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HomeMy WebLinkAboutFS 2015-05-05 COMPLETE AGENDA PACKETCity of Tukwila Finance and Safety Committee O Kathy Hougardy, Chair O Joe Duffie O De'Sean Quinn AGENDA Distribution: Recommended Action K. Hougardy P. McCarthy J. Duffie C. C'Flaherty D. Quinn R. Turpin K. Kruller L. Humphrey D. Robertson B. Miles Mayor Haggerton D. Cline Brandon Miles, Economic Development Liaison TUESDAY, MAY 5, 2015 — 5:30 PM HAZELNUT CONFERENCE ROOM (formerly known as CR #3) at east entrance of City Hall Item Recommended Action Page 1. PRESENTATION(S) 2. BUSINESS AGENDA a. Washington Place Development proposed Building and a. Forward to 5/11 C.O.W. Pg.i Impact Fee Deferral. Brandon Miles, Economic Development Liaison b. A resolution regarding human trafficking. b. Forward to 5/11 C.O.W. Pg.9 Laurel Humphrey, Council Analyst and 5/18 Regular Mtg. 3. ANNOUNCEMENTS 4. MISCELLANEOUS Next Scheduled Meeting: Tuesday, May 19, 2015 SThe City of Tukwila strives to accommodate individuals with disabilities. Please contact the City Clerk's Office at 206 - 433 -1800 ( TukwilaCityClerk (a)TukwilaWA.gov) for assistance. City of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Finance and Safety FROM: Brandon J. Miles, Economic Development Liaison DATE: April 24, 2015 SUBJECT: Washington Place Development Building and Impact Fee Deferral ISSUE Proposed deferral of some development fees associated with the Washington Place Development, located at 223 Andover Park East (former Circuit City property). BACKGROUND The owners of 223 Andover Park East are proposing to the construct the City's first residential high rise. When constructed, the 19 -story building will be the tallest building between Seattle and Tacoma and will include multi - family units (apartments or condos) and a full service hotel. The project is located within the Transit Oriented Development area or TOD of the City's Southcenter District. The TOD is envisioned to be a high density area with amenities that encourage walking and development that benefits from the proximity to the Sounder Station located east of the Green River and the Metro Transit Center located along Andover Park West, adjacent to Southcenter Mall. Over the last two years the City has taken various actions regarding the Washington Place Development in order to encourage the project to move forward since it fits the vision of the area. Development Agreement and Amendment In March of 2013 the City executed a development agreement (DA) with South Center WA, LLC, the owners of the property. The City executed an amendment to the DA in June of 2014. The initial DA and amendment provided the following modifications to the City's development standards: • Height. Half of the site may have a building that exceeds the maximum height in the zone, up to 190 feet. • Open Space. The open space requirements for the project were reduced. Each residential unit is required to have at least 45 square feet and each hotel room is required to have 25 square feet of open space. Clarification was also provided on what the City would consider as open space. • Condominiums. The multi - family units must be constructed in a manner so that they can be converted to condominiums at a later date. This includes that each unit have its own, separate electrical meter. • Parking. The City reduced the minimum number of required parking stalls for the project. The property owner is required to operate a shuttle and have valet parking on the site. O' _ • T- �• .,�. Signa.ge. The permitted size of wall signs on the building was increased; however, other types of signs, generally permitted on other types of buildings, were prohibited. Residential Component. The project must include at least 250 residential units. The DA will expire at the end of 2015 if a building permit has not been issued for the building. Approval of Multi - Family Tax Exemption Ordinance In order to encourage residential development within the TOD, the City Council approved a multi - family tax exemption ordinance on December 1, 2014. As the Council may remember, multi - family exemptions are permitted under State law and are used in many cities in the State to encourage multi - family development. The multi - family tax exemption ordinance allows for a significant reduction in the property valuation of projects that include a multi - family component within the TOD (west of the River). For example, the City has estimated that in the first year after the project is constructed, the City's share of property taxes will be reduced from $240,000 to $75,000. The savings to the property owner will be much more dramatic because the reduction in property valuation reduces the property taxes paid to all agencies (Washington State, King County, City of Tukwila, and Tukwila School District). Note: that the Ordinance does not reduce the taxes already received from the property. It only delays the collection of additional property taxes associated with the residential development. The property tax exemption only applies to the residential component of the project. The hotel and commercial space would not be eligible for a reduction in value. Land Use Approvals and Construction Permits The City issued a SEPA Determination of Non - Significance (E14 -0003) on May 18, 2014. Design review approval was granted on May 23, 2014 (1-14- 0016). The property owner has requested modifications to the approved design review application (1-14- 0055). A comment letter (via email) was provided to the applicant's representative on October 29. 2014 seeking additional information regarding the design review modification request. A demolition permit was issued on September 19, 2014. A foundation only permit for the new building is currently pending. DISCUSSION Economic Development staff has estimated that the project will be required to pay the City over $1.5 million in building and impact fees'. The City's Building Division estimates the total building construction costs at approximately $74 million, thus the permit fee represents approximately 1.8% of the total project costs. The collected building permit fees are used for plan review and inspection to support the City's oversight of construction standards in the City. Impact fees are used to fund capital projects related to expanding capacity for traffic, parks, and fire services. 1 This is an estimate only, based upon limited information available to the City. Final permit fees will be calculated once a complete building permit application is submitted to the City. Additionally, the $1.5 million does not include pass through fees, water connection fees, and other fees associated with other permits issued by the City. The fee amount is provided for discussion purposes only. 2 W:12015 Info Memos\WashPlacefeeDeferral.doc INFORMATIONAL MEMO Page 3 During the July 2014 Council review of the DA, its one amendment, and the multi - family tax exemption there was discussion about what else could be done regarding development and impact fees related to the project. A residential high rise in the Southcenter area of the City is an unproven development type. Many residential housing developers have expressed reluctance to develop in the City's Urban Center because there are no existing rent comparisons on new apartments or condos in or near the TOD district, especially for an urban product. Without rent comparable, proposed projects appear risky and are hard to finance. This sentiment of housing developers is supported by the conclusion of a report that the City had commissioned in 2014 regarding the project. Heartland, LLC, hired by the City, concluded, "...even under optimistic circumstances, the project would not meet financial expectations of market based investors or lenders." [It should be noted that the developers for the project have indicated that they have secured funding through the Federal Government's foreign investor visa program (EB -5]. The proposed project has considerable upside for the City. If successful, the project could demonstrate that residential development can succeed in the City's Urban Center. The project could help jumpstart residential and mixed use development and make the City a viable alternative to Seattle and Bellevue for these types of developments. However, the developer for the project does have to deal with soil conditions that are not present in downtown Bellevue and most of downtown Seattle. Tukwila's Urban Center is located in an old floodplain and developers must bore below the flood sediment to reach bedrock for the footings. This adds additional costs for developers of tall buildings, such as the Washington Place building. Imoact Fee Clarification Staff has been examining ways to reduce the impact of the City's fees as applied to the project. In August of 2014, the City was able to clarify the traffic, parks, and fire impact fees required for the project. This resulted in a reduction of nearly $300,000 in the amount of impact fees due. This is not a waiver of impact fees. Under State law, and the City's ordinance enabling for the collection of impact fees, the City must provide a process to reduce fees on a project by project basis. The reduction is based on an objective review related to the specific impacts associated with the individual project. Examination of Further Fee Reductions The Washington Place owners have requested that building permit fees for the project be reduced. The estimated building permit fee for the project is just over $568,000. Payment of building permit fee is divided into two payments, one payment is due at submission of the building permit. This is known as the "plan check" fee. This payment is intended to cover the City's staff time in reviewing the plans and other documentations prior to the permit being issued. The next payment for the building permit comes at issuance of the building permit. This payment is intended to cover staff time associated with conducting inspections as the project is constructed 2. Additionally, the impact fees are collected at time of issuance of the building permit. 2 Staff time is during normal business hours. A project can request inspections at night or on the weekends, provided arrangements are made to cover the City's overtime costs. WA2015 Info Memos\WashPlacefeeDeferral.doc 3 INFORMATIONAL MEMO Page 4 The table below shows the estimated fees (building and impact only) for the Washington Place Project. Table 1, Estimated Building and Impact Fees for Washington Place Staff examined if there were ways to reduce the City's building permit fees. Fees collected from building permits are directed to the City's general fund and are used to compensate the City for the cost associated with operating construction inspection services (Building, Planning, Fire, and Public works), as well as expenses associated indirect costs (Finance, IT, fleet and facilities). Reducing fees would require that the City examine its revenue and costs associated with building permit administration and would have be done citywide, not for a specific project. The current building permit fees were adopted by the Council via resolution and apply uniformly across the City. Building permit fees and other land use fees were increased during the City's budget challenges with the recession. The goal of increasing the fees was to make construction services and current planning, "self- funded." There are no City policies that would allow for a reduction of building permit fees for one specific project. In order to reduce building permit fees the City would have to amend the resolutions that levy the fees. Staff does not believe that this should be done without a comprehensive look at the City's revenues and costs. The owners of Washington Place project have suggested that the City enact lower fees in the TOD area of the TUC as a way to encourage residential development. While this is an innovative idea, staff is unsure if reducing fees in one area of the city would be legal (gifting of public funds). Even if it were legal, the City would have to consider the policy implications of allowing lower fees in one area of the City, while charging higher fees in another area. As mentioned above, impact fees will be collected from the project at time of issuance of the building permit. Impact fees are used by the City to pay for the construction of capital projects that increase capacity for roads, parks, and fire services. Some of the impact fees collected for this project will be used to pay for relocating Fire Station 51, the construction of the pedestrian bridge over the Green River, and for various traffic improvements in the Southcenter area. Under State law, waiving impact fees for an individual project requires that the City makes up the difference in the funds not collected. If the City wanted to reduce the impact fees for Washington Place it would have to enact reductions citywide. This is something that would require significant study and research, not something that could be accomplished in the next few months. Staff does not recommended that the City reduce building or impact fees for the Washington Place project for the reasons outlined above. Changes to the City's various fee ordinances should only be made after careful consideration of the City's revenue streams and cost of services. This would require a considerable amount of staff time and time by the City Council in reviewing the final results. WA2015 Info MemosMashPlacefeeDeferral.doc 4 Due at Application: Due at Issuance: Building Fee $217,316 $351,050 Traffic Impact $0.00 $48,894 Park Impact $0.00 $338,326 Fire Impact $0.00 $308,656 Total: $217,066 $1,046,926 Staff examined if there were ways to reduce the City's building permit fees. Fees collected from building permits are directed to the City's general fund and are used to compensate the City for the cost associated with operating construction inspection services (Building, Planning, Fire, and Public works), as well as expenses associated indirect costs (Finance, IT, fleet and facilities). Reducing fees would require that the City examine its revenue and costs associated with building permit administration and would have be done citywide, not for a specific project. The current building permit fees were adopted by the Council via resolution and apply uniformly across the City. Building permit fees and other land use fees were increased during the City's budget challenges with the recession. The goal of increasing the fees was to make construction services and current planning, "self- funded." There are no City policies that would allow for a reduction of building permit fees for one specific project. In order to reduce building permit fees the City would have to amend the resolutions that levy the fees. Staff does not believe that this should be done without a comprehensive look at the City's revenues and costs. The owners of Washington Place project have suggested that the City enact lower fees in the TOD area of the TUC as a way to encourage residential development. While this is an innovative idea, staff is unsure if reducing fees in one area of the city would be legal (gifting of public funds). Even if it were legal, the City would have to consider the policy implications of allowing lower fees in one area of the City, while charging higher fees in another area. As mentioned above, impact fees will be collected from the project at time of issuance of the building permit. Impact fees are used by the City to pay for the construction of capital projects that increase capacity for roads, parks, and fire services. Some of the impact fees collected for this project will be used to pay for relocating Fire Station 51, the construction of the pedestrian bridge over the Green River, and for various traffic improvements in the Southcenter area. Under State law, waiving impact fees for an individual project requires that the City makes up the difference in the funds not collected. If the City wanted to reduce the impact fees for Washington Place it would have to enact reductions citywide. This is something that would require significant study and research, not something that could be accomplished in the next few months. Staff does not recommended that the City reduce building or impact fees for the Washington Place project for the reasons outlined above. Changes to the City's various fee ordinances should only be made after careful consideration of the City's revenue streams and cost of services. This would require a considerable amount of staff time and time by the City Council in reviewing the final results. WA2015 Info MemosMashPlacefeeDeferral.doc 4 INFORMATIONAL MEMO Page 5 Fee Deferral Economic Development staff has examined the feasibility of deferring fees from being collected for the project. A fee deferral is not a fee reduction or waiver, but involves simply delaying the collection of fees. Several cities, such as Olympia and Sammamish allow for fee deferrals'. Developers often express concerns with the timing of cash outlays that are required for construction projects. A developer expends considerable cash to move a construction project forward prior to generating any rent or income from a project. For example, Washington Place will likely require two years of construction before it is open and able to start collecting rent from tenants and the hotel. A fee deferral shifts the fees due into the future and thus allows the developer to be closer to generating income before paying the fees. Since the City desires to see residential development in the TOD area, a fee deferral program could provide an incentive to assist developers in moving construction projects forward. If structured correctly, staff believes that a fee deferral program would be consistent with State Law. The following outlines general eligibility requirements and terms for how a fee deferral program could work. Eligibility requirements: 1. The project must be located within the Tukwila Urban Center's Transit Oriented Development district and west of the Green River. 2. The project must include at least 100 residential units and more than 50% of the net leasable area must be used for residential purposes. 3. The property owner of the project must execute an agreement with the City. Terms that would apply to any eligible fee deferral: 1. The building permit fee that is normally due at issuance, for the entire project, may be deferred for up to two years and must be paid before the City will issue a certificate of occupancy. 2. Development impact fees, collected by the City, for the entire project may be deferred and paid in equal, annual installments over eight years. The first payment is due within 36 months from the issuance of the first building permit. 3. The plan check fee and other land use, fire, and development fees will not be deferred and will be due according to standard City policy4. 4. The City will provide a non - binding estimate of the amount of fees (building and impact fee only) to be deferred after the City receives a complete building permit application. Any fee not listed in the non - binding estimate is not part of the fee deferral and shall be paid according to City policy. 5. The City will approve the amount of fees to be deferred when it is ready to issue a building permit. 6. Interest on the fees deferred will accrue from the date the building permit is issued. 7. Interest will be based on the stated rate for a 10 -Year US Treasury Bond on the date of permit issuance. Interest will be compounded annually. 8. The fee deferral will be secured with a revolving letter of credit for the outstanding fees, plus interest from a financial institution approved by the City. 3 The fee amounts deferred are very minor, with payment required prior to certificate of occupancy. 4 As discussed above, plan check fee is due at building permit submission. W:12015 Info MemosMashPlacefeeDeferral.doc 5 INFORMATIONAL MEMO Page 6 9. The financial institution must notify the City at least 30 days prior to the expiration or termination of the letter of credit. City may exercise the letter of credit for the total outstanding fees plus interest if the applicant does not provide another letter of credit satisfactory to the City at least 15 days prior to the expiration or termination of the letter of credit. 10. The City will have the right to exercise the letter of credit for the total outstanding fees plus interest if the applicant misses a payment. 11. The City may record the agreement against the property and the agreement will run with the land until fully paid. Table 2: Fee Deferral Payment Schedule as applied to Washington Place (Building and Impact Fees Only).' Paid at Time of: Year Permit Permit Certificate 2018 2019 2020 2021 2022 2023 2024 2025 Application Issuance of Occupancy 2015 2015 2017 $133,091 $0.00 $364,519 $97,508 $97,508 $97,508 $97,508 $97,508 $97,508 $97,508 $97,508 A fee deferral program would not have an impact on the City's ability to move ahead with capital projects funded by impact fees. The City's collection of impact fees has been slower than anticipated. Many of the projects funded primarily or partially with impact fees will move forward regardless of when the City has collected the budgeted impact fee amount or not. In the absence of grant funds, these project will be funded by the City with either bonds and /or having the general fund front the funds. Impact fees will simply payback the city for any funds that were advanced via bonds or the city's general fund. Some projects funded by impact fees are not even scheduled to move forward until after 2020. For example relocation of Fire Station #51 is budgeted to receive $331,000 in impact fees; however, construction of the fire station is currently scheduled to occur after 2020. One advantage of a fee deferral program for impact fees is that it delays starting the clock on the ten year expenditure requirement. Under State Law the city must use collected impact fees within ten years of when they were collected6. If they are not expended the City must return the funds, with interest. The ten year period does not start until the City collects the funds. Thus, by deferring the fees the City delays the starting date of the ten year period and also aligns the funds being received more closely with our expenditure outlays. Staff is proposing that a nominal interest rate be charged to the fees that are deferred. The interest rate standard proposed by staff is the rate on a US Ten Year Treasury Note at the time of issuance of the building permit'. Staff believes that this interest rate standard would cover the opportunity cost of lost revenue by delaying collection of the fees. 5 This table is provided for discussion purposes only and is not meant to be a final representation of the payment schedule. 6 Using the funds is very open and could include purchasing land, completing studies, or designing the capital project. On April 20`h the stated interest rate was 1.90 %. 6 M2015 Info Memos\WashPlacefeeDeferral.doc INFORMATIONAL MEMO Page 7 FINANCIAL IMPACT One possible financial impact would occur if the City moves ahead with construction projects that were funded with impact fees by securing funds with bonds. If the City's borrowing costs are higher than the interest that is charged on the deferred fees the City could incur a cost. However, this cost is only incurred if one assumes that the project would move forward without the deferral of fees. If Washington Place is not constructed the city would still incur bond costs associated with capital projects. RECOMMENDATION Staff does not recommend that the City reduce or eliminate building or impact fees. As discussed above, such a reduction would require careful review of the impacts to the City's general fund. Staff recommends that the City create a fee deferral program within the TOD area of the TUC to encourage residential housing. Staff's goal at this time is to discuss the fee deferral with Council and solicit feedback, with an Ordinance being presented to Finance and Safety in May. WA2015 Info MennoslWashPlacefeeDeferral.doc 7 L.*] City of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Finance and Safety Committee FROM: Laurel Humphrey, Council Analyst DATE: April 29, 2015 SUBJECT: Resolution relating to Combating Commercial Sexual Exploitation ISSUE A resolution expressing support for combating commercial sexual exploitation through comprehensive demand enforcement, deterrence and prevention. BACKGROUND Law enforcement and service agencies nationwide have been partnering to increase emphasis on the demand side of prostitution and human trafficking, acknowledging that children and vulnerable adults should be considered victims of commercial sexual exploitation. "Buyer Beware," an initiative that is led by the Organization for Prostitution Survivors and the King County Prosecuting Attorney's Office, represents a partnership with Police and City Attorney Offices across King County to go after purchasers of sex and not their victims. Buyers drive the industry and prosecutors estimate that around 27,000 men in King County are soliciting sex online every day. The Buyer Beware initiative also includes components relating to public education and an intervention program available to men both convicted of this crime and self - referred. Participating community organizations include The Organization for Prostitution Survivors, Businesses Ending Slavery and Trafficking (BEST), Stolen Youth, and Seattle Against Slavery. Several King County cities have formally pledged support via a resolution such as this one. DISCUSSION The proposed resolution expresses support for law enforcement emphasis on deterring buyers of sex, evidence -based innovations in this approach, and the Buyer Beware initiative in King County. RECOMMENDATION The Committee is asked to approve the draft resolution and forward it to the May 11, 2015 Committee of the Whole and subsequent May 18, 2015 Regular Meeting. ATTACHMENTS Draft resolution 9 10 7 ��r k A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, RELATING TO COMBATING COMMERCIAL SEXUAL EXPLOITATION THROUGH COMPREHENSIVE DEMAND ENFORCEMENT, DETERRENCE AND PREVENTION. WHEREAS, the Tukwila City Council is committed to public safety and the health and well -being of its residents and visitors, and WHEREAS, commercial sexual exploitation and sex trafficking are significant threats to our community values and the safety and well -being of the children and vulnerable adults being exploited; and WHEREAS, hundreds of children in King County are at risk of being commercially sexually exploited each year; and WHEREAS, the rise of online advertising has increased the demand for commercial sex, which victimizes children as young as 11 years old; and WHEREAS, it is illegal to purchase sex in Tukwila, King County and the State of Washington, yet prostituted individuals have typically been arrested and prosecuted up to 10 times more frequently than buyers; and WHEREAS, there is a growing body of evidence that targeting sex buyers is a pragmatic, effective way to combat the commercial sex industry; and WHEREAS, doctors and health professionals assembled by the Institute of Medicine issued the 2013 report, "Confronting Commercial Sexual Exploitation and Sex Trafficking of Minors in the United States," which suggests "a particular emphasis on deterring demand "; and WHEREAS, the Tukwila City Council is committed to promoting a safe and healthy community, taking a strong position against human trafficking, and supporting efforts to combat trafficking and reduce commercial sexual exploitation, W: \Word Processing \Resolutions \To combat human trafficking 4 -27 -15 LH:bjs Page 1 of 2 11 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, HEREBY RESOLVES AS FOLLOWS: Section 1. The City of Tukwila will continue collaboration with our neighboring jurisdictions and our county, state and federal partners to combat commercial sexual exploitation of children and vulnerable adults in our region, and to mitigate the associated public safety, economic, and health risks to our City. Section 2. The City of Tukwila supports the partnership of the King County Prosecuting Attorney's Office and the Organization for Prostitution Survivors, and the "Buyer Beware" initiative to reduce the demand for commercial sex. Section 3. The City of Tukwila's anti - trafficking strategies will be survivor informed and comprehensive, holding sex buyers and traffickers accountable, while providing exit strategies and options for prostituted individuals. Section 4. The City of Tukwila supports and promotes a culture of intolerance toward the purchase of a vulnerable human being for sex. PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this day of 12015. ATTEST /AUTHENTICATED: Christy O'Flaherty, MMC, City Clerk Kate Kruller, Council President APPROVED AS TO FORM BY: Rachel B. Turpin, City Attorney W: \Word Processing \Resolutions \To combat human trafficking 4 -27 -15 LH:bjs 12 Filed with the City Clerk: Passed by the City Council: Resolution Number: Page 2 of 2