2007, 05-29 Special Study SessionFILE COPY
AGENDA
SPOKANE VALLEY CITY COUNCIL
SPECIAL STUDY SESSION NIEETFNG
Tuesday, May 29, 2007
6:00 p.m.
City Hall Council Chambers
11707 East Sprague Avenue
Spokane Valley, Washington
(Please Turn Off All Electronic Devices During the Meeting)
Call to Omer by Mayor Diana Wilhite
ROLL CALL:
Agenda Topic:
1. Sprtgne-Applewav Revitalization Plan
2. Etecutive Session: Pending Litizution: Land Acquisition
3. Ail iuurnment
Not. . Unless othensise noted abo-r, there will he no public comments at Council Study Staiarn. lhowever, Council atwa)s
resents the right to request information from the public and staff as appropriate. During meetings held by the City of
Spokane Valley Council, the Council reserves the right to take "action" on any item listed or subsequently added to rite
agenda. The term "action" means to deliberate, discuss, review, consider, evaluate, or make a collective positive or
negativr decision.
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CITY OF SPOKANE VALLEY
Request for Council Action
Meeting Dane: May 29, 2007
City Manager Sign-off:
Item: Check all that apply: ❑ Consent ❑ Old business ❑ New business ❑ Public Nearing
❑ Information ® Admin. Report ❑ Pending Legislatlon
AGENDA ITEM TITLE: Sprague/Appleway Revitalization Plan Update
GOVERNING LEGISLATION: The Subarea Plan must be consistent with the City's
Comprehensive Plan and the Washington State Growth Management Act (GMA), RCW 36.70A.
PREVIOUS COUNCIL ACTION TAKEN: Council authorized the contract with ECONorthwest,
Freedman, Tung and Bottomley (FTB), Glatting Jackson and Studio Cascade in May, 2006.
BACKGROUND. The Sprague/Appleway Revitalization Plan process was initiated during the
summer of 2006. The consulting team is scheduled to deliver an initial administrative draft
Subarea Plan by the end of May, 2007. The document will be scheduled for public hearings
before the Planning Commission in late summer/early fall of 2007, with adoption by City Council
anticipated to occur late fall/early winter. As the Subarea Plan public hearing process proceeds,
City Staff will continue working on the City Center project.
The attached memo summarizes the work completed to date on the Revitalization Plan and the
City Center Project. Also attached is a summary of key issues and discussion points to help
focus Council's dialogue.
Staff will also inform Council about the verbal feedback received to date from Bob Gibbs, a
Town Center planning consultant who will help determine the viability of developing a mixed-use
City Center. Bob Gibbs is reviewing reports prepared by ECONorthwest, including a pro-forma
for City Center (attached).
Also attached to this RCA is a memorandum from Steve Worley addressing questions raised at
the May 22, 2007 Council Meeting.
OPTIONS: N/A
RECOMMENDED ACTION OR MOTION: Provide input to staff
BUDGET/FINANCIAL IMPACTS: There is currently $185,000 included in the 2007 budget for
continued work on the Revitalization Plan, Including the remainder of the contract work with FTB
et_ al., and the contract with ClearPath.
STAFF CONTACT: Scott Kuhta, Senior Planner
Attachments:
1. Sprague/Appleway Revitalization Plan Update memorandum.
2. Sprague/Appleway Revitalization Plan - Key Discussion Point Summary
3. ECONorthwest Pro-Forma Report
4. Transportation Memorandum - Steve Worley
Sprague/Appleway Revitalization Plan ,
Update Summary
Council Briefing - May 29, 2007
The Sprague/Appleway Revitalization Plan is an integrated land use, urban
design, and transportation planning project. The objective is to develop a
strategic plan that will create re-shape the corridor into thriving commercial and
residential districts.
Key project components include:
• Redevelopment strategy for corridor by designating a clearly defined
land use pattern of commercial centers, mixed use segments and
residential areas.
• Creating an identifiable City Center
• Strengthening Auto Row as a regional destination for new car sales
• Adopting innovative regulations that will guide development in a
way that meets community objectives and creates an attractive
environment for re-investment.
• Creating a street network that meets multiple objectives, including
moving cars, people, transit and bikes while supporting the vision for
future land use
• Identifying key public infrastructure investments that will
encourage private investment.
The following page identifies key issues and discussion points for Council's
consideration.
Summary of Issues and Discussion Points
Plan Adoption Schedule
May 31: Administrative Plan Draft Delivery to Staff
June T: Staff orientation session with consultants
June-July: Staff review and edit, Supplemental Environment Impact Statement
July-August: Public Review
August/September: Planning Commission Hearings
October/November: City Council Hearings
December: Plan Adoption
Public Hearingslinformation
• Public Hearings with Planning Commission/Council
• "Training" workshops for developers and property owners
• Informational brochures, publications, plan summaries.
• Additional Services - Michael Freedman
City Center
• 3 options to pursue development of a City Center
• ClearPath, LLC (real estate advisors)
• Bob Gibbs (retail market analysis, project viability)
• Library and Fire District Presence
• City actions
o SEPA SETS/Planned Action Ordinance
o City Hall
o Project Management (staff considerations)
City Hall
• Space programming
• Timing/Cost
• Shared use w/Library and/or Fire District
Development Incentives
• Tax Increment Financing District (TIF)
• Multi-Family Tax Abatement Zones
• SEPA EIS/Planned Action Ordinance
Capital Improvements
• Cost estimates for public facilities
• Phasing Street Improvements/Landscaping
• City Parks/Public spaces
• Funding mechanisms (grants, loans, City contributions)
Extra Consultant Services
• FTB - assist City with Plan adoption ($35 to $45K estimate)
• FTB/Studio Cascade - Public information, graphics
• Bob Gibbs - City Center Advisor
• SEPA EIS/Planning Action Ordinance - ($150K minimum)
• Glatting Jackson - transportation analysis, model evaluation, cost estimating
Auto Row
• Implementation Plan w/Auto Dealers participation
• Identify early catalyst projects
ECONorthwest
ECONOMICS • FINANCE • PLANNING
Phone • (541) 687-0051 Suite 400 Other Offices
FAX • (541) 344-0562 99 W. 10th Avenue Portland • (503) 222-6060
inf+oQeugene econw.com Eugena, Oregon 97401-3001 Seattle - (206) 622-2403
19 April 2007
TO: Hiro Sasaki and Michael Freedman
FROM: Anne Fifield and Terry Moore
SUBJECT: PRO) FOR-MA FINAYCLU. ANALYSIS FOR CITY CENTER
SUMMARY
This memorandum explains the pro forma financial analysis conducted by ECO for the Town
Center in Spokane Valley. The pro forma analysis illustrates the possible and likely costs and
revenues associated with developing,, a mixed-use Town Center at University and Spnwl-W
Avenue;.
The main benefit of a financial pro forma analysis at this early stage of project development is
that it organizes and makes explicit the factors and assumptions that will affect the financial
performance of a proposed development. Those assumptions will certainly change as the project
goes forward. In fact, they may change partly as a response to the preliminary pro forma
analysis: the product mix and size of the project could change to improve financial performance.
By providing rough estimates of the profitability (or loss) of the development, the model gives
some insight into what property owners and developers might be willing build, with and without
City financial assistance.
T}te remainder of this memorandum is organized as follows:
• Context explains how a pro forma financial analysis can be used and interpreted.
• Site description describes the assumptions fir the four density scenarios modeled in the
pro forma analysis.
• Development costs explains the assumptions the model uses to estimate development
costs.
• Property value explains the assumptions the model makes about occupancy rates and
rents for rented space and the assumption about valuing residential units.
• ProCtability analysis explains the calculations in the model to determine the net value 01
the development and the estimate price a developer would be willing to pay for land to
develop the City Center.
• Results summaries the results of the pro forma analysis.
• Recommendations summarizes FCO's recommendations to the City.
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 2
• Data sources lists the individuals interviewed by ECO and other data sources used in the
pro forma analysis.
CONTEXT
At this point in the project there is little detail about the style of development and the actual nnix
of uses. That is appropriate: detail gets added little by little as the design evolves. The pro forma
is necessarily preliminary.
ECO based the pro forma analysis on site layout diagram and Phase I Development Program
Summary provided by FTB. Revenue estimates came in part from ECO's market analysis for
Spokane Valley (Fall 2006). ECO interviewed realtors and developers in the Spokane Valley
area to understand construction costs, and supplemented those interviews ,vith other data
sources. The end of this memorandum lists the sources we relied on to develop construction and
operations assumptions.
A pro forma analysis can solve for different variables: e.g., rate of return, or product mix or size.
For projects involving the public sector, we have found it most useful to solve for residual land
Value. In other words, given the assumptions about all non-land costs, al_l revenues, and a market
rate of return, how much money would a developer be willing (able) to pay for the land. If that
amount exceeds what the property owner is asking or likely to be offered for, then the project
"pencils out," meaning that a developer would be able-given the assumptions about
construction costs and market prices; be able to purchase the property at market value, build the
project, and sell it for a price that would yield a normal rate (if profit. But that amount can be less
than the asking price for the land, or even negative. Small differences from the likely market
price for land are not significant: there is a lot of uncertainty in the assumptions,and calculations.
But big negative divergences from market price give a directly interpretable indication of how
much money the public sector might have to put into the deal to make the project work for a
developer.
Accompanying this memorandum is the pro forma model (an Excel spreadsheet). The model is
designed to be flexible: key assumptions af=fecting cost and revenue can be readily changed, and
the efle.cts on residual land value observed. All the model's inputs are color-coded yellow. Any
cell colored yellow can be changed, which in turn affects the outcomes. The asswnptions are
obviously critical-to the model: the results depend on them. The more important implication,
however, is that the evaluating the results really means evaluating the assumptions. That is the
value of a preliminary pro forma analysis. A.re the assumptions reasonable?.What is a reasonable
range? Does the bottom line stay consistently positive or negative over the range? What variables
have the biggest influence on the bottom line?
SITE DESCRIPTION
The pro forma analyzes four density scenarios based on the site plan developed by r7B. ECO
relied on the description of the site area and footprint size of the buildings in the site plan. This
section explains the source :for ECO's assumptions in the "Site Description" section of the pro
forma spreadsheet model.
Total site area. FTB reported that the total site area is 21.25 acres.
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 3
• Building footprints. FTB provided the square footage for the proposed structures, by
use. These figures show the square footage on the ground floor of the development. The
retail footprint has two types: multi-storied and single-storied. The multi-storied retail
will have upper floors with non-retail uses. The footprints of these structures are used to
calculate total square footage of these other uses.
• Density scenarios. The pro forma analyzes four density scenarios: low, medium, high,
and very high density. They all include all the ground floor square footage identified by
FTl in the development program. ECO had conversations with 1317.13 to determine
reasonable mixes of uses for four scenarios. The four scenarios vary in heights: two,
three, four, and six stories.
• Tow density assumes residential is townhouses only (two stories); retail is single-
story retail (134,400) aid ground-floor retail (84,900 square feet); office is one level
over retail (84,900 sf).
• Medium density assumes the residential is townhouses (three stories) and one level
over retail (84,900 st); retail is the satne as in the low-density scenario; office is one
level over retail (84,900 so.
• High density assumes the residential is townhouse (three stories) and two levels over
retail (169,800 sf); retail is the same as in the low-density scenario; office is one level
over retail (84,900 sf).
O Very high. density assumes the residential is townhouse (three stories) and three levels
over retail (254,700 so; retail is the same as in the low-density scenario; office is two
levels over retail ((169,800 sf).
• Total square feet. The model calculates the total square feet for retail., office, residential,
and civic uses. Total square feet is the footprint square footage multiplied by the number
of floor levels for that use.
• Average square feet per dwelling unit. The model uses 1,200 square feet (gross) as the
average size for the residential units. This is based on statistics for net square footage for
new multifamily units. In 2005, the median size of new multifamily units (1WCstem
region) was 1,087 square feet. The median for rental. units was 1,005 square feet, and the
median for units built for sale was 1,277.'
• Number of dwelling units. The model divides the average square feet per dwelling unit
into total residential square feet to estimate the number of dwelling units. The model
converts rentals to net square feet (so it can calculate total rents frorn per-square-foot
rents), and counts the number of owner-occupied units (so it can calculate per-unit value).
o Parlang footprint. FTB provided the total square feet of surface parking in the site plan.
• Parking spaces in surface lots + on-street. The model assumes that each surface lot
space requires between 300 and 350 square feet. It uses 333 square as a convenient
default value: three spaces per 1,000 square feet.FTB's site plan shows there grill be 200
on-street parking spaces. The model calculates the number of surface lot spaces and adds
it to the on-street parking.
Li.s. Census Bureau. "Characteristics of \TCw Housing for 2005".
i
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 4
• Parking spaces per dwelling unit. The, model's default assumption is that there will 1.5
i parking spaces per residential dwelling unit. Remember that all the units arc multifamily,
and many will be for rent. In the dense downtowns of major metropolitan areas that have
high-quality transit, developers and lenders are beginning to build with 1.0 parking
spaces per unit (or fewer) if allowed by code. We doubt that Spokane Valley is ready for
that: 1.5 seems the lower limit until transit service improves, which is many years off.
The model calculates the number of spaces for the over-retail units. The townhouses will
have their own parking under the building. The footprint of the to Amhouses is large
enough to accommodate 1.5 parking spaces per unit for both the 2- and 3-floor
townhouse scenarios.
Parking spaccs11,000 sf- retail. The model's default assumption is that retail space will
require 4.0 spaces per 1,000 square of space of gross floor area. Some retailers in
suburban markets prefer 5.0 spaces per 1,000 square feet. Since land values and the cost
of surface parking is relatively low, they will go with more parking because it is
relatively cheap. As our pro fonna demonstrates, for this project the limited site size and
desire for multi-story construction means that high parking ratios rather quickly push the
development to a need for structured parking, which is many times more expensive than
surface parking.
• Parking spaces/1,000 sf - office and civic. The model's default assumption is that office
and civic space will require 3.0 spaces per 1,000 square of space of gross floor area.
• Other parking assumptions. Two are particularly important. Parking pricing clearly
affects the demand for parking. Economic theory and the most recent planning literature
on parking2 are very clear on the proper transportation solution: parking should be priced.
For residential parking, it typically is: the cost of driveways and garages are bundled in
single-family housing pricing, and the price of a space in a surface lot, a carport, or a
stricture is part of multi-family price or rent (usually bundled; sometimes sold
separately). The big issue is commercial space.
Commercial space (retail, office) tends to not charge customers for parking. It is
important to understand the basic relationships. If a.developer builds parking. she will
definitely try to charge a building purchaser for the parking. If the market for the space is
strong enough, she will be successful, and the new owner will successfully charge
building tenants rents that cover that cost, who will pass on the cost to customers and
clients. Somebody pays for free parking-the issue is that the people parking do not pay
for it directly as a parking charge. The result is that there is more demand for parking-
more parking spaces are needed-than would be the case with proper pricing.
'T'here is ample evidence to suggest that proper pricing of parking, over the long run, is
compatible with (arid necessary for) successful commercial activity. It does several good
things: (l.) it makes parking available for the people that value it most, especially if on-
street parking is metered and priced to encourage a proper rate of.'turnover; (2) reduces
wasteful traffic (some estimates are that more than half of the vehicle-miles traveled in
congested downtowns are generated by people circling and looking for a parking space;
2 Donald Shoup, 2005. 77w High Cost ojFree Parking. American Planning Association Press. Chicago.
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 5
and (3) it generates revenues that can then fund streetscape maintenance and
improvements (including pedestrian amenity).
But pricing parking creates some problems for the new center. The center is
surrounded-for miles, not blocks-with free parking. Many retailers believe that they
must offer. "free" parking (i.e., absorb its cost in their cost of sales) to keep sales volumes
up. Offices (especially ones with expensive professional employees) believe that free
parking must be part of a competitive benefits package.
The point of this long explanation is that parking ratios have typically been established
based on the assumption that parking will not be paid for directly by the parkers. That
lowers the price, which increases the consumption. Pricing the parking would lower the
amount needed (tile parking ratios); but the vicious cycle is that most retailers are used to
the free parking and the parking ratios they generate, and believe that their businesses
will do poorly with anything less.
In sum, we believe that the center could be equally successful with priced parking and
less parking (which would lower the cost of construction and make the development
financials work better), but we also know that will be a stretch for many developers.
Parking pricing is a complicated issue that our simple pro forma cannot model in detail.
We do test it indirectly by simply lowering the parking requirements to see what happens
to the pro forma.
The second parking issue is .shared parking. If calculated over a 24-hour period for a full
year, a typical suburban parking space is empty over 95% of the time. if spaces could be
used more efficiently, fewer would be needed. One way to use them more efficiently is
with shared use. The typical example is a mixed-use district that has stronger office use in
the daytime and stronger entertainment use (movie theatre, restaurants) in the evening.
Ideally, the Spokane Valley City Center would have some of that pattern. And the City
would control some of that parking (for its city hall and, perhaps, library), so it could
make those spaces available for evening retail.
The details of a shared parking arrangement are beyond the scope of the analysis at this
point: they probably cannot be worked out until a developer is selected. At this point we
can test it indirectly by lowering the parking requirements to see what happens to the pro
forma.
• Needed parking spaces. The model calculates the total number of spaces needed for all
uses. This calculated figure does not include the spaces under the townhouses.
• Structured parking spaces. Total parking need less (1) spaces in surface lots and (2) on-
street spaces, yields the number of spaces that the development is short for each
development scenario. The costs section of the pro forma model assumes these spaces
will be accommodated by a parking structure. This is obviously a gross assumption: the
model does not figure out when there is enough parking that a structure of a reasonable
size can be built. Rather, it assume that structured parking can be added a space at a time.
That is clearly unrealistic, but usetid for the purposes of this preliminary project
evaluation.
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 6
DEVELOPMENT COSTS
ECO established a range of costs for different building types. The rai.iges are based on interviews
with local developers, building costs reported at www.rsmeans.com, and staff at Johnson-
Gardner, LLC, a real estate consultancy firm. Building costs vary widely, based on the quality of
construction. ECO identified costs in the middle of the ranges of costs, implying a nnid-range of
construction quality and detail. The actual costs of the project will vary.
Costs are categorized as hard costs (materials and labor) and soft costs (engineering, design,
permitting fees).
• Single-story retail hard cost per sf. The cost to the developer will vary based on
quality, but also the degree of finish. A space that is completely ready for a retailer to
move in is more costly than a shell. The model assumes the single-story retail will cost
$86 per square foot.
Retail/office/residential multi-story hard cost per sf. As buildings become taller, they
become more expensive. The building's structure must support the additional floors, and
fire code requirements increase cost. The cost per square foot ranges ftom $110 for the 2-
floor scenario to $150 for the 6-floor scenario. The prices jumps from SI 10 to $140 per
square foot at the 4-floor scenario because we assume that the structure can no longer be
stick-built; but will require steel supports.
O Residential-townhouse hard cost per sf. The cost for residential. can vary widely by
quality of the stricture. The model uses $110 per square foot.
C Civic hard cost per A The model assumes that the City pays for the construction of City
Hall. The cost is identified in the model, but it is not included in the total cost estimates.
The model uses $140 per square foot.
• Parking. Parking is a key development variable. In the "site description" section, the pro
forma model calculated how many structured spaces would be required to accommodate
these parking needs. The pro forma simply calculates the number of required parking
spaces. It does not attempt to locate those spaces; it only multiplies the total cost per
space by the calculated -needed spaces. The average cost of a surface space varies,
depending primarily on the amount of amenity (landscaping, lighting, stall and aisle
width) that gets specified. At the low end, without land, hard cost is in the range of $3.50
to $5.00 per square foot, and the average stall price (with soft cost at 25% and 333 s.f. per
stall) is in the range of $1,300. At the high end, the cost could be over twice that. We
assume something in between, and use $2,500 as an average cost per space. The average
cost for a structured spaces is in the range of $20;000. The cost of structured parking is a
key variable that drives costs of the City Center upward.
Soft costs. These include engineering, design; permitting fees, and others. The model
assumes that soft costs are calculated as a percentage of hard costs and added to the
total-rough, but typical in a preliminary analysis. Note that even this percentage
estimate can and should change as the project moves from concept planning to
development: contingencies should go down as the product gets more specific, new
information gets collected, and uncertainty gets reduced.
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 7
• Demolition costs. Local developers reported approximate demolition costs. The model
uses the approximate figure of $15,000 per acre. The model multiplies the per-acre cost '
by the total acres in the site.
The model assumes that the City pays for public open space and roads and does not include them
in the development costs.
PROPERTY VALUE
This section describes how ECO calculated the value for the entire site. For rental properties
(office, retail, and residential), we calculated the net operating income. For o-vvner-oecupied
residences, we determined the properties' sale value.
The net operating income of a commercial development determines its value. The net operating
income is rent per square foot multiplied by total leasable area. This figure is reduced by an
expected vacancy rate and operating expenses. This section. of the pro forma model identifies tine
net income .for the retail and commercial space when the development is at stable operation
(typically assumed to be 2 - 5 years after construction).
The key variables for operations are expected rent and vacancy rates. ECU interviewed local
realtors to identify rents and vacancy rates. Fundamental to the analysis is the assumption that
the new center will be built to the size and standards of the FTB design. and to an as-yet-to-be-
developed design code, and that such a center will have the mass, tenants, retail appeal, and
supporting public improvements (e.g., a city hall) that will allow it to compete with other centers
(like the Spokane Valley Mall) for some types of retail. It is that assumption that allows us to use
projected rents greater than those now found on the corridor, but less than those found at the
Spokane Valley Mall.
Retail
The F"1B design assumes that retail is located only on the ground floor, so the amount of retail
space does not vary across scenarios. The model assumes that 85% of retail square footage is
leasable space, and that percentage is applied to total square footage to calculate the actual
leasable area.
• Rent per sf per year. The model's default assumption is that the new retail space will
achieve annual rents of $22 per square foot, triple net.3 This is much higher than current
rents on the Corridor, but the low end of rents currently achieved at the Spokane Valley
Mall, which are about $22 to $26 per square foot per year.
O Vacancy rate. The model's default assumption is that vacancy rates will be 10%, which
one would see in healthy retail market. The Corridor has much higher vacancy rates now,
but it is reasonable to assume that the Town Center will attract retail to Spokane Valley
that is not interested in locating there now. This vacancy rate is what the Town Center
will have at stable operation.
"Triple Net' refers to a rcpt it agreement where the renter pay rent plus real estate taxes, building insurance, and maintenance.
The term loosely meaui the rent pays for most of the building's operating costs. Actual rental leans vary from lease to lease.
Spokane Valley City Center. Pro Forma Financial Analysis ECO 19 April 2007 Page 8
l • Operating expense of gross income). Retail rents are typically triple net (that is, the
renter pays most operating expenses), so the pro forma subtracts 10% from revenues to
cover operating expenses.
Office
The pro forma assumes that the second floor of the multi-storied buildings are office space. The
very high-density scenario include an additional floor of office space, which doubles the office
square footage. The model's default assumption is that 85% of office square footage is leasable
space.
• Rent per sf per year. The model's default assumption is that the new office space will
achieve annual rents of $20 per square foot, full service. A lease rate of $20 exceeds the
current average asking rate on the Corridor of less than $15, but the new Town Center is
likely to attract office tenants who are unwilling to locate on the Corridor in its current
state.
• Vacancy rate. The model's default assumption is that vacancy rates will be 12% (and
1.5% for the very high density scenario). Vocal realtors estimated a wide range of office
space vacancy, from 10% to 20%. Current office vacancy in Spokane Valley is roughly
20%. On the Corridor, vacancies are much higher. Office space on the Corridor has high
vacancies now, and tenants are leaving. There is not growing demand for office space on
the existing Corridor. The pro forma assumes that office tenants will find the Town
Center desirable, so that vacancy rates will be much lower. The assumptions here are all
connected. If the town center builds a City dill, and that in turn helps anchor successful
retail, then it is not unreasonable to expect that some service providers will find it
advantageous to locate in office space in the Town Center. Offices are, after all, a major
use in any town center.
• Operating expense of gross income). Office rents are typically full service net, so
the pro forma subtracts 30% from revenues to cover operating expenses.
Residential: Rental
The pro forma assumes that the residential units over the retail is rented. The townhouses are
likely to be owner.-occupied, and discussed below. We assume that 95% of residential square
footage is leasable space.
Rent per sf per year. The model's default assumption is that the new residential space
will achieve annual rents of $12 per square foot, full service. We have not included a
separate rent for parking spaces. implicitly we are assuming the parking charge is rolled
into the $1.2 charge.
• Vacancy rate. We assulled that vacancy rates will be between 4% and 7%. Residential
demand in Spokane Valley is strong, and we believe the lower vacancy rate is appropriate
for. this use.
• Operating expense of gross income). The pro forma subtracts 30% from revenues to
cover operating expenses.
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 9
Residential: Owner-Occupied
The pro forma model assumes that the townhouses are owner-occupied. The model multiplies the
total number of units by an average sale price to determine total value.
• Average price per unit. The model assumes that the sale price ranges between $195,000
and $185,000: the average price declines as density increases. "These prices are based on
recent sales data in Spokane Valley and the Spokane metropolitan area.a The majority of
new houses in the Spokane metropolitan area sell for between $200,000 and $300,000.
About half of all home sales in Spokane Valley are between $150,000 and $250,000. On
a per-square foot basis, the price range in the forma is from $169 to $177 per square foot.
This is a mid-range price per square foot for new condos in the Spokane market. New
condos in the Spokane area are on the market for prices ranges between. $111 per square
foot to $315 per square foot. ECO assumed the townhouse will sell on the low-to-mid
side of new houses because the units will be relatively small. Actual prices will depend
on quality and design of the units.
Total property value
The pro .forma calculates the total property value for the rental properties with the net operating
income (NOT), and adds that figure to the value of the owner-occupied properties. To calculate
the value of rental properties, the model divides the'NOI by the desired capitalization rate.
• Desired capitalization rate. Local capitalization rates ("cap rates") for mixed-use
development range from 5.5% to 6.5%. The model's default assumption is a 6.0%
capitalization rate. The capitalization rate is a rough calculation derived from the ratio of
the first stable year (NOI) to the asking price. It is designed to measure whether the price
of the property is competitive with other similar properties-in this analysis we use a
capitalization rate equivalent to that of other similar properties and the net operating
income to estimate the approximate asking price for the property.5 Capitalization rates are
not equivalent to the return on investment for the property because they do not consider
future income from operations and resale of the property at the end of the holding; period.
• Property value of rentals (based on N01). This is the net operating income divided by.
the capitalisation rate, plus the value of the residential units.
The total value of the property ranges for $70.7 million to $117.5 million.
PROFITABILITY ANALYSIS
Tlvs section. of the pro forma compares development costs to total value, to determine what a
developer would be willing to pay for land to develop the City Center.
• Total property value. This is from the property value section of the model.
Total development cost. This is :from the development cost section of the model.
a Real Estate Research Committee "The Real Estate Report" Volume 30, Nttnibcr 1, Spring 2006.
s l3nieggeman, William B. and Jeffrey D. Fisher, Real F'slale Finance and bnvestorenrs. New York. McGraw-Hill, 200 E
Spokane Valley City Center: Pro Forma Financial Analysis . ECO 19 April 2007 Page 10
Net value of development (value minus cost). This is the total value with development
costs subtracted out.
• Required rate of return. This measures the rate of return on investment, expressed as a
compound rate of interest, over the entire investment period. The models default
assumption is a.15% rate of return, typical for ruxed-use development.
• Break-even land acquisition. The pro forma model calculates the price a developer
would pay for the land as it exists.
• Price per square foot. The same as the break-even price, but expressed on a per-square-
foot basis.
RESULTS
The pro forma shows the calculated price of land that a private developer would be wiMig, to
pay in order to earn a 15% rate of return. Table 1 shows the inputs and results in the pro forma
model.
Table 1 shows that, given all the assumptions, only the low- and medium-density scenarios show
the land having a positive value. This means that a private developer would be willing to pay
about S16 per square foot for land to develop the low-density scenario and $9 per square foot for
land to medium-density scenarios, . The high-density scenarios do not 'pencil out': the price per
square foot of land for the two high-density scenarios is negative. The very high density scenario
calculates that a developer would need to be paid about $39 per square foot to achieve a
reasonable rate of return. ECO's market analysis found that land on the Corridor ranges between
j $8 and $25 per square foot-a wide range. The assessed value of the Town Center land is about
$8 per square foot (assessed value is lover than market value).
Why don't the high-density scenarios pencil out? The two primary reasons have to do with the
cost of taller structures and parking.
The first reason is that tall structures are more expensive, on a per-Square foot basis, than shorter
buildings. The structural support requires more material, the building requires more complicated
heating and water systems, and insurance costs rise. It is common for suburban areas to have
rents too low to allow high buildings to pencil out. Tall buildings are profitable in urban centers
because urban centers can command higher rents than surburban markets. The City of Spokane
Valley is ainting to develop a small urban-like city center. If the project is successful, in the long
term the Town Center will achieve higher tents than what one sees now in Spokane Valley. That
is a different condition than what one observes on the Corridor now: rents are low and vacancies
are high.
The second reason is that, for a given site size, as the development gets taller, more space gets
built, which accommodates more people (as residents, employees, and customers); those people
must be able to get to the built space which, in suburban areas means priunarily that they must be
able to drive; for driving to be useful they must be able to park: thus, taller buildings mean more
parking spaces are needed. If the site size is constant, then eventually parking spaces must get
taller as the buildings do-structured lots will provide the needed parking. Structured parking
varies in cost, but a typical figure is $20,000 per space. Paying for structured parking costs more
l - than a developer is willing to pay.
Spokane Valley City Center: Pro Forma Financial Analysis
ECO 19 April 2007 Page 11
Table 1. Pro Forma for Spokane Vall
ey Town Center
Low Density Medium DcnrJry
High Density Very High Density
Assumption
2 Floon
3 Flooaz
4 Floors
6 nom
Site Description
Thai site area (Acres)
21,25
Buiidhg Foztprird (SF)
Floor Levels
Retail (1vtalti-storied)
64,90D
1
1
1
1
Retail (Singla-sID- d)
134,400
1
i
1
1
Offilm
0
1
1
2
Residential-Townhouse
25,400
2
3
3
3
Resideml.d-Over Retail
0
0
1
2
3
Civic
20,000
3
25
2,5
2.5
Total Square Feet
407,000
518,300
603,200
773,000
Retail(ttidtfstariod)
84,9DD
84,900
84,900
84,900
Retail (Single-started)
134,400
134,400
134,400
134,400
Office
84,900
134,930
84,900
1x9,800
Rosi&4idsl-TOwsuho,e
52,8W
79,200
79,200
79,200
Residential-over Retail
0
84,9W
169,BD0
254,700
CiAc
50,000
50,000
50,009
50,000
A•.*mge SF per Dwelling Unit
1,2D3
Number of DweCing Units
44
137
205
278
Parking FotYprfrrl (SF)
317,603
Parking Spaces in Surface Lots+On-Straet
1,154
Parking spancsJ9welling unit
1,5
P&IJng space.11,0W sf -Retail
4.0
Parldng specesr1,000 st-Office * Civic
- 3.0
Ncoded Parking Spaces
1,282
1,388
1,494
1,85=5
Structured Spares
128
234
3,40
701
Development Cost--
Singo-Story Retail Hard Cost por SF
$Be
598
286 _
588
TaL-rl Cast
511,558,400
8,400
511,55
$11,55
6,400
$ll,5S8,4A7
RetaiUOIAWResidential Multi-Story Had Cost. per SF
__5.110
.
_
5110
.
_
5140 _
$150
Total Cast
S/8,678,000_
_$26,017,000
_
547,5
44,000
S76,_41O,900
Rosideffiial-Tawnhouse Hard Cost per SF
$110
slid
_
_
Sib
$1,10
Total Cost
$5,800.,000
$8,712,000
5x712,000
S3,712,D00
Civic Hard Cast per SF
$140
_ _ -_$140
b140_ '
5140
TC,a1 Cost
$7,000,D00
57,000,000
57,030,000
57,000,000
Total Building Hard Costs (not InrJuding civic space)
$36,044,400
$48,287,400
$67,814,400
S961660.400
Parking
Surface parspam
52,500
52,364,364
$2,384,384
$2,384,364
S2,384,3B4
Structured per 2;*ce
$20,00D
52.502,925
54,8856425
$6,837,025
514,024,425
Total Building d Parldng Hard Costs.
$40,691,709
$55,357,209
S77,005,709
$113,089,209
Soft Cost of hard costs)
30°x6
$12,297,513
516,607,163
523,502,013
533,926,763
Total Construction Coats (not Irtcluding civic space)
S63,269,Z22
571,964,372
5100,108,722
$147,015,972
Dorrolilion Cast per Acne
515,400
`....'10,750
$31 B,750
$3%a,750
$3%8,750
Total DovrJopnvenl Cords
553,607,972
$72,283,122
$100,427,472
$147,334,722
Prop" Value-Ronta1 Proportlcr.
Retail
Gross Leasable Aroa
85%
-
%88,405:
186,405
1 B6,405
193,405
Her. per SF per Yonr
S22.0D
W. D3
'S22.00
SM00
Vacancy Rate
105%
10%
1035
10%
Operating Expense of Gross Income)
IQ%
_ 1096
-10%.
t o%'
Net Operating Income (NOI)
$3,321,737
$3,321,797
$3,321,737
53,321,737
Office
Gress LeasablCAea
9596
72,165
72,185
72,165
1x4,330
_
Rent
520,00
_ 520.00
$20.00
_
$2D.OD
Vacancy Rate
12%
12%
- 12%
15%
Opr-.alin(•, Expense of Grass income)
3096
3D%-
30%
30%
Not Operating lncoane IN01)
$889,073
$899,073
$889,073
$1,717,527
Residential
% Gross Lcm-stible Aran
95%
0
60,665
161,310
241,965
Rent
512.00
$1200
$12.00
512.00
vocanCJ Rato
4%
5%
7%
7%
Operating Erperlse of Gross Income)
_ _ _317%
30%
_ 30%
_ 30%
Net Oporating tneomo (NOq
$0
5643,627
$1,200,154
$1,890,231
Property Vatue•Ownor-Occupied Rasidcnces
Number of units
44
66
66
66
Avc.oge price por unit
S19ri,000 -
$185,000
_ S{885.00D
S%85.DD0
Total residential value (ownot~cupplod)
58,580,000
512,210,000
$12,250,000
512,210,000
Total Net Operation income
$4,210,810
$4,554,437
$5,470,954
$6,929,495
Desred capitalization rate
•6,096
Property ,n, Iueof rentals{bnsed on NOQ
$70,180,165
580,907,280
$91,182,727
$115,491,578
Total Property Value
$70.760,165
S93,117,Z9D
$103,302,727
$127,701,578
Profitability Analysis
Total property value
$78,768,165
593,1 %7,260
5103,392,727
5127,701,578
TN M ",e3opment cost
S53,607,972
572,283,122
Sl00.427,472
5147,334,722
Nat value of development (vaajo minus cost)
525,152,193
$20,834,158
S2,9a5,25S
-519,633,144
Rcgr.rred two of return
15;5
Break-oven land ocquisition
514,879,128
$6,638,426
•$:0,520,753
536,289,672
Price per square foot
3 16.07
S9.39
-311,37
-513.20
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 12
Source: ECONorthwest.
i"
FCO tested how different parking requirement affected the residual land value. Table 2 shows
the price per acre a developer would be willing to pay for land for different parking
requirements. The table shows that as the number of spaces affects the overall profitability of the
development. If the parking requirements are very low; only 2 spaces per 1;000 square feet of
office and retail space, the medium density scenario pencils out the about $1.6 per square foot.
The high parking requirements, 5 spaces per 1,000 feet of retail and 4 spaces per 1,000 square
feet of office cause the medium-density scenario to not pencil out at all. A developer would have
to be paid for the land. The sensitivity analysis shows that reducing parking does not make the
denser scenarios pencil out, but it improves the profitability of the low and medium density
scenarios.
Table 2.
Price per acre sensitivity analysis-parking requirements
Land Price.per Square Foot
Low
Medium
High
Very High
Parking Spaces
per
Density
Density
Density
Density
1,000 SF
2 Floors
3 Floors
4 Floors
6 Floors
Low
Residential
1.5
Retail
2.0
Office
2.0
$19.67
$15.97
-$1.$0
-$20.71
Medium
Residential
1.5
Retail
4.0
Office
3.0
$16.07
$9.39
-$11.37
-$39.20
High
Residential
1.5
Retail
5.0
Office
4.0
$6.13
40.56
-$21.31
-$51.54
Source: ECONorthwest.
Table 3 shows the results of a sensitivity analysis for rents. ECO tested a range of rents for the
three uses to determine how rents affected profitability. The "low" rent scenario represents the
low end of rents local realtors reported to ECO. The "high" rent scenario represent the high end
they reported. The sensitivity analysis shows that if the develop commands rents towards the low
end of the market, the medium density scenario does not pencil out. If the development is able to
command the high end of rents (retail rates comparable to the best space at the Spokane Valley
Mall), the medium-density scenario becomes significantly more profitable, and the high-density
scenario becomes profitable.
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 13
Table 3. Price per acre sensitivity analysis-rents
Land Price per Square Foot
\
Low
Medium
High
Very High
Density
Density
Density
Density
Rent per SF
2 Floors
3 Floors
4 Floors
6 Floors
Low Residential
$10
Retail
$18
Office
$15
$3.14
-$5.23
-$27.59
-$60.32
Medium Residential
$12
Retail
$22
Office
$20
$16.07
$9.39
-$11.37
-$39.20
High Residential
$15
Retail
$26
Office
$22
$26.92
$22.75
$4.41
-$19.66
Source: ECONonhwest.
RECOMMENDATIONS
We start with a summary of our conclusions, and then follow that summary with some
explanations and caveats.
0 The three-story mixed use development scenario is the one the City should aim for.
The very-high density scenario is too much of a push. The low-density scenario is too
far from the kind of city center that the City wants.
e The medium-density (hvo-story) scenario works better fnancially tinder the
assumptions in the pro forma, but:
® It gets the City less of what it wants for its City Center. It's a design issue, but the
massing of the third story provides a look and, ultimately, a density that the City
wants for its center.
m There are many examples of three-story centers of this type around the country,
even in denser urban environments. In other words, the model has worked in a lot
of other places.
O If the City finds in the next steps of analysis and negotiation that it cannot
financially support the necessary public costs to make the denser pattern work, it
has the option of dropping back to the mo-story development option., or, perhaps
better, something between the low- and medium-density scenarios, where three-
stories get built on parts of the develop to create appropriate massings.
e "Che City will have to put money into the development. At a minimum, it is likely to have
to pay for streets and public spaces. .
Consistent with all the general strategy that has been described several times during the
planning process, the City should. get a measure of reliable control. of the land, be clear
about what the City can and cannot pay for, and then issue a developer R.FQ as part of an
all-out effort to secure an investor/developer..
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 14
l The pro forma model yields results that are intuitively reasonable and can hardly be unexpected.
High-density, urban-looking development is highly desirable for a downtown, but it needs
downtown demand to pencil out.. f there is a place that many people-as residents, business
owners, employees, customers, students, tourists-want to be, they will pay higher prices to be
there. Right now, the Corridor is not a concentrated destuiation; it is a dispersed pathway. It is
certainly not a downtown.
Thus, the challenge for the City is to make a downtown where one has not evolved over time
from standard market forces. The pro forma suggests possible strategies: starting more modestly,
with lower density, or putting more public money into the project to get the desired form and
density from the start.
The pro forma analysis suggests that under a range of reasonable assumptions, the highest-
density scenarios would cost more to develop than they would earn, and that it might take many
years to absorb the new space. That result does not mean that the City should simply pursue the
low-density scenario. It means the City should decide that if it wants a lugher-density City
Center, it must be prepared to subsidize in some way, and it needs to make a concerted effort to
attract retailers.
There is no space like the proposed City Center in Spokane Valley. Existing development at the
site is older, low density, and not attractive to residential developers. To make the City Center
happen, the City must completely change the site. That is exactly what the FT3 design does.
Moreover, it must create most of the Center in one step: it does not have the armature of an
existing center that it can add to incrementally. It cannot aim to attract a few townhouses, a little
retail and some offices, then maybe some more housing, and then a restaurant, and so i'n. The
City must pursue the whole Phase i development the uses modeled in this pro forma-to create
an attractive urban place where there is none now.
In any large-scale development like this, timing is a problem. Buyers of residential units will find
the area more attractive if there is retail. But retail will find it more attractive if there are many
residential >.u-tits in the vicinity. The more residences nearby, the better for retail in pedestrian-
friendly environments. What comes first: the residential or the retail? Obviously it would be
great to have both instantaneously and simultaneously, but the real. world does not work that
way.
One strategy for the City-probably the best one given the cu-cumstarices-is for the City to get
a measure of reliable control of the land, be clear- about what the City can and cannot pay .for,
and then issue a developer R.FQ as part of an all-out effort to secure an investor/ developer. The
City should also make a concerted effort to attract retailers to the Center. This effort should be in
coordination with the City's retail consultant (Bob Gibbs) and a developer (who likely has ties to
certain retail chains). Such. an effort can shorten the absorption period for the retail uses. Ideally,
the majority of the retail space would have a tenant lined up before construction is finished.
The City's work on retail should try to bring a mix of national, regional, and local retailers to the
City Center to make it distinctive. Some examples of businesses that City could pursue:
• Specialty foods: e.g., Trader Joe's. A small but lughly successful. west-coast grocery
chain.. This could be an anchor store for the whole development. Competition with the
existing grocer at University and Sprague will be an issue.
• Bookstore: e.g., Borders or Barnes and Noble. These medium-box book stores
successfWly operate in mid-range markets. A large bookstore could function as a small
L_ anchor to the development.
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 15
Mid-level, m.id-sized clothing: e.g., Kohls. Given the objectives and design for the City
Center, a medium-box clothing store would be a great anchor. Given the level of buying
power in the area and the competing supply, landing such a retailer is not a simple task.
We mention Kohls because its size and quality seem to fit the design and the
demographic, its smaller size allows it to go into these kinds of developments, and it is
not in the Spokane market.
• Local restaurants. Restaurants will fill the development with people after business hours.
The City should work with local or regional restaurants looking to expand or open a spin-
off business.
Typical anchors for this type of development in larger, more developed markets would be
national clothing / furnishings retailers (e.g. Old Navy. Pier 1 Imports, TJ Vlaa~c). But many
national retailers are already located at the Spokane Valley Mall: the local market may not have
the household density and average incomes that create aggregate buying power sufficient to
power sales at identical stores that close together.
The cost of parking drives the high-density scenarios out of the profitable range. The City has
options to solve the problem.
e Build all or some of the parking with city funds, reducing the cost to the developers:
• Allow adjacent lots to become surface parkitig lots that supply parking to the Town
Center.
Lower the parking requirements. The model assumes that each dwelling unit will require
1.5 spaces, retail will require 4.0, and office space will require 3.0 spaces per 1,000
square feet. The question is whether the developer and lenders would respond to the
lower standards. That can happen in denser do«vntoARis with proximate high-density
residential and good transit those are not the conditions on the Corridor. The sensitivity
analysis showed that very low parking requirements cannot make the high density
scenario pencil out, but it does improve the profitability of the medium-density scenario.
In part because the Tovm Center is in a suburban area with relatively low rents and high
vacancies, the pro forma analysis is showing City will have to provide some kind of incentive to
get higher-density Town Center development. The cost and form of the incentive depends on the
expected cost of the development, and how flexible the City is willing to be. The City must be
clear about what it is willing to pay for. We expect the City to pay for the streets and
landscaping. Those costs are not included in the pro forma model.
In summary, there is nothing in the pro forma that suggests unanticipated new challenges: they
are the same ones that have been part of the discussion about the City Center from the beginning.
What the pro forma corroborates is the intuition that lower-density development will pencil out
for private development better in the short run, and high-density development will take more
public support. How much public support is a policy decision. The general thrust of public
discussion in Spokane Valley has been in favor of a real City Center, not a shopping mall. that
might pass as one. The public process has also defined that City Center to be something
approximately like what I;TB has designed, which is not like Anything on the Corridor or
elsewhere in Spokane Valley. This project is not just, or even primarily, about getting more retail
or housing. It about creating a City/Civic Center that benefits the citizens of Spokane Valley.
Such a center is partially a. public work, and competes for funding with other public works that
Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 16
the City might consider for its citizens. Like other public works, it may be justified as investment
that pays off in the long term for patient public capital.
i
There are many ways the City might make that investment. It could acquire the land frorn the
private wwners, and then provide the land to private developers at a reduced price. It could
provide public amenities (streets, streetscaping, parks, civic buildings). It could take a lease on
some of the conunercial space to underwrite some of the risk. These techniques and more have
bee.n_ used by other cities to jump-start development at higher densities and in different
configurations what the current market will support.
DATA SOURCES
ECONorthwest interviewed the following individuals to determine inputs to the pro forma
model:
• Nick Bentley, Chief plan reviewer, City of Spokane Valley
O Grant Person, Vice President, Tomlinson ]flack Commercial
f" O Scot Auble, President, Auble, Jolicoeur & Gentry
O Tom Quigley, President and. CEO, Kiemle & Hagood Company
e Doug Byrd, President, Byrd Real Estate
• Ron Wells, Partner, Wells and Company
e Bruce Jolicoeur, Principal, Auble, Jolicoeur & Gentry
0 Bill Reid. Johnson Gardner LL C.
ECOL\lorthwest also used these data sources:
G Real Estate Research Committee. The Real Estate Report. Regional research on Spokane
And Kootneai Counties. Volume 30, NLunber 1, Spring 2006.
0 RS Means, http://www.rsmeans.com/calculator/index.asp.
S0~6Ka-ne
,;ooOValley 11707 E Sprague Ave Suite 106 ❑ Spokane Valley WA 99206
509.921.1000 0 Fax: 509.921.1008 a cityhall@spokanevalley.org
Memorandum
To: David Mercier, City Manager and Members of City Council
From: Scott Kuhta, Senior Planner
CC: Nina Regor, Deputy City Manager
Date: May 29, 2007
Re: Sprague/Appleway Revitalization Plan Update
This memorandum reviews the schedule for adoption of the Sprague/Appleway -
Revitalization Plan and presents considerations for developing an implementation program.
The Subarea Plan will provide a policy framework for revitalization. It will also be a
regulating document, one that will introduce Form-based zoning to the Spokane region.
Plan Adoption Schedule
The Sprague/Appleway Revitalization Plan is scheduled for delivery to City staff by the end
of May, 2007. This "administrative draft° will be an internal draft for staff (administrative)
review. Staff will review and edit the consultants' draft as necessary to ensure consistency
with the Comprehensive Plan and local vernacular.
Once staff review is complete, the Draft SpraguelAppleway Revitalization Plan will be
available for public review. A public involvement and education program will be developed
to ensure interested parties have sufficient opportunity to review and comment on the Draft
Subarea Plan.
Public hearings before the Planning Commission will likely take place in late summer 2007,
with Council hearings in early fall. The final plan is anticipated to be adopted by the end of-
2007.
The Subarea Plan will include 3 sections, titled as follows:
Book 1: Community Intent and Guiding Principles - Describes the community's vision
and the intended outcomes.
Book 2: Development Regulations - Establishes new form-based regulations for
development, including site layout, landscaping, parking, signage and
architectural standards.
Book 3: City Actions - Proposes capital improvements and other actions the City should
consider for plan implementation.
Form-based codes are beginning to take hold in many parts of the Country, but they are
unfamiliar to most of Spokane's public and private planners and developers. Traditional
zoning focuses on segregating different types of land uses, making it nearly impossible to
mix residential with higher-intensity commercial and office uses. Form-based codes are
much more flexible with regard to the use of property but more restrictive on how buildings
look and are located on the land.
The main purpose of adopting a form based-code is "to achieve a specific urban. form... by
controlling the physical form of development, with lesser focus on the actual use of land.
Form-based codes address the relationship between building facades and the public realm,
the form and mass of buildings in relation to one another and the scale and types of streets
and blocks" (Form-Based Codes Institute).
Representatives from Freedman, Tung and Bottomley (FTB) will conduct a staff orientation
session on June 7. This orientation session is the final consultant deliverable under the
Sprague/Appleway Revitalization Plan contract. Council may consider optional consultant
services provided by FTB to assist the City through the plan adoption process. The extra
consultant services would include support for City Council and Planning Commission during
the public hearing process. FTB would be available to Council for study sessions and/or to
attend hearings and respond to technical questions. The extra services may also include
editing the plan document as directed by Planning Commission and Council. The plan
document will include a large number of graphics and FTB has more expertise than City
staff in graphic design and document layout. A preliminary estimate for extra services
ranges between $35,000 and $45,000.
Environmental Review
Community Development staff will prepare a Supplemental Environmental Impact Statement
(SEIS) to meet the requirements of the State Environmental Policy Act. The SEIS builds on
environmental analysis completed as a part of the Spokane Valley Comprehensive Plan
adoption. Citizens will be able to review the environmental documents concurrently with the
review of the Sprague/Appleway Revitalization Plan.
Subarea Plan Implementation -Steps Underway
As previously mentioned, the draft Revitalization Plan will include a section titled 'Planned
City Actions`, which are actions the City could consider taking to implement the goals and
vision of the plan.
City Center Project
Early in the Sprague/Appleway Revitalization Plan process, Michael Freedman
recommended to Council the east side of University Road between Sprague and Appleway
as the preferred location to start a City Center. Freedman asked Council if they concurred
and Council unanimously directed the planning team to begin analyzing the feasibility of
starting the City Center at that location. Freedman suggested 3 options to pursue the
development of a City Center:
1. Master plan and zone the preferred site for and then wait for the market to respond.
2. Master plan and zone the preferred site and then "stimulate" developer interest by
constructing civic buildings and/or other capital improvements such as streets,
sidewalks and parks.
3. Master plan and zone the preferred site, assemble the property by purchase or
option, market the city center plan to developers through a competitive Request for
Proposals (RFP) process and then resell the property to the selected developer.
Council expressed an interest in exploring Option 3. To that end, Michael Freedman
suggested that the City would be best served by hiring a consultant with expertise in real
estate negotiations and creating public/private partnerships. City Council authorized staff to
issue an RFQ for City Center consulting services, not to exceed $50,000.
i
After issuing the RFQ and interviewing 3 qualified consulting teams, the City entered into an
agreement for consultant services with ClearPath, LLC. The City decided to split the
contract into two phases, with the fist phase totaling $15,000. Tasks to be completed under
the initial contract with ClearPath include clarifying the City's intentions and defining a
strategy to securing land for the City Center. ClearPath will identify barriers to success and
will outline opportunities for Council's direct involvement if a higher role in developing a City
Center is desired.
On May 8-9, ClearPath, LLC, conducted interviews with City Council, staff and property
owners in order to begin aligning the interests of all parties and to understand how easy, or
difficult, it will be to assemble the property. ClearPath is schedule to complete their tasks
under the current contract by July 1, 2007, including a written progress report to staff and
Council.
After discussions with Council, ClearPath and staff will prepare a contract and Scope of
Work for the second phase of their project, which will include more detailed discussions and
possible negotiations with property owners.
Michael Freedman also recommended that the City consider hiring a consultant to provide a
"second opinion" on the viability of creating a mixed-use City Center at Sprague and
University.
Bob Gibbs is a highly sought-after expert on retail and mixed-use development, particularly
in downtowns and new Town Center developments. The City has contracted with him for
initial services totaling $7,500. Gibbs will review the planning assumptions, market data and
City Center master plan prepared by Freedman and ECONorthwest and will provide
feedback on the master plan design. He will also conduct a preliminary retail market study
based on an estimated trade boundary.
The market study will indicate the amount of surplus and leakage retail spending by
business type, including restaurants, grocery stores, apparel, etc. This work will provide
needed information for Council to use to determine how aggressively to pursue the
development of a City Center.
A multi-departmental staff team has been meeting regularly to direct the work program for
the City Center project, including Mike Connelly, Neil Kersten, Greg McCormick, Nina Regor
and Scott Kuhta.
Subarea Plan Implementation -Additional Steps
Following is a summary of some other tasks the City could undertake to implement the
Revitalization Plan.
City Center EIS/Planned Action Ordinance
The Washington State Environmental Policy Act (SEPA) allows jurisdictions to prepare a
detailed Environmental Impact Statement (EIS) and Planned Action Ordinance for smaller
geographic areas, such as the proposed City Center, as a part of the Subarea Plan
development process. A Planned Action Ordinance is a thorough environmental review of
potential environmental impacts within a defined area at the planning stage in order to
determine the potential impacts of development in advance of said development.
This environmental review reduces permit-processing time, saves developers the cost of
preparing project specific environmental documents, and creates certainty for developers by
identifying project mitigation requirements in advance of development proposals.
Planned Action Ordinances require a significant upfront cost by the local jurisdictions as the
work is typically done by a private consulting firm. Preparing an EIS/Planned Action
Ordinance for the City Center will likely cost the City around $150,000.
Auto Row
The Subarea Plan will include action items for implementing the vision for the gateway
commercial area (auto-row). An implementation plan for this area should have the input
from the auto dealers and City Council may consider funding a catalyst project, one that
shows the auto dealers that the City is serious about strengthening their position and
visibility as a regional destination for automobile purchases.
Capital Improvements
The Subarea Plan will include a prioritized list of capital improvements that are considered
necessary"to successfully revitalize the corridor. The plan will include a proposed phasing
schedule to create a complete two-way system for Sprague and Appleway. Initial projects
will include the extension of Appleway east of University to Evergreen and turning Sprague
and Appleway into a two-way system around the proposed City Center. The Draft
Revitalization Plan will not include cost estimates for proposed capital improvements.
Once the plan is adopted, City staff will prepare capital cost estimates and phasing
schedules for Council's consideration. City Council will consider capital programming for the
Sprague/Appleway corridor in balance with the needs for capital improvements throughout
the City. Adoption of the Revitalization Plan will put the City in good position to compete for
special grants and loan programs, such as Washington State's Community Economic
Revitalization Board (CERB) grants.
Development Incentives
A significant part of any redevelopment plan is to identify various tools and programs that
can used to expedite new development. Tools such as Tax Increment Financing (TIF) and
Mutli-Family Tax abatement districts have been used throughout the state to successfully
spark desired development; they have also performed poorly for some jurisdictions. Such
programs require careful, thorough analysis and public scrutiny before they are
implemented.
Public Education
Once the Subarea Plan is adopted, there will be an initial need to provide education and
training opportunities for property owners, developers, private engineers and designers so
that they know the new requirements for developing in the Sprague/Appleway corridor.
l
SpCITYokan ~
jValleye
11707 E Sprague Ave Suite 106 ♦ Spokane Valley WA 99206
509.921.1000 ♦ Fax: 509.921.1008 ♦ cityhall®spokanevalley.org
Informational Memo
Date: May 25, 2007
To: City Manager, David Mercier and Members of City Council
From: Steve Worley, Senior Capital Projects Engineer
Neil Kersten, Public Works Director
Re: Sprague/Appleway' Corridor Discussion
At the May 22 Council meeting during the Motion Consideration for the Appleway
Avenue Extension, MTP Request several issues/questions were expressed regarding
the Sprague/Appleway Corridor. This memo addresses some of these issues.
1 IVITP AND GRANT APPLICATION SCHEDULES
J • The SRTC updates the Spokane Regional Metropolitan Transportation Plan (MTP)
every three years.
• Based on Council's action Tuesday night, staff will submit a letter to SRTC
requesting that the 2007 update to the MTP include the following:
1) The extension of Appleway Avenue from University Road to beyond Sullivan
Road as a two-lane, two-way residential boulevard,
2) The reduction of Sprague Avenue from seven lanes to five lanes east of
University Road, and
3) The conversion of the existing one-way couplet between Argonne
Road/Dishman-Mica Road and University Road to two two-way streets.
• This MTP request focuses onl on that portion of the corridor east of Argonne Road.
The existing couplet west of Argonne, and any potential future changes (conversion
to two-way?), does not have to be included in the MTP.
• If Council wishes to change the above Appleway Extension proposal, staff would
need to have that decision by approximately June 15 so SRTC has time to do an air
quality analysis on the proposal and have results ready to be included in the SRTC
Boards' packets by July 2.
_ • A 2007 update of the MTP is scheduled to go before the SRTC Board for approval at
their July 12th meeting.
Informational Memo .5/25/07
Sprague/Appleway Corridor Discussion Page.2
• Staff proposes to submit a TIB grant application for additional funding for the
extension of Appleway. It will take time to write the grant application, prepare an
Engineer's Estimate, and gather the necessary figures and attachments. Any
changes to the Appleway Extension project would be needed by August 1. TIB
applications are due August 31
The project in which we submit a TIB grant application must be on the MTP
If the Appleway Extension project gets amended into the 2007 MTP and decision is
made later to revise the scope of the project, we would need to formally request this
change to the MTP. This requires getting a favorable review by SRTC staff including
an air quality analysis, approval from the TTC (Transportation Technical Committee),
and then approval from the SRTC Board. This process may take a few months.
REGIONAL TRAFFIC MODEL
• The transportation modeling for the Sprague/Appleway Revitalization Plan was
based on the "interim" regional traffic model completed by SRTC back in late 2005.
This was simply a conversion of the old T2 model to the new VISUM traffic modeling
software.
• In 2006 SRTC embarked on the development of a "new, more robust" regional traffic
model. This "news"model would be built with all new GIS data, include the results of +
SRTC's Home Interview Survey, and include bus routes and schedules. I
• The 2030 model showed significant traffic growth but no Level of Service problems
at any Valley intersections (all intersections were at LOS D or above) and no
capacity problems on any Valley roadways. The "new" model has recently been
reviewed by another consultant for "refinements" to the intersection delay functions
and road capacities.
• The 2005 version of the "refined" "new" regional traffic model was reviewed by
SRTC staff last week and sent back to the consultant for revisions. Once the 2005
model is finalized then the 2030 model will be developed. Then SRTC will do a
review of the 2030 model to see if additional refinements are needed. It is unknown
at this time when the final "refined" "new" 2030 regional traffic model will be available
for use by the jurisdictions.
• The recommendations of the Sprague/Appleway Revitalization Plan need to be re-
evaluated with the "new" model.
PUBLIC WORKS COMMENTS
A significant amount of work is needed to refine the project scopes including
developing detailed plans showing cross street access, streetscapes and on street
parking requirements and development of preliminary cost estimates for each stage
of the corridor improvements. A consultant will be needed to accomplish this work.
Other issues include: Do Sprague and Appleway west of Argonne need to be
converted to two-way before Appleway can be extended east of University? Can we
Informational Memo 525/07
Spmgue/Appleway Corridor Discussion Page 3
get the intersections at Argonne/Dishman-Mica to work effectively with one-way
roads on the west and two-way roads on the east? Is there adequate existing right
of way and is new right of way required for cross streets? Which streets and
improvements are paid for by developers and what is paid for by the City?
• Schedules need to be developed for the implementation of each stage of the corridor
improvements taking into consideration potential funding sources.
• Option B: If it is determined that the corridor east of Argonne/Dishman-Mica should
be two-way (currently recommended), and the corridor west of Argonne/Dishman-
Mica remain one-way (not currently recommended), more detailed work is needed to
redesign the intersections at Argonne/Mullan/Appleway/Dishman-Mica. Based on
the current analysis, these intersections will function at LOS 'F' under this scenario.
See Figure 1 below.
4-
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FiGm 1: SYNCHRO MODEL DIAGRAM - ALTERNATIVE B. ONE-WAY COUPLET FROM 1-80 To ARGONNE1D4sHmAN-MICA, Two-
WAY SPRAGUE ANo APPLEWAY EAST of AROONNE/DISHMAN-MICA