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2007, 06-02 Special Council RetreatF' ACENDA SPOKANE VALLEY CITY COUNCIL R.I 'rREAT/W0RKSH0P SaturcLay, June-), 2007 9:00 a.m. to approximately 3:00 pan. Councilmember Dcaenny's Lake Cabin: 29897 N. Isle View Road Spirit Lake. Idaho ii3869 TENTATIVE AGE NDA TOPICS: Urnji' 1l)(IS' C,.r~rr»cil llwi~rt Crc►c►l~ Krvirw M07 Cowscil lhalget G wA J. Financied rorcca v a. Drq(t Bicrinem Plim 5. Sprakuo*?p1ci4vy R.,ritaiju km Plim 6. Fina.fnre Chuiorrc Rurullx~uca &atntmw rrtr Tltr ~irrrrrh►•~f tnurc►►riua) memo will he acrd to gruel r d,L dm-'s cfiscussfa►rs Spo°~ane ValYey~ 11707 E Sprague Ave Suite 106 ♦ Spokane Valley WA 99206 .J 509.921.1000 ♦ Fax: 509:921.1008 ♦ cityhalt@spokanevaltey.org Memorandum To: David Mercier, City Manager and Members of Council From: Nina Regor, Deputy City Manager Date: June 2, 2007 Re: Background Information for June 2007 Retreat The purpose of this memo is to provide a summary of the intent of each scheduled agenda item, as well as any necessary attachments. Agenda Item # 1: Draft 2008 Council Budget Goals 1. Continue monitoring wastewater issues, including governance of wastewater facilities, and pursuit of the most efficient and economical methods to ensure the continuation of wastewater discharge licenses. 2. Refine initial departmental si_x year business plans in order to identify and incorporate fiscal impacts into a strategic financial plan. 3. Formulate a Six-Year Strategic Financial Plan by fitly 2008 that forecasts expected revenues and expenses; incorporates the cost elements of departmental business plans; identifies fiscal constraints; and proposes formulas for Council consideration that institute sustainable budget-balancing approaches and itemizes necessary service reductions or revenue increases or combinations thereof. 4. Initiate implementation of the Sprague/Appleway Revitalization flan. 5. Adopt area-wide rez oning proposals consistent with the comprehensive plan that reflect appropriate adjustments in zoning designations. 6: Perform an analysis of a land owner initiated request for annexation. 7. Develop a Shoreline Master Plan and draft implementing regulations. Agenda Itcjn # 2: Review 2007 Council Budget Goals At each retreat, time is set aside for Council to consider its most recently adopted Goals, to ensure they are up to date. Following are the seven adopted 2007 Council Budget Goals. They provide the basis for the 2007 Work Plan. I . Continue monitoring wastewater issues, including governance of wastewater facilities, enhanced citizen awareness of options for the future and pursuit of the most efficient and economical use of allowed wastewater discharges. 2. Explore the available telecommunications infrastructure that may be accessed by public institutions, residents, and businesses within Spokane Valley. 3. Adopt a sub-area plan for the Sprague Corridor and initiate the implementation of achievable recommendations. Background Information for ,Tune 2007 Retreat, continued June 2, 2007 Page 2 of 2 4. Amend the comprehensive plan to reflect accommodalion of Spokane Valley population projections within and adjacent to city limits and to outline annexation policies. 5. Adopt a Street Master Plan and draft a financial strategy to implement the plan. 6. Establish departmental priorities and incorporate diem into a six year business plan for each department that includes forward looking budget and funding implications. 7. Adopt a Uniform Development Code that implements the Comprehensive Plan. Agenda Item # 3: Financial Forecast The purpose of this item is to review the latest revenue and expenditure projections for the General, Street, and Capital Funds for 2007-2012. We do this to identify financial problems that may be on the horizon. This allows us to be.better prepared for these problems. In anticipation of the 2008 budget, the forecast has been extended to 2013. (See Attachment 9 1) Agenda Item # 4: Draft Business Plan Attached is a draft of the first iteration of the City's Business Plan. Staff will use Council's feedback on the proposal to draft the Business Plan document, and to develop the 2008 preliminary budget. (See Attachment # 2) Agenda Item # 5: Sprague/Appleway Revitalization flan The purpose of this item is to further discuss plans for implementation of the SpraguelAppleway Revitalization Plan. A Council Study Session is planned for May 29, 2007. Attached are the materials from the Study Session. (See Attachment 9 3) Agenda Item # 6: Fundinll Options/Bond Issues The purpose of this item is to discuss financing options for the operating budget and capital improvement projects. Agenda Item # 7: Brainstorming Brainstorming is a lateral thinking process. It asks that people come tip with ideas and thoughts that seem at first to be unrelated, too big of an issue, or too minor. We can then change and improve them into ideas that are useful and productive. Attachments: I. Agenda Item # 3 Financial Forecast 2. Agenda Item # 4 Draft Business Plan 3. Agenda Item # 5 Sprague/Appleway Revitalization Plan 4. Information Only: a. 2007 City Work Plan Update 1 AT1HCri WENT A.i City of Spokane Valley Multiyear Financial Plan - General Fund - Problem Statement #1 5!22107 r r•r rt n 14 rD rr General Fund Revenues: Sales Tax Property Tax Gamb5ng Tax Franchise FeeslBus, Reg State Shared Revenues Service Fees Fines & Forleituios Rmeation Program Fee= Inlerfund Transfers Investment Interest Carryover from prior yr Total General Fund General Fund Expenditures: Legislative Executive & Legislative Public Safety Deputy City Manager Finance Legal Hunan Resources Public Works Planning Budding Parks Admin Recreafion Aquatics Senior Centor CenlerPlaoe Transfer to Capital Transfer to Street Fund Transfer to Civic Facilities ConterPlace Deprec. Library Transfer to Serv. Level General Government Total General Fund Leis constant tune bal. Carryover to next yr 2007 2008' 2009 2010 2011 2012 2013 Estimate Estimate Estimate Estimate Estimate °timate Estimate S 18,790,000 S 19,165,800 $ 19,549,116 x $ 18,600,000 $ 18,972,000 $ 19,351,440 S 19,738,469 S 9,65n,000 5 9,848,500 S 10,044,965 5 10,245,415 S 10,447,869 3. 10,852,346 $ 10,858,871 $ 660,000 S 880,000 S $80,000 S as0,000 S 880,000 S 880,000 $ 880,OD0 $ 845,000 $ 853,450 S 881,985 S 870,605 $ 879,311 $ 888,104 S 896,985 $ 1,142,000 $ 1,170,550 $ 1,199,814 $ 1,229,809 $ 1,260,554 $ 1,292,068 S 1,324,370 $ 1,900,000 $ 1,900,000 $ 1,900,000 $ 1,900,000 $ 1,900,000 $ 1,900,000 5 1,900,000 5 1,300,000 S 1,300,000 $ 1,300,000 $ 1,300,000 5 1,300,000 S 1,300,000 $ 1,300,000 5 450,000 S 507,000 S 512,070 S 517,191 S 522,363 S 527,580 $ 532,862 S 60,000 S 84,800 S 89,888 S 95,281 S 100,998 S 107,058 $ 113,482 $ 410,000 $ 414,100 $ 418,241 S 422,423 $ 426,647 S 430,913 $ 435,222 $ 6900,000 $ 3,349,383 $ 7,175,582 $ 9,145,741 $ 7,728,637 $ 4,071,892 S (1,937,566) $ 42,347,000 S 39,471,583 $ 43,931,661 $ 45,207,465 S 44,418,379 S 41,401,410 $ 36,042,695 $ 290,393 $ 320,104 $ 3415,713 S 373,370 $ 403,239 $ 435,499 S 470,338 $ 546,921 $ 590,675 S 637,929 $ 688,963 $ 744,080 S 803,606 S 687,895 $ 18,256,400 $ 19,716,912 $ 21,294,265 $ 22,097,808 $ 24,837,631 $ 26,824,641 S 28,970,012 $ 522,012 $ 563,773 $ 608,875 $ 657,585 $ 710,192 $ 767,007 $ 828,367 S 782,052 S 845,264 $ 912,885 $ 985,916 S 1,064,789 S 1,149,973 $ 1,241,970 5 389,933 S 442,000 S 477,360• $ 515,549 S 556,793 $ 601,336 $ 649,443 $ 165,944 $ 179,220 S 193,557 S 209,042 $ 225,765 5 243,826 S 263,332 $ 1,476,000 $ 1,713,000 $ 1,850,040 $ 1,958,043 $ 2,557,887 $ 2,330,518 5 2,516,959 $ 1,114,967 $ 1,225,000 $ 1,323,000 $ 1,428,840 $ 1,543,147 $ 1,666,599 S 1,709,927 S 1,295,309 S 1,475,000 $ 1,593,000 $ 1,720,440 S 1,858,075 $ 2,006,721 $ 2,167,259 S 905,309 S 977,734 $ 1.055.952 $ 1,140,429 S 1,231,663 $ 1,330,196 $ 1,436,612 S 242,947 S 262,383 S 281,373 S 306,043 S 330,527 S 356,969 S 365,526 $ 259,450 $ 280,206 $ 302,622 $ 326,832 $ 352,979 S 381,217 $ 411,715 S 76,201 $ 82,297 $ 68,881 $ 95,991 $ 103,671 $ 1111,964 S 120,921 $ 603,179 $ 651,433 $ 703,548 $ 759,832 $ 820,618 $ 888,268 $ 957,169 $ 4110,000 S 20,000 $ 20,000 $ 20,000 S 20,000 $ 20,000 $ 20,900 $ 900,000 $ 2,346,000 S - S S S $ S - $ - $ S - S $ S $ $ 20,000 $ $ $ S S $ 361.000 S $ - $ $ - $ - $ - $ 3,046,000 S 2,951.000 $ 3,093,920 $ 3,254,147 S 3,385,431 $ 3,422,636 $ 3,566,370 33,997,617 32,296,001 34,784,921 37,478,828 40,346,486 S 43,338,976 S 46,698,417 (5,000,000) 3,349,383 7,175,582 9,146,741 7,728,637 4,071,892 (1,937,566) (10,653,722) x Law enf- Sales tax ends; after 2009 - SST affect unknovm 0- Street Fund - Problem Statement #2 MAY 22, 2007 Street Fund - 4 Beginning Fund Bal Diverted Road Tax Interest Income Transfer from General Fund Motor fuel tx t misc 2007 2008 Estimate Estimate 2009 2010 2011 2012 2013 Estimate Estimate Estimate Estimate Estimate $ 4,930,000 $ 4,003,628 S 2,093,186 $ 15,308 $ (2,444,000) $ .(5,272,053) $ (8,498,350) $ 40,000 $ 10,000 $ - $ - $ - $ - $ $ 160,000 $ 85,000 $ 40,000 S - $ - $ - $ - $ 900,000 $ - S - $ - $ - S - S 2,150,000 $ 2,150,000 S 2,150,000 $ 2,150,000 $ 2,150,000 S 2,150,000 $ 2150.000 $ 8,180,000 $ 6,248,628 $ 4,283,186 S 2,165,308 S (294,000) $ (3,122,053) S (6,348,350) Expenditures S 4,088,372 $ 4,155,442 $ 4,267,878 $ 4,609,308 $ 4,978,053 ' $ 5,376,297 $ 5,806,401 Savings from 07 budget $ (150,000) Carry over costs from 2006 $ 238,000 Ending Fund Balance $ 4,003,628, S 2,093,186 $ 15,308 $ (2,444,000) $ (5,272,053) $ (8,498,350) $ (12,154,751) City of Spokane Valley - Capital Improvement Program Funding Problem Statement #3 MAY 22 2007 Year 2007' 2008 2009 2010 2011 2012 2013 RESOURCES: BEG. BAL $ - $ 5,860,000 $ 4,490,000 $ 3,593,000 $ 1,444,000 S 105,000 $ 397,000 ARTERIAL ST FND S 882,000 S - $ - $ - $ - $ - $ - CAP PROJECTS REET 1 $ 4,460,000 $ 1,100,000 S 1,100,000 $ 1,000,000 $ 1.,000,000 $ 1,000,000 S 1,000,000 SPEC. CAP PROJECTS REET 2 $ 4,600,000 $ 1,100,000 $ 1,1100,000 $ 1,000,000 $ 1,000,000 S 1,000,000 $ 1,000,000 PARKS CAP. IMPRV. FUND $ 1,350,000 S - $ - $ - $ - $ - $ - INVESTMENT EARNINGS $ 200,000 $ 150,000 S 100,000 $ 15,000 $ - $ - $ - SPOKANE COUNTY $ 1,600,000 $ - $ - $ - $ - $ - $ - STATE - UNIV- PARK $ - $ 800,000 $ - $ - S - $ - $ - PARKS GRANT $ 200,000 $ - $ 200,000 S - $ 50,000 $ - S - STORM WATER DRAINAGE $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 COUNTY STEP PROJ.-STORM DRN S 150,000 $ 200,000 $ 200,000 $ 200,000 S 200,000 $ 200,000 $ 200,000 GEN. FUND $ 410,000 $ 20,000 $ 20,000 S 20,000 $ 20,000 $ 20,000 $ 20,000 TOTAL RESOURCES $ 14,152,000 $ 9,530,000 $ 7,510,000 $ 6,128,000 $ 4,014,000 S 2,625,000 $ 2,917,000 EXPENDITURES: PARKS $ 3,550,000 $ 900,000 S 500,000 $ 580,000 $ 100,000 $ 200,000 $ 100,000 UNIVERSAL PARK $ 800,000 DEBT SERVICE PYMTS $ 187,000 $ 185,000 $ 187,000 $ 184,000 $ 185,000 $ 186,000 $ 186,000 "CITY MATCH ON 6-YR TIP STEP STORM DRAIN IMPRVMTS $ 150,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 PINES/MANS & CORRIDOR #2 S 230,000 $ - $ . - $ - S - $ - $ - TIP MAY 24 VERSION $ 3,875,000 $ 2,655,000 $ 2,730,000 S 3,420,000 $ 3,124,000 $ 1,342,000 $ 2,663,000 STORM DRAIN IMPROV. $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 i TOTAL EXPENDITURES $ 8,292,000 $ 5,040,000 $ 3,917,000 S 4,684,000 $ 3,909,000 $ 2,228,000 $ 3,449,000 CARRYOVER TO NEXT YEAR $ 5,860,000 $ 4,490,000 S 3,593,000 $ 1,444,000 S 105,000 $ 397,000 $ (532,000) 'Beg. Fund balance & 07 receipts "Waiting for conSUItant's plan Annual Projected Shortalls May 22, 2007 Problem Statements #1, #2 & #3 2007 2008 2009 2010 2011 2012 2013 Shortfalls: ##1 General $ (1,937,566) S (8,716,156) #2 Street $ (2,444,000) $ (2,828,053) $ (3,226,297) (3,656,401) ##3 Capital $ (532,000) $ _ $ (2,444,000) $ (2,828,053) $ (5,163,863) $ (12,904,557) "Waiting for consultant's plan CITY OF SPOKANE VALLEY MULTIYEAR FINANCIAL PLAI\' AT 6-2-07 SIGNIFICANT POINTS GENERAL FUND (Problem statement 1): 1. Major increases coming in 2008 as departments develop their business plans 2. Cost of property options or property purchase for city center is not included 3. Additional consulting work for city center will need to be a budget amendment and is not included in these projections 4. Sales tax revenue estimated at 2% increase each year 5. Property tax estimated at $1.60/per thousand dollars of taxable value 6. Discontinued the General Fvmd transfer to Street Fund 7. General Fund increase in expenditures is estimated at 80/o/year 8. General fund deficit has been pushed out to 2012 9. When sales tax revenues weaken; expect to see building and planning revenues weaken as well 10. CenterPlace depreciation'? 11. Reduction in transfers to reserves helps Gen. Fund cash flow STREET FU ID (Problem statement 2): 1. Deficit still appears in-2009-2010 2. In late 2006 the city council approved a reduced Street Fund budget to control the deficit. Those estimates used here. 3. Consultant's report on streets may change operating costs 4. Assumes General Fund transfer to Street Fund ends after 2007 CAPITAL (Problem statement 3): 1. 2007 projected costs are close, later years are difficult to predict 2. Consultant's report on streets may change project priorities & costs 3. There will always be more projects than money 4. Parks projects areas included in the facilities section of the comprehensive plan SCM'OFIane jUalley June 2, 2007 Council/Staff Retreat, Attachment 2 11707 E Sprague Ave Suite 106 ♦ Spokane Valtey WA 99206 509.921.1000 ♦ Fax: 509.921.1008 ♦ cityhallgspokaneva[icy.org Memorandum To: City Manager David Mercier and Members of City Council From: Nina Regor, Deputy City Manager Date: June 2, 2007 Re: Draft 2008 - 2013 Business Plan: Initial Proposal (General Fund) One of Council's adopted 2007 budget goals is to create the City's first six-year Business Plan, which will be updated on an annual basis. The intent is to incorporate the first year of the Plan into the 2008 budget process. It is important to note that the Business Plan, even after it is finalized and adopted, is still the first iteration of the City's efforts in this area. Since we are still in our five-year start-up mode, many of our programs and services are still under development. This makes it difficult in sortie cases to create a dependable six year perspective. The start-up mode also means that there are sonic things that we aren't doing at all right now and on which we have not had the opportunity to initiate a policy discussion. To address this, the initial proposal is divided into two sections - first, the proposal itself, which includes the issues and associated staffing and cost proposals. The second section identifies pending ideas. These are a heads up of issues and proposals that are worth further consideration. The initial proposal of the Business Plan includes thirteen new positions over the six year period. The annual cost spwis from $360,000 in 2008 to $925,000 in 201.3. The effects of this proposal on the six-year financial forecast are attached on blue paper. The purpose of this memo is to stimmarize the initial proposal. Staff will use Council's feedback on the proposal to draft the Business Plan document, and to develop the 2008 preliminary budget. Part I: the Initial Proposal Each department identified issues and goals along with strategies for addressing them. They are described below. The following table summarizes the costs of the initial proposal by department. A spreadsheet providing more detail is included at the end of the memo. Business Plan Initial Proposal (General Fund), continued .June 2, 2007 Page 2 of Executive & Legislative Support (Exec) The Executive & Legislative Support department provides the City Council and employees with leadership, useful advice and implementation of best practices to achieve adopted goals and deliver quality services to the community. It includes the legal and City Clerklelections functions of the City. The proposal takes into consideration the following goals: • Facilitate the achievement of annually established Council Goals • Formulate a sir-year Strategic Financial Plan by July 2008, and propose formulas for Council consideration in composing a budget balancing approach • Implement citywide document management system l • Assist other departments in analyzing and mapping existing processes to determine compliance with the law and whether higher levels of customer service can be achieved Operations & Atbninistrative Services (O&A) The Operations & Administrative Services Department supports the organization by assessing and addressing the needs of customers and employees, empbasizing public accountability, fostering commtulity involvement, and managing the delivery of services to the citizenry. It includes the human resources, central reception, public information, and contract administration functions of the City. The proposal takes into consideration the following goals: • Respond to internal and external impacts on the City's human resources function in order to recruit and retain a well-qualified workforce • Enhance comnuuiity involvement in City government 'The City is still analyzing the best document management system. The City has set aside. S250,000 for implementation of a document imaging system. This proposal does not include additional systems funding. Business Plan Initial Proposal (General Fund), continued June 2, 2007 Page 3 of 6 • Formalize public accountability in City operations through incorporating the Business Plan into decision making, conducting a periodic community survey, and establishing a toolbox for evaluating the City's contract services Finance & ILrfonn atiou Technology (FIT) Finance & Information Technology provides duality financial info-nation to Council, citizens and City departments. The Information Technology Group (IT) seeks to understand technology and how it can best serve internal and external IT users. The proposal takes into consideration the following goals: • Assist in the implementation of the Sprague-Appleway Revitalization Plan, especially in the area of City Hall, City Center and other infrastructure financing • Assist in developing the financing of the Street Master Plan • 'Explore available telecommunications infrastructure accessible to the public Community Development (CD) Community Development provides planning, permitting, and code compliance services in a responsive and efficient manner to ensure the safety, health and welfare of our citizens, and. to encourage orderly development and economic sustainability. The proposal takes into consideration the following goals: • Meet the growing need for code compliance response2 • Implement the Sprague-Appleway Revitalization Plan (SARP)3 • Complete the Shoreline Master Program update • Prepare for annexation possibilities Parks & Recreation (P&R) Parks & Recreation acquires, develops, operates and maintains a diverse park and recreation system that enhances our community, including the regional events facility, CenterPlace. The proposal takes into consideration the following goals: • Implement recommendations of the Parks and Recreation Master Plan • Implement the CenterPlace Regional Marketing and Communications Plan • Make facility improvements to CenterPlace • Expand senior services to serve changing needs and expectations of the senior population • Work with Centennial Trail partners to develop 20 year plan l ` The addition of a Code Compliance Officer as proposed would result in an increased demand for legal services, which is not addressed in the proposal. 3 Proposal does not include costs associated with SARP implementation outside of existing staffing level Business Plan Initial Proposal (General Fund), continued June 2, 2007 Page 4 of 6 Public Works (P6H9 Public Works oversees the City's transportation and stormwatera maintenance, operations and capital programs, development engineering, and coordination with wastewater providers. The proposal takes into consideration the following goals:. • Implement the Street Master Plan once adopted • Continue transition of road maintenance services • Continue implementation of the stormwater program o Develop a six-year project plan o Implement the Regional Stormwater Manual o Develop a six-year plan for compliance with the Underground Injection Control (UIC) program • Implement public infrastructure aspects of Sprague-Appleway Revitalization Plan, including City Center • Coordinate the City Hall project It's important to note that the City is still creating the financial models for the Street Master Plan and the Sprague-Appleway Revitalization Plan, including the City Center and City Hall. As a result, this business plan proposal does not include associated capital project costs. General t":overnrneitt General Government houses City costs that are not specifically assigned to a department. This proposal includes funding to recognize the City's l:ifth and tenth year anniversaries. Part It: Pending Ideas There are many ideas that warrant further consideration, but have not reached a point of maturity such that an inlformed decision can be made to include them in this .first iteration of the Business Plan.. They are described in the table below as notice of future policy discussions. The ideas are listed in the order of lead department - they are not prioritized. The programs/services are either multi-year or ongoing in nature. The table lists the proposed first year of implementation, along with an estimation of the .first year's cost. The cost of some of the programs may partially or completely offset, either by specific revenue sources, or by reductions in other expenses. The table indicates whether there is an offset, but does not identify the amount. The table does not include capital project or land acquisition costs. 4 Street maintenance and stortrnvater each propose an additional maintenancelconstruction inspector in a futw-e year because both of these programs reside in dedicated funds, their costs do not appear in this proposal, which is focused on the General Fund. Business Plan Initial Proposal (General Fund), continued June 2, 2007 Page 5 of 6 Business Plan Initial Proposal (General Fund), continued .Tune 2, 2007 Page 6 of 6 Detail of Initial Proposal Costs Summarized in Table 1: FTE 2008 2009 2010 2011 2012 2013 Exec/Legislative Support Deputy City Clerk 0.50 30,921 28,671 30,534 32,519 33,332 34,166 Operation s/Ad min Services HR Assistant 0.50 27,000 28,755 30,624 32,615 33,430 34,266 HR Assistant 1.00 0 0 60,000 59,640 63,517 67,645 Administrative Analyst 1.00 71,500 71,888 76,560 81,537 83,575 85,664 Community Inv/Public Info 0.00 23,000 73,520 34,061 29,623 30,208 30,816 Contract Services 0.00 33,000. 13,520 14,061 34,623 15,208 15,816 Other HR Services 0.00 11,000 25,000 5,000 7,000 27,000 7,000 Subtotal 2.50 165,500 212,683 220,306 245,038 252,938 241,207 Finance Administrative Assistant 1.00 0 53,668 52,897 56,335 59,997 61,497 Accountant/Bgt Analyst 1.00 70,481 70,802 75,404 80,305 82,313 84,371 IT Specialist 1,00 0 0 81,547 82,588 87,956 93,673 IT Specialist 1.00 0 0 0 0 85,240 86,520 Subtotal 4.00 70,481 124,470 209,848 219,228 315,506 326,061 Community Development Code Compliance Officer 1.00 0 85,340 65,327 69,574 74,096 75,948 Parks & Recreation Operations Coordinator 1.00 0 79,222 80,112 85,319 90,865 93,136 Janitor (convert from temp) 2.00 78,503 83,605 89,039 94,827 97,198 99,628 CenterPlace Services 0.00 116,720 119,638 122,629 125,695 128,837 132,058 Senior Center Services 0.00 10,508 ' 10,771 11,040 11,316 11,599 11,889 Offset 0.00 (185,223) (193,243) (201,668) (210,522) (216,035) (221,686) Subtotal 3.00 20,508 99,993 101,152 106,635 112,464 115,025 Public Works Capital Project Engineer 1.00 86,057 87,391 93,071 99,121 101,599 104,139 Admin Assistant 1.00 52,457 51,607 54,961 58,533 59,997 61,497 Offset 0.00 (65,257) (69,499) (74,016) (78,827) (80,798) (82,818) 2.00 73,257 69,499 74,016 78,827 80,798 82,818 General Government City Anniversary (5/10 Year) 0.00 2,000 0 0 0 0 50,000 General Fund Grand Total 13.00 362,667 620,656 701,183 751,821 869,134 925,225 City at Spokane Valley MhMysw Ffnamiai Plan • General Fund - Problem Stateroom 1M PreBrrtMtsry 6!22107 172212007 with Wflal Business Plans glue 3007 me 2001 2010 ?011 2012 2013 Eat4nale EsOmete Estlmste Estierrate estim1lS Ealtmat OsaeralFund Revenues: Sales Tax f 14,700.000 3 10,165,600 t 19,541,116 a ! 18,000,0110 s 18,077,000 3 10,351,440 3 73n,4r,;> 19 Prop" Tex 3 0,450,000 3 4,640,300 t 10,044,968 f 10,74S,4t6 s tn,447.609 1 10,862.348 3 , 10 858 6-1 Gambli~n0 Tax f 680,000 1 &10,000 f 880,000 i 480 000 1 WON 3 800,000 t , , 58O Wo Frmr mm FeewMue Rep 3 845,000 1 853,450 t 861,095 s 870,005 t 670,311 S 888,104 t . aW 0_5 Scats Sllsrod Revsmree t 1,142,OOn f 1,170.550 1 1,190,014 i 1,120.305 3 1,200,654 t 1,202.056 t , 1,324,370 Service Fees 1 1,900.000 ! 1,000,000 6 1,900.000 i /,900,0110 t 1,000 000 ! 1,000,000 i 1.900NO Finns b Fortmillmn f 1,300,000 1 1.140,000 f 1,100,000 i 1,300,000 a 1,300.0110 1 1,3an.000 0 1.300 000 Reereetion Pmg mm roes { 460.000 3 57:,000 t 5t2,010 t 5t7.1e1 f 522.563 S 527,806 f , Sm,as? O t fund Trarmtem s 80,000 f 84.800 t 89,t18a $ 95,?81 6 100,000 6 107,059 f 113 40: lovestmenllnferod 1 410,000 f 414,100 t 416.741 3 422.473 i 4219.047 4 430,013 f , 435.'27 C4rm,-w hompoor yr i 4000,000 i 3,14G,30 1 6,012,5n, 5 &&.741 1 6.047,0137 9 1,633,842 f (5244.'+861; Total General Fund f 42.s4TA0 5 31,471,583 43,568,641 t 44,223.465 111 -4V32-371 i 31,343,410 32.735,996 Gwwml Fund Eapendfturse: Legislative f 208,303 3 370.104 9 345,713 f 113,370 f 4032" f 43,4,490 t 4711 130 Exetubvn R LegWalve s 546,021 3 500,87b 3 037,0:9 t 688.983 1 744,000 8 60`_1,605 f , West Public Salellr f 1e2br1.400 3 10,716,912 t 21,2W.78S t 2,997,6116 f 24,037,031 t 26,624,641 6 012 VL070 Deputy CITY 1twW f 529,m7 f 683,773 t 008.075 t 657,585 1 710,192 3 767,007 6 , 307 5211 Finenos 1 702.552 3 645,204 t 012,06) t 08;,913 f 1,084,769 1 1,140,073 f , 1,241,070 Legs! i 369.133 i 447,000 t 477,380 s 515,540 t 558,701 S 601,338 f 443 049 Human Reammes t 105,144 1 179,:20 t 103,557 t 209,042 s 225,765 3 2143,076 f , 283 332 Pubao Works 3 1,478,000 s 1.713.000 t 1,850,040 t 1,988,043 f :,15.,587 s 2,330,510 f , 2.516 950 Planting 3 11114,907 1 1.223000 f 1,373,000 t 1,4'%640 3 1,543,147 3 1,604,500 f , 1,740 177 Bt d*V f 1.2"5 a 1 471,000 f 1,503.On0 f 1,770+.440 f 1,658,073 3 2008,721 t , 2107 7:9 FsrxsA*Wn 3 OM,100 3 OT1,734 3 1,058.982 1 t,140,420 t 1,:]1,08] s 1,330,141 t , 1 436 612 ReaesW f 242947 3 292,383 t 563,377 s 708,013 t 130,527 s ?..88,969 t , , 305,Q6 Aq-Mcs t 259,450 t 760200 f 3M194-. 3 326.832 1 362,177 f 301,217 f 411 715 SeniorCantsr i 70,201 f 02-97 t weal f 95.041 ! 103,671 S 111,084 f , 120 021 Trstdo to WiM Fund f 000.000 3 t 6 1 - t - $ , CertterPlaca 1 603,179 t 631,433 1 703,116 ! T5➢,63? f 634,610 s 689 288 6 037 189 TnwWw to Caudal f 410 000 S 20,000 t 20,000 t 20.000 i 20.000 3 , 20,000 t , 20 000 Tfundar to CfVIC FacAlltla t 2.346.000 3 6 6 - f - s - t , this Plan Aadltlons f 3 353,000 1 021.000 t 702.000 f 732,000 3 8x0,000 3 2:0 000 CenterPloce Depreciation t t f - ! ! - 3 - 3 , Library s 70.000 t f 1 i - It Trarleter to Sam Level t '371,000 3 f 0 t f - t Ci nwul Govornmant s 3,040 000 3 2,291.!100 s 3 0839,E t 7,2'51 1421 S .389 436 3 S 3,472,630 3 3 smC. T73 Total General Fund 3,917,N7 37,888,001 .4. 58 1 3 t .e n ♦ , 00 480 1 .876 ' ' 47,022.41.' Lets tamant tuns hr jM1,Utx) ni?v7 Carr3ww to next yr 3,]4!,783 b,a2-M2 81111E.7411 6,02 637 1433,8117 61244. 1a 690,2122 * I nvr enc. '.!alas tm andi xM1 ;DM P CITY OF SPOKANE VALLEY Request for Council Action Meeting Date: May 29, 2007 City Manager Sign-off. Item: Check all that apply: ❑ Consent ❑ Old business ❑ New business ❑ Public Hearing ❑ Information ® Admin. Report ❑ Pending Legislation AGENDA ITEM TITLE: SpraguelAppleway 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 SpraguelAppleway 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 summertearly fall of 2007, with adoption by City Council anticipated to occur late fallfearly 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: NIA 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. SpraguelAppleway Revitalization Plan Update memorandum. 2. SpraguelAppleway 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, mined 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 7: 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 Hearings/Information • 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 SEPA SEIS/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 99W 10th Avenue Portland • (503) 222-6060 IntoCeugene.econw.com Eugene. Oregon 97401-3001 Seattle • (206) 622-2403 19 April 2007 TO: Iliro Sasaki and Michael Freedman FROM: Anne Fifield and Terry Nloore SUBJECT: PRO FORM,% FINANCIAL ANALYSIS FOR CITY ('ENTER SUMMARY This memorandum explains the pro forma financial analysis conducted by E:CO 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 wid Sprague Avenues. 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 a}- eet the financial performance of a proposed development. '1 host: 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 fuianeial performance. By providing rough estimates of the profitability (or loss) of the development, the model gives some insight into what property o%vricrs and developers might be willing build, with and %krithout City financial assistance. the 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 for the four density scenarios modeled in the pro fornia 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. • Profitability analysis explains the calculations in the model to determine the net value of the development and the estimate price a developer would be willing to pay for land to develop the City Center. • Results summarizes the results of the pro forma analysis. • Recommendations summarizes E:CO'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 1 pro forma analysis. CONTEXT At this point in the project there is little detail about the style of development and the actual mix of uses. That is appropriate: detail gets added little by little as the design evolves. The pro forma is necessarily preliminary. FCO based the pro forma analysis on site layout diagram and Phase i Development Program Summary provided by FTB. Revenue estimates came in part fi-om ECO's market analysis for Spokane Valley (hall 2006). ECO interviewed realtors and developers in the Spokane Valley area to understand construction costs, and supplemented those interviews with 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 difT'erent variables: e.g., rate of return, or product mi-x or sire. For projects involving the public sector, we have found it most useful to solve for residual land value. Ili other -,vords, given the assumptions about all non-land costs, all 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 of profit. But that amount can be less than the asking price for the land, or even negative. Small differences from the likely market price fior land are not significant: there is a lot of uncertainty in the assumptioi.s.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 affecting cost and revenue can be readily changed, and the effects 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 assumptions 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. Are the assumptions reasonable? What is a reasonable range? Does the bottom lute 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 F`I'B. 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. 0 Total site area. l:TB 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..h FB 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 FT13 in the development program. ECO had conversations with FTB to determine reasonable mixes of uses for four scenarios. The four scenarios vary in heights: two, three, four, and six stories. • Low density assumes residential is townhouses only (two stories); retail is single- story retail (134,400) and 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 sf); retail is the same as in the low-density scenario; office is one level over retail (84,900 sf). • 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 st). • Very high density assumes the residential is townhouse (three stories) and three levels over retail (254,700 st); 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 (western 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 from per-square-foot rents), and counts the number of owner-occupied units (so it can calculate per-unit value). • Parking footprint. F'I`B 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 will be 200 on-street parking spaces. The model calculates the number of surface lot spaces and adds it to the on-stTeet-park.ing. 1 U.S. Census Bureau. "Characteristics of'Nlcw Housing for 2005". 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 parking spaces per residential dwelling unit. Remember that all the units are 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 townhouses is large enough to accommodate 1.5 parking spaces per unit for both the 2- and 3-floor townhouse scenarios. Parking spaces/1,000 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 forma demonstrates, for this project the limited site size and desire for multi-story construction means that high parking ratiosrather quickly push the development to a need for structured parking, which is many times more expensive than surface parking. 6 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 1 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 structure 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. 17he result is that there is more demand for parking- more parking spaces are needed than would be the case with proper pricing. There is ample evidence to suggest that proper pricing of parking, over the long run, is compatible with (and necessary for) successful conunercial activity. It does several good things: (1) 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. 200 . 77:e High Cost ojf ree Parking. American Manning 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). ~ i 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. 'Chat lowers the price, which increases the consumption. Pricing the parking would lower the amount needed (the 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 sec what happens to the pro fornia. The second parking issue is shared parking. ii' calculated over a 24-hour period for a fiill 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 aiTangement 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. o 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 Erma model assumes these spaces will be accommodated by a parking strtiicture.'l"his is obviously a gross asstumption: 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 useful 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 ranges are based on interviews with local developers, building costs reported at ww~v.rsmeans.com, and staff at Johnson- Gardner, LT C, a real estate consultancy firm. Building costs vary,,videly, based on the quality of construction. LCO identified costs in the middle of the ranges of costs, implying a mid-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). a 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 from $110 for the 2- floor scenario to $150 for the 6-floor scenario. The prices jumps from $110 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 structure. The model uses $110 per square foot. 0 Civic hard cost per J. 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. 0 Parking. Parking is a key development variable. hi 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 o» 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 S5.00 per square foot, and the average stall price (with soft cost at 25% and 333 s.f. per stall) is in the range of $1,800. 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 Cite Center upward. O 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 tuicertainty gets reduced. Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 7 e 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 owner-occupied 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 the 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. ECO 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 FT B 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 F713 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 35% of retail square footage is leasable space; and that percentage is applied to total square footage to calculate the actual leasable area. O Rent per sf per year. The model's default assumption is that the new retail space will achieve atuiual rents of $22 per square foot, triple ne.t.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. 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. 3 "Triple \Tet" refers to a rental agreement where the renter pay rent plus real estate taxes, building insurance, and maintenanc:.e. The term loosely mean the rent pays for most of the buildiag~s operating costs. Actual rental teens vary from lease to lease. Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 8 • Operating expense of gross incorne). 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 15% for the very high density scenario). Local realtors estimated a wide range of office space vacancy, from 10% to 20%. Current office vacancy in Spokane Valley is roughly 20/0. On the Corridor, vacancies are much higher. Office space oil the Corridor has high vacancies now, and tenants are leaving. There is not growing demand for office space on the existing Corridor. The pro fonna assumes that oil-ice 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 Hall, 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 oNvver-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 $12 charge. • Vacancy rate. We assumed 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 to«2lhouses 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.4 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. Nlew condos in the Spokane area are on the market for prices ranges between $111 per square (:oot to $315 per square foot. ECO assumed the towliliouse 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 NOT by the desired capitalization rate. Desired capitalization rate. Local capitalization rates ("cap rates") for mixed-use development range from 5.5% to 6.5'/0. 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 (NOT) 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 operation-, and resale of the property at the end of the holding period. • Property value of rentals (based on NOI). This is the net operating income divided by the capitalization 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 This section of the pro forma compares development costs to total value, to detennine what a developer would be willing to pay for land to dcvclop the City Center. Total property value. "this is from the property value section of the model. • Total development cost. This is ironn the development cost section of the model. 4 Real Estate Research Committee "The Real Estate Report" Volume 30, Number 1, Spring 2006. 513nieggeman, William B. and Jcffrey D. Pishcr, Real Estate Finance and imvest;nents. New York: W(Jraw-Hill, 2001. 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 kvitb 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 model's default assumption is a.15% rate of return, typical for mixed-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 willing to pay in order to earn a 15% rate of return. Table l 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 $16 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 pard about $39 per square foot to achieve a reasonable rate of return. ECO's market analysis found that land on the Corridor ranges between $8 and $25 per square foot-a wide range. The assessed value of the Towns Center land is about $8 per square foot (assessed value is lower 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 aiming to develop a small urban-like city center. if the project is successful, in the long term the Town Center will achieve higher rents 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 primarily that they must be able to drive; for driving to be usefiil 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 S20,000 per space. Paying for structured parking costs more than a. developer is willing to pay. Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Table 1. Pro Forma for Spokane Valley Town Center Low Density Medium Density IUgh Density Very Hlgh OonsltY Assumptions 2 floors 3 Floors 4 Floors 6 Floors Site Description Totes site area (Acres) 21.25 Busking Footprint (SF) Floor Laves Rairr] (Multi-stoned) 84,900 1 1 _ 1 t Rela3 (Single-storied) 134,400 1 1 1 1 Omee D 1 1 1 2 Residential-Townhouse 26.400 2 3 3 3 Residential-Over Retail 0 O 1 2 3 Civic 20,009 3 2.5 2.5_ 2.5 Total Square Feet 407,000 518,300 603,20D 773,000 R--ail (Wti-ztaiod) 84,903 64,913D 84.13M 84,900 Retail (Single•storiad) 134,400 134,400 134,40) 134,400 Office 84,909 84,900 04,000 169,600 Re>`dontiel-Townhouse 82,809 79,200 79,2+70 79,200 Resfdcmial-Over Retail 0 54.900 569,80.7 254,700 Civic 50,000 50,OD0 51),1370 57,000 A:eroge SF Per Dwelling Unit 1.200 Number al D melling W;Ls 44 137 208 278 Parking Foottp-mt (SF) 317,600 Parking Spaces in Surface LotstOn-Street ;,154 ' Parking spocasldwcifmg urr t 1,5 Perking spacesf1,001) sf .Retail 4.0 PwWg specesf1,00D sf -Office + Civic 3.0 Nco7od Parking Spaces 1,282 1,363 1,494 1.355 Structured apneas 128 234 340 701 Development Costs _ Single-Story Retail Hard Cost per SF $8fi $85 894 M Total Cast $11,556,403 $11,558,400 S11,5513r,400 51,55 6,400 5 RetelhUfficelResidentialNulti•SlorjHard Cast perSF $;10_ Stjo _ _ _ - $ifr0 _ . _ $150 Total Cost S18,678.0M $28 017,000 $47,544,000 % 5_76,410,000 RarldrMial-Townhouse Hard Cost per SF to SS 11) _ _ _ - 1A0 - _ _ 5110 Total Cast 55,808,000 59,712,070 8,7;2,000 5 $8,712.000 Clfc Herd Cost per SF $140 _ S)LO . _7$149 1140 'role] Cost 57,000,070 37,000,070 $7,070,000 $7,009,000 Total Building Rand Costs (not including civic space) 536,044,400 548,287.400 SG7,e14,400 S56,650.400 Parking Surloca per space $2,50 £2,384,394 52.384.384 S2,334,384 $2,384,384 Structured per mace _ .00D $2,562,925 54,683,425 56,807,925 $14.024,425 Total Building 8 Puking Hard Costs 540,991.709 $55,357,249 $77.006,709 5113.069,209 Sall Cast (%d hard casts) 30% S12,207,513 $16,607,163 $23,102,013 533,026,763 Total Construetton Costs (not including civic space) $53,289,222 $71.964,372 $100,108,722 $147,015,972 Demolition Cost per Ave $15.003 S3A8,75D $318,75D S318,750 5318.750 Total Development Costs $53,607,972 $72,283,122 $100,427,472 5147,334,722 Proporty Value-Rental Properties Retail Gross Lenable Area E5% _ 188,405 186,409 186.405 186,405 Rent per SF per Year $22.00 $22,00 _ - - MOO 822.00 Va-rancy Rote 10;6 10% 1096 10% Operating Expense of Gross Ltoome) 10% 10% _ 10% _ q0 6 Not Operating Incorno (NOT) $3,321,737 53,321,737 $3,321,737 $3,321,737 OFm Gross Leesable Arco 85% 72.165 72,165 72,165 144.330 Real $21X00- - $20,00 $20.00 - - -520.00 Vacancy Rage 12% 1296. 12% 159: Opcmting Fxpense of Gress Income) $3% 3D% 30%_ _ - :146 Net Oparvl ag Income (1)01) 5889,073 $699,073 $88D.073 $1,717.527 Residential % Grass Leasable Area -95% 0 80.655 161,310 241,965 Rent _ 512.00 - - $12.00 _ 512.00 $12.00 Vacancy Rate 4% 5% 7% 7% Oprrnting Expense of Grass income) 30% 30% 30% _ 30%' Net Operating Income (N100) _ $0 S643.627 $1,26Q154 $1,890,2111 Property Value-Owner-Occupied Residences Number of unn AA 68 66 68 Average price per wit S1J5.000 $185,070 $1155,000 _ $185,007 Total residential value (0,ovne:ocuppied) 58,580,000 $12,210,000 $12,210,000 $12,210,000 Total Not Operation Income $4,210,810 $4,854,437 55,470,964 $6,929,495 Desired capitalizatfon rate 6,Orb Propony value d roma (based on NOQ 570,100,165 560,907.230 $91,182.727 $115,491.578 'T'otal Property Value $78,760,165 $83,117,280 $103,392,727 $127,7Dt,578 Profllability Analysts Total propeity value $78,760.%G5 SOO,117,280 S103.392,727 $127,701.570 Totaldavaloprncr4cost $53,607,972 S72,2A$22 51 00.427,472 5;47,334,722 Net value of deelaprnent(vaiueminuscost) 525,152,193 520,834.158 52,965,255 •$19.633,144 Required rate of return 15% Broak-m•en land ecquisl0on $14,879.125 $8,688,426 310,520,753 M,289,872 Prim par sgmre foot 516.07 59.39 -$11.37 -539.20 Page 11 i Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 12 Souroe: ECONorthwe.sE ECO 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 nu nber 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 $16 per square foot. The high parking requirements, 5 spaces per 1,000 feet of retail and 4 spaces per 1;000 square feet o IF 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 -$1.80 -$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 -$0.56 -$21.31 451.54 Source: ECON''orthwest. Table 3 shows the results of a sensitivity analysis f'or 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 conunands 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 Valle), 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 S15 $3.14 -$5.23 -$27.59 -$60.32 Medium Residential $12 Retail S22 Office 320 $16.07 $9.39 -$11.37 -$39.20 High Residential $15 Retail $26 Office S22 $26.92 $22.75 $4.41 -$19.66 Source: ECONorthwest. RECOMMENDATIONS We start with a stunmary of our conclusions, and then follow that sununary with some explanations and caveats. • The three-story mixed use development scenario is the one the City should aim for.. o The very-high density scenario is too much ofa push. The low-density scenario is too far from the kind of city center that the City wants. 9 The meditun-density (two-story) scenario works better fuiancially under the assumptions in the pro foi ma, 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. • 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 tot 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 two-story development option, or, perhaps better, something between die low- and medium-density scenarios, where three- stones get built on parts of the develop to create appropriate massings. • The City will have to put money into the development. At a minimum, it is likely to have to pay for streets and public spaces. O Consistent with all the general strategy that has been described several times during. the plannuig 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 RFQ as part of an all-out ciTort to secure an investor/developer. Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 14 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. If 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 destination; 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 lime 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 higher-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 F TB 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 on. The City must pursue the whole Phase 1 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 units in the vicinity. The more residences nearby, the better for retail in pedestrian- friendly environments. What conies 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 circumstances-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 12fQ 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 e1Tort 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 .toe's. A small but highly ,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. c Bookstore: e.g., Borders or Barnes and Noble. These mediurn-box book stores successftdly operate in mid-range markets. A large bookstore could (.'unction as a snnall .l anchor to the development. ' Spokane Valley City Center: Pro Forma Financial Analysis ECO 19 April 2007 Page 15 • Mid-level, mid-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 Kolds because its size and quality seem to lit 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 / [unushings retailers (e.g. Old Navy, Pier 1 Imports, TJ Maxx). 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. • Build all or some of the parking with city funds, reducing the cost to the developers: Allow adjacent lots to become surface parking lots that supply parking to the Town Center. Lower the parking requirements. The model assiunes that each dwelling unit will require 1.5 spaces, retail Nvill 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 downtowns 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 Town 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 he. 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 stunmary, 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 higb-density development will take more public support. Flow 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 FTB 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 i 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. There are many ways the City might make that investment. It Could acquire the land from the private owners, and then provide the land to private developers at a reduced price. It could provide public amenities (streets, strectscaping, parks, civic buildings). It could take a lease on some of the commercial space to underwrite some of the risk. These techniques and more have been 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 fornnia model: • Nick. Bentley, Chief plan reviewer, City of Spokane Valley • Grant Person, Vice President, Tomlinson Black Commercial 6 Scot Auble, President, Auble, Jolicoeur & Gentry o Tom Quigley, President and CEO Kiemle & Hagood Company o Doug Byrd, President, Byrd Real Estate o Ron Wells, Partner, Wells and Company o Bruce Joticoeur, Principal, Auble, Jolicoeur & Gentry Bill Reid, Johnson Gardner LLC. ECONIorthwest also used these data sources: G Real Estate Research Committee. The Real Estate Report. Regional Research on Spokane And Kootneai Counties. Volume 30, number 1, Spring 2006. v 12.S Means, http:/hvww.rsmea.is.com/calcul.ator/index.asp. L S061ane Valley 11707 E Sprague Ave Suite 106 n Spokane Valley lAlA 99205 509.921.1000 n. Fax: 509.921.1 DOB 0 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 Sprague/Appleway 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 i 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 Proiect 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. 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. C-ICITY 01' 00'~ 3pCiZne ,;oOValleye 11707 E Sprague Ave Suite 106 ♦ Spokane Valley WA 99206 509.921.1000 ♦ Fax: 509.921.1008 ♦ cftyha1I 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. MTP AND GRANT APPLICATION SCHEDULES f • 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 only 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 o 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 "new" model would be built with all new GIS data, include the results of SRTC's Home Interview Survey, and include bus routes and schedules. • 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 hiformational Memo 5/25/07 Sprague/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. Leo Fxww 1: SYNCHRO MODEL DIAGRAM - ALTERNATNE B, ONE-WAY COUPLET FROM 1-90 TO ARGONNE1D1sHwm-MICA, TWO- WAY SPRAGUE ANo APPLEWAY EAST OF ARGONNE/DIsHMAN-MICA SpoRaine~ jUalley° Annual Work Plan for 2007 June 2007 Update Operations & Administrative Services Public Works Parks & Recreation Community Development 2007 Budget Goals The 2007 budget reflects the distribution of resources consistent with the Council's determination of core services priorities. The following goals represent just the very broad areas of concentration important to the well being of the community. 1. Continue monitoring wastewater issues, including governance of wastewater facilities, enhanced citizen awareness of options for the future and pursuit of the most efficient and economical use of allowed wastewater discharges. 2. Explore the available telecommunications infrastructure that may be accessed by public institutions, residents, and businesses within Spokane Valley. 3. Adopt a sub-area plan for the Sprague Corridor and initiate the implementation of achievable recommendations. •1. Amend the comprehensive plan to reflect accommodation of Spokane Valley population projections within and adjacent to city limits and to outline annexation policies. 5. Adopt a Street Master Plan and draft a financial strategy to implement the plan. 6. Establish departmental priorities and incorporate them into a six-year business plan for each department that includes forward looking budget and funding implications. Adopt a Uniform Development Code that implemenbi the Comprehensive Plan. Continue monitoring wastewater issues, including governance of wastewater facilities. enhanced citizen awareness of options for the future and pursuit of the most efficient and economical use of allowed wastewater discharges. Public Works - Tasks and Timeline: Co,nvotle Afoidtorrng t+Westesvater G14 C? L c J• tsSUGS I ~I ~7i I I ; Jr' Analysis & review with the County, City of Spokane, and Dept of Ecology regarding Wastewater Treatment Farrlrty options Explore the available telecommunications infrastructure that may be accessed by public institutions, residents, and businesses within Spokane Valley. Operations and Administrative Services - Tasks and Timeline: Firpfore file Available Telocornmunlcarluns Jnfrastructrrrb v►, w;: dl,~; i air, I =-~a I ~•;f i'.XIiI~)(~~ Meet with areawide agencies re: current status & needs Meet with Economic Development Adopt a sub-area plan for the Spra&ue Corridor and initiate the implementation of achievable Community Development - 'T'asks and Timeline Complete 8prapudApploway l Pl d B / ;}r r..' ~ -.j r_,,: l:r rt Ravhn fiatian an an eg lmpfrxnentation ,~r .Ir:: .r;J .'1• .i^ .il d.•J il: UJ t I ~resentaEron of final concept plan 2 Dina) draft of revitalization plan - 3 I Public review of draft plan - ~ Planning Commission consideration - 5 Council consideration Community Development - Tasks and Timeline: r= rst t/NOSlo Ct tna Camp*ohurairo Qt ar osar Qscr C+o~ Pan, to tereluce Urban GrowtA Area (V G4) Amenumer+ts A. FO U.r API Wy AM M auq UP Oct NO o.c Staff analysrs and recommendations Recommendations to Planning _ Commission Comp Plan update and UGA _ recommendations to Council draft a financial strategy to implement the plan. Public Works - Tasks and Timeline: Aelopt well dtlfinad Srroct Master a- cloy Q707 Q4 ar ICIPla r►, ►VitA Funding OjiriJItY Atep .Stn 1'?• Develop Piolects and Estimate Costs k Street Master Plan update to Council _ Final Report that includes forward ltx)king budget and funding implications. Operations & Administrative Services/Citywide - Tasks and Timeline: ~ttF7Ur" QG;i;t7i'a;;t F'1!~t{f?[3 1. ti irk^rf~;~r!lh%:•I!U ~r~t•~^_A~~J.'1!rR3~ ~1r'rl .-+r^ r.^ .liv 1~My _ i,,,i I t7ctaflga Conduct SWOT Analysis and Mission . Statement sessions with each deaprtment Facilitators work with assigned departments to create draft departmental _ business plans Senior Stall meet to discuss departmental - business plans Present draft Business Plan to City - Council Refine business plan proposal based on - Council retreat feedback incorporate business plan into 2008 - proposed budget Publish final 2008 business plan t implements the Comprehensive Plan. Community Development - Tasks and Timeline: Comprefo Gt ~:a► :tw Uniform Devoropment Code (UDC) ,ht11 ~I •r A ai. L I iJupdate UDC implementing Comprehensive Plan 2 I Draft UDC to Planning Commission 3 Draft UDC to Council - Final adoption of UDC in compliance d ! with the Growth Management Act 5 implement Zoning Changes Department Objectives Operations & Administrative Services F/ rtance Ar+ Frw VV Ili!, VA .tun alf Auk Sep Ca: hrW Cr: incorporate costs associated with the priorities - identified in the six-year business plan for departments Consider recommendations made by the State ` Auditor's Office for improved intemal control Operations & Administrative Services - con't t t C M ract arnagenton on :v: ►r0 r/i, ~ ~ IL,r~ .tan ~cIQ ~F .CS -VJi («rs~ Develop and implement contract management auditing functions Identify measurement tools (e.g. usage reports) Develop audit work plan for each contract Develop audit schedule and criteria _ Perform audits and compile results Emphasis on Internal' and ErfernaJ Cornrr unIcation I A f.,~! x~• (u.l~ i ,-3 Se: • l for each position in the Deputy City Manager Division Develop list of topicstspeakers available for Speakers Bureau & promote Develop information brochures on high- interest areas regarding City processes that seek to answer the most common inquines about these processes Create brochure on residential permitting process (non-developer oriented) Create infomLational brochure on frequently reported types of code crornpliancx Public Works rd d m n ct A t ra wa an age con s a Flashing Beacon/Speed Display Phase III Conduct/Complete Survey Apply for grant funding _ Order Equipment Installation - Implementation _ Stormwater Regional Manual Complete Final Draft Adopt Stormwater Manual by ordinance Beverly Hills Drainage Improvements Bid project & award contract Construct improvements - Underground injection control compliance In ent & ass m nt r v ess o y e Begin implementing NPDES Phase II Permit Public Works - can't t I 1 C 0' O7 Q; W QS 07 Oa U7 ra mpro vvn►arrc ap - - F C~ct my 0- Update Six-Year Transportation Plan for Arterial Roadways Identify & recommend new projects Public hearing on draft plan Seek Council approval of plan Submit STP,TIB & other grant requests Capital Projects Valley Corridor - Environmental li i m nary Assessment and pre engineering Pines/Mansfield intersection - design, ROW acquisition, construction Trentwood - design & construction Grandview Acres - design construction Spaldings -design & construction Barker Rd. Bridge - design & permitting Veradale Heights sewer project - construction - Appleway Ave Reconstruction - Rd i gn, - des Tschirley Rd to Hodges ROW & construction Argonne Rd overlay - Indiana Ave to Montgomery - striping 44th Ave, Pathway. Woodruff to Sands - design only Signal Controller Upgrades Sullivan Rd PCC (WSOOT) - Parks & Recreation lN l l & F R Of at 020r War, ~ ac es ecrvat on Programs t .*,I ~M r Apt may .nrn nr AW b+r~ Qq Mir' f A d ccre itations Investigate accreditation with National Park & Recreation Association Investigate accreditation with National Institute of Senior Centers 2 P k l iti d i an acqu on ar s Greenacres - negotiations Greenacres - purchase ti l it t t Id tif f ure po a s es u en en y n il d libe ti C ra ons ou e c ti / N ti h purc ons ase ego a 3 P k I t ar mprovemen s Child ' l P k i U ar ren versa n s Pursue funding Select Architect _ 4 I P /R ti l C t ti on ons ruc enova ons oo Public review & meetings Preliminary plan Council deliberations Final plan Select Contractor - Construction 6 CenterPlace Regional Marketing Plan Evaluate use of old Senior Center building Community Development r f r D f opmon ►oy evo Spokano Va. .I~~ 4~~ ~{11{ .i.^I ( ~~11~ r..lll mill A4 !4 Update Shoreline Master Program I Shoreline Restoration Plan Dept of Ecology Shoreline Grant 2 Joint Planning Agreements with di d jacent ng a Spokane County regar properties Draft Intedocal Agreement Negotiate with County CDBG Program Evaluation