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FEDRAC MINS 06-29-2004 City of Federal Way City Council Finance/Economic Development/Regional Affairs Committee Tuesday, June 29, 2004 5:00 p.m. City Hall Mt. Baker Conference Room MINUTES Committee Members in Attendance: Chair Eric Faison, Member Jeanne Burbidge, and Member Jim Ferrell. City Council Members in Attendance: Mayor Dean McColgan , Deputy Mayor Lin da Koch mar , Councilmembers Jack Dovey and Michael Park. Staff Members in Attendance: Iwen Wang, Management Services Director; David Moseley, City Manager; Derek Matheson, Assistant City Manager; Pat Richardson, City Attorney; Mary McDougal, Human Resources Manager; Tho Kraus, Finance Manager; Patrick Doherty, Deputy Director of Community Development; Jason Suzaka, Management Analyst. Others in Attendance: Connie Boyle, Colliers International; Mark Clirehugh, Kidder Mathews; Mark Freitas, Erica Hall, Federal Way Mirror; Bill Ptacek, King County Library System; 1. CALL TO ORDER Chair Eric Faison called the meeting to order at 6:10 p.m. 2. PUBLIC COMMENT None. 3. COMMITTEE BUSINESS a) Panel Discussion: Options on Use of Old City Hall Connie Boyle of Colliers International was the first panelist to speak; she passed out Collier’s 1st quar ter 2004 report on office space in the south King County real estate market. The area is in a recovery market; with the exception of the City of SeaTac, Federal Way has a lower vacancy rate than the rest of south King County. However, it is still close to a 20% vacancy rate. She cited the cost of tenant improvements as one of the difficulties for the government leasing a building. If the government doesn’t have the money for tenant improvements, the building could stay vacant as in the property owned by the State of Washington in Tacoma. Another is the high load factor (approximately 25%). One advantage that leasing a building is that the payments could help the City with its budget situation. Mar k Clir eh ugh of GVA Kidder Mathews was the second panelist to speak; h e agr eed with man y of th e statemen ts Ms. Boyle made con cer n in g th e state of th e r eal estate mar ket. Th e decision of whether to lease or sell the building depends on whether the owner is planning on using the building during the next 36 months. If the owner is planning on using over half the building during this time period, then leasing may be a good option. That being said, he feels that government in general does not makes a good landlord, because of it is process oriented and A-1 can n ot move fast en ough to compete with th e pr ivate sector . Th e cost of r e-ten an tin g th e building would probably cost about 24 months worth of income, so any benefits of leasing would not be seen until then. Regarding the idea of the old city hall as a business “incubator,” Mr. Clirehugh stated that it is extremely tough to run, high maintenance, and a critical mass is needed, which he felt is not present. In addition, there is nothing that stops the business from leaving the City once they are self-sufficien t. He agrees with Ms. Boyle that the market is in a recovery period. He also added that much of the vacancy rate is concentrated in a few large buildings, such as the Capital One building. Mark Freitas was the final panelist to speak at the meeting. He cautioned the City on leasing building, citing tough competition from the private sector. The small office spaces have high turnover, and when the tenant leaves, the landlord has to pay for maintaining the empty space. He feels that the old city hall building is an excellent economic development opportunity for someone. If the City sold, they would benefit from the increased business (new businesses moving into the building) and subsequent jobs and tax revenue brought in. He complimented the Council for talking to the local real estate markets for additional information in order to make th eir decision . Mr. Clirehugh commented that the Federal Way real estate market is very small and can change rapidly; so you cannot get caught up in the numbers. In regards to the questions of interest rates and a possible sale, he commented that anything under 10% is still a pretty good deal; while they may affect a sale, it would probably be slight and rates will most likely inch up very slowly. The committee thanked all of the panelists for taking the time to come in and speak to them. b) Approval of the May 25,2004 Meeting Minutes Motion to approve the May 25, 2004 meeting minutes. Motion seconded and carried. c) Capital Replacemen t Bon d Measur e Presented by Bill Ptacek, King County Library System Mr. Ptacek presented a video talking about the bond measure to the committee. Brochures explaining the measure were also passed out. He added that the measure would continue (replace) the measure passed in 1988, and would be about $25.00 per person, or $1 less than the 1988 measur e. It was suggested that the video could be put on the FWTV. Chair Faison asked if the library would be open to the idea of a new library (that would replace the 320th library in the measure) built next to the Sound Transit center as part of the City’s economic development plan, if proposed and passed. Mr. Ptacek replied that the library would be open to working with the City on the idea. In fact, they are already talking to the Cities of Bellevue and Burien about doing the same thing. Both libraries will be hosting open houses: The 320th Library on 7/28 at 7:00pm; The King Cou n t y Regi on a l Li br a r y on 1st Way South on 8/4 at 7:00pm. d) Legislative and Regional Affairs Update Presented by Der ek Math eson C:\staging\41704FDC-18CA-20B489\in\41704FDC-18CA-20B489.doc A-2 The SST (Streamlined Sales Tax) mediation group continues to meet to come up with a proposal for cities at the next legislative session. The next meeting will be held in early July. Transportation: The big city mayors met at the AWC (Association of Washington Cities) con fer en ce. Tr an spor tation fun din g n eeds was th e top issue discussed at th e meetin g, specifically how the state n ickel package pr ovided r even ue for state pr ojects, but n ot local on es. Th e mayor s discussed two options: One is a local voter-approved option that cities can enact and the other was direct distributions. Among the options discussed were fuel taxes, street utility, and a vehicle license fee to replace I-776. Keep in mind that these options are just brainstorming ideas. Puget Sound Regional Council: Staff and the city lobbyi st will be developing a fact sheet on the issue, and plan to talk to the cities that have a vested interest in their sheet on the council. Drivin g Wh ile Licen se Suspen ded: was r ecen tly str uck down by th e Supr eme cour ts. It h as resulted in many dismissed cases/warrants. 37% of the criminal cases (10% of the total caseload) in the City’s municipal court have affected, creating a potential shortfall. Because of a potential shortfall, a question was asked as to whether it would actually be a cost savings. Staff replied that it would only be realized if there was a decrease in the number of court st a ff. Legi sl a t i ve a gen da h a s begun , wi t h t h e l obbyi st m eet i n g wi t h t h e depa r t m en t h ea ds t o det er m i n e the priority issues for the next session. e) New City Hall Project Update Presented by Der ek Math eson A certificate of occupancy should be issued very shortly. The police department and municipal court will be moving next week, and should be operational on July 12. The second floor continues to be on schedule, but the parking lot across the street is running a little bit behind. Construction on the lot should begin around the 1st of August. Combined bids are running about $260,000 below estimates, and the project contingency fund of $640,000 has not been tapped. f) Old City Hall Surplus Equipment Presented by Der ek Math eson Motion to approve the proposal recommendation to full Council. Motion seconded and carried. g) Compensation Study Presented by Mar y McDougal Ms. McDougal presented the potential options to the committee. AWC does do a general salary survey every year, but it was noted that the duties of the position listed by the City may not match up exactly with those listed in the survey. In addition to the costs of the study, there will be implementational costs as well. The study is not intended to be used as a bargaining tool with repr esen ted employees. Th e sh or t ver sion of th e study would en tail a quick ch eck of salar ies an d wh eth er or n ot th ey ar e comparable with other cities. The more detailed version would be more useful; however, the results would not be ready in time to prepare for the upcoming budget. C:\staging\41704FDC-18CA-20B489\in\41704FDC-18CA-20B489.doc A-3 C:\staging\41704FDC-18CA-20B489\in\41704FDC-18CA-20B489.doc A-4 Motion to forward scope option 1 and timing option a to full Council for approval. Motion seconded and carried. h) Discussion of City Center Redevelopment Plan Presented by Patrick Doherty Mr. Doherty reviewed the options with the committee. Council member Ferrell expressed his concerns with the housing component, which he perceived as a new issue that hadn’t been discussed. Council member Dovey expressed the same, asking the question, “What is the big picture for downtown? What will it look like?” There was also discussing pertaining to what to do after the market study has been completed and submitted to Council. i) May 2004 Monthly Financial Report Presented by Tho Kraus Ms. Kraus reviewed the Monthly Financial Report (MFR) with the Committee. Motion to accept the May 2004 Monthly Financial Report and full to full Council for approval. Motion seconded and carried. j) Vouchers Presented by Tho Kraus Ms. Kraus presented the vouchers for approval. Motion to accept the vouchers and forward to full Council for approval. 4. OTHER None. 5. FUTURE AGENDA ITEMS 6. NEXT SCHEDULED MEETING FEDRAC – Economic Development: July 13, 2004 at 5:30 p.m. in the Mt. St. Helens Conference Room. FEDRAC: July 27, 2004 at 5:30 p.m. in the Mt. Baker Conference Room. 7. ADJOURN Chair Eric Faison adjourned the meeting at 6:50p.m. Recorded by Jason Suzaka