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Home My WebLink AboutCOW 2016-12-12 Item 4F - Discussion - Developer Selection for Motel Site: HealthPoint Community Health CenterCOUNCIL AGENDA SYNOPSIS Initials Afeetins Date 12/12/16 Prepared by Mayor's review DCS C_ cil revieav ITEM INFORMATION ITEM No. 4.F. & Spec 3.A. 81 STAFF SPONSOR: DEREK SPECK ORIGINAL AGENDA DATE: 12/12/16 AGENDA ITEM TITLE Developer Selection for Motel Site CATEGORY Z Discussion Mig Date 12/12/16 1 d motion Dade 12/12/16 ❑ Resolution Mtg Dade ❑ Ordinance Mtg Date ❑ Bid Award Mtg Date [ Public Hearang At Date Q Other aildg Date Mlldg SPONSOR ❑ Council ❑ HR ❑ P[V Mayor MI DCD • .Finance ❑ Fire ■ TS ■ P&R ❑ Police SPONSOR'S Staff requests Council to authorize the Administration to enter into negotiations with SUMMARY HealthPoint Community Health Center to purchase and develop the four parcels of land the City owns at 14420, 14440, 14442, and 14452 Tukwila International Boulevard (formerly the Great Bear Motel, Boulevard Motel, Spruce Motel, and Sam Smoke Shop plus assessor parcel number 004000 -0255 for fair market value. REVIEWED BY ❑ COW Mtg. ❑ CA &P Cmte 0 F &S ante ❑ Transportation Cmte ❑ Utilities Cmte ❑ Arts Comm. ❑ Parks Comm. ❑ Planning Comm. DALE: E: COMMITTEE CHAIR: - - - - RECOMMENDATIONS: SPONSOR/ADMIN. COM;MirrI.•T Mayor's Office COST IMPACT / FUND SOURCE EXPENDI'rum REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED $ $ Fund Source: NOT APPLICABLE Comments: MTG. DArill RECORD OF COUNCIL ACTION 11/14/16 Discussion MTG. DATE ATTACHMENTS 12/12/16 Informational Memorandum dated 12/7/16 _ Exhibit A: Map of Properties Exhibit B: Application from El Centro de la Raza Exhibit C: Application from HealthPoint 81 82 City of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: City Council FROM: Derek Speck, Economic Development Administrator CC: Mayor Ekberg DATE: December 7, 2016 SUBJECT: Developer Selection for Motel Site ISSUE City Administration requests the Council select an organization to purchase and develop the four parcels of land the City owns at 14420, 14440, 14442, and 14452 Tukwila International Boulevard, plus parcel number 004000 -0255 on South 146th Street. BACKGROUND In 2014 and 2015 the City purchased the Great Bear Motel, Boulevard Motel, Spruce Motel, and Sam Smoke Shop properties located at 14420, 14440, 14442, and 14452 Tukwila International Boulevard to reduce crime and revitalize the neighborhood. The Sam Smoke Shop property also included a small vacant parcel on South 146th Street (assessor parcel number 004000- 0255). A map is attached as Exhibit A. In 2016 the buildings were demolished and the land is now vacant. At the time of the acquisition the City had planned to sell the properties and currently has budgeted the sale to occur in 2018. In late October and early November, the City received letters from two organizations, El Centro de la. Reza (El Centro) and Health Point Community Heath Center ( HealthPoint), both expressing interest in purchasing the properties. Both organizations have expressed a desire to seek funding for their proposed development from Washington State in the 2017 -18 biennial budget. That process begins during the upcoming Legislative session, which starts this January. HealthPoint anticipates the State funding could be as much as $3 million and that an organization would need to have been selected by the City to be competitive for State funding. In November, the City Council approved a developer selection process and staff issued a Request for Statements of Interest and Qualifications (RFQ). Applications were due on December 5th and the City received two submittals. The applications are from El Centro and HealthPoint and are attached as Exhibits B and C. DISCUSSION The Administration believes both applicants are highly qualified and missions that are beneficial to Tukwila as such we will continue to help both in their effort to develop in our City. The applications include many pages of information. City staff has summarized most of the information in the table below as a quick reference guide; however, it is important to refer to the full applications to have a more complete understanding of the proposals. 83 INFORMATIONAL MEMO Page 2 Applications Summary Table El Centro HealthPoint Organizational Mission "Our mission is to build the Beloved Community through unifying all racial and economic sectors; to organize empower, and defend our most vulnerable and marginalized populations; and to bring justice, dignity, equality, equity and freedom to all the peoples in the world." "Our mission is to strengthen communities and improve people's health by delivering quality health care services, breaking down barriers and providing access to all." Organization History 501(c)3 founded in 1972. Currently has 125 employees and a $10 million annual budget. Operates 49 programs and services for residents of King County serving a diverse and low income families and individuals. 501(c)3 founded in 1971. Currently has 740 employees. Operates at 14 locations in King County providing comprehensive health care to 84,000 patients, primarily low income (16% have no insurance and 37% are underinsured). Primary Use of the Site Affordable Housing: 100 to 120 apartments with a mix of one, two, and three bedrooms affordable to individuals and families earning 30%-60% of AMI. Health and Wellness Resource Center: primary medical care, primary dental care, behavioral health, pharmacy, health and wellness classes Additional Uses of the Site Commercial spaces for community services such as El Centro satellite office and child development; a farmers' market (plaza), a marketplace with small, family -owned businesses; a commercial, commissary kitchen for small businesses. Mental health and substance use; women infant and children's nutrition services (WIC); maternity support services (MSS); rotating specialty care (dermatology, sports medicine, cardiology, oral surgery, etc.). Possible Uses of the Site Examples at Plaza Roberto Maestas are: credit union; coffee shop; restaurant. Shared spaces for classes in exercise, cooking, nutrition, music, art, technology, and legal; daycare; financial services/banking; social 84 INFORMATIONAL MEMO Page 3 85 service navigation. Uses the Applicant Will Consider (based on City interest) Health and/or dental clinic. Affordable housing. Land Purchase Price At or below fair market value. May request partial land contribution. At fair market value. City Revenues Property tax exempt Sales tax on construction Sales tax on retail space Sales tax on purchases from employees and residents. Property tax exempt Sales tax on construction Sales tax on purchases from employees (and residents, if included). City Costs No request for special ongoing City services. No request for special ongoing City services. Applicant Development Experience El Centro is the developer and owner of Plaza Roberto Maestas, a $45 M mixed -use, affordable housing development located at 2524 16th Avenue South in Seattle which opened in 2016. HealthPoint completed at least three major construction projects and 12 alteration and renovation projects in the past 10 years. The most recent major construction project is HealthPoint Midway located at 26401 Pacific Highway South in Des Moines. Development Team Experience Beacon Development Group is a highly qualified and experienced affordable housing development consultant. SMR is a highly qualified and experienced architecture firm with expertise in mixed -use, transit oriented projects. Architect and general contractor not identified in the application. Owner Financial Capacity Would seek potential acquisition bridge loan from the Washington State Housing Finance Commission. $11 M currently available. Project Financing Plan The financing plan is achievable in that it would be similar to the financing El Centro arranged for Plaza Roberto Maestas. The financing plan is achievable in that HealthPoint has arranged financing for multiple projects. However, their vision for this site is larger than their other projects and they have not developed 85 INFORMATIONAL MEMO Page 4 86 or financed affordable housing and would need a qualified consultant or partner. Project Timeline El Centro identified logical milestones but not a specific timeline. HealthPoint estimated 4 to 5 years. Environmental Sustainability Project would be built to Evergreen Sustainable Design Standards. See application for additional details. Project will explore LEED certification and possibly the Living Building Challenge and net zero energy consumption. See application for additional details. Key Policy Requests The project may need a reduction in the city's required number of parking spaces. None requested. Construction Quality El Centro has an incentive to build with quality because they would own the project long term. See application for additional details. HealthPoint has an incentive to build with quality because they would own the project long term. See application for additional details. Management Quality El Centro has incentive to manage the project in a high quality manner because they would own the project long term. See application for additional details. HealthPoint has incentive to manage the project in a high quality manner because they would own the project long term. See application for additional details. Economic Benefits Local businesses would benefit from expenditures from residents (100 to 120 households) and employees. Local businesses would benefit from expenditures from residents (if included) and employees. Employment 19 permanent jobs onsite. 100 permanent jobs onsite. Community Engagement El Centro is committed to civic involvement, grassroots organizing and social activism and would engage the community in the development of the site and has experience in doing so at Plaza Roberto Maestas. HealthPoint was a founding partner for Global to Local, which provides organizational structure to the City's Community Connectors outreach program. HealthPoint would engage the community in a needs assessment. Community Knowledge 1 El Centro understands the HealthPoint understands the 86 INFORMATIONAL MEMO Page 5 Development and Construction Considerations In terms of development and construction, both organizations are highly qualified to complete the projects as proposed. They have proven experience in assembling financing and development teams. El Centro has more experience in developing affordable housing than does HealthPoint. If HealthPoint incudes affordable housing, they would need to partner with an experienced affordable housing developer. Financing affordable housing is complex and can add significant time to a project. HealthPoint is in a stronger financial position to move forward faster based on Owner Financial Capacity (listed above). Both organizations would own and manage the site and, as such, would be committed to quality construction and ongoing management. In terms of ongoing operations, both organizations are very experienced in providing ongoing services in the primary and additional uses they proposed (see chart above). HealthPoint is stronger in healthcare and El Centro is stronger in managing affordable housing (approximately one year managing Plaza Roberto Maestas). 87 Tukwila community very well. Tukwila community very well. For many years El Centro has For many years HealthPoint's made their services available clinics in Renton and SeaTac to Tukwila residents. Since served Tukwila residents. In 2009 El Centro has helped the 2011 HealthPoint opened a residents of Rainbow Haven location in Tukwila and has on South 152nd Street meet since re- opened in another zoning, fire, and building Tukwila location and codes to avoid displacement expanded. Health Point and potentially homelessness. currently serves almost 2,000 Tukwila residents. Impact on School Districts Additional housing, and Health care facilities would be affordable housing, can affect within walking of Foster High the local school districts. and Showalter Middle schools. If housing it included, or if affordable housing is included, it can affect the local school districts. Other This cell is intentionally blank. HealthPoint would develop the buildings to an "essential facilities" standard so they would be able to serve the community in times of natural disaster such as an earthquake. Development and Construction Considerations In terms of development and construction, both organizations are highly qualified to complete the projects as proposed. They have proven experience in assembling financing and development teams. El Centro has more experience in developing affordable housing than does HealthPoint. If HealthPoint incudes affordable housing, they would need to partner with an experienced affordable housing developer. Financing affordable housing is complex and can add significant time to a project. HealthPoint is in a stronger financial position to move forward faster based on Owner Financial Capacity (listed above). Both organizations would own and manage the site and, as such, would be committed to quality construction and ongoing management. In terms of ongoing operations, both organizations are very experienced in providing ongoing services in the primary and additional uses they proposed (see chart above). HealthPoint is stronger in healthcare and El Centro is stronger in managing affordable housing (approximately one year managing Plaza Roberto Maestas). 87 INFORMATIONAL MEMO Page 6 Revenue: In terms of one time city revenue, HealthPoint would probably pay a higher price for the land. If Health Point does not include housing, El Centro would probably generate $100,000 to $200,000 in higher construction sales tax. In terms of ongoing city revenue, El Centro would probably generate higher sales tax due to more retail uses. Because the projects are in a very preliminary stage of planning, any estimates of annual sales tax would be very unpredictable. Alignment with City Values: Both organizations know Tukwila very well and have missions that align well with Tukwila's goals. The table above shows the differences in types of uses that are proposed. Those uses are appropriate at this location. Both organizations are well respected and their projects would be positive for the Tukwila International Boulevard neighborhood and the rest of Tukwila. Administration's Recommendation: Although the Administration very much appreciates both organizations and their proposals, to move forward with a development, the City will need to select one organization to lead development of the property. The Administration recommends the Council select HealthPoint. There are many reasons but among the top ones are: (1) The comprehensive medical and health services would benefit many of Tukwila's residents and the activity and spending from employees and patients would benefit the neighborhood businesses. Even if HealthPoint is not able to include affordable housing in the project we think affordable housing will develop on other sites in the neighborhood. The City can still work with El Centro to find such a site. (2) It is a rare opportunity to expand comprehensive health care in a location that can more easily serve our entire community. HealthPoint has been seeking a new location in this neighborhood since 2012 when it hoped to find space in Tukwila Village. (3) The City would receive a higher revenues due to a higher land price. Justice Center Relevancy In terms of whether to start negotiations at this time, one key consideration is whether the City wants to use the property for a new Justice Center to house the police department and municipal court. We should note that this site is 1.7 acres and the facilities plan estimated the Justice Center would need 5 acres. The City has not yet conducted a study of possible sites for the Justice Center but the City can choose to complete that analysis before completing sale negotiations on the TIB parcels. Even if the City starts negotiations with a developer, the City is not legally bound to complete those negotiations and sell the property. Of course, we do not want to conduct a selection process and enter into negotiations if the Council is not willing to even consider selling the property. 88 INFORMATIONAL MEMO Page 7 Options The Council has the following options: (1) Authorize the Administration to enter into negotiations with one of the developers. (2) Request staff to conduct a more extensive proposal evaluation process. This could include more information from the current applicants, more community input, or starting the selection process over. This approach will miss the start of the upcoming State supported funding window and may jeopardize state funding in this cycle. (3) Put the decision on hold until a later time. This would have the same effect on State funding as described above. Next Steps If the Council selects a developer, the Administration would begin negotiations. Before selling the property, the City will want to see a more detailed plan for how the developer would use the site, what services would be provided, how the project will be financed, and a timeline. During that time, as key policy questions arise, the Administration will check back with the Council for direction. FINANCIAL IMPACT This item would have no financial impact at this time. If the City completes negotiations and the Council approves selling the property, the City would receive revenue from that sale. BUDGET IMPACT The City currently has budgeted $1,850,000 for the sale of these properties in 2018. If the City does not sell the property, it will need to remove the revenue projection from the budget. RECOMMENDATION The Council is being asked to pass a motion authorizing the Administration to enter into negotiations with HealthPoint Community Health Centers to sell the properties located at 14420, 14440, 14442, and 14452 Tukwila international Boulevard and assessor parcel number 004000- 0255 for fair market value. Council is asked to consider this item at the December 12, 2016 Committee of the Whole meeting and subsequent December 12, 2016 Special Meeting. ATTACHMENTS Exhibit A: Map of properties Exhibit B: Application from El Centro de la Raza Exhibit C: Application from HealthPoint 89 Exhibit A: Map of Properties 4 AA T T Parcels Under Consideration A: Great Bear Motel, 14420 TIB B: Boulevard Motel, 14440 TIB C: Spruce Motel, 14442 TIB D: Sam Smoke Shop, 14452 TIB Note: Parcel D also includes a small parcel, APN 004000 -0255. Note: Parcel E, Travelers Choice Motel is not included in the developer selection discussion. Updated: 12/7/16 EXHIBIT B El Centro de la Raza Application 94