FEDRAC PKT 08-06-2005
"l"
AGENDA
1. CALL TO ORDER
2. PUBLIC COMMENT
3. COMMITTEE BUSINESS
A. Approval ofthe July 12, 2005 Minutes
B. Tours of lifestyle centers (Doherty)
C. Economic development financing options (Wang)
Action
Action
Discussion
4. OTHER
5. FUTURE AGENDA ITEMS
A.
B.
6. NEXT MEETING:
FEDRAC - Economic Development:
FEDRAC: August 23, 2005
September 13, 2005
Committee Members.'
Eric Faison, Chair
Jeanne Burbidge
Jim Ferrell
Citv Staff
Patrick Doherty, Economic Development Director
Jordan Wheeler, Management Intern
(253) 835-2403
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MINUTES
Committee Members in Attendance: Chair Eric Faison, Member Jeanne Burbidge, and Member Jim Ferrell.
City Council Members in Attendance: Deputy Mayor Linda Kochmar, Councihnember Jack Dovey
Staff Members in Attendance: David Moseley, City Manager; Derek Matheson, Assistant City Manager; Karen
Kirkpatrick, Deputy City Attorney; Iwen Wang, Management Services Director; Mehdi Sadri, Information Systems
Manager; Jordan Wheeler, Management Intern.
Others in Attendance:
1. CALL TO ORDER
Chair Eric Faison called the meeting to order at 5:35 p.m.
2. PUBLIC COMMENT
None.
3. COMMITTEE BUSINESS
a) Approval of the June 14. 2005 meeting minutes
Motion to approve the June 14, 2005 meeting minutes. Motion seconded and carried.
b) Espresso Cart in City Hall
Presented by Jordan Wheeler
Mr. Wheeler gave an overview of the recent proposal for an espresso cart in city hall, which would
be located underneath the stairway on the first floor of city hall.
Mr. Wheeler informed the Committee that last December the city went out for a first RFP, received
one response, and entered into discussions with the business owner. However, the owner moved
from Federal Way without warning. Therefore, staff issued a second RFP, received two proposals,
and entered into discussions with Terino's Espresso for espresso cart services in City hall.
Motion to recommend to full Council authorization for the City Manager to enter into a
contract with Terino's Espresso to provide espresso services to the City and its visitors to city
hall (option 1). Motion seconded and carried.
c) Comcast Franchise Extension
Presented by Mehdi Sadri
Mr. Sadri summarized the proposed Comcast Franchise Extension. Mr. Sadri explained to the
committee that the city currently has two separate cable franchises and the goal is to combine the
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two into one with a common expiration date. The proposed ordinance would extend th~ Comcast
Franchise that is expiring August 10, 2005 to coincide with the Franchise that is expiring March
20, 2006.
Motion to approve the ordinance and forward to full councilfor first reading at the July 19,
2005 meeting (option 1). Motion seconded and carried.
4. OTHER
None.
5. FUTURE AGENDA ITEMS
Chair Eric Faison identified three (3) items for future agenda consideration.
A discussion regarding funding for an eeonomic development fund, a diseussion regarding a fund for white-
collared jobs in Federal Way, and a discussion on interim zoning ordinance designs in other jurisdietions or
cities.
6. NEXT SCHEDULED MEETING
August 9, 2005 at 5:30 p.m in the Hylebos Conference Room.
7. ADJOURN
Chair Eric Faison adjourned the meeting at 6:01 pm.
Recorded by Jordan Wheeler
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A-2
~ Federal Way
DATE:
TO:
VIA:
FROM:
SUBJECT:
May 6, 2005
Finance, Economic Development and Regional Affairs Committee
David MO~anager
Patrick DOhe~iC Development Director
Tours of Lifestyle Centers
Issue
Should the City Council make one or more visits to lifestyle center developments in the Greater Seattle
area, greater Portland area, and/or in San Jose, California for the purposes of familiarizing the
Councilmembers with new-format, lifestyle and mixed-use development consistent with the type of
development being considered for the Federal Way City Center?
BackQround
New-format, "lifestyle" retail centers and/or mixed-use developments have been developed around the
country and the Puget Sound region in recent years and constitute the type of development currently being
considered by the City for the Federal Way City Center. In particular, the City has employed the Leland
Consulting Group to analyze the market demand for, and develop redevelopment strategies for, this type
of development.
City Councilmembers may wish to take one-day tours of these types of developments as an education
about "lifestyle" centers and related mixed-use development. Below are three potential one-day tours that
may be of interest.
Greater Seattle area
Van tour of University Village in Seattle, AldelWood Mall new "lifestyle" center in Lynnwood, and Redmond
Town Center.
This tour would probably last from about 9:00 a.m. till 4:00 p.m.
Greater Portland area
Van tour to Portland area to see mixed-use buildings in Portland's Pearl District, the Tualatin Commons
project (planned/developed with Leland Consulting Group assistance), and the Bridgeport Village lifestyle
center between Tualatin and Tigard.
This tour would require leaving Federal Way about 7:30 a.m< and return to Federal Way about 7:30 p.m.
San Jose, California
Flight and van tour to Santana Row ~ probably the West Coast's premiere "lifestyle" center and mixed-use
development.
This tour would require a flight to San Jose< Current fares run from about $140 to $200. Several flight
options are available to accommodate a one-day trip, depending on how much time one would want in the
San Jose area during the day. A round-trip visit from the San Jose airport to only Santana Row could
easily be accomplished in 3 to 4 hours.
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Memo to FEDRAC
Tour of Litestyle Centers
Augl1st4, 2005
Page 2 of2
Staff Recommendation
Staff recommends at least the Seattle area tour, however. both the Bridgeport Village and Santana Row
projects are examples of higher-end lifestyle centers than available in the Seattle region. In addition,
Santana Row is the only project with a true mix of housing, hotel and office within the lifestyle center
above the retail shops. Other projects have housing, hotel a'nd/or office adjacent or neart)y.
Upon Committee direction, Staff will set up dates for any or all of these tours.
B-2
CITY OF FEDERAL WAY
MEMORANDUM
Date:
To:
Via:
From:
Subject:
August 5, 2005
.Financc, EconO~ic Dev. ..lopment and Regional At1airs Committee
David H. Mose I lager
Iwen Wang, Manag ment Services Director zZ-c~
Downtown Redevelopment Fund (DRF) Issue Paper
Policy Question:
l What is a realistic goal for the city to accomplish and in what timeframe?
Il What is the city willing to do to achieve the established goal(:;'J?
III How would the city finance the program?
BACKGROUND:
Economic development has always been a priority for the leaders of the City of Federal Way. Over the
past couple of years, there have been discussions focusing on ways to encourage redevelopment in the
City Center area and/or strategies to bring about the comprehensive plan vision of a mid-rise, mixed use,
pedestrian friendly City Center. Specifically, the City:
· Adopted multi-family housing tax exemptions in the targeted area.
· Examined what has and has not worked in other cities.
· Reviewed types of potential public participation that may be needed to develop a denser mixed
use downtown.
· Provided funding to consider a public gathering place: a plaza, a park, and/or other amenities as
part of the redevelopment strategy.
· Currently performing a downtown action SEP A analysis to make redevelopment time and eosts
more predictable.
· Currently condueting a market study to identify the likely and desired types of developments that
should be pursued.
Specifically, the Market Study, as presented by the Leland Group at the July 19, 2005 study session,
identified there is a reasonable market demand over the next 10 year to support:
· 200,000 to 300,000 sq ft of retaiVentertainment space;
· 200,000 to 300,000 sq it of office/employment space;
· 800 - 1,200 units of urban housing; and
· 250 - 400 hotel rooms
This is an estimated total potential private investment in the magnitude of $180 to $280 million.
At recent discussions, the Council also ~xpressed interest in establishing a fund that could assist qualified
developments to construct public improvement elements of development requirement, as a strategy to
encourage and achieve our share of the desired private investments in the City Center. The purpose of
this memo is to explore the options and raise policy issues that Council may wish consider in clarifying
the objectives, and to identify some potential financing options that could set aside funding in pursue of
these economic development ideas.
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POLICY ISSUES:
1. WHAT IS A REALISTIC GOAL FOR THE CITY TO ACCOMf'lJSll AND INWllAT TIMEFRAME?
Using the market demand analysis we just received, staff recommends the Council establish a
goal/target that through the economic development efforts, we will generate:
· 200,000 s.f. of retail/entertainment space,
· 100,000 s.f. office space,
· 600 urban housing units, and
· 250 hotel rooms;
for an estimated total private investment of $200 million within the next 5 years, in the City Center.
In addition to the broad goals, if the city is considering financial incentives, the city should also
consider establishing more detailed criteria to guide the desired private investment/development.
Some ofthese detailed considerations are:
1. What type of developments would qualify for public assistance?
We know we want mixed use, multi-story developments. Would there be a minimum number of
stories required? Would there be a minimum mixture of uses required? Is retail a required
element; regardless of other uses above the ground floor? If we are already providing a ten-year
property tax exemption for multi-family housing, do we treat them the same as other types of
mixed use developments? Is structured parking a requirement?
2. Should there be a threshold for the size of eligible the developments?
Because the City Center area is largely developed today, would a substantial rehabilitation
project qualify (e.g. adding housing above existing retail structure)? Or would there be a
threshold of investment amount or development size to qualify for public participation?
3. Should there be any location priorities?
If the funding is limited, should the city consider different priority/weight for where exactly the
development located in the City Center? (e.g. properties front 320lh with higher weight vs.
properties front other internal grid roads?)
If. WHAT IS THE CITY WILLING TO DO TO ACHIEVE THE GOAL(S)?
As the Council is well aware, many communities within the city's trade area are providing various
public assistance programs to attract mixed use development or redevelopment projects. Federal
Way will be competing with other communities for desirable developments.
Based on the conceptual development analysis in the Market Analysis prepared by the Leland Group,
to achieve the desired development is more costly to the developers and the gap could be anywhere
between 0% to 20%. If the Council agrees that the type of developments the city wants will likely
cost more to develop and therefore likely have a financing gap without public assistances, then the
question is how much?
Using the $200 million private developments as a goal and using the average 10% potential gap as
base, the projected private financing gap would be around $20 million.
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How the amount of assistance might be determined could be based on a number of criteria:
1. As a percentage of private development.
2. A percentage up to a fixed dollar cap.
3. Based on substantiated funding need (gap analysis).
4. Proportionally to the development's contribution towards the goals.
Even with established criteria and guidelines, there needs to be flexibility and subjective judgment to
allow the best public investment decisions. Therefore a fair and transparent process how a project's
eligibility and funding would be considered should be determined prior to the launch of the program.
III How WOULD THE CITY FINANCE IT?
Assuming the goal is to provide $20 million or 10% of targeted private development, it is more than
likely we will need to use a combination of methods and options to create the funding.
1. I-time sources:
With the high level of new construction activity and the robust real estate market this year, the
City has collected more building permit fees and Real Estate Excise Tax (REET) revenues than
budgeted. Staff anticipates the combined surplus from these two sources will reach $3 to $3.5
million by the end of this year. While the interest rate is inching upward, it is likely the
momentum of the market will carry it the next six to twelve months and thus additional resources
may be available next year. Therefore the City Council could designate a portion of these I-time
revenues towards the fund. Staff recommends using two-thirds of the one-time surplus during
this biennium to create the Downtown Redevelopment Fund.
Pros:
.
The public improvements are eapital in nature, thus matching the Council's policy for
using I-time revenues.
Building permit revenues are directly connected to the economic development activities.
.
Cons:
.
This would exhaust one-time funding for other potential uses such as paying off the new
city hall mortgage.
REET is restricted capital revenue and can only be used for qualifying projects; part of
the revenue cannot be used for park or land acquisition.
.
2. Current on-going Capital Sources:
The City Council can redirect a portion of existing capital resources towards downtown
redevelopment.
Current allocation of on-going capital resources. annual amount in 2005 dollars:
(in thousands
$1% available
Sources! Allocations Current
Tax, each 1 % = $1.25 mil/ion_",__.,n_.___
$1% available
By 2012
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Street Overlay $875/0.7% $875/0.7% $875/0.7%
Transportation Capital $1,250/1 % $2,500/2% $2,500/2%
Parks -- $1,250/1% $1,250/1%
Community Center $925/0.75% $925/0.75% $925/0.75%
Other Public Facilities -- -- $625/0.5%
Real Estate Excise Tax, approximately $2 million per year, 2005 Year End
Estimate ~ $4 million
Street $1,000 $1,000 $1,000
Parks $550 $650 $650
Public Facilities $550 $450 $450
Major projects funded include:
· Transportation: SR99 improvements, Triangle project, S320th bridge widening over 1-5.
· Parks: Lakota Park Redevelopment, and Sacajawea Park Redevelopment.
· Public Facilities: New City Hall Mortgage, DBC rehab. Other needs: SL Maintenance
facility.
Pros:
· A portion of the 1997 utility tax was initially designated for economic development
(320th Streetscape, gateway treatment - welcome monument sign, etc); re-establishing
the fund would be consistent with the initial purpose of the tax.
· Most of the City Center improvements are street/transportation-related expansions. The
capital utility taxes as well as REET are largely designated for road projects.
· On-going resources can also be used to fmance larger lump sum investments by issuing
bonds.
Cons:
.
Existing revenues are designated for certain purposes/projects. Diverting these resources
means delayinglreprioritizing such projects.
REET is not' as predictable an on-going revenue source.
.
3. Incremental on-going sources from new development:
The City Council can also designate a portion of new incremental revenue generated from the
new development towards the DRF fund.
Pros:
· It is logical to return some new revenues generated from the new developments back into
the new developments.
· While not legal in Washington, many other states recognize these incremental revenues
and allow cities to use that to finance infrastructure needed for new developments.
Cons:
.
New revenue generated from new developments is uncertain. If we expect to use the
new revenue to repay debts, and it does not materialize or if it were delayed in timing,
the City would be required to cover such shortfall with other revenues, including the
general fund revenues.
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· New development will create new demands for serviees. If the new revenue is not
available to pay for such increases in service costs, all city services will need to be
lowered to accommodate the added demand.
· Any additional public improvements will require additional on~going resources for
maintenance and operation. A public park will cost $lOOk per year to maintain. There
could also be costs to provide programming (concerts, plays, fairs) at such parks/places
in season, if desired.
4. City-funded Revolving Account.
A couple of ways the City can make the initial investments, but recover the cost from property
owners and/or developers.
1. Latecomers Fee: The City pays for improvements upfront; as they occur, each
development will be assessed their proportional share of the cost (we can add interest
cost for the money fronted and can also collect less than 100% of the cost), which
reimburses the City's initial investment. This is similar to the concept of a utility
connection charge. As developments occur, the City will recover its initial investment
and can invest in additional areas.
11. LID: The City pays for improvements upfront and assesses property owners who benefit
from the improvements in orderto recover the costs. The property owner(s) will pay an
annual assessment for a period up to 10 (n) years, regardless if or when the property is
redeveloped.
Pros:
· City can make needed improvements all at once instead of piecemealing a project.
· Lower overall cost (since each time we do part of a road, we need to do 2/3 of a road as a
minimum, so to make a full street we will do the middle 1/3 of the road twice.)
· City can borrow at a lower interest rate and can pass on the interest savings to the
developer.
Cons:
· Developers will pay for the public improvement(s) that are needed for the
development.
5. Private Latecomers Agreement.
There is also possibility for a private development to put in the required public improvement and
receive reimbursement from future developments. This is done by a latecomers' agreement with
the City, where the City will collect the cost from future developments based on their
proportional benefit from the improvement, with interest, and reimburse the first developer. A
private latecomers' agreement typically lasts ten years, but the City has the option to extend it for
an additional ten years.
This would only work if the improvements benefit additional future developments.
Pros:
.
Improvements can be made all at once instead of piecemeal.
Lower overall cost (since each time we do part of a road, we need to do 2/3 of a road as a
minimum, so to make a full street we will do the middle 1/3 of the road twice) and fewer
disruptions.
.
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· Developer can recover part of their costs with interest.
Cons:
· The first developer will need to front the cost of the public improvement.
· Cost recovery is uncertain (depends on when the next development occurs, and who
benefits from the improvement).
RECOMMENDATION:
For discussion purposes only.
COMMITTEE ACTION:
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