assumption ($/SF)$2.84 $2.84 BC Result: Podium-style development beats the hurdle value (existing land use values)!! 19 Page 26 of 32 RLV Modeling: CC -F Example Scenario 1/18/2023 §No changes, models existing conditions §Removed Inclusionary Zoning §Parking ratio reduction §Retail reduced to 1:1000 §Residential reduced by 25% §Retail space required reduced 70% §Off-site stormwater treatment §Assumes application of the 12-MFTE program SCENARIO VARIABLES 2.1 Base Scenario 2.2 Code Adj MFTE Y/N Yes Yes Inclusionary Housing Y/N -Yes No Parking Ratio Residential (Stall/unit)1.33 1.0 Parking Ratio Retail (Stall/1k SF)3.33 1.0 Parking Typology Structured/Surface Structured Impact Fees Current Current BC/CCF –30’ height limit in proximity to SF No No Ground Floor Retail Requirements 0.85 of floor plate 0.25 of floor plate Onsite Stormwater Management Yes No Market Rent Assumption $2.84 $2.84 CC-F Result: Podium-style development beats the hurdle value (existing land use values)!! 20 Page 27 of 32 §No changes, models existing conditions §Removed Inclusionary Zoning §Parking ratio reduction §Retail reduced to 1:1000 §Residential reduced by 25% §Retail space required reduced 70% §Off-site stormwater treatment §Assumes application of the 12-MFTE program RLV Modeling: CC -C Example Scenario 1/18/2023 SCENARIO VARIABLES 3.1 Base Scenario 3.2 Code Adj MFTE Y/N Yes Yes Inclusionary Housing Y/N -Yes No Parking Ratio Residential (Stall/unit)1.33 1.0 Parking Ratio Retail (Stall/1k SF)3.33 1.0 Parking Typology Structured/Surface Structured Impact Fees Current Current BC/CCF –30’ height limit in proximity to SF No No Ground Floor Retail Requirements 0.85 of floor plate 0.25 of floor plate Onsite Stormwater Management Yes No Market Rent Assumption $2.84 $2.84 CC -C Result: Podium-style development beats the hurdle value (existing land use values)!! 21 Page 28 of 32 RLV Modeling: Summary of Evaluation/Land Hurdles 1/18/2023 §The policy changes and infrastructure investment push the RLV above the both the land hurdle value and the improvement value hurdle in the BC, CC-F, and CC -C zones, indicating these changes would significantly improve redevelopment feasibility. §There is no singular factor in isolation that sufficiently ‘moves the needle’, rather, it is the combination of changes that help drive viable project economics. §However, we recognize some modeled code changes may or may not be possible (stormwater, for example), at least in the near term. §There are important policy considerations to be discussed when considering a suspension or elimination of inclusionary zoning, expansion of MFTE. §More thoughtful approach on where to require retail, how much, and what parking requirements to impose (supplementing requirements with infrastructure investments) may be the most important takeaway. 22 Page 29 of 32 1/18/2023 Phases 1-3: Summary/Recap §Study Area consists of three (3) zones (BC, CC-C, and CC-F) comprising 400 parcels across 686 acres. §41% of the Study Area is within 1/2 mile of a future light-rail station. §Retail comprises 328 acres, or almost 50% of the land use in the Study Area. §26% (173 acres) of the land in the Study Area is considered redevelopable, either because it is vacant (88.7 acres) or redevelopable * (86.6 acres). §There are 2,000 multifamily units in the Study Area currently; the City will need to add an average of 640 units annually to satisfy 2044 growth targets for medium/high-density housing (11,200 units). Code is confusing as written and requires an excessive amount of retail relative to prototype examples. Lack of FAR-based code makes it challenging to quickly discern permitted volume; setback requirements abutting SF zones will make development on affected parcels challenging. requirement provides no offsetting benefit since code is not density-based. program is a valuable tool to encourage desired development and the City’s adoption of both the 8 and 12-year programs is helpful. The BC zone is not currently eligible to participate in the MFTE program. in the BC zone are higher than those of prototype examples, regardless of typology. CC-C and CC-F zones allow parking at 1.0 stalls/unit if provided in non-surface typology. Code offers no relief or exemption from retail parking requirements. Vaults are only allowed in CC -C and CC-F zones currently; a regional conveyance alternative (recovered through GFC) would be welcomed. Expansion of fee-in-lieu program may allow creation of more purposefully functional open space in the Study Area. *If improvements contribute 25% or less to overall assessed value 23 Page 30 of 32 1/18/2023 Phases 1-3: Summary/Recap §Generally emphasized the same items that we identified in our Regulatory Review §Additionally, developers highlighted the following: §The City is digging out of a hole of its own making of being anti-development; prior adoption of the school impact fees indicated a lack of City interest in encouraging multi-family development and effectively served as a development moratorium §Encourage the City to be: §Realistic in its vision for development –high-rise towers do not make economic sense currently §Flexible in its application of the code –general feedback is that the staff is less well-versed in applying the code to higher density multi- family projects than it is in permitting additional retail; some provisions as written may not be practical §Moderate in its ‘wish list’ for new projects –developers cannot afford to pay for additional bells and whistles under current land use economics §Entrepreneurial in considering targeted public investment in infrastructure (streetscape, open space) to help ‘set the stage’ in catalyzing new development. §Understand that the pioneers take the greatest risks; City should embrace an ‘incentive-oriented’ mindset to catalyze new development. If successful, economics may allow either (a) some incentives to sunset over time or (b) the imposition of density bonus/value capture for funding of public benefits. 24 Page 31 of 32 1/18/2023 Phases 1-3: Summary/Recap §RLV is a method to compare supported land values across different/competing development alternatives in order to arrive at the Highest and Best Use (HBU) of a property §Redevelopment ’pencils’ when the RLV of development > existing value in use (expressed in land value) by a sufficient margin that also compensates for entrepreneurial risk §Current values §~$20 PSF for vacant land §~$50 PSF (expressed as an imputed land value) existing value of developed properties §Given current code requirements, podium-type construction is not viable, even assuming market-supported rents for prototype product ($2.84 PSF – 35% higher than existing rent structures in Study Area) §Developer sentiment and existing case study research suggests a rent bump of 10-20% is possible from adjacency to light-rail alone, however walkability of the existing land use pattern has a great influence on the size of the bump §We mainly tested the impact of changes to the following variables: §MFTE –retention for CC -C and CC-F and expansion to BC §Inclusionary Zoning –eliminating or suspending the program §Parking Standards –reducing these to be closer to market averages (1.0 stalls/unit) §Retail Requirements –dramatic reduction to the requirement; note that prototype projects average ~3,000 SF ground-floor retail §Stormwater Management –eliminating on-site requirements assuming a regional conveyance alternative is possible §Favorable adjustments to all these variables resulted in scenarios for each zone where supported RLV from development > exist ing land values 25 Page 32 of 32