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2018-02-14 Planning Board MinutesCITY OF EDMONDS PLANNING BOARD MINUTES February 14, 2018 Chair Monroe called the meeting of the Edmonds Planning Board to order at 7:00 p.m. in the Council Chambers, Public Safety Complex, 250 — 5r' Avenue North. BOARD MEMBERS PRESENT Nathan Monroe, Chair Matthew Cheung, Vice Chair Todd Cloutier Phil Lovell Daniel Robles Mike Rosen Carreen Rubenkonig Megan Livingston, Student Representative BOARD MEMBERS ABSENT Alicia Crank (excused) READING/APPROVAL OF MINUTES STAFF PRESENT Rob Chave, Planning Division Manager Brad Shipley, Planner Jerrie Bevington, Video Recorder Karin Noyes, Recorder BOARD MEMBER LOVELL MOVED THAT THE MINUTES OF JANUARY 10, 2018 BE APPROVED AS PRESENTED. BOARD MEMBER ROSEN SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY. ANNOUNCEMENT OF AGENDA The agenda was accepted as presented. AUDIENCE COMMENTS No one in the audience indicated a desire to comment during this portion of the meeting. DEVELOPMENT SERVICES DIRECTOR REPORT TO PLANNING BOARD There was no Development Services Director Report. RECOMMENDATION ON REVISITING FIVE CORNERS PLAN AND ZONING INITIATIVE Mr. Chave reviewed that in 2007 the City worked with the University of Washington and the Green Future's Lab to come up with some plans and ideas for how focused development could be accomplished in Westgate and Five Corners. Although the two plans were completed at the same time, quite a bit of work still needed to be done to translate them into implementable codes. The City Council decided to move ahead with formalizing the Westgate Plan first, and postponed work on the Five Corners plan until after the anticipated roundabout project had been completed. Since the Westgate Plan has been completed, and the Five Corners Roundabout has been built, the City Council has expressed interest in taking up the Five Corners Initiative again. Because some key properties in the area have been sold since the initiative was tabled, there was concern that the area's opportunities for redevelopment may have changed. Director Hope suggested that a feasibility analysis be done to determine whether the changes previously proposed for Five Corners would likely result in redevelopment of any key properties. He noted that, although significant work has already been done on the Five Corners Initiative, significant staff time, as well as Planning Board and City Council time, would still be needed to complete the project. The intent of the feasibility analysis is to determine whether this substantial extra work is appropriate in the near future. Mr. Chave advised that the City hired a consultant team, Heartland, to provide the analysis. The team is now ready to present its findings to the Planning Board. Following the presentation, the Board will be asked to make a recommendation to the City Council about whether to take up the Five Corners Initiative again and do more work to prepare it for further consideration under a full public process. Board Member Lovell observed that the analysis appears to focus on future redevelopment opportunities and does not really address the viability of the existing development. He noted that this is the first time the Board has received a presentation from a fully economic standpoint. Chris Fiori, Principal and Project Director, Heartland, advised that Heartland is a real estate advisory, investment and brokerage firm. Since he joined the firm 15 years ago, his work has focused on advising public agencies and municipalities on public assets and public policy. Much of this work involves bringing real estate lands through the planning process to help inform the creation of policies and plans. The consulting team was hired by the City to evaluate the feasibility of redevelopment in the Five Corners area under the form -based code concept outlined in the Five Corners Initiative that was done by the University of Washington in 2007. Amy Hartman, Project Manager, Heartland, advised that the feasibility analysis studied four sites within the Five Corners subarea using different scenarios: existing site value, site value under the proposed form -based code, and site value under the proposed form -based code with greater flexibility. The concept was that the Five Corners area has the potential to add increased density and housing stock to the Edmonds area. For the analysis, they looked at the feasibility of redevelopment from a developer's perspective. Developers make decisions based on the amount of return they will get from a project. She explained that residual land value is a method used to determine the value and potential profitability of a piece of property minus any expenses related to the land. Residual land value is the value of the land that remains after all deductions associated with its development have been made. It basically represents what a developer can afford to pay for the land. Any additional cost added to a project will push down the residual land value and additional entitlements can increase it. Redevelopment occurs when residual land value is higher than the value of the site's current use. The analysis assumes the developer would maximize the allowable square footage on a property. Board Member Lovell summarized that, according to the analysis, unless changes are made to the code to introduce more flexibility in terms of density, height, parking ratios, land uses, etc., the properties do not appear to be desirable for redevelopment. Ms. Hartman reviewed that the existing buildings in the four test sites are currently 100% occupied with relatively high market rents, and the current zoning prohibits multi -family or buildings with heights over 25 feet. Therefore, it is highly unlikely that the sites will be redeveloped under the current zoning. The draft form -based code would increase development capacity enough to make redevelopment financially feasible, but additional enhancements to the code would increase redevelopment value even further. For example, for medium-sized and large sites, decreasing the required parking minimums would provide the highest lift to land value. For small sites, allowing an extra floor of building height would provide the most additional value. Mr. Fiori explained that because the subarea is fairly small, they could analyze the individual properties in four of the five corners. The analysis looks at the economics of the existing uses and identifies land values for the existing development as income properties. He summarized that there is more uniformity in the propensity for redevelopment of the four properties than they thought there would be going into the analysis. This may aid policy making because there will not be the disparate impact that is often present in subareas. Board Member Robles questioned why only four of the five properties at Five Corners were analyzed. Mr. Shipley explained that the 5t' property was not included in the scope of work because it is small. The intent was to study the four larger properties that had the most potential for redevelopment. Board Member Cloutier added that the analysis focused on commercial areas Planning Board Minutes February 14, 2018 Page 2 and did not include properties in the residential zones. Ms. Hartman pointed out that the analysis focused on the properties that front the roundabout. While the four larger properties could accommodate up to five stories, the smaller property would be limited to a maximum of four. Mr. Fiori advised that the same methodology was applied to all four of the parcels that were studied as part of the analysis. Vice Chair Cheung asked why the value of the flexible parking option is so much lower for the Edmonds Veterinary site (Site 2). Ms. Hartman explained that it has to do with the size of the site. The smaller sites require more underground parking to meet the parking requirement so meeting the minimum parking requirement is costlier. Having a flexible parking requirement is less important on larger sites where there is more space for surface parking. Ms. Hartman explained that, in the analysis of each of the four properties, the current land value is based on existing rentable space and market rates as well as the market cap rate (what someone would be willing to pay the owner for the income stream coming from the building). In order for redevelopment to be feasible, the land value based on the various scenarios would have to be greater than the existing land value. She reviewed the specific findings for the four areas as follows: Site 1 — BARC. This property's land value based on its current use under the existing code is $65/square foot (SF). Under the draft form -based code, the land value would be $95/SF, which is $30/SF greater than the hurdle value (existing land value). The form -based code would allow about 265 units and 30,000 square feet of retail space, with about 325 parking spaces. Based on the cost of construction for the ground floor podium and the upper floors of wood and based on the rent you could get for multi -family and new retail, the analysis found that the property value was about $25,000 per unit or $95 per square foot. The land value would increase to $120/SF with flexible height, as the total number of residential units would increase to 361. With the flexible parking scenario, the land value would be $172/SF. The number of required stalls would decrease from 324 to 192. Using a combination of flexible parking and increased height, the land value would jump to $219/SF or more than double the hurdle value. Development under this scenario would accommodate 341 residential units, 230 parking stalls and 30,000 square feet of retail space. Board Member Lovell reiterated that the numbers provided in the analysis are based on the assumption that 75% of the site is buildable. The numbers reflect demolition and removal of the existing development. Ms Hartman agreed that the analysis assumes that the sites would be cleared and that 75% of the land would be developable. The average unit size would be 600 square feet. Board Member Lovell pointed out that the BARC property was recently redeveloped into a veterinarian hospital, and it is not likely that the use will be demolished to accommodate redevelopment any time soon. Mr. Fiori explained that in some situations his firm is hired to work on assets and policies together. In these cases, they work through all of the encumbrances and existing issues that might affect redevelopment beyond the basic economics. If the intent was to encourage near -term redevelopment, it is likely the consultant team would recommend a different set of next steps. However, this type of implementation piece goes beyond the scope of the current analysis. Board Member Lovell asked if an owner could hire Heartland to study options for further development or redevelopment of his/her property. Mr. Fiori answered affirmatively. There are logistics involved with retail development and the sensitivities around parking. As the BARC building is currently laid out, it is not likely that vertical development will be an option. Additional development would likely have to occur in the area currently used for parking. It would be up to whoever controls the property to pursue redevelopment options. Board Member Cloutier recalled that when the Westgate Plan was in progress, some property owners were concerned that it would mandate redevelopment of their properties. It was emphasized that the site could be redeveloped at some point in the future, but property owners would not be forced to redevelop. The plan simply identifies what the future envelope could be, but it does not require that any changes occur. Ms. Hartman agreed that the property owner would have control over what happens to the site in the future. When subarea plans are created and properties are rezoned, it generally takes years for redevelopment to happen. • Site 2: Edmonds Veterinary. The value of this site's current use is $52/SF. Based on the draft form -based code, the land value would be $110/SF. This scenario would allow up to 124 residential units and about 30,000 square feet of retail space. With the flexible height scenario, the land value would increase to $137/SF, and the number of Planning Board Minutes February 14, 2018 Page 3 residential units would increase to 166. The land value for the flexible parking scenario would be $125/SF, and a combined flexible scenario would result in a land value of $226/SF. Because this site is smaller, development would be limited to a smaller number of units, which means fewer parking spaces would have to be provided. • Site 3: Calvary Chapel. This site was sold in 2012, so the sale value was used to calculate a land value in today's dollars of $63/SF. Under the draft form -based code, the land value would be $109/SF. With the flexible height scenario, the land value would increase to $134/SF, and the number of units would increase from 140 to 186 units. The land value of the flexible parking scenario would be $177/SF, and a combined flexible scenario would result in a land value of $225/SF. • Site 4: Five Corners Plaza. The current land value of this site is $74/SF. Under the draft form -based code, the land value would increase to $110/SF. This scenario would increase the number of residential units from 113 to 151. The land value for the flexible parking scenario would be $135/SF, and a combined flexible scenario would result in a land value of $223/SF. Board Member Lovell asked if the numbers presented for cost metrics for each of the scenarios represent project costs. Ms. Hartman answered that the numbers identify construction costs with sales tax. They obtained the figures from another similar project being done in the area. Board Member Rubenkonig said she understands that the analysis is an economic approach, but the consultants now understand Five Corners quite well. She asked them to share their thoughts on the redevelopment potential of the four properties that were studied. Mr. Fiori answered that the level of attractiveness is expressed in the numbers displayed in the analysis. He explained that redevelopment potential is the highest where the spread is greatest between the existing circumstance and either of the scenarios. All four properties have a relatively similar land use value now, and there is a significant spread between the existing hurdle rate and what they think is possible in the market based upon changes in zoning. Changing to a form -based code will have significant impacts over time. Another thing to consider is how likely the current uses are to redevelop. For example, although the Calvary Church has only been in its current location for five years, as the land value increases, they may consider moving somewhere else. The length of current leases could also be a component. Properties with shorter timelines are more desirable. Most developers will seek to find property owners who are inclined to allow them to get into their process of entitlement as soon as possible. Aside from economic returns, Board Member Rubenkonig asked what other returns the City would receive from changes in zoning. Mr. Fiori said one major return could be an increased tax base. However, if the properties are developed primarily as residential and the existing ground floor retail is simply replaced, tax revenue would not increase significantly. But zoning changes would likely alter who lives in the City and how the City thinks about affordable housing. He said his company has been involved in a number of affordable housing discussions, including subsidized housing. There is a strong argument that bringing on more low-cost units (smaller in size and typically wood framed) is the best a jurisdiction can do without capital subsidies. Many jurisdictions do not have places for the next generation to live, and the idea is to allow people to age in place and stay in their communities. While a lot of areas place multi -family zoning in unattractive areas along high -traffic arterials, the Five Corners intersection has a great sense of place and low traffic. It is quite attractive and has good infrastructure to accommodate residential uses. Board Member Rubenkonig commented that it is important to the Mayor and others that the City has a good image. Increasing the visibility and sense of place at Five Corners will also increase the desirability of Edmonds for people to live and visit. Board Member Rubenkonig said she looked at what the rents would be based on each of the scenarios, recognizing that 15% of the residential units would have to be provided at 80% AMI. The market value of a 600 SF unit would be $1,400, and the affordability requirement would reduce the rate to $1,152. A larger 900 SF unit would have a market value of $2,160, and the affordability requirement would reduce the rate to $1,728. This is not taking into account working with non -profits and other groups to subsidize the units. This is another option the Housing Task Force is currently working to address. She voiced concern that that units that are "affordable" would still be quite costly. Board Member Robles pointed out that a 600 SF unit is quite small and clearly not large enough for a family. He expressed his belief that family -sized units would be the most desirable application at Five Corners, yet the rate for each unit would be Planning Board Minutes February 14, 2018 Page 4 significant. He asked if the analysis considered the view amenity. The properties are located on a ridge, and their may be a view of either the mountains or the Sound from the upper units. Mr. Fiori said view was not connected to the estimated rents identified in the analysis. Board Member Robles felt this should be a component of the discussion, since view is one of the motivators for this exceptionally beautifully area. Board Member Robles asked how the surrounding residential properties would be impacted by the proposed changes in zoning that would allow taller buildings, etc. Mr. Fiori said the analysis did not study this issue. However, impacts to surrounding properties would be considered as part of any State Environmental Policy Act (SEPA) review. Board Member Robles recommended that some extended studies be done relative to impacts to surrounding properties. Board Member Robles said he appreciates seeing the report in terms of economics through the developer's eyes. Although it is not the Board's job to optimize a developer's return, the information can be used to help identify the current demand for property. Mr. Fiori explained that the concept of identifying excess profit from which public benefits can be leveraged can be contentious. The issue becomes how finely the City wants to fine tune the delta between redevelopment value and hurdle value. The more public benefit you try to squeeze out of developers, the more you risk not getting enough delta to trigger redevelopment. Conversely, the more you give extra stories of height to trigger redevelopment, the more you risk other impacts like light, view and air. Public entities should be careful when thinking about how much to squeeze the capital. The market for larger mixed -use projects is robust and attracts national capital. The returns will likely meet or exceed the numbers provided in the analysis, but it is also competitive. Board Member Robles commented that the City needs to have tools in place to attract amazing and great projects. Given the City's proximity to Amazon, Paine Field, etc., they have some leverage. They are far enough away that they are not influenced by them, but they are close enough to them to be accessible via various modes of transportation. The City has a lot going for it. Board Member Rubenkonig asked the consultants to comment on how the 4 and 5-story height limits might constrain prospective developers from obtaining the needed capital to move forward with a project at Five Corners. Mr. Fiori clarified that obtaining capital is less about the number of stories and more about the scale of a project. The national players who build large projects have been flooding into the Seattle area for a number of years. They are looking for 200 to 300-unit projects. Projects of this scale and type would tend to be attractive to a range of capital sources that are stable and relatively low cost. Board Member Cloutier said he flinched every time the consultant mentioned flexible parking because he keeps thinking about what has happened in Ballard. He asked the consultant what the parking ratio is in Ballard. Mr. Fiori said the parking ratio for multi -family development is around .6 or .7 spaces/unit. He acknowledged that a .5 parking ratio would be quite aggressive for Five Corners. Typically, the .4 and .5 parking ratios are found in very strong transit locations. While Five Corners has good transit service, it would not qualify as a strong transit location. Board Member Cloutier summarized that a .5 parking ratio is not really an option for Five Corners. Mr. Shipley reminded the Board that the intent is to create a plan for Five Corners that looks to the future. He suggested that ten years from now the situation could be much different than it is today as far as how people get around. Mr. Fiori said his company is currently doing work with King County Metro's Transit Demand Group. This group has done a robust study of parking for multi -family projects, and they have a great repository of information the City could draw from. Their study tracked not only what has been built, but what is being utilized. Generally speaking, despite some people's perception, there is a lot of underutilized parking, even in newer buildings. There is some rationale to address current realities and the future by coming up with a way to do a combination of surface and garage parking. Surface parking can be eliminated if it isn't needed; but once a garage has been built, it becomes permanent. Chair Monroe asked how much retail space is currently located on the parcels. Ms. Hartman noted that this information is contained in the tables that were provided as part of the presentation. The tables also identify the maximum square footage at build out for each of the scenarios. Chair Monroe noted if the proposed zoning changes are adopted, the City could expect some increase in the amount of retail space, as well as an increase in residential units of between 670 and 864 at total build out. This equates to roughly 1,500 to 2,000 more people. Board Member Lovell observed that the Board's responsibility is to make a recommendation to the City Council as to how to proceed with the Five Corners Initiative. However, cautioned that there are many more aspects of the Five Corners Initiative that still need to be studied before the Board can make a recommendation. For example, it has been suggested that the study Planning Board Minutes February 14, 2018 Page 5 area should be increased, and the public has provided significant input relative to multi -family housing adjacent to single- family housing. There will also be issues relative to building heights and property uses. He recalled that the Westgate Plan required a significant amount of work, and a lot of different aspects, provisions and attributes of the sites in that area were looked at in conjunction with the Board's study and ultimate recommendation for a modified form -based zoning approach. A lot more work is needed to get the Five Corners Plan to that point. Mr. Chave said the Five Corners area is currently zoned as Neighborhood Business with a 25-foot height limit, and one dwelling unit per lot is allowed. Retail space is required on the ground floor. He clarified that the Board is not being asked to make a specific recommendation now. The study is intended to be a check off point to determine whether the plan outlined by the University of Washington is still feasible. He recognized that a lot of issues need to be hammered out, but the Board could report back to the City Council that the plan appears to be feasible. They could also ask the City Council to identify priorities for when the project should move forward. Board Member Lovell commented that the planning effort must move forward with the parameter that zoning must change in some way in order for redevelopment to be feasible. Mr. Chave agreed and pointed out that there are Comprehensive Plan policies already in place for Five Corners that call for up to four stories of development. It's not like the Board would be starting with a blank slate. Some Comprehensive Plan work has already been done, and the University of Washington Plan took it a step further by looking conceptually at how different arrangements of uses could happen. Board Member Rubenkonig said she understands that the Board is being asked to make a recommendation based on the information presented by the consultant. However, she recalled that the Board also received a request from the Economic Development Commission (EDC) to meet jointly with them to discuss the Five Corners Plan. The Board had postponed the joint meeting until after the consultants had completed their work on the feasibility analysis. She said she is hesitant to move forward with a recommendation to the City Council without first obtaining input from the EDC. Board Member Lovell asked if the EDC has access to the study results, and Mr. Chave answered affirmatively. However, he noted that the scope of work did not include a presentation by the consultant to the EDC. Board Member Rubenkonig suggested that the Board postpone its recommendation to the City Council until the next meeting so that Board Member Lovell, liaison to the EDC, can solicit their input. Chair Monroe pointed out that the EDC only meets once a month, and they will not have time to review the report thoroughly and provide feedback before the Board's next meeting. He commented that there will be plenty of opportunities for the EDC to weigh in on the project as it moves forward. Mr. Chave concurred. Board Member Rubenkonig suggested that the Board's recommendation to the City Council should also include a suggestion that they study whether the boundaries of the plan should be expanded to include the multi -family zones. Chair Monroe suggested that the Board take action now and forward their recommendation on to the City Council. Mr. Chave commented that once the City Council authorizes the Board and staff to proceed with the plan, they can determine the appropriate steps, and issues such as study area boundaries and input from the EDC can be addressed. The Board's recommendation at this time would simply ask the City Council for permission to move the plan forward and invite them to provide input as to priorities and an appropriate timeline. BOARD MEMBER CLOUTIER MOVED THAT THE BOARD FORWARD A RECOMMENDATION TO THE CITY COUNCIL THAT THEY AUTHORIZE THE BOARD TO MOVE THE FIVE CORNERS PLAN FORWARD. VICE CHAIR CHEUNG SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY. REVIEW OF EXTENDED AGENDA Board Member Lovell asked if the review and discussion on the Urban Forest Management Plan (UFMP) would include a presentation by the consultant. Mr. Chave said he is not sure if the consultant will be present at the meeting or not. Board Member Lovell said that some members of the Tree Board have requested a joint meeting with the Planning Board to talk about the UFMP plan. Rather than a special joint meeting, Board Member Rubenkonig suggested that the Board extend a special invitation to the Tree Board, asking them to attend the February 28' meeting. The Board could then discuss the option of having a special joint meeting at some point in the future. The Board concurred and asked staff to extend the invitation to the Tree Board. Planning Board Minutes February 14, 2018 Page 6 PLANNING BOARD CHAIR COMMENTS Chair Monroe did not provide any additional comments. PLANNING BOARD MEMBER COMMENTS Board Member Lovell announced that he would attend the February 2 1 " Economic Development Commission meeting ADJOURNMENT The Board meeting was adjourned at 8:35 p.m. Planning Board Minutes February 14, 2018 Page 7