HomeMy WebLinkAboutCAP 2010-03-22 COMPLETE AGENDA PACKET1. PRESENTATION(S)
2. BUSINESS AGENDA
City of Tukwila
Community Affairs
Parks Committee
O Joe Duffie, Chair
O Joan Hernandez
O Verna Seal
MONDAY, MARCH 22, 2010, 5:00 PM
Conference Room #3
1 RECOMMENDED ACTION
ITEM
AGENDA
a. Rental Housing Ordinance;
Jack Pace, Community Development Director,
b. Naming of Park (Codiga);
Rick Still, Interim Parks Recreation Director.
c. Update on Southcenter Plan;
Nora Gierloff, Deputy Community Development
Director,
Next Scheduled Meeting: Monday, April 12, 2010
Distribution: B. Giberson J. Pace
J. Duffle M. Hart D. Speck
J. Hernandez S. Hunstock R. Still
V. Seal S. Kerslake B. Arthur
D. Robertson K. Kertzman C. Parrish
Mayor Haggerton G. Labanara K. Narog
S. Lancaster K. Matej S. Kirby
E. Boykan M. Miotke S. Norris
S. Brown C. O'Flaherty N. Gierloff
J. Ferrer -Santa Ines N. Olivas
1 Page
a. Forward to 4/12 C.O.W. Pg.1
and 4/19 Regular.
b. Forward to 4/12 C.O.W. Pg.15
and 4/19 Regular.
c. Information only. Pg.19
Committee Goals:
Seek out opportunities for Councilmembers to further their knowledge, experience and awareness of the different
cultures represented within the Tukwila community.
Support programs and services that provide a sense of stability, community and unity throughout Tukwila's residential
neighborhoods.
Provide legislative support and encouragement to Tukwila residents living in rental communities through programs
that hold owners and /or property managers accountable for providing safe places to live through the implementation
of a rental licensing program.
Formulate an Adopt -a- Neighborhood program that will provide Councilmembers the opportunity to become more
familiar with the changing faces of communities and neighborhoods throughout the City.
Ensure a commitment to continued human services funding in relation to the cost of living through consistent review
of regional, state and federal budgets affecting human services progams and services (also assigned to F &S).
Research the viability of sponsoring a City-wide Citizens' Academy (also assigned to F &S).
S The City of Tukwila strives to accommodate those with disabilities.
Please contact the City Clerk's Office at 206 433 -1800 for assistance.
TO:
FROM: Jack Pace, DCD Director
DATE: March 22, 2010
ISSUE
BACKGROUND
City of Tukwila
INFORMATIONAL MEMORANDUM
Mayor Haggerton
Community Affairs and Parks Committee
SUBJECT: Residential Rental Housing Licensing and Inspection Draft Ordinance
Jim Haggerton, Mayor
Should the City require a residential rental business license and mandatory inspection for all
rental dwelling units?
As part of 2008 program goals, the City Council asked that we develop a proposal for a rental
housing inspection program. Staff has presented an overview of this proposal to Community
Affairs and Parks Committee on several occasions, most recently on December 14, 2009. The
committee requested that we return with a draft ordinance, program details, and suggested fee
and implementation schedules.
The purpose of any rental housing and inspection program is to ensure that our citizens are
living in units that are safe and healthy. Code Enforcement staff regularly investigates
complaints from tenants about conditions in their units. In many cases, the tenants have
previously notified their landlords, but the violations remain unrepaired. We provide information
to tenants on effective ways to complain, and we work with the landlords to respond more
appropriately. We are careful to follow the State Landlord- Tenant laws, and require tenants and
landlords to do the same.
Staff believes that a proactive and on -going inspection program would prevent many
substandard conditions BEFORE tenants occupy the units. Low income families living in
substandard conditions are far more likely to suffer increased illness and yet are the least able
to afford to move. City of Pasco, currently the only city in the state with a mandatory inspection
program, reports significant improvement in their rental housing stock over the 10 years of the
program. Improved housing can also spur economic development, lower crime, increase
property values, and generally improve the quality of life for all our citizens.
According to the 2004 "City of Tukwila Housing Needs Assessment Condition Survey
60% of Tukwila households live in rental housing
40% of renter occupied housing units are rated as "needs maintenance "deteriorated or
"dilapidated"
65% of Tukwila's housing stock overall is 40 -50 years old or older
Community Affairs and Parks Committee
Rental Housing Licensing and Inspection Program
March 22, 2010
Page 2
DISCUSSION
At the Community Affairs and Parks Committee meeting December 14, 2009, staff presented a
briefing on the City's proposed residential rental business license and inspection program. The
Committee recommended that staff return with a draft ordinance and associated fee schedule in
second or third quarter 2010.
In late December 2009, staff was contacted by AWC concerning pending state legislation
proposed by the Washington Rental Housing Industry Coalition (WRHIC) which would place
severe limits on rental housing inspection programs. Staff actively participated in joint
discussions with AWC, WRHIC and state Senator Hobbs in an effort to achieve agreement on
the bill language. In the end, AWC and other cities were unable to support the bill before the
legislature. Staff testified at a Senate hearing in opposition to the bill. As of this writing, the bill
appears to have passed both houses and is headed to the governor for signature.
The bill does contain language which would specifically exempt any municipality which has
adopted an ordinance as of the effective date of the bill. It also specifically permits such
adopted ordinances to be amended. It is interesting to note that without the exemption in the
bill, Pasco's program would be made illegal, despite the fact that the landlords offered praise of
Pasco's program at the Senate Hearing and have repeatedly stated that their proposal is not
that much different than Pasco's". This legislative session concluded on March 11, 2010 and
legislation becomes effective 90 days later (July 1, 2010).
Since Tukwila has been actively working on a residential rental housing and inspection program
for the past four or five years, staff felt it was appropriate and necessary to get this ordinance
before the Council for their consideration at this time.
The City's ordinance under consideration today is one that would:
Require all rental dwelling units to obtain an annual residential rental business license
Require an inspection of all units every fifth year
Set fees which would cover the costs of this program
Implementation Schedule and Phased Roll Out:
There are approximately 4000 rental dwelling units in the City of Tukwila. Implementing a
broad program of licensing and inspections will require that we roll out in phases. Our program
would:
Require all residential rental property owners to obtain an annual residential rental
business license beginning January 1, 2011.
Require all residential rental units to be inspected every fifth year.
The remainder of 2010 will be spent developing the forms, implementing the software
improvements, educating landlords and tenants about the program, and establishing the
process.
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Community Affairs and Parks Committee
Rental Housing Licensing and Inspection Program
March 22, 2010
Page 3
Process Details:
All rental property owners must apply for and obtain an annual residential rental
business license.
Initially, the City will issue a "provisional license" with a deadline for submitting the
inspection certificate. The provisional license will be valid for the calendar year issued.
The deadlines for obtaining the initial inspections are:
Property Type
1 5+ units per property
1 2 -4 units per property and rental condos
1 Single family ADUs
All owners must submit an "Inspection Certificate" signed and dated by the inspector
showing the inspection results for each unit by the deadline.
A "Certificate of Compliance" will be issued by the City for units achieving a score of
less than 25 on the inspection certificate.
The certificate of compliance is valid for four years. A copy will be retained in the City
Code Enforcement office along with the inspection certificate.
With a valid certificate of compliance, the owner must only renew their annual residential
rental business license.
90 days before the certificate of compliance expires, the Owner must submit the new
inspection certificate.
Failure to obtain a certificate of compliance will result in the City declaring the unit Unfit
for Occupancy. Tenants, if any, must vacate the unit.
The unit cannot be legally occupied until the repairs are completed, an inspection
certificate submitted, and a certificate of compliance and residential rental business
license for that unit is issued.
Inspection Details:
We are proposing an inspection checklist that is based on the standards in the International
Property Maintenance Code (IPMC) which the City adopted in 2004 as its housing code. We
will be evaluating the exterior structural elements (foundation, exterior walls, roof, balconies,
railings, etc.) and interior conditions, such as electrical and plumbing systems, windows and
doors, hot/cold water service, heat, emergency egress and other items. Exterior property
conditions, such as junk vehicles, debris, and weeds are not part of this inspection program, but
can be dealt with under our normal code enforcement process.
We have assigned a point value to the inspection items reflecting the severity of the violation.
In determining the value of each inspection item, we referred to the IPMC section regarding
unsafe structures and equipment for guidance. Violations of these standards pose a life- safety
risk and constitute an automatic failure of the inspection "25" points). These include such
things as no permanent source of heat, no water, blocked emergency egress, lack of a kitchen
or bathroom, lack of electrical service, or electrical hazards, etc.
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Inspection Deadline 1
December 31, 2011 1
December 31, 2012 1
December 31, 2013 1
Community Affairs and Parks Committee
Rental Housing Licensing and Inspection Program
March 22, 2010
Page 4
Violations which are less severe, but still affect the overall quality of the housing are given a
lower point value ("1", "2 or "3 These items include such things as broken windows, mold,
inadequate door locks, inadequate ventilation, lack of address numbers, etc.
In general:
Landlords have the option of using city inspectors or hiring a private inspector who
meets certain qualifications. Private inspectors must be pre- approved by the City.
Units which accrue fewer than 25 points on their inspection certificate pass the
inspection. The City will then issue a "Certificate of Compliance" for that unit along with
the residential rental business license.
The certificate of compliance is valid for four years from the date it is issued by the City.
Units which accrue 25 points or more on their inspection certificate will be required to be
repaired by the owner.
The owner has 30 days to make the necessary repairs and request a re- inspection.
Under most conditions, during the 30 -day repair period, the unit may continue to be
occupied.
Upon re- inspection, if unit achieves a score of less than 25, the certificate of compliance
and the residential rental business license for that unit is issued. Re- inspections
require additional per -unit inspection fees.
If the unit fails the second inspection, the certificate of compliance will not be issued.
The unit will be posted "Unfit for Occupancy It will not be available for rent until the
repairs are completed and pass inspection.
If a failed unit is occupied, the tenant will be required to move and may be eligible for
Relocation Assistance under TMC 8.46.
A copy of the inspection checklist will be included with the application form to allow landlords to
prepare for the inspection.
The landlord is required to make the necessary repairs in order to achieve a "score" of Tess than
25 on the inspection checklist. Although certain items are deemed an automatic failure, it is
also possible to "fail" the inspection by the accumulation of 25- points worth of smaller items. In
either event, the score must be below 25 in order to receive the certificate of compliance and
the residential rental business license for that unit.
Costs: The anticipated cost of this program will include supplies and staff for inspecting,
issuing, and tracking residential rental business licenses. We expect that the inspections will
take approximately 30 minutes to complete. The inspections will be performed by current
inspector staff (building inspectors and code enforcement officers), with contracted inspectors
used to fill in on an as- needed basis. Administrative support will need to be increased by .50 fte
to manage the administrative tasks and scheduling. Phasing the roll out over three years will
naturally spread out the inspection schedule.
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Community Affairs and Parks Committee
Rental Housing Licensing and Inspection Program
March 22, 2010
Page 5
Fees: Currently owners of complexes with more than four units pay an annual business
license fee of $100.00. Under our proposal, all rental property owners will need to obtain an
annual residential rental business license (in lieu of the regular business license) and pay an
annual fee:
50.00 (1 -4 units on a property)
$100.00 (5 or more units on a property)
In addition to the annual residential rental business license fee, there will be a per -unit
inspection fee of $35.00. The inspection fee is due and payable:
When the inspections are scheduled
Only on the years that an inspection is due
Only if the landlord chooses a City Inspector
The cost of the inspections amounts to less than $.75 per unit per month over the four -year
period.
Enforcement: For this program to be effective there must be consequences for violations. In
some cases, units may fail inspections, and the repairs will not be completed. In that case, the
certificate of compliance and the residential rental business license for that unit will not be
issued. Tenants, if any, will be required to vacate the unit.
If the unit is occupied, tenants may be eligible for Relocation Assistance (TMC 8.46) for units
that are declared unfit for occupancy due to failure of the required inspections. Failed units may
not be occupied until the repairs are completed, inspected and passed.
If a unit fails the second inspection, the City will issue a Notice of Non Issuance of Certificate of
compliance and will revoke or not issue the residential rental business license for that unit. The
notice of non issuance will contain appeal provisions. Appeals will be heard by the Tukwila
Hearing Examiner.
RECOMMENDATION
The Council is being asked to approve the ordinance and associated fee resolution and
consider this item at the April 12, 2010 Committee of the Whole meeting and subsequent April
19, 2010 Regular Meeting.
Attachments:
Draft Ordinance
Draft Fee Resolution
C:ltemp\XPgrpwise12010 -03 -22 Rental Staff Report- CAP.doc
Ei
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, ESTABLISHING RESIDENTIAL RENTAL HOUSING
REGULATIONS, TO BE CODIFIED AT TUKWILA MUNICIPAL CODE
CHAPTER 5.06, "RESIDENTIAL RENTAL BUSINESS LICENSE AND
INSPECTION PROGRAM PROVIDING FOR SEVERABILITY; AND
ESTABLISHING AN EFFECTIVE DATE.
WHEREAS, the City of Tukwila commissioned a City of Tukwila Housing Needs
Assessment and Condition Survey, which found that 60 percent of Tukwila households
live in rental housing, 40 percent of renter occupied housing units are rated as "needs
maintenance," "deteriorated" or "dilapidated," and 65 percent of Tukwila's housing
stock overall is 40 -50 years old or older; and
WHEREAS, the City Council has determined substandard and unsanitary
residential buildings and dwelling units exist within the City of Tukwila, the physical
condition of which violates State and local housing and technical codes, rendering thern
unfit or unsafe for human occupancy and habitation; and
WHEREAS, the existence of such substandard buildings and dwelling units
threatens the physical, social and economic stability of sound residential units and of
their supporting neighborhood facilities; necessitates the expenditure of public funds
for remedial action and abatement; and destroys the amenity of residential areas and
neighborhoods and of the community as a whole; and
WHEREAS, improving the residential housing environment and providing for
neighborhood stability throughout the City requires periodic inspection of residential
rental housing units in the City to ensure such premises conform to the City's Housing
Code and other applicable laws; and
WHEREAS, in order to provide for such periodic inspection of residential rental
housing units, these regulations establish a Residential Rental Business License and
Inspection Program to protect occupants from substandard housing; and
WHEREAS, the fees imposed pursuant to these regulations shall not exceed the
reasonable cost of providing the services for which such fees are charged; and
WHEREAS, such fees imposed to recover the cost of the Residential Rental Business
License and Inspection Program are not imposed on property ownership, but rather on
the carrying out of the business of renting residential property subject to these
regulations; and
WHEREAS, nothing in these regulations shall limit the City's ability to inspect
properties and issue citations/ orders for property related conditions that may
constitute an immediate threat to health or safety;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY ORDAINS AS FOLLOWS:
Section 1. New Regulations Established. New residential rental housing
regulations, to be codified at Tukwila Municipal Code Chapter 5.06, "Residential Rental
Business License and Inspection Program," are hereby established to read as follows:
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5.06.010 Declaration of Purpose. The City Council finds that the establishment of a
Residential Rental Business License and Inspection Program for rental units is necessary
to protect the public health, safety and welfare by ensuring the proper maintenance of
such housing, by identifying and requiring correction of substandard housing
conditions, and by preventing conditions of deterioration and blight that could
adversely impact the quality of life in the City of Tukwila.
5.06.020 Definitions. Unless specifically defined below, words or phrases used in
this chapter shall be interpreted using the meaning they have in common usage and to
give this chapter its most reasonable application.
1. "Accessory dwelling unit" or "AD U" means a unit that meets the requirements
of TMC Section 18.10.030(2).
2. "Applicable laws" include, but are not limited to, the City's housing code, the
City zoning ordinance and other City ordinances, and other laws or regulations relating
to the health and safety of City residents or the general public.
3. "Certificate of Compliance" means the certificate issued by the City evidencing
compliance with the requirements of this chapter. A Certificate of Compliance is
required before a unit can be rented.
4. "Code official" means the Department of Community Development Director or
his /her designee.
5. "City" means the City of Tukwila, Washington.
6. "Deficiency" means any failure by a rental unit to comply with applicable
laws.
7. "Department" means the City of Tukwila Department of Community
Development.
8. "Inspection Certificate" means the document submitted to the City as the result
of an inspection conducted by an inspector which shows the true condition of the unit.
An Inspection Certificate must be signed and dated by the inspector.
9. "Inspector" means:
a. A City building code inspector;
b. A City code enforcement officer;
c. A private inspector, approved by the City upon evidence of at least one of
the following credentials: A.A.C.E. Property Maintenance and Housing Inspector
certification, I.C.C. Property Maintenance and Housing Inspector certification, or I.C.C.
Residential Building Code Inspector;
d. A Washington State licensed architect; or
e. A Washington State licensed home inspector.
10. "Non -City inspector" means any inspector meeting the criteria in Section
5.06.020 who is not a City code official.
11. "Occupant" means an individual, partnership, corporation or association, or
agent of any of them lawfully residing in a unit.
12. "Owner" means the owner of record as shown on the last King County tax
assessment roll or such owner's authorized agent.
13. "Rental inspection deficiency point system" means the point system used by
inspectors to evaluate whether a rental unit is in compliance with the requirements of
this chapter.
14. "Rental unit" means a unit occupied or leased by a tenant.
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15. "Single-family residence" means a building, modular home, or new
manufactured home designed to contain no more than one dwelling unit, plus one
accessory dwelling unit.
16. "Tenant" means any adult person granted temporary use of a rental unit
pursuant to a lease or rental agreement with the owner of the rental unit.
17. "Unit" means any structure or part of a structure, which is used as a home,
residence or sleeping place by one or more persons, including but not limited to, single
family residences, duplexes, tri- plexes, four plexes, multi family dwellings, apartment
buildings, condominiums, mobile homes and similar living accommodations.
18. "Unit unavailable for rent" means a unit whose owner has filed with the code
official a statement signed under penalty of perjury that such unit is not offered or
available for rent as a rental unit and that prior to offering or making the unit available
as a rental unit, the owner will apply for a Residential Rental Business License and
comply with any applicable administrative regulations adopted pursuant to this
chapter.
5.06.030 Scope. The provisions of this chapter shall apply to all rental units, with the
exception of:
1. Owner- occupied rental units;
2. Units unavailable for rent;
3. Housing accommodations in hotels, motels, inns or tourist homes;
4. Housing accommodations in retirement or nursing homes;
5. Housing accommodations in any hospital, State licensed community care
facility, convent, monastery or other facility occupied exclusively by members of a
religious order or an extended medical care facility;
6. Housing accommodations that a government unit, agency or authority owns,
operates or manages, or which are specifically exempted from municipal regulation by
State or federal law or administrative regulation. This exception shall not apply once
the governmental ownership, operation or management regulation is discontinued.
5.06.040 Residential Rental Business License Requirement. Every rental unit
owner shall obtain an annual residential rental business license, pursuant to Title 5 of
the Tukwila Municipal Code, prior to operating, leasing or causing to be leased a rental
unit. Rental unit owners must file a written application with the Department for each
rental unit to be leased. To be considered for approval, residential rental business
license applications must be complete and include the appropriate application fee as set
by the City's fee schedule. Failure to obtain a residential rental business license will
result in the inability to rent the unit.
5.06.050 Inspection Required. The owner must obtain an inspection of each
rental unit and submit the inspection results to the code official. The owner may utilize
a City inspector or a non -City inspector, as defined herein. Unless the owner indicates
on the application that a non -City inspector will be utilized, the owner shall contact the
code official to schedule an inspection of the rental unit specified. If using a City
inspector, the code official shall provide at least seven days prior written notice to the
owner and to the tenant, if any, as to the date and time of the inspection. The City shall
provide the inspection criteria to the owner with the application form. The code official
shall issue a Certificate of Compliance for rental units that comply with applicable laws
based on a submitted inspection certificate. If using a non -City inspector, the owner
shall be responsible for making the inspection arrangements with the non -City
inspector.
5.06.060 Inspection Consent. Owners shall make every effort to make units available
for inspection pursuant to this chapter. If the owner fails to arrange for a non -City
inspector and/ or the owner or occupants do not consent to City entry for inspection,
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the code official may not force or otherwise attempt to gain entry except in accordance
with a court warrant authorizing entry for the purpose of inspection.
5.06.070 Rental Inspection Deficiency Point System.
A. The code official or Department shall prepare and shall keep on file for public
inspection the rental inspection deficiency point system used in the point calculation
procedure set forth herein. The code official shall assign points according to the severity
of each code violation on a scale of 1 to 25. Except when otherwise provided by State
law, conditions in the design or structure of a building such as, but not limited to, the
size and dimension of rooms and windows and the electrical and plumbing systems
that were legal under existing codes when built, shall not be violations as long as they
are maintained in good repair. A violation noted during the inspection shall receive the
assigned point value.
B. A rental unit shall be considered unfit for occupancy if it fails an inspection by 25
points or more.
5.06.080 Inspection Certificate. As a condition of the issuance of a residential rental
business license, the owner shall provide a completed Inspection Certificate signed by
the inspector showing the current condition of the rental unit. The code official shall
issue a Certificate of Compliance upon receipt of the inspection results indicating
compliance with the applicable laws pursuant to this chapter.
5.06.090 Deficiencies. Items to be inspected are weighted according to a point
system established by the City. Accrual of 25 points or more for deficiencies constitutes
a failure of the inspection and requires correction. The inspector shall provide the
owner and the City written notice of each deficiency disclosed by inspection. A
Certificate of Compliance shall not be issued until the Inspection Certificate indicates a
score of less than 25 points. Repairs required to bring the unit into compliance are the
responsibility of the owner. Rental units shall be subject to re- inspections pursuant to
Section 5.06.110.
5.06.100 Violations. If an inspection of a rental unit conducted pursuant to this
chapter reveals deficiencies of 25 points or more on the Inspection Certificate, the
violation must be cured within 30 days. If upon re- inspection, the unit reveals
deficiencies of 25 points or more, the City's code official may seek any remedies
permitted by law including, but not limited to, denial or revocation of a residential
rental business license for that unit pursuant to Title 5 of the Tukwila Municipal Code,
and abatement proceedings pursuant to Chapter 8.45 of the Tukwila Municipal Code.
The City may seek legal or equitable relief to enjoin any act or practice that constitutes
or will constitute a violation of any regulation under this chapter.
5.06.110 Re- inspections. A rental unit that exhibits deficiencies of 25 points or more
on the Inspection Certificate shall be subject to a re- inspection and re- inspection fee as
set forth in the City's fee schedule adopted pursuant to this chapter.
5.06.120 Notice of Non Issuance of Certificate of Compliance. If, upon re-
inspection, the inspector determines a rental unit is unfit for occupancy by failing an
inspection by 25 points or more, the City shall provide the owner with written notice of
non issuance of Certificate of Compliance. Such notice shall specify the date of the non
issuance determination, the rental unit address, the name of the owner, the name of the
inspector and the specific reasons for the non- issuance determination. Failure to obtain
a Certificate of Compliance will result in the non- issuance or revocation of the rental
business license for that unit. The unit shall be posted Unfit for Occupancy. Tenants, if
any, shall be required to vacate. Relocation Assistance pursuant to TMC 8.46 may
apply.
5.06.130 Contents of Certificate of Compliance. Certificate of Compliance shall
specify the date of issuance, the legal use and occupancy of the rental unit, the rental
unit address, the name of the owner to whom the certificate is issued, the expiration
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date of the Certificate, and an indication the rental unit complies with applicable laws
as far as could be determined by inspection.
5.06.140 Certificate of Compliance Validity and Renewal. Certificates of
Compliance are valid for four years from the date of issuance by the City. The owner
shall submit a new Inspection Certificate no later than 90 days prior to the expiration of
the current Certificate of Compliance. Failure to renew the Certificate of Compliance
every four years shall result in the non issuance or revocation of the rental business
license for that unit.
5.06.150 Notice. All notices issued pursuant to this chapter shall provide the address
and phone number where additional information concerning the inspection may be
obtained. Notice to the owner and occupants shall be mailed by first -class mail to the
owner's last known address as it appears in the records of the county assessor or other
address provided by the owner, and to the rental unit's occupants.
5.06.160 Authority. The code official shall be responsible for enforcement and
administration of this ordinance.
5.06.170 Administrative Regulations. The code official is authorized and directed to
promulgate administrative regulations pertaining to the implementation of this chapter.
5.06.180 Complaint -Based Inspections. Nothing contained herein shall prevent or
restrict the authority of the City's code official to inspect any unit or premises thereof in
response to a complaint alleging code violations or other violations of law at such unit
and to pursue all code enforcement remedies available under this code or other laws
following such a complaint -based inspection of a unit.
5.06.190 Voluntary Inspection Requests. Nothing in this chapter shall be construed
to prohibit an owner or occupant from voluntarily requesting an inspection to
determine whether a rental unit complies with applicable laws, even though such
inspection may not be required pursuant to this chapter. Such voluntary inspection
requests shall be subject to all of the provisions of this chapter including, but not limited
to, the provisions governing applications and fees.
5.06.200 Penalties.
A. Violations of the provisions of this chapter shall be deemed civil infractions
subject to the provisions of TMC Section 8.45.050 and the monetary penalties specified
in Section 5.06.200.C.
B. Any violation of this chapter that constitutes an immediate health or safety threat
shall constitute a public nuisance.
C. Any person who violates any of the provisions of this chapter shall, upon a
determination that a violation has been committed, be assessed monetary penalties as
follows:
1. First civil penalty: $250.00.
2. Second civil penalty: $500.00.
3. Third and each subsequent civil penalty: $1,000.00.
D. Each day that a property or person is not in compliance with the provisions of
this chapter may constitute a separate violation of this chapter.
E. The code official shall have the authority to waive or reduce monetary penalties.
Such waiver or reduction in monetary penalties shall be based on the code official's
finding that compliance has been obtained and that further penalties are punitive
assessments that serve no purpose.
F. In addition to the penalties above, the City shall not issue or shall revoke the
unit's business license and require that the unit be vacated until the unit is brought into
compliance.
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G. The penalties set forth in this chapter are not exclusive. The City may avail itself
of any other remedies provided by law.
5.06.210 Appeal.
A. Upon notice of non issuance of a Certificate of Compliance, the owner may
appeal by filing a notice of appeal, specifying the particular reason(s) upon which the
appeal is based, with the City Clerk within ten calendar days of and including the date
of the notice of non issuance. A timely notice of appeal shall stay the effect of the notice
of non issuance.
B. Upon timely filing of a notice of appeal, the City Clerk or his /her designee shall
schedule a hearing on the appeal before a Hearing Examiner. The hearing shall be
conducted no later than 45 business days from the date of the notice of appeal, unless
an extension is agreed to by the appellant or otherwise ordered by the Hearing
Examiner for good cause shown.
C. Within 14 business days, excluding holidays recognized by the City of Tukwila,
from the date of the hearing on an appeal under this section, the Hearing Examiner
shall issue a written decision, which shall set forth the reasons therefore.
D. A decision of the Hearing Examiner to reject an appeal as untimely, shall be final
unless an application for a writ of review is filed with the King County Superior Court
and properly served upon the City of Tukwila within 14 calendar days of and including
the date of the Hearing Examiner's decision.
5.06.220 Annual Review and Report. The code official shall conduct an annual
review of the Residential Rental Business License and Inspection Program and shall
submit an annual report of the program's effectiveness to the City Council.
5.06.230 Immediate Health and Safety Threats. Nothing in this ordinance shall limit
the City's ability to inspect properties and issue citations for property- related conditions
that may constitute an immediate health or safety threat.
5.06.240 No Warranty by City. By enacting and undertaking to enforce this
ordinance, the City, City Council, its agents and employees do not warrant or guarantee
the safety, fitness or suitability of any dwelling in the City or any unit inspected under
this program. Owners and occupants should take whatever steps they deem
appropriate to protect their interests, health, safety and welfare.
Section 2. Severability. If any section, subsection, paragraph, sentence, clause or
phrase of this ordinance or its application to any person or situation should be held to
be invalid or unconstitutional for any reason by a court of competent jurisdiction, such
invalidity or unconstitutionality shall not affect the validity or constitutionality of the
remaining portions of this ordinance or its application to any other person or situation.
Section 3. Effective Date. This ordinance or a summary thereof shall be published in
the official newspaper of the City, and shall take effect and be in full force five days
after passage and publication as provided by law.
PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON,
at a Regular Meeting thereof this day of 2010.
ATTEST/ AUTHENTICATED:
Jim Haggerton, Mayor
Christy O'Flaherty, CMC, City Clerk
Filed with the City Clerk:
APPROVED AS TO FORM BY: Passed by the City Council:
Published:
Effective Date:
Office of the City Attorney Ordinance Number:
W:\ Word Processing Ordinances Rental Housing 3- 10.docx
KLS:ksn 03/10/2010
Page 6 of 6
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, ADOPTING A RESIDENTIAL RENTAL BUSINESS
LICENSE AND INSPECTION PROGRAM FEE SCHEDULE.
WHEREAS, the City has adopted a Residential Rental Business License and
Inspection Program, pursuant to Tukwila Municipal Code Chapter 5.06; and
WHEREAS, the City is authorized to impose fees for services rendered;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY RESOLVES AS FOLLOWS:
Residential Rental Business License and Inspection Program fees will be charged
according to the following schedule:
RESIDENTIAL RENTAL BUSINESS LICENSE AND INSPECTION FEES
DESCRIPTION
Annual Residential Rental Business License:
Property with five or more units
Property with one, two, three or four units
Inspection fee per unit (City inspector)
Re- inspection fee per unit (City inspector)
Hearing Examiner appeal fee
PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at
a Regular Meeting thereof this day of 2010.
ATTEST/ AUTHENTICATED:
Christy O'Flaherty, CMC, City Clerk
APPROVED AS TO FORM BY:
Office of the City Attorney
DRAFT
W: \Word Processing\ Resolutions \Residential Rental Business License Fee Schedule doc
KS:ksn 3/4/2010
FEE
$100.00
$50.00
$35.00
$35.00
$300.00
Filed with the City Clerk:
Passed by the City Council:
Resolution Number:
Dennis Robertson, Council President
Page 1 of 1
TO:
FROM:
City of Tukwila
Mayor Haggerton
Community Affairs and Parks Committee
Rick Still, Interim Parks and Recreation Director
DATE: March 17, 2010
INFORMATIONAL MEMORANDUM
SUBJECT: Park Naming Process Codiga Park
ISSUE
Officially name the recently developed park site at 12929 50 Place South.
BACKGROUND
Jim Haggerton, Mayor
There is a long history behind the developed park site at 12929 50 Place South. The land
belonged to the Codiga family and served as a pioneer farm. In 1974, the land was sold to King
County to be used a park land, and included a leaseback to the Codiga's for $25 /month. In
1983, King County updated the lease to $160 /month. That lease was in effect until the City of
Tukwila acquired ownership of the land through annexation in the early 1990's. The City
continued leasing the land to the Codiga's.
The annexation in the early 1990's also included the site that the Tukwila Community Center
currently sits on. At the time of the annexation, King County was running a Pea Patch program
on this site. The City's Recreation Division continued to the run the Pea Patch, and in 1995,
was re- located to the Codiga site as construction of the new Community Center was to begin,
and was known as the Codiga Farm Pea Patch.
In 2002, the City and the U.S. Army Corps of Engineers entered into agreement to develop a
fish channel and park on the site. The fish channel had to go deeper than originally planned,
which also meant wider, resulting in less area available for the upland park development, and
the Pea Patch re- located to it's present location at Riverton Park.
The fish channel project work took place during 2003 '06, however the Corps abandoned the
park development portion of the project. The site was left alone for nearly 3 years until the
Parks and Recreation Department took over the responsibility to complete the park
development. The Department went through the design and bed phase, and the park
development will be complete in March 2010.
DISCUSSION
City of Tukwila Council Resolution #1400 describes the process for Naming City Property,
specifically in this case, Parks. The names of Parks are recommended by the Parks
Commission, who forwards their recommendation to the Community Affairs and Parks
Committee. The City Council is the final authority in approving the names of City -owned real
property. The criteria for Naming City Property according to CR #1400 includes geographical
location, historical considerations, name of person, geological features, and city identify /image.
W:\2010 InfoMemos \CAP 3 -22 Codiga Park Naming 3 -17 -10 UPDATED.docx
INFORMATIONAL MEMO 3 -17 -10
Park Naming Codiga Park Page 2
Over the years, this site has been referred to in a variety of communications and documents as
the Codiga Fish Channel, Codiga Farm property, Codiga Farm Park, or Codiga Park. This site
is referred to as Codiga Park in the City of Tukwila Capital Improvement Plan.
This item was taken to the City of Tukwila Parks Commission on March 17, 2010. Proposed
names were those listed above. After careful and thoughtful consideration, the Parks
Commission recommends Codiga Park.
RECOMMENDATION
Based on the recommendation of the Parks Commission, the Council is being asked to consider
naming the park property located at 12929 50 Place South as Codiga Park at the April 12,
2010 Committee of the Whole meeting and subsequent Regular Meeting April 19, 2010.
ATTACHMENTS
Resolution #1400 June 15, 1998, Policy for Naming City Property
W.12010 InfoMemosICAP 3 -22 Codiga Park Naming 3 -17 -10 UPDATED.docx
�J,�N11L�A was
City of Tukwila
Washington
Resolution No. /0
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF TUICWILA, WASHINGTON, ADOPTING
POLICIES FOR NAMING CITY PROPERTY; AND
REPEALING RESOLUTION 981.
WHEREAS, Resolution 981 was passed in 1985 to set policies for naming City property; and
WHEREAS, since 1985 the City has grown, development has increased, and Resolution 981
no longer applies as effectively as it once did; and
WHEREAS, Tukwila has a rich history, an important location, and a number of individuals
who have contributed to the City's development and enrichment; and
WHEREAS, naming of remaining property in Tukwila should be done in a fashion that is
responsible and reflects a thoughtful and meaningful process;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUICWILA,
WASHINGTON, HEREBY RESOLVES AS FOLLOWS:
Section 1. Authority to Name City Property.
A. The Tukwila City Council shall be the final authority in approving the names of City-
owned real property.
B. New streets in the central business district and business /industrial areas shall be given
grid numbered names In order to enhance quick response by public safety officials in emergencies
and in order to facilitate access by the general public.
C. The City's Fire Marshal will approve the names of numbered City streets. The
Administration will inform the Council of these names when approved.
D. The names of parks in the City shall be recommended by the Park Commission. Their
recommendation will be forwarded to the Community and Parks Committee for consideration.
E. In all cases other than parks and numbered streets in the central business district, the
Community and Parks Committee will recommend a name or alternative names for City Council
consideration and approval.
Section 2. Criteria for Naming City Property.
A. Named City property and facilities including streets, parks, bridges, and facilities shall use
the following unranked criteria to guide their naming decision:
1. Geographical location;
2. Historical considerations;
3. Names of persons;
4. Geological features;
5. City identity and image
NAMEPROP.DOC 6/11/1998
B. Where persons' names are used, they should be people who have made an outstanding
contribution to the community, or whose names are of historical significance to the area, or who
the City would like to recognize as an important influence in the area.
C. When the name of City-owned real property or of a City facility is being changed, the
City Council will delay a final decision for thirty (30) days after a recommendation from a
Committee of the Whole is made.
Section 3. Repealer. Resolution 981 is hereby repealed.
PASSED BY THE CITY COU "ICIL OF THE CITY OF TUKWILA, WASHINGTON, at a
regular meeting thereof this day of in 1 998.
ATTEST /AUTHENTICATED:
�JZL�rC e C�7 (��(�iL.Z�r�c�
j E. Cantu, City Clerk
APPROVED AS TO FORM:
By
Office of the City Arney
Filed with the City Clerk: 4 9E
Passed by the City Council: l.P7-9;5
Resolution Number /Ole)
NAMEPROP.DOC 6/11/1998
Pamela Linder, Council President
ISSUE
DISCUSSION
City of Tukwila
INFORMATIONAL MEMORANDUM
TO: Mayor Haggerton
COMMUNITY AFFAIRS AND PARKS COMMITTEE
FROM: JACK PACE, COMMUNITY DEVELOPMENT DIRECTOR
DATE: March 17, 2010
SUBJECT: Briefing on Status of Draft Southcenter Plan
Jim Haggerton, Mayor
Provide a briefing on the status of the draft Plan for the Southcenter area, the City's designated
urban center.
BACKGROUND
From March May 2009 the Planning Commission held a public hearing and held 3
worksessions on the draft Plan.
In May, the Planning Commission directed DCD staff to review the comments received from
the public on the draft Southcenter Plan and propose revisions to address the issues raised.
Staff responded to stakeholder concerns regarding the economic feasibility of the vision and
the draft development regulations by contracting with ECONorthwest (ECO), the consultant
that prepared economic and market analyses during the preparation of the first draft of the
plan. ECO's analysis consisted of:
1) Technical research on market and demographic forces that will influence Plan
implementation;
2) Creating four pro formas (economic analyses of development scenarios) for possible
prototype developments in the TUC; and
3) Conducting three focus groups and follow -up interviews with TUC stakeholders and
other office, retail, residential and mixed -use developers. Also attending the focus
groups were George Malina (Planning Commission Chair), Derek Speck (Economic
Development Administrator), and DCD staff.
ECO's attached Memo summarizes their findings, identifies recommended revisions to the
development standards, and suggests implementation strategies. ECO presented their
findings to the Planning Commission on December 10
ECO's technical memo recommended revisions to the development standards and changes
to the implementation strategies:
General comments recommended strateaies:
o Almost all stakeholders agreed the vision is the right Tong -term goal for development
in TUC.
o The vision is achievable in the mid to long term with significant, targeted public
investment to catalyze and support types of development the City would like to see.
INFORMATIONAL MEMO
Page 2
o Code appears to be more complex than it actually is: it is designed to provide
certainty while minimizing discretionary interpretive decisions.
Specific recommendations comments:
o Revise high -rise ordinance to allow mid -rise construction will make the Plan more
economically viable and allow Tukwila to be more competitive with other cities.
o Achieving multiple storied development is limited due to difficulty in meeting parking
requirements:
Current parking requirements reflect reinforce suburban development
patterns.
Not enough lot space to meet multi -story parking requirements.
Costs associated with constructing structured parking is the most significant
factor affecting financial performance of prototypical development.
Recommend eliminating minimum parking requirements.
o When reducing parking requirements, need to provide other options to avoid
negative consequences:
Provide on- street parking soon
Enhance transit service facilities serving the TUC
Explore public investment in public parking garage.
o Open space requirements are consistent with other jurisdictions.
o Short Term actions:
Establish a lead redevelopment entity to coordinate implementation
Create a public sector redevelopment tool kit
Consider rebranding Tukwila
o Mid Long Term actions:
Collaboratively craft a redevelopment strategy and secure buy -ins for actions
that move redevelopment forward
Choose implement strategy
RECOMMENDATION
This briefing is for information only. DCD plans to continue developing a revised draft plan
under the following schedule:
1 2 Qtr 2010
Reaffirm TUC Vision internally with city departments
3rd Qtr 2010
Establish stakeholders groups adopt a resolution
Review evaluate public comments ECONW memo
Begin determining implications for development policies and implementation strategies
o Initiate stakeholder group meetings to address key policies and strategies
ATTACHMENTS
Technical Memorandum: Tukwila Urban Center Implementation Analysis Final, from Abe
Farkas and Lorelei Juntunen (ECONorthwest) to Lynn Miranda and Nora Gierloff, December 3,
2009.
W:12010 InfoMemos\Draft Southcenter Plan- DCD.doc
Phone (503) 222 -6060
FAX (503) 222 -1504
info @econw.com
ECONorthwest
ECONOMICS FINANCE PLANNING
Suite 1460
888 SW 5 Ave
Portland, Oregon 97204 -2028
Other Offices
Eugene (541) 687 -0051
Seattle (206) 622 -2403
3 December 2009 Project 7279
TO: Lynn Miranda and Nora Gierloff
FROM: Abe Farkas, Anne Fifield, and Susan Davis
SUBJECT: TECHNICAL MEMORANDUM: TUKWILA URBAN CENTER
IMPLEMENTATION ANALYSIS—FINAL
The City of Tukwila contracted with ECONorthwest (ECO) to evaluate the vision and
development regulations (Books I and II) of the public review draft of the Southcenter
Plan —the City's plan for their urban center. ECO evaluated the market for proposed
redevelopment in the Tukwila Urban Center (TUC) and provided financial analysis to
identify potential adjustments to the plan and development regulations to make
redevelopment of the TUC more feasible in the short run, and to assure that the vision
outlined in the draft plan is aligned with longer -run market realities.
This technical memorandum summarizes the research conducted by ECO. It has four
sections:
Introduction and Background provides an overview of the development vision
for the draft Urban Center Plan and its purpose. It identifies the key issues of the
development requirements that may negatively affect redevelopment. This
section also includes an overview of the research methods used in this analysis.
Development Market Economics: The Long Run describes the market and
demographic forces that will influence the implementation of the TUC plan
vision over the long term.
Development Market Economics: The Short Run describes the results of ECO's
pro forma analyses of four prototype developments to determine financial
feasibility of the draft TUC development regulations in the short term.
Implications and Recommendations summarizes the implications of the
technical research and recommends strategies to support the implementation of
the TUC plan.
Attached to this memorandum are two Appendices:
Focus Group Notes and Participants provides detailed notes of focus group
discussions and those who participated.
Details of Financial Pro Formas provides the details of the technical analyses.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 2
Tukwila Urban Center Plan Implementation Analysis
1 INTRODUCTION AND BACKGROUND
1.1 THE TUKWILA URBAN CENTER
The City's Comprehensive Plan identifies the Tukwila Urban Center (TUC) as one of
King County's designated Urban Centers; as such, the plan's vision is consistent with
the Countywide Planning Policies that require an average of 50 employees and 15
households per gross acre. The draft Plan describes a future development pattern that is
more dense, pedestrian- oriented, and includes a broader mix of uses than is currently
seen in the TUC. In February 2009, the City of Tukwila issued the public review draft of
the Southcenter Plan (the Plan), which presents the community's vision for growth and
change for the TUC. The draft Plan also includes development regulations specific to
the TUC that require development forms designed to achieve the community's vision
for the area.
Existing development patterns in the Plan Area are primarily single- story, auto
oriented, commercial development. The northern portion is dominated by a super
regional shopping mall surrounded by parking lots and rings of associated smaller
scale, surface parked commercial buildings. The southern portion is primarily a
warehouse and distribution center, with some retail outlets and office buildings. Some
"big box" retailers have located in the western and southern portions of the Plan Area.
The community envisions growth in the northern part of the Plan Area taking on a
more compact and differentiated form. Tukwila's new redevelopment strategies
support the continued success of existing uses, with districts of more urban mixed -use
development including residential, entertainment, restaurant, life -style retail, and office
components. These districts are envisioned as active, mid -rise areas with pedestrian
oriented streets, connecting the expanding Westfield Southcenter Mall with the Sounder
Commuter Rail /Amtrak Station, and including the area surrounding Tukwila Pond.
The draft Plan identified key characteristics envisioned for districts and corridors
within the TUC, shown in Figure 1:
The Regional Center. The area currently dominated by the Southcenter Mall will
become denser and scaled for pedestrians. In the long -term, the draft Plan shows
increased building height with offices, residences, or hotels on upper floors.
Parking will continue to transition from surface lots to structured parking.
The Pond District. The draft Plan calls upon new development to take
advantage of the pond as a natural amenity, with new development oriented
toward the pond, with active doors, windows, and public walkways facing the
water.
The TOD Neighborhood. The draft Plan calls for the area to intensify, with the
taller buildings near the Transit Station and close to the Regional Center, and
lower buildings along the river.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 3
Tukwila Urban Center Plan Implementation Analysis
The Workplace District. Much of the southern portion of the Plan Area has been
and will continue to be devoted to warehousing and distribution uses. As in the
other districts the draft Plan calls for a finer grid of new, smaller streets that
interconnect existing large -scale blocks.
The Commercial Corridor District. The draft Plan calls for the continuation of
auto oriented retail and services along Southcenter Parkway, including big box
retail, super centers, and drive -up facilities.
Figure 1. Envisioned district structure
711617111
Regional TUC
Center Boulevards
The Pond
District
Conunercial
Corridors
Workplace
District
Source: Tukwila Urban Center draft Plan.
To achieve the desired forms across the TUC, the draft Plan proposes development
regulations specific to the TUC. The proposed development code is a "form- based"
code, which means it specifies allowed building form (e.g., height and setback). The
code also has standards for use, scale, and form for the zones and corridors described
above.
1.2 KEY ISSUES ADDRESSED IN THIS ANALYSIS
Several parties have expressed concerns that the draft TUC plan and the development
regulations overreach market realities. Stakeholders have expressed concern that much
of the draft TUC Plan is based on a market analysis conducted in 2002 that is now
outdated. The stakeholders have indicated that the draft TUC Plan and development
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 4
Tukwila Urban Center Plan Implementation Analysis
code require types and densities of development that are not economically feasible in
today's market.
The City extended an invitation with these stakeholders to participate in focus groups
on the draft measures of the Plan. ECO conducted interviews and three focus groups
with these stakeholders. The stakeholders identified some of the following key
requirements of the development code as concerns:
Height requirements. The development code requires a two -story (25 foot)
minimum for structures (excluding anchor retail uses) in the Regional Center, the
Pond District, and the TOD Neighborhood. For the short-term, stakeholders
were concerned that the required building types may be more costly to build
than current rents can support.
Parking requirements. The code requires 6.0 spaces per 1,000 s.f. of restaurant
space, 3.3 spaces for retail, 3.0 spaces for office, and 1.0 spaces per bedroom for
each residential unit (with a maximum of 2.0 spaces per dwelling unit). The
parking requirements are typical of suburban development. Providing minimum
parking would likely require parking structures, increasing construction costs.
Complexity of the Code. A few stakeholders felt that the proposed development
code is complex. It includes code that regulates both form and use.
Redevelopment and conformity to Code. Remodels or expensive tenant
improvements could trigger requirements for conformity to the TUC Code
Stakeholders perceived that a relatively small change could force very difficult
and costly improvements to the structure. Such a remodel could require a new
building height minimum or bringing a building up to the street. A building
owner may avoid making any improvement to a structure, in order to avoid
improvements that are not economical at this time. The area could see
disinvestment in existing structures.
Fire code requirements for high- rises. The existing Tukwila Fire Code requires
significant engineering for buildings over 40 feet tall. Those engineering
requirements add significant costs— essentially making a mid -rise building have
the same fire /life safety engineering requirements as a high -rise building. The
stakeholders believe that these requirements make it unlikely that it would ever
be cost effective to build a mid -rise structure in the TUC. Many other
jurisdictions in Washington and Oregon have adopted codes that enable mid -rise
construction for buildings that are 65 feet which makes it possible to build five
floors of residential or office over one story of retail. These buildings tend to be
more economically viable in many markets and reinforce activated ground floor
goals in these communities. This is a city -wide issue, though especially
problematic to the TUC vision.
The above issues have specific details that make them problematic but they all
contribute to the same, broad concern voiced by stakeholders about the proposed
TUC development code: The Code requires building types that are expensive.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 5
Tukwila Urban Center Plan Implementation Analysis
The market in Tukwila does not currently generate rents from tenants high
enough to make it financially feasible to build required structure types.
Improvements that are financially feasible trigger additional improvements that
add prohibitive costs. This is likely to discourage any improvement to existing
structures, unnecessarily causing disinvestment in a successful retail center.
Some voiced concerns that existing, successful retail tenants may choose to
relocate to neighboring jurisdictions, causing the City to experience a decline in
sales tax revenue.
Part of ECO's aim in this analysis is to explore these concerns and provide
information to the City about how realistic they are, and about how changes to the
Code and the Plan might help to mitigate the outcomes?
1.3 METHODS USED IN THIS ANALYSIS
To respond to stakeholders' concerns, ECO relied on a variety of analytical methods
for this analysis:
Review of existing documents and studies. ECO reviewed the documents that
supported the development of the draft TUC Plan, including the public review
draft of the Tukwila Urban Center Plan, its Development Code and
Implementation Strategy, and the 2002 market analysis
Demographics and market trends. ECO reviewed long -run economic,
demographic, and development trends to provide a sense of the TUC's
comparative advantage and risks.
Pro Forma analysis. To answer the concern that the required development types
are not feasible, ECO created four financial pro formas for prototype
developments to illustrate how they might work. The pro formas answer
questions about how realistic development forms are in the short term, given
current financial markets and also more historic patterns.
Focus groups. ECO conducted three focus groups and follow-up interviews with
TUC stakeholders and other office, retail, residential and mixed -use developers
1 In addition, many of the stakeholders in the TUC have expressed concerns that the
draft TUC Plan and development code require types and densities of development that
are not economically feasible in today's market, and much of the draft TUC Plan is
based on a market analysis conducted in 2002 that is now outdated. ECO agrees that
the 2002 market analysis is not adequate now as a short-run analysis: the market has
changed. However, given the uncertainty in the current market, it is not an effective use
of City funds to do a new, detailed market analysis (like the one completed in 2002) at
this time.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 6
Tukwila Urban Center Plan Implementation Analysis
doing business in the region (but not in Tukwila) to determine specific concerns
and identify potential solutions to problems.
2 DEVELOPMENT MARKET ECONOMICS: THE LONG -RUN
This section describes some of the market-based forces that will influence the
implementation of the TUC Plan. It describes how broad trends in demographics,
economic conditions, and development give Tukwila a competitive advantage or
disadvantage for attracting the urban development form envisioned in the Plan.
2.1 FACTORS THAT FAVOR DEVELOPMENT
The TUC has a number of competitive advantages that will
positively affect implementation of the proposed development
plan.
The TUC's primary advantage is its location. It is centrally
located between the major population centers of Seattle and
Tacoma and has good transportation connections.
It is about 20 minutes by car from downtown Seattle and about 25 minutes from
Tacoma.
It has good access to a variety of automobile transportation routes. The TUC is
on the southeast corner of the I -5 and I -405 interchange.
The temporary Amtrak Station will be replaced by the permanent Tukwila
Sounder Commuter Rail /Amtrak Station, which is in the design phase with
construction expected to begin 2010. It will be located on the eastern edge of the
TUC.
Summary: Comparative advantages for
development in Tukwila:
Location and access
Large marketshed and regional retail draw
Regional employment center
Potential waterfront amenity
Large, unconfigured parcels
It is less than five miles from Sea -Tac, a major international airport.
It is a 10- minute bus ride from the Light Rail stop on Tukwila International Blvd.
Because it has good access to large employment centers, it has access to a large market
for both retailers and employers. In a market-shed that is roughly equal to four miles
around the TUC, there are about 214,000 households.
Its good access and strong retail base, largely stemming from the location of the
Southcenter Mall, makes the TUC a reasonable location for employment for many in the
labor force. About 16,000 individuals commute daily to the TUC, and those workers
come from all over the Puget Sound region. Table 1 shows the residential location of the
individuals employed in the TUC boundary.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 7
Tukwila Urban Center Plan Implementation Analysis
Table 1. Residential location of
TUC employees, 2006
Location Workers Percent
Seattle 2,049 13%
Kent 1,033 6%
Renton 850 5%
Tacoma 696 4%
Federal Way 680 4%
Cascade Fairwood 648 4%
Tukwila 334 2%
All Other Cities 10,072 62%
King County 10,993 67%
Pierce County 2,198 13%
Snohomish County 1,178 7%
All Other Counties 1,993 12%
Total 16,362 100%
Source: U.S. Census OnTheMap 2006.
The firms employing the largest number of people are major retailers, including
Nordstrom, Macy's, Costco, J.C. Penny, and Red Dot Corporation (truck air
conditioning equipment). Carlyle, Inc., another major employer, manufacturers and
distributes wire, cable, and connector products.
Figure 2. Waterfront amenities
Source: Tukwila Urban Center draft Plan.
The TUC area has two significant water features: the Tukwila Pond and the Green
River. Existing development has not used the features as an amenity, and they are an
obvious opportunity for attractive and appealing development. Figure 2 shows the
location of the water features.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 8
Tukwila Urban Center Plan Implementation Analysis
Existing land ownership patterns in the TUC are an advantage for redevelopment.
The parcels are large, meaning that redevelopment can take many forms. Future land
division has flexible options. Figure 3 shows existing land development patterns and
the proposed development pattern.
Figure 3.Existing and proposed parcel division
Existing
Summary: Comparative disadvantages for
development in the TUC:
Relatively lower- income market
Need to create a residential community in an
auto oriented retail center
Lack of publicly -owned land limits options for
open space and catalyst projects
Declining strength of retail market
Large, unconfigured parcels
Proposed
2.2 FACTORS THAT CONSTRAIN DEVELOPMENT
Figure 4 shows household incomes in the approximate
market shed for the TUC relative to statewide incomes and
incomes in King County. The data show that households in
the TUC's market shed have average incomes lower than
households in just King County. King County's average
higher income is influenced by the higher incomes in
Seattle. This affects potential development types in the TUC
because Seattle, immediately to the north, is more likely to
capture the highest income households, for both residences
and retail sales. Higher end residential development and higher retail rents are more
easily obtained in Seattle, and the TUC will have to compete with well- established
mixed -use areas in Seattle and other King County locations.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 9
Tukwila Urban Center Plan Implementation Analysis
Figure 4. Household incomes in market shed, King
County, and Washington State, 2008
$100,000 and
above
$75,000 to $99,999
$50,000 to $74,999
$25,000 to $49,999
$15,000 to $24,999
Less than $15,000
0% 5% 10% 15% 20% 25% 30% 35%
Percent of Households
Washington King County Market Shed
Source: Claritas, Inc. and WashingtonProspector.com.
The existing development pattern is very different than the proposed vision for the
TUC. There are currently no residential uses in the area, and there is very little
pedestrian traffic for neighborhood- serving retail. These factors make it challenging to
create an urban neighborhood.
The existing land ownership pattern is primarily made up of large parcels, discussed
above in the factors that favor development. The downside of the existing land
ownership patterns is that parcel division is costly. New roads to access the parcels may
need to be constructed. The cost of the new urban infrastructure is not trivial. Outside
of urban centers it is normal for the private sector to pick up many key infrastructure
off -sites however land and construction are less costly. In urban centers land is a
greater part of development costs, and since development is taller and there is often a
need for structured parking, development costs are higher. Adding off sites, such as
parking, to the equation could further disinterest developers since current rents will be
even less able to make their projects profitable. However, greater economic benefits can
be achieved by breaking up larger parcels with new streets, gaining more locations at
intersections and increased street frontage for businesses which translates into higher
rents, better access and visibility, and increased pedestrian and vehicular traffic.
Some cities require developers to build off -site infrastructure, some do not, while
others share offsite costs with developers. If the City does require developers to fund all
the off -site infrastructure, it may discourage developers from considering the TUC. To
avoid adding yet another layer of development costs in a highly competitive market it
may be worth exploring how the City of Tukwila can effectively share some of the off
site burden so that it can achieve the larger goal of securing envisioned development.
Another constraint is that all the large parcels appear to be privately owned which
can impede the ability to initiate redevelopment through a demonstration project. This
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 10
Tukwila Urban Center Plan Implementation Analysis
ownership pattern limits the City's ability to direct and support redevelopment. The
City has no land it can offer for sale a tool a City can use to its advantage to require
specific development types. This also limits the City's ability to create attractive open
space without first acquiring land. The lack of publicly held land limits the City's tools
to encourage redevelopment —it cannot use its own site for a catalytic project.
Figure 5 shows retail sales per capita in Tukwila and other nearby cities. Tukwila's
per capita retail sales have greatly exceeded nearby cities for many years; in 2001 it
captured 9.3% of all sales in the cities shown in the figure.
The state of Washington's tax structure makes retail development a revenue generator
for local governments. In years past, the City's coffers have benefited from the
substantial retail development in the TUC. But other cities have worked to increase
their share of retail sales. Tukwila's share of retail sales of the cities in Figure 5 fell to
7.8% in 2008.
Tukwila does not impose a local B &O tax, as a result, the City is very dependent on
its sales tax revenue.
Figure 5. Retail sales per capita, 2001 and 2008
S140,000
m $120,000
v $100,000
Q. $80,000
co
-0
ea $60,000
to
$40,000
ce $20,000
$0
Source: Washington State Department of Revenue, City Data.com.
Il ilir
0,
Tukwila Issaquah Bellevue Renton Kirkland Seattle Federal
M 2001 ;..2008 Way
The long -term economic and demographic conditions create competitive advantages
and disadvantages for the TUC Plan. Its primary advantage is the central location with
good transportation access. Also, the existing retail base is strong with healthy brands
which tend to promote synergy among retailers. The primary challenge to achieve the
vision in the draft TUC Plan is to create a residential friendly area. The complete
2 Some of the drop may be attributable to a change in Washington state's sales tax distribution system. The tax is
now applied to the community a purchased item is delivered. If someone purchases a good in Tukwila and takes that
good at the time of sale, Tukwila receives the sales tax. But if the individual has the item delivered to a different
jurisdiction, that different jurisdiction receives the sales tax. The change is expected to affect furniture and large
appliance sales.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 11
Tukwila Urban Center Plan Implementation Analysis
absence of any residential development means that it must start from scratch, and
redefine the existing perception of the TUC. This requires public investment in the
potential amenities of the area, so that developers considering the TUC can see the
advantages outweigh the disadvantages.
3 DEVELOPMENT MARKET ECONOMICS: THE SHORT -RUN
The current economy has negatively affected development and redevelopment in
almost any form. This economic downturn is particularly difficult for new
development. Not only is demand depressed with overall economic conditions, but the
financial sector has been greatly affected. The financial sector is unwilling to make loans
for development— equity in a project must be very high, prohibitively high for most
developers. Financing terms are not only more onerous than there were during the
boom of 2006 and 2007, they are more onerous than they have been for a long time
before that. Most development projects are simply unable to get financing in 2009.
Financing terms are expected to remain tight throughout 2010, and there is a lot of
uncertainty about when and how conditions will change.
The depressed economy and curtailed consumer spending have hurt the retail sector.
Retail vacancies are increasing as some retailers exit the market. Remaining retailers are
typically generating lower revenues, which in turn negatively affects the rents those
firms are willing to pay. Some retailers have been able to negotiate lower rents. If retail
rents decline or stagnate, the expensive development types envisioned for the TUC (i.e.,
taller, mixed -use structures, and facilities that require structured parking) become less
viable.
The property and business owners in the TUC have expressed concerns that the draft
TUC Plan and development code require types and densities of development that are
not economically feasible in today's market, and much of the draft Plan is based on a
market analysis conducted in 2002 that is now outdated.
3.1 DEVELOPMENT PROTOTYPES AND PRO FORMAS
A new look at the market, however, is certainly warranted within the context of
attempts to understand how the proposed code will affect property owners and
developers as they work to improve their properties. To understand how existing
market conditions (construction costs, rents, financing terms) affect the potential
development in the TUC, ECONorthwest created four prototype developments with
accompanying financial pro formas that comply with the Code outlined in the draft
Plan to illustrate how those developments might work both physically and financially.
A pro forma is an essential tool to a developer to determine if a proposed project
pencils out If costs exceed revenues, the project will not receive financing, and will
not get built without some subsidy. The pro formas use expected development cost and
revenue data for building and use type to determine cash flow.
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Tukwila Urban Center Plan Implementation Analysis
The pro formas in this section are based on prototype buildings. ECO worked with
the City to determine prototype developments that were most indicative of the vision
for the future of the area and we then applied the proposed development code to the
buildings, to determine how the code affected structure type and cost. The prototype
buildings are hypothetical —they are not real or proposed structures.
In this section, we discuss the pro formas for four building prototypes:
1. Mixed -use mid -rise building
2. Office tower
3. Residential tower
4. Adaptive re -use of big box retail
For each prototype, we analyze four financing scenarios:
The current, constrained market, with the lender loaning 65% of the project costs
at an 8% interest rate.
A "normal" market, based on financing terms typically available before the mid
2000s. This scenario has the lender loaning 80% of the project costs at a 6%
interest rate.
Current market conditions supported with a second loan from a public agency.
The bank lends 65% of the cost at 8% interest. A second public loan covers 25% of
the cost at 1% interest.
A "normal" market, based on financing terms typically available before the mid
2000s with a second loan from a public agency. The bank lends 80% of the cost
6% interest. A second public loan covers 10% of the cost at 1% interest.
ECO made a variety of assumptions to develop the prototypes and the pro formas. It
is important to remember that the assumptions are preliminary and incomplete. A real
development would conduct a much more detailed analysis based on known conditions
and costs of development forms. But the analyses reveal important information about
TUC development code. All the pro formas made these assumptions:
We assumed land division was necessary for all prototypes.
No off -site costs were included. As discussed above, these costs can be
significant.
The parking spaces do not produce revenue. The analysis assumes parking
(structured and surface) is free.
All residential units are rental apartments. We did not consider any
condominiums in the analysis.
Other assumptions (e.g., construction costs, unit sizes, etc.) were based on
interviews with industry professionals and our experience in the field. The
assumptions vary by prototype.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 13
Tukwila Urban Center Plan Implementation Analysis
ECO understands that the ground under the TUC is not composed of stable soils.
To meet building standards, piles had to be driven into the ground for a recent
construction project. Tall structures can be built in the TUC, but the local geology
increases the costs. ECO has probably underestimated the cost of construction,
given the geology of the area.
ECO calculated the fair market value of the structure by dividing the net
operating income (NOI) by a capitalization rate of 8.5%.
To determine the 'created value', we subtracted the development costs from the
fair market value.
Table 2 shows the rents (triple net and parking ratios ECO used in the pro forrnas
for the four development types. The parking ratios are based on Code requirements. To
determine appropriate rents, we interviewed local commercial real estate brokers.
Table 2. Rent and parking requirements used in pro formas
Use
Office
Retail
Restaurant
Residential
Source: ECONorthwest.
Rent per SF
per Year
(NNN)
$18.00
$20.00
$17.00
$20.40
Parking Requirements
3.0 spaces /1,000 sf
3.3 spaces /1,000 sf
6.0 spaces /1,000 sf
1.0 spaces per bedroom w/ max
of 2.0 spaces per d.u.
Based on the assumed square footage in the prototypes and the rent per square foot, the
residential rents are:
1- bedroom $1,360 per month
2- bedroom $2,040 per month
3- bedroom $2,550 per month
The residential rents are higher than current rents in Tukwila, and more similar to
rents seen in Redmond and central Seattle. An example project in the metropolitan area
achieving these rents is the Union Bay Loft Apartments on East Lake Avenue in Seattle.
Tukwila will require significant rebranding to achieve these residential rents. We used
them as a starting point in the pro formas because no market for residential
development currently exists in the TUC, and it is unlikely that any significant
3 ECO interviewed local real estate professionals to determine local capitalization rates. We were told that the
market is in such a state of flux at this time that there is no consensus on capitalization rates. The 8.5% cap rate is an
estimate of current cap rates.
4 A triple net (NNN) lease is a lease agreement where the lessee pays rent as well as taxes, insurance, and
maintenance expenses.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 14
Tukwila Urban Center Plan Implementation Analysis
residential development would be constructed without at least some rebranding and
very active marketing occurring.
3.2 RESULTS OF PRO FORMAS
This section summarizes the results of the pro forma analyses. Appendix B of this
memorandum shows detailed information about the building description and the pro-
forma analysis.
Table 3 shows basic data about the size and uses for each of the four prototypes. It
also shows the estimated cost of development and ECO's calculated fair market value.
The cost estimates (detailed in Appendix B) include the cost of land, based on average
price per acre in the Urban Center, from the Tukwila Assessor's database. Construction
costs are based on estimates provided by Ankrom Moison Architects and Howard S.
Wright Constructors, in September 2009. The cost estimates do not include the cost of
any off -site infrastructure improvements, which, as stated previously, could be fairly
significant.
ECO calculated the fair market value of the structure by dividing the net operating
income (NOI) by a capitalization rates of 8.5 To estimate the NOI, ECO used the rents
described above, assumed vacancies over times, and a management fee. To determine
the 'created value', we subtracted the development costs by the fair market value.
Table 3. Size and calculated value for prototypes
Prototype
Total floors
Gross SF (excluding parking)
Useable SF
Uses
Development Cost
Fair Market Value
Created Value (Cost Value)
Source: ECONorthwest.
Mixed -use Mid -rise
6
80,000
68,000
Residential
Ground floor retail
Parking
$22,088,572
$14,388,640
($7,699.932)
Office Tower
6
157,000
133,450
Office
Ground floor retail
Parking
$37,614,700
$27,017,463
($10,597,237)
Residential tower
11
161,000
136,850
Residential
Ground floor retail
Parking
$52,777,129
$30,831,914
($21,945,215)
Adaptive Re -Use
2
90,000
76,500
Office
Ground floor retail
Restaurant
Parking
$11,196,188
$15,532,688
$4,336,500
The first three prototypes yield a building that is more expensive to build than it
would be worth. The pro forma analyses show that, even with fairly optimistic
5 The capitalization rate (cap rate) is the ratio between the NOI produced by an asset and its market value. A
market cap rate is determined by evaluating the financial data of similar properties which have recently sold in a
specific market. ECO interviewed local real estate professionals to determine local capitalization rates. We were told
that the market is in such a state of flux at this time that there is no consensus on capitalization rates. The 8.5% cap
rate is an estimate of current cap rates.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 15
Tukwila Urban Center Plan Implementation Analysis
residential rents, not including off -site costs, and possible underestimating construction
costs given geologic issues in the area, the taller buildings do not pencil out.
The pro formas also calculated rates of return, under the four financing scenarios
described above. Detailed results are in Appendix B. The pro formas show that the first
three prototypes— the multiple story buildings—could not get bank financing in any
market, nor with some subsidized loan. For the three taller buildings, the following is true:
The Loan -to -Value ratio is too high. In typical market conditions (i.e., not the
current constrained financial market), lenders can require a ratio of 0.80. Under
any market conditions, lenders will not finance a commercial project if the loan
exceeds the value of the project, yielding a loan-to-value ratio greater than 1.0.
The three taller buildings all have loan-to-value ratios of 1.0 and higher.
The debt coverage ratio (DCR) is too low. Lenders typically want the DCR to be
at least 1.20, to ensure there is a cushion so that if the NOI becomes less than
anticipated, the borrower will still be able to make the mortgage payments. The
three taller buildings have a DCR less than 1.0, and the Residential Tower has a
DCR of about 0.8.
The internal rate of return (IRR) on equity is negative. For the three taller
buildings, the equity investor (the developer or other private investors) would
lose money on the project.
The fourth prototype, an adaptive re -use of an existing structure, is the only
prototype that pencils out. For that prototype, the cost of parking was very low. ECO
assumed that most of the required parking could be accommodated by the existing
extensive surface parking. The construction costs per square foot were significantly
lower than for the other, taller, prototypes. The one cost that exceeded the other
prototypes was for the land, which was more expensive because it was a larger parcel.
The adaptive re -use prototype yielded a structure whose fair market value exceeded
the cost of construction. The pro forma calculation showed that the prototype could get
financing, even in today's difficult markets. The loan-to-value ratio is low, well under
the ratio of 0.80 that lenders require. The DCR is high, well in excess of the 1.20 DCR
that lenders prefer. The IRR is low in the financial scenario that represents today's
difficult financing terms. Under more normal markets, the IRR is a healthy 19
6 The debt coverage ratio (DCR) is the ratio of NOI to the mortgage payment. If the NOI is $120,000 and the
mortgage payment is $100,000, the DCR is 1.2.
7 The internal rate of return (IRR) measures the return on an investment, expressed as a compound rate of interest,
over the investment period. It is the interest rate at which the costs of the investment lead to the benefits of the
investment.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 16
Tukwila Urban Center Plan Implementation Analysis
4 IMPLICATIONS AND RECOMMENDATIONS
Based on the analysis and input from stakeholders, we conclude that the draft TUC
Plan's vision of a more urban, mixed -use neighborhood is a desired outcome for most
stakeholders with whom we talked. But the draft Plan and its development code require
a type of development that is not financially viable at this time because of uncertainty in
the financial market, but it is more likely to be viable upon the market's return with
significant public investment in amenity and infrastructure. In short, ECO found that
many of the code related concerns expressed by the stakeholders were realistic, and that
some changes to the City's draft Plan and accompanying Code could be helpful.
At the same time, however, almost all of the stakeholders agreed that the vision
described in the draft Plan is the right long -term goal for development in the TUC.
Given the comparative advantages of the TUC, ECO feels that the vision is achievable,
but in phases and over a period of time and only with significant, targeted public
investments to catalyze and support development of the type that the City would like to
see.
ECO recommends the City take the following steps to ensure that the long-term
vision can be gradually implemented. We have divided the recommendations into two
general categories: (1) change the development code, and (2) catalyze development.
4.1 CONSIDER AMENDMENTS TO THE DRAFT SOUTHCENTER PLAN
DEVELOPMENT CODE (CHAPTER 18.28)
The draft TUC development standards are intended to implement the City's long-
term vision for continued growth in the urban center. As noted earlier in this report,
stakeholders have expressed concerns that the draft TUC plan development regulations
may be overly complex and /or may conflict with interim market realities. ECO
reviewed the Code in conjunction with potential prototypes included in this report,
conducted interviews (focus groups) with key stakeholders, reviewed written comment
from property owners and developers, and generated the recommendations in this
section.
Organization and complexity. Some of the stakeholders noted that the code
seemed to be overly complex. A certain level of unfamiliarity is expected when a
City implements a new code or code section. In this case, the TUC code section
also represents a shift towards form -based code, which is by nature less familiar
to developers and property owners than a more traditional code. The code may
appear to be more complex than it actually is: while it may appear to be
confusing to a casual reader, it is designed to provide certainty by prescribing
detailed and objective standards for a property owners and developers- -while
minimizing discretionary and interpretive decisions that can erode certainty
about what the code will and will not allow.
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Tukwila Urban Center Plan Implementation Analysis
Thresholds that trigger compliance with TUC standards. Some stakeholders
noted that the thresholds that trigger compliance with TUC standards may
disproportionally limit or discourage interim investment in existing structures.
Any new or revised development code must be accompanied by clear thresholds
for compliance, as this draft contains. The thresholds are intended to ensure that
major investment within the TUC aligns with the vision set forth in the plan,
while allowing continued operation and maintenance of existing businesses and
structures. Thus, it is typical to require new construction, expansions, alterations
and changes in use to comply with a new or revised code. The actual thresholds
for what constitutes an alteration, however, must be defined locally. It is our
understanding that the City derived the thresholds through a careful review and
analysis of building permits from prior years and therefore represent levels of
investment -both in absolute dollars and percent relative to total value that are
appropriate for Tukwila.
Parking requirements. Stakeholders who participated in the focus groups
discussed the possibility of eliminating parking minimums and maximums. Our
analysis shows that the costs associated with constructing parking to meet the
TUC code's minimum parking requirements is the single biggest factor affecting
the financial performance of the prototypes analyzed in this report. On one hand,
the suburban -level parking requirements in the TUC conflict with the City's
vision of higher intensity, urban development. (That is, a vibrant, pedestrian
oriented urban center, requires a shift away from large surface parking areas
while the minimum parking requirements in the TUC are set at levels more
appropriate for surface level parking). On the other hand, a lack of sufficient
parking during the interim may have negative consequences on new and existing
businesses.
We recommend that the City consider a phased approach that first reduces, and
then eliminates, parking minimum requirements in close coordination with
ongoing transportation demand management (TDM) strategies and efforts to
increase on- street (metered) and shared parking. The City would first establish
benchmarks for developing on- street parking spaces and shared parking
arrangements -and consider phasing in reduced parking minimums for new
development as these benchmarks are met. It would be necessary to coordinate
with other ongoing TDM strategies that can help alleviate the demand for
parking over the long -term, such as increasing use of alternative modes,
carpool /vanpool, and parking pricing, which are outlined in the City's Growth
and Transportation Efficiency Center Program (GTEC).
8 The GETC plan includes a comprehensive strategy for transit, carpool /vanpool, marketing, bicycle /pedestrian
opportunities, telecommuting, and rideshare. It recommends that the City work with employment sites to encourage
them to implement parking management strategies, such as reducing parking capacity and implementing
preferential parking for carpools and vanpools.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 18
Tukwila Urban Center Plan Implementation Analysis
Minimum height requirements. The minimum height requirements prescribed
by the Scale Standards 18.28.031 require a 25 -foot tall structure for anchors,
pharmacies, and groceries. For other uses, a second floor is also required. This
requirement is triggered by any expansion and substantial alterations to a
building. A building owner who wishes to expand an existing use will be
required to build a second floor. This may or may not be feasible, depending on
the age and type of existing building, parking requirements, etc. While this may
be the intent of the Code, it may have the effect of discouraging interim
investment in existing buildings. We recommend that the City consider reducing
or eliminating minimum height requirements for upgrades to or adaptive re-use
of existing single story buildings.
Tower bulk and minimum frontage requirements. The minimum frontage
requirements (in conjunction with tower bulk requirements) appear to anticipate
smaller sites than those that exist now in the TUC, which may result in conflicts
depending on the size of the site and how site is defined. For instance, a one -acre,
square site (as defined by property lines) on an urban corridor would have
roughly 208 feet of frontage. A building on that site would be required to cover
at least 90% of the frontage on an urban corridor, which would equate to a
building that is 187 feet in length. Likewise, a two-acre site could easily have 300
or 400 feet of frontage, which would require a 270 feet to 360 feet building. A
square (or L- shaped) building of this dimension would likely exceed the tower
bulk requirements. We recommend that the City consider revising tower bulk
requirements or allowing flexibility to ensure that frontage requirements can be
met, particularly in the short- and medium -term
Open space requirements. Stakeholders noted that the open space requirements
may be too prescriptive. We note that the amount and type of pedestrian space
required in section 18.28.060 is consistent with other cities in the northwest. The
requirements allow flexibility in the type of pedestrian space required (linear
green, square, plaza, courtyard, etc), the location, and configuration as long as
certain requirements are met (e.g., access to sidewalks and visible from sidewalks
etc). Further, the code allows flexibility at the discretion of the Director in
situations where small or awkwardly shaped properties limit options for on -site
pedestrian space, and in situations where common open space may be more
appropriately provided off -site as part of a larger open space area provided by
one or more developments.
Fire code. In order to make the Plan more economically viable and competitive
with other cities, it is recommended that the fire code be revised to enable mid
rise construction for buildings that are up to 65 feet. This would make it possible
to build five floors of residential or office over one story of retail. These buildings
tend to be more economically viable in many markets and reinforce activated
ground floor goals in these communities.
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Tukwila Urban Center Plan Implementation Analysis
4.2 PLAN TO CATALYZE DEVELOPMENT
Inspired plans, progressive land use regulations, and development codes cannot
alone actualize a vision in most markets. Given current uncertainties in the financial
markets, the repositioning occurring in various real estate asset classes, and limited
public programs and funds to assist development, the City should assess the potential
to catalyze development over an intermediate and longer term. This section provides
sample actions and tools the City could use to form and implement a redevelopment
strategy for the TUC. Some of these actions can be initiated immediately to help the
City and TUC prepare for the economic rebound while others will take more
preparation and time enabling the TUC to benefit during future investment cycles.
4.2.1 Short -term actions (one to two years)
Get the facts
The City should gather additional information and data about the area that will be
needed for prudent development decisions. City planners and development staff
should be familiar with market and construction issues for the TUC and track these
items over time. Some of the data are:
land and building values;
rents for all asset classes;
construction costs for desired building types;
land ownerships and status;
dynamics of the real estate lending market
a clear understanding of water, soils, and other environmental challenges;
projected needs and targets for various uses, with particular attention on
workforce and affordable housing goals
Establish a lead redevelopment entity
Identify or establish a lead redevelopment entity on the public side to coordinate
implementation of a TUC redevelopment strategy and provide it with resources (people
and tools) to succeed. The City could make this function the responsibility of an
existing department or create a new entity.
Consider rebranding Tukwila
The City appears to have two images —one acknowledges it as a strong regional retail
shopping center while a second plays on less positive perceptions and realities around
public safety and socio- economic issues. For the TUC to succeed, the image of Tukwila
will need to be more reinforcing of mixed -use development for customers, tenants and
developers. Part of that repositioning can be done through development of a fresh
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 20
Tukwila Urban Center Plan Implementation Analysis
brand for Tukwila. Taking advantage of assets such as waterfront amenities, central
location, affordability and quality, etc. to develop the brand could be advantageous.
Ensure that light rail, bus transit, and commuter rail are effectively linked
An integrated and dependable system can foster growing and repeat ridership This
will make the area more viable for office and residential uses.
Create a public sector redevelopment tool kit
Identify existing public resources /tools that can be used to partner on implementing
a redevelopment strategy. Adopt, adapt and /or create new tools if existing programs
are insufficient.
In the short and long -term, the City will have to offer developers some assistance in
order to achieve the community's goals for the TUC. The City should determine what
incentives it is willing to offer and the criteria for using them so that informed
redevelopment decisions for strategic investments can be made when opportunities
arise. Some incentives can be applied administratively while others may require action
by elected officials. Incentives that might be available to the City include:
Low interest loans to leverage private development investments for adaptive
reuse or expansion of existing buildings as well as for creation of new
developments. Possible fund sources include: HUD Section 108, Federal Stimulus
program funds, SBA 504 program, federal Economic Development
Administration loans
Purchase or option land and re -sell it at below- market prices to qualified
developers.
Utilize revenue bonds (e.g., 501(c)(3), and 63-20 bonds to support public and
non profit projects that enhance the mix of uses in the TUC.
Fund pedestrian and other mobility improvements.
Acquire and develop open space areas in strategic locations.
Construct or participate in financing a parking garage to support catalytic
development.
Focus impact fees from the TUC to uses that benefit development in the center or
reduce these fees for qualifying projects.
9 Any lending program will need to be evaluated to ensure it is within Washington State's lending of credit
provisions.
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4.2.2 Intermediate and Tong -term actions (two years and beyond)
Prepare a Collaborative Redevelopment Strategy for the TUC
Collaborate with area property owners, businesses, and community members to
capitalize on the TUC vision and plan by crafting a redevelopment strategy that clarifies
and secures buy -in for actions that will move redevelopment forward. The stakeholders
know the area well and will be able to provide helpful insight into developing an
effective strategy. The strategy should identify key projects, responsible entities on the
public and private sides, and potential funding approaches. Elements that could be
incorporated into the strategy are:
Secure agreement on where critical new streets would be. These will be major
streets that begin to create new development parcels and will provide important
community connectivity and development predictability.
Identify the number, type and potential locations for the most important open
spaces.
Identify desired priorities for public improvements (e.g., open space, structured
parking, pedestrian amenities) and how these could be funded. Link their
implementation timing to private investment in significant development.
Identify alternative starting areas for redevelopment. Use the stakeholders'
knowledge to identify the areas most likely to be catalytic and that will build
momentum. Look for proximity to existing active areas, or potential to redevelop
key intersections.
Choose approach(es) to initiate redevelopment
Based on the data and input from stakeholders, choose among alternatives
approaches (one or more) to initiate redevelopment:
Purchase or secure options on site(s), have the tool kit ready and solicit
developers, preferably through a request for qualifications (RFQ).
Partner with private sector owners who control strategic sites to refine a
development concept on their property. Identify the amount of risk the private
owner is willing to assume in the property's redevelopment. Memorialize
property owner's position and the City's in an agreement between the City and
property owner. Then have a tool kit ready and solicit developers.
Offer public assistance and tool kit programs on a first-come/first-serve basis.
(This is often a less focused approach than either of the above and will require
guidelines such as: site needs to be consistent with City vision and plans for
area; development concept needs to be viable with reasonable employment of
public tool kit, etc.) It is also an approach that can assist in retaining those
existing businesses, particularly local operations or one -of -a -kind market entities,
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 22
Tukwila Urban Center Plan Implementation Analysis
that want to upgrade or are interested expanding within the TUC and that would
enhance to use mix.
Implement the Redevelopment Strategy
While the City is preparing the strategy it should continue to work with stakeholders
to advance goals of the TUC plan. It should also take advantage of opportunities that
present themselves to acquire key land parcels through options or in response to a
property owner /developer presenting a viable project consistent with the draft plan's
objectives for redevelopment.
Once the redevelopment strategy has been vetted and approved, and the public
implementing entity is operational with staff and a redevelopment took kit, the strategic
actions identified above can be more effectively initiated. The City can assemble key
parcels (through options or outright purchases) or collaborate with willing property
owners to solicit qualified developers preferably through a RFQ process.
Upon developer selection the City can enter into pre development agreements which,
while non- binding, establish a good -faith path for the participating parties to flesh out a
development project and clarify expectations of each party to the agreement (e.g.,
timing for various development steps from due diligence on a site to anticipated
construction completion, projected uses, desired public amenities, potential financing
sources, etc.). Predevelopment agreements provide the groundwork for eventual
development agreements that legally bind public and private parties by committing
resources to complete a project.
While larger -scale catalytic projects are eagerly sought by most cities, a more realistic
approach usually involves starting with smaller scale but important momentum
generating projects. Gaining momentum with a series of successful smaller and mid-
sized projects can bring greater confidence to the investment community that the larger
scale projects can be viable. This is particularly valid when those early projects are of
high quality and in close proximity enough to create a sense of place in an emerging
area.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 23
Tukwila Urban Center Plan Implementation Analysis
APPENDIX A: Focus GROUP PARTICIPANTS AND NOTES
Focus group participants and interviewees
The following individuals participated in the focus groups or were interviewed by
ECONorthwest:
Developers
Don Milliken, Milliken Development
Pat Callahan, Urban Renaissance Group
Bruce Lorig, Lorig Associates
Kristin Jensen, Tarragon Development
Brokers
Don Moody, CBRE
Local Business Property Owners
Mon Wig, Wig Associates LLC
Tom DeZutter, Double Tree Hotel
Robert Christian Schofield, RHS Enterprises
Randy Bannecker, Bannecker Associates (representing Sears)
Dawna Holloway, Eastbay Sculpture Lighting
Brandon Lee, Target Corporation
Mark Hancock, Segale Properties
Westfield Corporation
Nicholas Lee, Development Manager
John Goodwin, VP of Development
Antony Ritch, Senior VP
Andy Ciarrochi, Senior General Manager
Brent Carson, Gordon Derr (representing Westfield)
City of Tukwila
George Malina, Planning Commission Chair
Jack Pace, DCD Director
Nora Gierloff, DCD Deputy Director
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 24
Tukwila Urban Center Plan Implementation Analysis
Lynn Miranda, Senior Planner
Derek Speck, Economic Development Administrator
Focus group and interview notes
The following summarizes the comments received during the focus groups and
interviews:
Office space
Explore opportunity for Class A office market in proximity to the airport. Is there
market potential? What building types (heights, sq ftg, costs) would be needed?
Does plan support this? Where? What else can be done to capture benefits of
airport (ie, for hotel development).
To make the UC more viable for office, need to ensure that light rail, bus transit
commuter rail are effectively linked.
To kick start office development, need a "signature" office development large.
Ground breaking building may be 100k sf ultimately need something larger.
Need more office /biotech type of uses. These are the people that will live here.
Labor, housing availability of 'ground' are decision points for major
corporations to locate in UC. Tax breaks (including lack of B &O) that Tukwila
offers are not significant attractors. High end office needs amenities parks are
important. Corps look for large, contiguous parcels and the ability to grow in
place.
Office development around the mall would be good.
Office, rather than housing, should be built around the Sounder Station since
people will walk farther (1/2 mile) from their homes than their place of work.
Proposed Standards
Need more flexible approach towards complying with standards for adaptive re-
use projects.
Horizontal mix of uses is "coming back
Incentives code changes implementation steps suggested:
o Impact fee waivers (or sole source use areas if they are collected)
o Sign code modification
o No parking minimums or maximums are really needed the market will
drive this. Think about setting a maximum for on- street parking.
o Parking costs make new development of any real density untenable. Consider
a public parking garage.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 25
Tukwila Urban Center Plan Implementation Analysis
o Consider phased implementation of code. Concerns about short -term impacts
of prescriptive code until the market is there to better support the
development types envisioned.
o Complete a development study to identify key opportunity sites, market
those sites, or consider acquiring them to incent development (through
options if necessary or more feasible)
o Consider developing a public park next to a proposed office site.
o Non binding pre- development agreements with owners of key sites
o Consider eliminating height restrictions.
o Revisit building /fire code's definition of high rise. 40' threshold is a problem.
70' is typical. Must allow 5/1 configuration for residential development to
occur.
o Ground level retail spaces need 18 -24' in height.
Tukwila is not right for street fronting retail yet.
The TUC Plan is too specific. Give developers flexibility so they come up with
creative solutions. Don't be too prescriptive.
Mixed -use development is complicated. The parking, lay out, and exhaust
systems are complicated. And to be successful, it must be done right. For
example, residents don't want to hear beeping truck. Every development has its
own unique solution, cookie cutter development will not work for something
this complicated.
Strategies to Consider
Current tax permit policy supports the types of development (single story
retail) that is here today. Policies need to change if city wants to achieve the
vision.
Consider a new strategy revenue sources to support development. Low taxes
might work for business recruitment, but don't do much for business.
A shift in employment base is needed current retail employment won't attract
residents in demographics needed to support the development costs associated
with new mixed -use residential developments
Audience matters in marketing efforts: developers will be interested in different
factors than residents or shoppers. A single- pronged strategy probably won't be
effective.
Explore models that work in or may be adaptable from other communities
(Sanctuary at Renton Landing)
City needs to make strategic choices about where to invest and how to best
leverage its limited resources.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 26
Tukwila Urban Center Plan Implementation Analysis
Branding or rebranding Tukwila how do developers, customers, others
become more positively associated with Tukwila
To do nothing in the UC is not OK; good developments will bypass the city and
go elsewhere.
Look at Americana at Brand, Caruso project in CA. Good models.
City should do a study of specific properties to determine vulnerability /how
much it would take to relocate them.
High quality development can cost a lot, maybe $200 to $300 a foot. But it is done
well and new, appealing place is created with a real town center, the area could
command rents as high as $30 a foot (per square foot per year).
Tukwila has a good location, it's a good opportunity. There is no reason a core
cannot be created in Tukwila
Catalyst Project/Investments
Major infrastructure investments are needed to achieve the pedestrian-friendly
finer street grid in the vision. The costs probably can't be born by developers, or
they'll just choose to go elsewhere.
City should plan to capture development two cycles from now. Catch revenues
on the next upswing, and invest that in infrastructure and amenities that will
make development attractive in the upswing that follows. Need to find the
political will to make these investments, or the plan won't happen.
Development has to attract institutional capital to pencil out. Need to have
'evidence on the ground' to convince investors. Plan alone will not work. Need a
significant public investment first; provides a 'story to tell'. Pick a place /project.
Make significant public investment, then develop a marketing center for plan on
Baker Blvd (similar to that for S. Lake Union project in Seattle).
Lack of publicly owned land in UC presents challenges.
Parking structures are expensive because of soils /geology. Subterranean parking
is HUGE cost. Parking agreements make reductions in parking spaces
impossible. Many other malls have transportation alternatives up and running
before parking reductions occur.
Land Use
Focus on improving the quality of retail versus increasing the quantity.
Coming changes at the mall:
o of national tenants reinventing themselves
o Anchor tenants may move
o new types of tenants coming into the mall.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 27
Tukwila Urban Center Plan Implementation Analysis
To enhance the appeal of residential development, the area needs a grocery store.
It's a necessity for people who want to live in an urban area. Residential rents
increase with proximity to a grocer —but it can't be a tired looking old kind of
grocery. It has to look good.
'Transportation' related
Heard at several focus groups: Access issues (including changes to mode split) is
key to making the vision happen. Need better auto circulation, access from
freeways, signage (especially for retail).
Mall doesn't see that transit is important to the Mall. Most shoppers come from
east /west, not north /south. However, employees take transit.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 28
Tukwila Urban Center Plan Implementation Analysis
APPENDIX B: FINANCIAL PRO FORMA ANALYSES
This appendix provides detailed data and discussion for the four prototypes
B.1 MIXED -USE MID -RISE BUILDING
The mixed -use mid -rise building is six stories high, with one floor of ground-floor
retail, two floors of parking, and three floors of residential units and 20,000 s.f.
footprint. Table 4 summarizes floor space by use type and Figure 6 shows the
prototype.
Table 4. Mixed -use mid -rise building: uses, floors, and square feet
Use Stories Gross SF Useable SF
Residential 3 60,000 51,000
Ground floor retail 1 20,000 17,000
Parking 2 44,135 n/a
Total (w /o parking) 6 80,000 68,000
Source: ECONorthwest.
To determine the amount of parking that would be required, ECO relied on the TUC's
development code: for retail, 3.3 spaces per 1,000 useable s.f.; for residential, 1.0 spaces
per bedroom with a maximum of 2.0 spaces per dwelling units. Based on our assumed
mix of unit sizes, the retail and residential units require 126 parking spaces. At 350 s.f.
per space, parking requirements equal 44,135 s.f., which is 4,135 s.f. larger than the two
floors of parking incorporated into the building. The prototype would require an
additional 11.8 parking spaces to meet the development code requirements.
Figure 6. Mixed -use mid -rise prototype
illiiIaliMIItiUII 11111.11 11111 111 111011
;aio 1 1.111.11 111 1111111 1101
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Source: ECONorthwest.
The frontage requirements in the development code conflict with building length
maximums for this prototype. The minimum linear frontage coverage is 90 but the
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 29
Tukwila Urban Center Plan Implementation Analysis
maximum building length is 120 feet. This prototype has a footprint of 140' x 140', and
90% of 140 feet is 126 feet, six feet longer than the maximum building length.
The pro formas compare the cost of construction to a stabilized net operating income
(NOI) based on estimated net rents. For this prototype, we assumed the following rents:
Retail $20 per s.f. per year, based comparable retail properties for lease in the
south Puget Sound
Residential $1.70 per s.f. per month, or
o 1- bedroom $1,360 per month
o 2- bedroom $2,040 per month
o 3- bedroom $2,550 per month
The residential rents are higher than current rents in Tukwila, and more similar to
rents seen in Redmond and central Seattle. An example project in the metropolitan area
achieving these rent is the Union Bay Loft Apartments on East Lake Avenue in Seattle.
Tukwila will require significant rebranding to achieve these residential rents
Our cost estimates (detailed in Appendix B) include the cost of land, based on average
price per acre in the Urban Center, from the Tukwila Assessor's database. Construction
costs are based on estimates provided by Ankrom Moison Architects and Howard S.
Wright Constructors, in September 2009. The cost estimates do not include the cost of
any off -site infrastructure improvements, which, as stated previously, could be fairly
significant.
ECO calculated the fair market value of the structure by dividing the NOI by a
capitalization rate of 8.5% (see Table 5).
Table 5. Mixed -use mid -rise building:
development costs and value
$2009
Total Development Costs $22,088,572
Fair Market Value $14,388,640
Created Value (Cost Value) 47,699,932
Source: ECONorthwest.
The pro forma shows that, even at optimistic residential rents, the mixed -use mid -rise
building would cost $7.7 million more to build than it would be worth.
10 ECO interviewed local real estate professionals to determine local capitalization rates. We were told that the
market is in such a state of flux at this time that there is no consensus on capitalization rates. The 8.5% cap rate is an
estimate of current cap rates.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 30
Tukwila Urban Center Plan Implementation Analysis
The pro forma also calculates rates of return, under the four financing scenarios
described above. Table 6 summarizes the results. The analysis shows that it would be
difficult for any developer to get financing on the mixed -use mid -rise prototype:
The Loan -to -Value ratio is high. In typical market conditions (i.e., not the current
constrained financial market), lenders can require a ratio of 0.80. Under any
market conditions, lenders will not finance a commercial project if the loan
exceeds the value of the project, yielding a loan-to -value ratio greater than 1.0.
The debt coverage ratio (DCR) is low. Lenders typically want the DCR to be at
least 1.20, to ensure there is a cushion so that if the NOI becomes less than
anticipated, the borrower will still be able to make the mortgage payments.
The internal rate of return (IRR) on equity is negative. The equity investor (the
developer or other private investors) would lose money on the project.
Table 6. Mixed -use mid -rise building: financing assumptions and return equity
Public Debt Equity
Financial Assistance LoanNalue Coeverage Repayment IRR on
Scenario Bank Loan Loan Ratio Ratio Gap Equity
1 65% 1.00 0.96 $15,030,073 -38%
2 80% 1.23 0.95 $8,654,736 -33%
3 65% 25% 1.00 0.96 $5,040,575 -13%
4 80% 10% 1.23 0.95 $4,793,470 -11%
B.2 OFFICE TOWER
The office tower is nine stories high, with one floor of ground -floor retail, two floors
of parking (partially submerged), and six floors of office space and 22,000 s.f. footprint.
Table 7 summarizes floor space by use type and Figure 7shows the prototype.
Table 7. Office tower: uses, floors, and square feet
Use Stories Gross SF Useable SF
Office 6 135,000 114,750
Ground floor retail 1 22,000 18,700
Parking 2 70,000 n/a
Total (w /o parking) 9 157,000 133,450
Source: ECONorthwest.
To determine parking, ECO relied on the TUC's development code: for retail, 3.3
spaces per 1,000 useable s.f.; for office space, 3.0 spaces per 1,000 useable s.f. The retail
and office space combined require 406 parking spaces, or 142,000 s.f. In this prototype,
the parking was accommodated by placing the office tower on a larger podium of
parking, because stacking the parking between the ground floor use and office use on
the same footprint size would result in a building that is too tall to meet height
requirements. The prototype leaves a deficit of 206 parking spaces, just over 72,000 s.f.,
to meet the TUC's development code requirements.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 31
Tukwila Urban Center Plan Implementation Analysis
Figure 7. Office tower prototype
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Source: ECONorthwest.
Table 8. Mixed -use mid -rise building:
development costs and value
$2009
Total Development Costs $37,614,700
Fair Market Value $27,017,463
Created Value (Cost Value) 410,597,238
Source: ECONorthwest.
The pro formas compare the cost of construction to a stabilized net operating income
(NOI) based on estimated net rents. For this prototype, we assumed the following rents:
Retail $20 per s.f. per year, based comparable retail properties for lease in the
south Puget Sound
Office $18 per s.f. per year, the high end of office rents in the south Seattle
market.
Our cost estimates include the cost of land, based on average price per acre in the
Urban Center, from the Tukwila Assessor's database. Construction costs are based on
estimates provided by Ankrom Moison Architects and Howard S. Wright Constructors,
in September 2009. The cost estimates do not include the cost of any off -site
infrastructure improvements.
ECO calculated the fair market value of the structure by dividing the NOI by a
capitalization rate of 8.0 To determine the 'created value', we subtracted the
development costs by the fair market value (see Table 8).
The pro forma shows that, even at top -of- the market office rents, the office tower
would cost $10.6 million more to build than it would be worth.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 32
Tukwila Urban Center Plan Implementation Analysis
The pro forma also calculates rates of return, under the four financing scenarios
described above. Table 9 summarizes the results. The analysis shows that it would be
difficult for any developer to get financing on the office tower prototype:
The Loan -to -Value ratio is high. In typical market conditions (i.e., not the current
constrained financial market), lenders can require a ratio of 0.80. Under any
market conditions, lenders will not finance a commercial project if the loan
exceeds the value of the project, yielding a loan-to -value ratio greater than 1.0.
The debt coverage ratio (DCR) is low. Lenders typically want the DCR to be at
least 1.20, to ensure there is a cushion so that if the NOI becomes less than
anticipated, the borrower will still be able to make the mortgage payments.
The internal rate of return (IRR) on equity is negative. The equity investor (the
developer or other private investors) would lose money on the project under any
financing scenario.
Table 9. Office tower: financing assumptions and return equity
Public Equity
Financial Assistance LoanNalue Debt Coverage Repayment IRR on
Scenario Bank Loan Loan Ratio Ratio Gap Equity
1 65% 0.90 1.00 $25,021,461 -34%
2 80% 1.11 0.99 $14,164,879 -29%
3 65% 25% 0.90 1.00 $7,712,877 -9%
4 80% 10% 1.11 0.94 $7,951,045 -33%
Source: ECONorthwest.
B.3 RESIDENTIAL TOWER
The residential towering is 11 stories high, with one floor of ground -floor retail, four
floors of parking, and six floors of residential units and 23,000 s.f. footprint. Table 10
summarizes floor space by use type and Figure 8 shows the prototype.
Table 10. Residential tower: uses, floors, and square feet
Use Stories Gross SF Useable SF
Residential 6 138,000 117,300
Ground floor retail 1 23,000 19,550
Parking 4 80,680 n/a
Total (w /o parking) 11 161,000 136,850
Source: ECONorthwest.
To determine parking, ECO relied on the TUC's development code: for retail, 3.3
spaces per 1,000 useable s.f.; for residential, 1.0 spaces per bedroom with a maximum of
2.0 spaces per dwelling units. Based on our assumed mix of unit sizes (see Appendix B
for details), the retail and residential units require 231 parking spaces. At 350 s.f. per
space, parking requirements equal 80,680 s.f., which can be incorporated into four floors
of this structure. This building type is limited to the Regional Center zone because of its
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 33
Tukwila Urban Center Plan Implementation Analysis
height. The parking requirements forced the height of the prototype, thereby limiting
the zone in the TUC where this building could be built.
Figure 8. Residential tower prototype
um 11 1111111 "1111111.1111111 1111111
1111111 1111111 11111110 1011 1111111
1111111 1111111 1111111 11111 11111.11
nlnu 1111111u 1111ili'u11111
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Source: ECONorthwest.
The pro formas compare the cost of construction to a stabilized net operating income
(NOI) based on estimated net rents. For this prototype, we assumed the following rents:
Retail —$20 per s.f. per year, based comparable retail properties for lease in the
south Puget Sound
Residential —$1.70 per s.f. per month, or
o 1- bedroom $1,360 per month
o 2- bedroom $2,040 per month
o 3- bedroom $2,550 per month
Our cost estimates include the cost of land, based on average price per acre in the
Urban Center, from the Tukwila Assessor's database. Construction costs are based on
estimates provided by Ankrom Moison Architects and Howard S Wright Constructors,
in September 2009. The cost estimates do not include the cost of any off -site
infrastructure improvements.
ECO calculated the fair market value of the structure by dividing the NOI by a
capitalization rate of 8.0 To determine the 'created value', we subtracted the
development costs by the fair market value (see Table 11).
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 34
Tukwila Urban Center Plan Implementation Analysis
Table 11. Residential tower: development
costs and value
$2009
Total Development Costs $52,777,129
Fair Market Value $30,831,914
Created Value (Cost Value) $21,945,215
Source: ECONorthwest.
The pro forma shows that, even at optimistic residential rents, the residential tower
would cost $21.9 million more to build than it would be worth.
The pro forma also calculates rates of return, under the four financing scenarios
described above. Table 9 summarizes the results. The analysis shows that it would be
difficult for any developer to get financing on the office tower prototype:
The Loan -to -Value ratio exceeds 1.0 for all financing scenarios. In typical market
conditions (i.e., not the current constrained financial market), lenders can require
a ratio of 0.80. Under any market conditions, lenders will not finance a
commercial project if the loan exceeds the value of the project, yielding a loan -to-
value ratio greater than 1.0.
The debt coverage ratio (DCR) is low. Lenders typically want the DCR to be at
least 1.20, to ensure there is a cushion so that if the NOI becomes less than
anticipated, the borrower will still be able to make the mortgage payments.
The internal rate of return (IRR) on equity is negative. For this prototype, the
cash flow is never positive. In the absence of any positive cash, the spreadsheet
model was unable to calculate an IRR.. The equity investor (the developer or
other private investors) would lose money on the project under any financing
scenario.
Table 12. Residential tower: financing assumptions and return equity
Public Equity
Financial Assistance LoanNalue Debt Coverage Repayment IRR on
Scenario Bank Loan Loan Ratio Ratio Gap Equity
1 65% 1.11 0.81 $39,232,026 n/a
2 80% 1.37 0.80 $23,999,172 n/a
3 65% 25% 1.11 0.81 $17,086,214 n/a
4 80% 10% 1.37 0.76 $18,154,488 n/a
Source: ECONorthwest.
B.4 ADAPTIVE RE -USE OF BIG BOX RETAIL
The adaptive re -use prototype is two stories high, with one floor of ground -floor
retail that includes 10,000 s.f. of restaurant space, one floor of office space, and covered
surface parking. The prototype assumes the structure is an existing big box store, with a
100,000 s.f. footprint. Table 13 summarizes floor space by use type and Figure 9 Figure
7shows the prototype.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 35
Tukwila Urban Center Plan Implementation Analysis
Table 13. Adaptive re -use of big box retail: uses, floors, and square feet
Use Stories Gross SF Useable SF
Office 1 40,000 34,000
Retail 1 50,000 42,500
Covered Parking 0 30,000 n/a
Total (w /o parking) 2 90,000 76,500
Source: ECONorthwest.
To determine parking, ECO relied on the TUC's development code: for restaurant
space, 6.0 per 1,000 useable s.f., for other retail, 3.3 spaces per 1,000 useable s.f.; and for
office space, 3.0 spaces per 1,000 useable s.f. ECO assumed that most of the required
parking could be accommodated by the existing extensive surface parking.
Figure 9. Adaptive re -use of big box retail prototype
Source: ECONorthwest.
The pro formas compare the cost of construction to a stabilized net operating income
(NOI) based on estimated net rents. For this prototype, we assumed the following rents:
Restaurant— $17 per s.f. per year, in the middle of the range of retail properties
for lease in the south Puget Sound.
Retail $20 per s.f. per year, based comparable retail properties for lease in the
south Puget Sound
Office —$18 per s.f. per year, the high end of office rents in the south Seattle
market.
Our cost estimates include the cost of land, based on average price per acre in the
Urban Center, from the Tukwila Assessor's database. The one cost that exceeded the
other prototypes was for the land, which was more expensive because it was a larger
parcel. Construction costs are based on estimates provided by Ankrom Moison
Architects and Howard S. Wright Constructors, in September 2009. The construction
costs per square foot were significantly lower than for the other, taller, prototypes. The
cost estimates do not include the cost of any off -site infrastructure improvements.
Final Technical Memorandum: ECONorthwest December 3, 2009 Page 36
Tukwila Urban Center Plan Implementation Analysis
ECO calculated the fair market value of the structure by dividing the NOI by a
capitalization rate of 8.0 To determine the 'created value', we subtracted the
development costs by the fair market value (see Table 14).
Table 14. Adaptive re -use of big box retail:
development costs and value
$2009
Total Development Costs $11,196,188
Fair Market Value $15,532,688
Created Value (Cost Value) $4,336,500
Source: ECONorthwest.
This is the only prototype in the analysis where the fair market value exceed the total
development costs. The created value is roughly $4.3 million.
The pro forma also calculates rates of return, under the four financing scenarios
described above. Table 15 summarizes the results. The analysis shows that this project
could get financing, even in today's difficult markets:
The Loan -to -Value ratio is low, well under the ratio of 0.80 that lenders require.
The debt coverage ratio (DCR) is high. It is well in excess of the 1.20 DCR lenders
typically want.
The internal rate of return (IRR) on equity is low for the first finacial scenario
(today's difficult markets), but would be considered strong in a more normal
market.
This prototype is able to stand on its own, and the second public loan scenario
(Scenario 4) is not needed.
Table 15. Adaptive re -use of big box retail: financing assumptions and return
equity
Public Equity
Financial Assistance LoanNalue Debt Coverage Repayment IRR on
Scenario Bank Loan Loan Ratio Ratio Gap Equity
1 65% 0.46 1.97 $2,862,190 4%
2 80% 0.56 1.96 $369,321 19%
3 65% 7% 0.46 1.97 $63,408 17%
4 n/a n/a n/a n/a n/a n/a
Source: ECONorthwest.
Development Desciption
Prototype: Mixed -use mid -rise building
Applicable sites:_ All Ti SF
Cost Per SF Total
Units Stories Gross SF Usable SF
Use 150 9,000,0 $25
3 60,000 51,000 115 9,000,000
Residential 1
20,000 17,000 7 5 2 1 4 ggg,450
2 44,135 14,se Zones: Regional Center
TOTAL (w /o retail 80 000 68,000 Pond District &R
Parking 6 Use Zones: TOD Urban,
TOTAL (w Parking) Scale zone: General Urban, Urban Core
LAND 0
Corridor Zone: Urban Corridor fartherst corners of
Max height: 98 feet (8 stories)
of diagonal connecting
Max diagonal: 250' -300' (length
size of parcel (acres) 1,700,000 the footprint)
price oer acre 20 000 Min Parking: Residential: 1/bedroom max of 2/du, Office: 3/1,000 ufa, Retai
Total acquisition cost $1,0 3.3/1,000 ufa
Unaccomodated parking spaces: 11.81
PARKING Mi parking Sq ft. f8 parking
Use 70
24,500 Required square fod footage e
T for
Residential ail 56 19,635
e 126 44,135
Total
RESIDENTIAL BREAKDOWN
units Total sf Parking spaces
10 12000 33600 42
unit size 42 22
800 1
1 bd 1200 6000 8
3 bd 1500 4 70
T t 00
Total 56 516
Retail rates from C.B. Richard Ellis (pulled 9/23/09)
$18.00 Comparable retail properties for lease
$1 In the South Puget Sound; USD /SF /YR
255.00 .00
$14.00
$25.00
$30.00.
$20.33 average
Footprint: 20,000 sf (about 140 x 140)
Diagonal: About 140'
Parking lot efficiency: assumes 350 square feet per stall
t p
Usable SF: assumes 8556 of cross SF
SOURCES: Write
building construction costs: Ankrom Moison Architects;
Constructors, Sept Z009 Sept 20 rice
11 estimates: ECONorthwest based on an average p
land estimates: from Tukwila assessor's database,
ner acre in the Urban Center_
prototypes meet frontage requirements, due to site size
On Ur with
None of the p e requirements will probably
On Urban Corridors: Frontag e coverag
Building length maximums arking (about 12 spaces) will be
This pro forma assumes that some p emae. Land costs do not
accommodated by variance or in some shared arrang
include this space.
Min linear frontage coverage: 9056
Maximum building length: 120 feet the
On sites that are Z00 i 200, i s 1 i fee m frontage coverage is 180 feet, but
the maximum building 9
Financial Pro Forma
Prototype: Mixed -use mid -rise building
Assumptions Building value bottome ilne Scenario 1 (35/65)
About the development Equity Equity Equity Equity
use gross sq 7000 assurrprxn dollars 300009000 dollars ....TM= do:ars
Apartments 60,000 Equity required '30 $7,731,000 Equity requli ell .20% $4,417,714 Equity iequlred 10% 52,208,857 Equity required
Ground floor retail 20,000 Equity tarns Equity terms Equity terns Equity terms
St and surface
Parking 44,135 rm (yrs) 7 term (yrs) 7 term (yrs) 10
TOTAL tw /o parking) 00,000 interest rate 20% interes1,ace 20% interest •ate 20%
Total equity repayment balloon Total equity repayment tballoon Total equity repayment (balloon
payment at end of Seim) 515,013,351 payment at end of term) 08.579,058 payment at end or term) 85,268,627
Development costs Bank loan Bank loan
.tern
Site acquisition
New construction
Developer fee (as
of construction)
Soft costs (as
of construction)
Contingency
(as of soft 6 hard costs) 5% 0967,814 Annual payment
Off -site costs 0% 50
10fA 521,008,5/2
Revenues and expenses Bottom line
VS
source et income/expense axsunpfinn annual reams Loan to value ratio
Residential rent
(Per month) 14 $1,040,400 Debt coverage ratio
Ratad rent (00,
v0ar) I 20 $340,000 Financing gap
Equity repayment gap (or
total revenue 21,380,400 surplus)
Management fee (as
of revenue) 5% $69,020 11214 on equity
Other assumptions
Rent Increase per year 3%
Operating cost increase 3%
Vacancy, Yr 1 30%
Vacam.y, Yr 2 10%
Vacancy, Yr 3 and
stablliaahon 0%
Cap rate 8.5%
Bottom line
Fair Market Value
Created value (0610
costs)
96 assumption do8irs
$1.020,000 Bank loan required
914,889,450 Bank loan terms:
,596 $744,473 tern (yrs)
30% $4,466,835 Interest rate
$14,386,640
.1,000,600 d08ars
8004' $14,357,572 Bank loan required
Bank Ilan terms:
30' term (yrs)
:'.;e,0% interest rate
Scenario 2 (20/80)
assumption dotes
'80% 017,670,057
51,275,346 Annual payment $1,283,769 Annual payment
Bottom line Second loan
1.00 Loan to value ratio 1.23
0.96 Debt coverage ratio 0.95 Required loan amount
50 Financing gap 50 Second loan terms
Equity repayment gap Or
$15,030,073 001 plus) -58,654,736 tens (yrs)
Annual payment (interest
STABILIZED 001 01,223,034 only payments for 10 yrs)
This sheet allures the user to manipulate four
development and financing scenarios by changing
the 038106(04 that are highlighted in 01(1F. All
scenarios reference the same development
program. All scenarios reference the same
revenue and cost assumptions, but these
assdmptlons can be changed on this page. The
key difference in the scenarios is the structure of
the financing.
Scenario 3 (35/85 with public) Scenario 4 (20/80 with public)
Bank loan Bank loan
ssunpton do2oo assunptinn dolars
805'6 $17,670,857
Bank loan required 6006, 514,357,572 Bank loan required
Bank loan terns: Bank loan terms:
term (yrs) 5d. term (yrs)
Interest rate ,8%., interest rate
0.
term (yrs)
interest rate
Total equity repayment (balloon
payment al erd of tent
51,275,346 Annual payment
Second loan
assumption do1,rs
25% $5,522,143 Required loan amount
Second loan terms
tern (yrs)
nual payment (interest
5213,973 only payments for t0 yrs)
as0unptM do)3rs
30% $2,208,857
10
20%
assumption dales
10% $2,208,857
50
-38% (RR on equity -33% Interest 7: interest 1%
Bottom line Bottom line
Loan to value ratio 1 00 Loan to value ratio 1.23
Debt coverage ratio 0,96 Debt coverage ratio 0.95
Financing yap 50 Financing gap 408
Equity repayment gap (or Equity repayment gap fa,
surplus) 55.040,575 surplus) 54,793,470
IRR on equity -13% 1RR on equity -11%
59.260,627
51,283,769
085,589
Developm
evelops pfd D tows( ion
Apopka sites-. Al[
Applicabl
Use
Office
Ground Floor retail
_Structured Par(\
TOTAL (w /o Parking)
PARKING
Use
Office
Retail
Total
Units
2
{iN,ND (acres) 1 ;700,00(2).
00
size of parcel
per acre,
price P cost
Total acquisition
otal $25
Cost Per SF
Usab[� 16 200,000
Gross SF 120 2 530 000 24 1g0,000 14,75 Stories 114,75
18 700 115 g 00,000
6 135, 000 70 23,630,000
22,
1 70,000 133,45❑ Re9enter
2 157,000 -MD Urban, Pond District
Urban Core
Use Zones: of the
Scale zone: General Urban, careers
Urban Corridor fartherst
Corridor Zone' 8 stories)
Max height' 98 feet' length of diagonal CO" nect+n9
250' 10 ufa
Max diagonal: 1 0Q0 ufa, Retail: 3.3/ 00
odated Parking footprint} Office: 3/
Unaccom 206 (spaces} Min parking: O Edlen)
72086 (sq ft) 2 p00 sf from Gerding
ware feet per stall ----T." footprint: 210' e s 350 square
Diagonal: assumes lot efficiencY85% of gross SF and W rite
Parking
Usable SF: assame�
costs: Ankrom Mo +son Architects; How
SOURCES rice
building construction on an a verage p
200 t 2009 based
Constructors, Sept om'Tuk it Sep is database,
11 estimates: from Tukwila a ssessor' s [and es tlmates Urban C
per acre in the
M i n arkin
Solt. ��4 120,
62 21,599
406 142,056
ulled froRich� d� the
/sf /Yr) r ents P arable units for re
rents Offic ,comp
Comparable office 17.5 9123 /09
Come youth 5 eattie market.
12
15
15
15
14.9
Financial Pro Forma
Prototype: Office tower
Assumptions Building value bottome 1me
About the development
use gross 54 rest
Once 135,000
Ground Floor retail 22,005
51vcture3 pa1kfng 70,000
70741 (te /a parking) 157,000
0evelcoment costs
tern 96 assiarprtO
500 aCquiSelon
New Construction
Developer fee (as
or construction)
Son costs (es
46 of construction)
Contingency
(as of son a hard casts)
rorA1
Revenues and expenses
S /50
.starer, orarcorre/expense arsunpt0n
Office rent (per
year)
Retail rent
year)
STA81LIZED 001
(per
total revenue
Management fee (es
of re+enue)
Other assumptions
Rent increase per year
Operating cost Increase
Vacancy, Yr 1
Vacancy, Yr 2
Vacancy, Yr 3 and
stabilization
Cap rate
Bottom line
Fair Market Value
Created value (Fmv
costs)
daises
53,400,000 Bank loan required
524,180,000 Bank loan terms:
51,209,000 tens (yrs)
30% 57,254,000 interest rate
Annual payment
Mnue prone
18 $2.065,500
10 5374,000
32,439,500
5%' 5121,975
3%
3%
30%
10%
5%
8.0%
527,017,463
00 f „e,,n,
51,
3'1, 6(4 ,70 70 0 8
57,161,397
Equity
Equity required
Equity terms
te rm re(yrs)
test rate
Total equity repayment (balloon
payment at end of term)
Bank loan
Scenario 1 (35/65)
assumption 40'15
513,165,1
Bottom line
Loan to value ratio 0.90
Debt coverage ratio 1.00
Financing gap 50
Equity repayment gap (or .525,02[,461
ralus)
700 en equity -34%
20%.
425,566,284
assunpfaan Mars
66% 824,449,555
30'
This sheet allows the user to mannpiiaie bum
development and financing scenanos by changint
the variables that are highlighted in BLUE. Ail
programs reference scenadou reference the same
r and cost assumptions, but these
assumptions can be changed on this page. The
key difference in the scenar05 Is the structure of
the financing.
Equity required
Egnty terms
term (yrs)
interest rate
Total aunty repayment (balloon
Payment at end of term)
Bank loan
Bank loan required
B0061000 terms:
term (yrs)
interest rate
57,171,791 Annual payment
Bottom line
Loan to value ratio
Debt coverage ratio
Flnandng gap
Equity repayment gap (or
surplus)
1148 on equity
Scenario 2 (20/80)
,,000 pr00 do00,0
20 57,522,940
9
204
as ofte7 00400
930,091,760 Bank loan terms: required
0
1.11
0.99
60
-514,164879
-29%
Equity
assumptio0 dolars
Equity required 9044, $3,761.470 fquly oe9n n 5 d
Equity [arm) 10, tom (yrs)
interest 15 (yrs) ;.;,2,0% interest rote
rate Total equity repayment (balloon
Total equity 0 00 50 0) balloon $8,971,963 payment M end of 0000)
$14,609,305 payment at end of term)
Bank loan
Bank loan
tens (yrs)
Interest rate
52,106,134 Annual payment
Second loan
Required jean amount
Scenario 3 (35/65 with public) Scenario 4 (20 /B0 with public)
Equity
Second loan terms
team (yrs)
interest
Annual payment (.00,0001
only payments for 10 yrs)
Bottom line
Loan to value ratio
Debt coverage ratio
Financing gap
E940510001ment non (or
sumws)
IR8 on e9uity
asstespeon ceears
BS, Nb 52A 649,507 Bank Inn 0890(0
term (yrs)
8y, Interest rate
52,171,791 Annual payment
Second loan
assumption dealers
25% 59,403,675 Required loan amount
Second loan terms
O. term (yrs)
.10S interest
0.90
1.00
50
47,712,877
-9%
Annual payment (interest
5364,375 only payments for 10 yrs)
Bottom line
Loan to value ratio
Debt coverage ratio
1500010ng gap
Equity repayment gain (00
surp:os)
IRR on equity
ssorrp0n dotes
10% 43,761,470
7
2004
57,304,557
400002000 rialtos
80% $30,091,760
30
assumption defers
10% 53,761,470
30
1
1.11
0.94
411
•57,951
•33
$2,304,350
8145,750
Development Desciption
Prototype: Residential tower
Regional Center zone
Applicable sites_____
Units Stories
Use
Residential
Ground Floor retail
Parking, parking)
TOTAL (w /o p
LAND 0.5
size of parcel (acres) $1, 700,000
Total acq
price oer uistion cost $850,000
PARKING
Use
Residential
Retail
Total
6
1
4
11
Min parking Sq ft.
166 22,580
231 80,680
RESIDENTIAL BREAKDOW units
unit size 800
1 bd 1400
2 bd 1800
3 bd
Total
Gross SF
138,0
23,00
80,6
161,00
NOTE: Can only be in this zone b/c parking requires
increased height of building.
Total
Usable SF Cost Per SF
27,600,
$25
2,875,
5,647,618 36,697,618
36,122, al Center
117,300 200
125
19,550 70
136,8
Parking spaces
60
Total sf 48000 70
35 4900 36
18 32400 166
113 129,400
Ti /SF
Use Zones: TOD Urban, Pond District Region
Scale zone: General Urban, Urban Core
Urban Corridor footprint)
Corridor Zone: 1 2 stories} fartherst corners of the °ot 2 1du
Max height: 142 feet th of diagonal connecting Residential: 1/bd with
diagonal: length Retail: 3.3/1,000 ufa,
Max diag Office: 3/1,000 ufa,
Min Parking:
max
Footprint: 23,000 sf
assumes 350 square feet per stall
Diagonal:
Parking lot t efficiency:
ale SF: assumes 85% of ross SF
building construction costs: Ankrom Moison Architects; Howard Write Constructors,
SOURCES:
per acre
Sept 2009 based on an average price p
Ti estimates: ECONorthwest, Sept 2 009
land estimates: from Tukwila assessor's database,
in the Urban Center. conflict with
e coverage requirements will probably
NOTE:
On Urban Corridors: maximums
Frontage
g
Building g
frontage coverage: 90%
Min linear r length: 120 feet b the
Maximum budding frontage coverage is 180 feet,
On sites that are 200 x 200, the minimum
maximum building length is 120 feet
Frontage requirements are usually
based on a linear percentage of the total building
ercentage of the length of the site
facade, rather than a p
Financial R F tower
Prota e.
Assumptions J Building value bottome line
About the development re 2e[
use 130,000
Aportments 23,000
Ground acts retail 80,660
S parking N, 161.000
TOTAL (ve✓r!o CarkMg)
Oevetonment costs
Rent
Site acquisition
New construction (a.
D er fee
%09 09 construction) (as
o
Soft costs
f c onstruction)
Contingency
(as 93 of sorts nerd costs)
TOTAL
total tem-we
Management fee (air
%of reveruel
STABILIZED NO)
90 assun91On
Other assumptions
Rent Increase per ea
Opel aton9 t
Vacancy, 00 L
Varen Y, Yr 2an0
Vacancy,
stab01aah
cap rate
Bottom line
Fair Market Value
created value (FMV
10
dollars
5850,000
636,697,
91,834,8
611,00
Revenues and expenses
space or)4<one1experlse $/3F ass mptu" annual econv
Residential rent 1.7 92,3
(per month) (per
92
0 53
Retail rent
ear)
5%
5%
3%
30%
10%
5%
8.0%
630,931,9
92,385,3
652,77
92,920
91,000
7 83,92 0
5139,196
52,466,55
Equity
Equity requir d
Equity trms
term (yrs)
rest rate meat (balloon enUity i'eoaY
payment at end M rem+)
Batik loan
Bank loan resulted
Bank loan ce05'.
term (yrs)
interest rate
Annual payment
Bottom Rae
Loan to Value ratio
Debt coverage soya
Financing Equity reFaYrnent 9055 (o'
surp
1RR on equntY
Scenaro 1 (35/6
assturptun 65% do 134,305,135 Bank ban required
ss
Bank loan terms:
term (yrs)
interest rate
30
1.11
0,81
90
.939 232,026
0NUM)
our
This sheet. 43101N51110 user to niap no u s ale f oan4�ng
development and financing An
the. variables that are highlighted In 51
5694059 A) scenarios ar the reference the same
oo8 and ,,o 1 assumptions, but these
assumptions can he changed on thi0 Page 1hC
key difference .n the Sn r' 01 IC, is the .11301110 td
the lm5ncinq.
Equity
03,047 237 Annual payment
Scenario 2 (20!8
a5starp6pl dollars $18,471,995 Equity required
35,
Equity terms
term (yrs,
207c
r r terest rate
Total equity repayment {balloon
935,072,014 payment at end of tam%
Bank loan
Bottom line
Loan to value ratio
Oebt coverage ran*
Finandn9 gap t y ap (or
Equity sedaYmer
f0145)
I011 on equity
assumPfbn 20% 610 ,050,426
7
20%.
1.30
0.80
90
023,99
#NU51>
$20,408,
assumption dollars
800 942,221,703
Equity
Equity required
Equity terms
term (yrs)
interest rate
Total equity repayment (Nation
Paym ent M end M terra)
Bank loan
Bank loan required
Bank loan terms'
term (Yrs)
interest rate
633.067,361 Annual payment
Second loan
Scenario 3 (35/65 with public)
Required loan amount
Second loan terms
term (Yrs)
Interest
o Annual payment. (Interest
y pants nix flu 10 yrs)
Bottom line
Loan to value ratio
Debt coverage rano
fvnan :Fig g
Equity repayment gap (or
surplus)
IRR on 09003
00 277,7
10
20.0E
1 90U0Ptat^ 6
40E401
Equity
Equity requir
EgUlty terms
term (yrs)
interest rate ment(b6bon
Total equity repay
517,588,546 pn °meat at end of term)
Bank loan
dolaR yank Loan x890110
6330,305,134 Bank ioa0 terms:
term (yrs)
interests ale
63047 237 Annual payment
Second loan
aSsurrptla <4
o0 R¢gUir¢d loan amount
2046 813,194,282
Second ban terms
30
term (yrs)
interest
1% onterest
9511254 only payments 101")
s o
Bottom line
Loan to Value ratio
1.11 Debt coverage Matto
0 Finandeg gap
50 Equity repayment gap (01
urpius)
.517,086, IRR on equity
Scenario 4 (20180 with public) ba1
a sw091' dOMala
10W3, 55,277,713
ed
10'
20%
1 37
0 J
90
818,15
,9515)0
912,SR
assurr9tmn 4 rs 221,703
140 9
93,233,23
assumptin Ontars
10% 55,277,713
70
7e
9204,501
Development Desciption
Prototype: Adaptive re -use of big box retail
Applicable sites: Pond District
Use
Office
Retail
Brew pub
Covered Parking
TOTAL (w /o parking)
LAND
size of parcel (acres) 2.3
price per acre $1,700,000
Total acquisition cost $3,910,000
PARKING
Use
Brew pub
Retail
Office
Total
Units Stories Gross SF Usable SF
1 40,000 34,000
1 40,000 34,000
1 10,000 8,500
163 30,000
164 2 90,000 76,500
Min parking Sq ft.
51 17,850
112 39,270
102 35,700
163 57,120
Spaces in surface lots
77.4857143
square footage of surface lots:
27,120
Cost Per SF
95
30
40
20
Total
3,800,000
1,200,000
400,000
600,000
6,000,000
TI SF
$25
$25
$25
7,912,500
Use Zones: Pond District
Scale zone: General Urban, Urban Core
Corridor Zone: Urban Corridor
Max height: 98 feet (8 stories)
Min height: 2- stories 25 -feet [does not say whether 2nd floor has to be
active]
Max diagonal: does not apply to buildings less than 58'
Min Parking: Restaurant: 6/1,000 ufa, Residential: 1 /bedroom max of 2 /du,
Office: 3/1,000 ufa, Retail: 3.3/1,000 ufa
Footprint: 100,000 (assumes one -story big box)
Diagonal: n/a
Parking lot efficiency: assumes 350 square feet per stall
1 lcahla SP- ac<l CO, of n•« CE
Assumptions Building value bottome in
About the development
use gross so feet
Retail 40,000
Restaurant 10,000
Surface parking 30,000
TOTAL (w /o parkmg) 50,000
Development costs
rtem
Site acquisition
New Construction
Developer fee
(as of construction)
Soft costs
of construction)
Mana gemt fee
or reven en ue)
STABILIZED NO/
Bottom line
Fair Market Value
Created value
(FMV costs)
(as
Other assumotions
%assumption dollars
$3,910,000
$7,912,500
Contingency
Co of soft 8 hard costs) -5% $514,313
Off -sites (as
of consuucbon) 05 50
TOTAL $11,196,188
Revenues and expenses
source 51 /5F
income /eapense assonwtion annual income
Brew pub rent
(per year) 17 5144,500
Retail rent
(per year) 20 5680,000
Office rent (oer
Vest) 18 $612,000
total revenue $1,436,500
Rent increase per year 3%
Operating cost Increase 3%
Vacancy, Yr 1 30%
Vacancy, Yr 2 1O
Vacancy, Yr 3 and
stabilization 5%
Cap rate 8.0%
$15,909,238
54,713,050
5 5395,625
$2,373,750
.5% 571,825
0I,272,730
Equity
Equity required
Equity terms
term (yrs)
Interest rate
Total equity repayment (balloon
payment at end of term)
Bank loan
Bank loan required
Bank loan terms'
term (yrs)
interest rate
Annual payment
Bottom line
Loan to value ratio
Debt coverage ratio
Financing gap
Equity repayment gap (or
surplus)
IRR on equity
Scenario t (35/65)
This sheet allows the user to manipulate four
development and financing scenarios by
changing the variables that are highlighted in
BLUE. All scenarios reference the same
development program. All scenarios reference
the same i evenue and cost assumptions, but
these assumptions can be changed on this
page. The key difference to the scenarios is the
structure of the financing.
Equity
Scenario 2 (20/80)
asstm,pnon dollars
35% $3,918,666 Equity required
Equity terms
7 tens (yrs)
26% Interest rate
Tnlai equity repayment (6nuonn
$7,609,921 payment at end of term)
asstmprs,n dollars
'65 4 A. 57,277,522
30
-52,862,190
Bank loan
Bank loan required
Bank loan terms:
tern (yrs)
mterast rate
$646,444 Annual payment
Bottom line
0.46 Loan to value ratio
1.97 Debt coverage ratio
$0 Financing gap
Equity repayment gap (or
surplus)
4% IRR on equity
assumption 00/6,0
,2055 $2,239,238
7
20%
assumption dollars
80% $8,956,950 Bank loan required
Bank loan terms
39 term (yrs)
interest rate
0.56
$369,321
$4,348,526
Equity
Equity required
Equity terms
term (yrs)
interest rate
Total equity repayment (balloon
payment at end of term)
Bank loan
$650,713 Annual payment
Second loan
assumption dollars
1.96 Required loan amount 7% $783,733 Re,
90 Second ban terms
19%
term (yrs)
Interest
Scenario 3 (35/65 with public) Scenario 4 (20/80 with public)
Annual payment (m
only payments for 10 yrs)
Bottom line
Loan to value ratio
Debt coverage ratio
Financing gap
Equity repayment gap (nr
surplus)
1RR on equity
assumption dollars
28 $3,134,933
Eqt
10 b
.20 if
Tot
$7,477,527 pay
assumption dollar'
65 94,' $7,277,522 Bar
Bar
0.46
1.97
5646,444 Ant
Equity
aSSO49I ffgrn__doOiirs__
Eqt This scenario 0 not needed for this prototype.
Ba
If
Se
Sec
term (yrs)
interest
Annual payment (interest
630,368 only payments for 10 yrs)
Bottom line
Loan to value ratio
Debt coverage ratio
90 Financing clap
Equity repayment gap (or
$63,408 surplus)
1/% 505 on equity
30,
104
0.56
1.96
$0
$2,465,211
44%
163
/50
r13
,19
$43,383