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HomeMy WebLinkAboutCC Minutes - 04/16/07 Work Session M I N U T E S Eugene City Council Workshop Council Chamber—Eugene City Hall 777 Pearl Street, Eugene, Oregon April 16, 2007 5:30 p.m. COUNCILORS PRESENT: Andrea Ortiz, Chris Pryor, Betty Taylor, Bonny Bettman, George Poling, Jennifer Solomon, Mike Clark, Alan Zelenka. Her Honor Mayor Kitty Piercy called the meeting of the Eugene City Council to order. A. WORKSHOP: Downtown Development City Manager Dennis Taylor introduced Alexis Garret, Chair of the Eugene Redevelopment Advisory Committee (ERAC) and Gerry Gaydos, Chair of Downtown Eugene, Inc. (DEI), who would be facilitating the panel discussion by development professionals. Panelists included Hugh Prichard, Tom Bowerman, Steve Korth, Jean Tate, Greg McLaughlan, and Jerry Diethelm. Mr. Gaydos said the panelists had been selected to provide a range of perspectives on development, how to achieve a vibrant downtown, and the use of private/public partnerships. He said the workshop was an opportunity to be curious, establish a framework for thinking about the future of downtown, and begin a community dialogue on possibilities. Ms. Garret said that each speaker would have ten minutes to make a presentation, followed by a five-minute question and answer period with the council. She said all presentations would be followed by an opportunity for additional questions and answers. Mr. McLaughlan discussed three points: the purpose of downtown and what it meant to the community; the role of the public sector in revitalization of downtown; and observations and ideas about current opportuni- ties for downtown revitalization. He said that a more diverse, active, and economically dynamic downtown would benefit Eugene as a whole because it was an important step in creating a sustainable, livable city. He said the role of the public sector and public investment in downtown, including subsidies, should be based on the public good derived from that investment. He said no city had achieved a successful, vital downtown core without a significant public investment. He said ensuring the benefit of public investments was based on accountability, transparency, diversity of people and uses and sustainability. He said fairness in dealing with existing businesses and activities was also important. Mr. Zelenka asked how features that made downtown Eugene unique could be preserved and a monoculture approach that made downtown look like any other city avoided. Mr. McLaughlan replied that a major redevelopment effort needed to look and feel as if it was of, by and for Eugene. He said that would only MINUTES—Eugene City Council April 16, 2007 Page 1 Workshop happen with strong local participation by elected officials, the public, and communities that lived and worked downtown. Mr. Zelenka asked whether an incremental or critical mass development approach was preferable. Mr. McLaughlan cautioned against a debate on the issue of scale instead of the content of the development itself. He felt a larger scale project could be sensitive to local needs, as could an incremental approach. Ms. Bettman noted that scale was not the only issue; diversity was also critical and one of the proposals would consolidate ownerships. She questioned how diversity could be achieved if there was a monopoly on ownership of downtown property. Mr. McLaughlan replied that even with a single developer, key community goals such as diversity could be leveraged if there was a significant public investment in the project. Mr. Prichard said he had been involved in many development projects in Eugene and discussed the financial imperatives that all projects had to follow. He said that projects needed to meet the same financial requirements, regardless of their nature and those requirements were stringent. He explained how projects developed a construction budget and operating budget; the built value of the project must not be lower than the construction cost or financing would not be available. He distributed a handout titled PPPM 407/507 Real Estate Development - Prichard that described redevelopment costs and financing. He said that for some projects, a gap between construction costs and built value could be filled through various funding sources, depending on project eligibility and that generally required assistance from local government. He encouraged creative public/private partnerships to bridge gaps. Mr. Zelenka asked why it was more expensive to develop in the urban core than outside of it. Mr. Prichard said a number of factors contributed to the higher cost of downtown development and those were detailed in his handout. He said lack of development experience and expertise in Eugene and the challenges of building in a higher density environment were some of the factors. Mr. Zelenka repeated his question regarding a preference for incremental or critical mass development. Mr. Prichard noted that incremental development had been occurring and either approach could work, depending on the situation. Mr. Bowerman remarked that from his perspective money was not the most important factor in development and there were other things that might motivate a developer. He said it was important that jurisdictions recognize that. He believed in the social purpose of development and described his experience with a project in downtown that preserved unique old buildings while creating economic vitality. He said the role of the City was to have good goals that provided a statement of community objectives, development codes, and a permitting process that encouraged redevelopment and economic development financial assistance. He emphasized the need for policies and strategies to be applied uniformly and in a focused manner. He felt that civic vitality occurred with broad participation and liked the idea of diverse ownership and owner/managers who worked closely with tenants to assure compatibility and longevity. He preferred to work with incremental development rather than large projects. Ms. Bettman opined that it was difficult for a developer to address the entire footprint in the City's request for proposals and asked what criteria might be included that would encourage a wider range of developers to respond. Mr. Bowerman said it would be difficult to respond to that question on the spur of the moment and he would get back to Ms. Bettman with his thoughts on the subject. MINUTES—Eugene City Council April 16, 2007 Page 2 Workshop Mr. Zelenka asked how the unique nature of downtown could be preserved and enhanced. Mr. Bowerman said he did not think the goal should necessarily be about uniqueness; most west coast cities had many common qualities and individual characteristics came about by responding to the local environment. Mr. Korth offered his perspective on the fundamentals of development, using the Oakway Center as an example. He said that any redevelopment project needed to consider some basic issues, including creating a master plan for the project regardless of whether the development was incremental or critical mass. He said that ownership of contiguous properties was a significant factor as adjacent properties and neighbors were important to retailers. He said that establishing a timeline was also essential. He indicated that the regional mall model had worked well for the Oakway Center and resulted in a vision that guided overall development. He agreed with earlier comments about the importance of a project's economics; the rent structure had to support the project but be tempered by what tenants could afford. In response to a request from Mayor Piercy, Mr. Korth said the Center Courtyard and heritage tree features of the Oakway Center were intended to establish a connection to the community through preserving its historical significance and creating a pleasant environment for the public. Ms. Bettman asked if any subsidies had been involved in development of the mall. Mr. Korth said that no subsidized were used although some system development charges (SDC) credits were used in the develop- ment of property across Coburg Road from Oakway Center. Mr. Diethelm distributed to the council a memorandum dated April 16, 2007, on the subject of downtown project evaluation. He said his bias was toward encouraging downtown development and that public investments would be involved in order to further the City's goals. He was familiar with the sites identified for redevelopment and discussed some of his previous experience with developing overall public urban design frameworks for projects. He said the difference between those projects and the ones being considered by the council was that they began with urban design plans that set forth details of what the jurisdiction was trying to accomplish and developers were asked to show how they could fit into that framework of community expectations. He contrasted that with simply asking developers what they would like to do. He used the example of a project in which the owners refused to sell the property for redevelopment until there was an urban design plan with broad community agreement. He said that the downtown development proposals were premature and urged development of urban design plans for both sites to measure proposals against. He also encouraged the inclusion of more public space in any development project. He noted that critical mass might not happen all at once. Ms. Bettman appreciated Mr. Diethelm's point that critical mass could be achieved incrementally. She asked what disadvantages large development had. Mr. Diethelm said an advantage of large-scale develop- ment could be building infrastructure all at once instead of piecemeal, but a disadvantage was that large developers did not always do what a city wanted. Ms. Tate said her development experience was with smaller scale projects such as the L & L Market and Woodleaf Village. She said that in one case the financing gap was filled from a number of sources, including affordable housing tax credits. She said a subsidy was essential to building a project that people could afford. She said the condominiums she recently developed at 14th Avenue and Lincoln Street had a cost of almost $300 a square foot and the City's requirement for a mix of commercial and residential had made it challenging to build the project. She noted that other projects had problems filling their commercial space and she would not have embarked on the condominium project without a commitment from a tenant for two of the three spaces. She urged the council to rethink the requirement for retail and office space. She MINUTES—Eugene City Council April 16, 2007 Page 3 Workshop expressed concern about incremental development and felt that critical mass was necessary to attract people to downtown. She said the City should also take into consideration the challenges developers faced in obtaining financing for projects. She commented that the escalating costs of construction meant that if her project had been started six months later it could not have been built. Mr. Zelenka asked if the condominiums had any public investment. Ms. Tate replied that the only public investment was the multi-unit property tax exemption (MUPTE) and without that exemption it would have been much more difficult to sell units. Ms. Bettman questioned why downtown property was more expensive and had higher value when the downtown area was identified as depressed. Ms. Tate replied that property value included the structure as well as the land and most developers would demolish an existing building to build a new one, making it more costly to develop in downtown. Mr. Gaydos thanked the panelists for their presentations and opened the question and answer period. Replying to Ms. Bettman's question, Mr. Prichard said a factor in the cost of downtown property was parking. He gave the example of a higher return on a parcel when it was parking than after a building was constructed, making parking the highest and best use of property downtown. Ms. Bettman asked if the downtown and urban renewal plans were sufficient to meet the need to guide overall development. Mr. Diethelm said development of the train station area involved developing what was in essence a small refinement plan that had community involvement and support. Mr. Korth said a plan could evolve in many ways but whatever the project, it should be well thought out in advance. He said there needed to be some decisions about the vision or direction to guide the project. He said it was difficult to proceed with a project when there were too many different perspectives involved. Mr. Diethelm said the downtown plan was general and did not provide much guidance on things that would be important in developing the area. Mr. Bowerman commented that the development code was like a master plan and was so specific it almost functioned as a template. He said many developers were interested in a performance pathway in the code to allow flexibility in meeting the City's goals. He said that performance pathways had been successful in other cities in encouraging vibrant community development. Mr. Clark observed that demand-driven development was a successful model and asked what there was in terms of demand for downtown. Mr. Diethelm replied that there needed to be a reconception of what downtown would become. He did not think that was a retail center; the goal should to target a downtown residential population of 5-6,000 people and that would carry with it a demand for certain goods and services. Mr. Prichard said based on an evaluation of the costs of redevelopment, he concluded that retail, office and market-rate housing were not currently feasible; what would work was affordable housing and condomini- ums. Mr. Bowerman believed that critical mass was necessary and it had been demonstrated frequently that a dense urban experience was attractive to a segment of the population. He said downtown Eugene, having MINUTES—Eugene City Council April 16, 2007 Page 4 Workshop reached a critical mass, would be a highly desirable place to visit and live in but that had to be done correctly. Mr. McLaughlan said there was demand for a downtown that was an entertainment and cultural center, a center for government services, special retail, nonprofits and a diverse environment. He said in many respects creating diversity created its own demand. Ms. Tate said there was room downtown for more law offices close to the courthouse, more space for the insurance industry, specialty retail, and restaurants. She said the location of government offices downtown was also very important, but was concerned about who would build and pay for what was necessary to achieve critical mass without a master plan. Mr. Gaydos agreed with Mr. McLaughlan's comments as it would be difficult to anticipate future demands; it was important to celebrate the diversity that existed and create greater diversity. He encouraged the creation of public/private partnerships to foster revitalization of downtown and urged that those efforts move forward soon. Ms. Taylor liked the Oakway Center but did not want it downtown. She agreed with Ms. Tate's comments about the difficulty of filling commercial space. She emphasized the need to protect existing businesses, which contributed to a vibrant life downtown at night. She asked how those businesses could be protected and also whether it was appropriate for the City to buy property downtown and then work with potential developers. Mr. Bowerman agreed it was critical to protect current businesses. He said the concept of a single developer should incorporate a component to include current businesses in the finished product so they had equity and ownership. He thought the City could form a partnership with a developer to establish those standards. Mr. Diethelm cautioned against large-scale projects that made it impossible for small businesses to stay in downtown. He suggested the City could buy some key properties to break up an ownership monopoly and demonstrate the effectiveness of a public/private partnership. Mr. Prichard also encouraged establishing a performance pathway. He said both Salem and Corvallis had good examples. Mr. Zelenka said the council had to address the difficult question of how much public investment was appropriate on a particular project. He said some people in the community wanted no public investment and others wanted a project done, regardless of the amount of public investment. He asked if there was a sense of what the balance for public investment might be. Ms. Tate said the City should ask developers who were willing to undertake a project what they would require in terms of public investment and then choose among those projects. She did not think the City could superimpose its preferences on a developer. Mr. Korth encouraged a financial analysis to demonstrate the benefit to the community of any public investment, regardless of the size of the investment. Ms. Tate pointed out that the property on which Tate Condominiums was built was previously owned by the City and was now part of the tax base. MINUTES—Eugene City Council April 16, 2007 Page 5 Workshop Mr. Zelenka asked whether it was better to establish a relationship with one developer or have several developers involved in downtown. Ms. Tate felt it was preferable for the City to try to work out a project that meet everyone's needs with one developer, as developers generally preferred not to be involved in a project that would include other developers. Mr. Diethelm said that initial projects would "prime the pump" and the City might expect to make a greater public investment in them than in subsequent projects. He felt there were benefits to incremental develop- ment through increased values from earlier projects. He said that a plan would provide a framework and guidance for developers, not impose directives. Mr. McLaughlan encouraged thinking creatively about investments that served more than one objective, business or organization. He used the pocket park as an example of a public investment that could enhance the value and feasibility of a development and become a magnet for public gatherings. He said parking was also a source of public investment but parking or any other transportation system investment should serve existing businesses as well as new construction. Mr. Bowerman was concerned about the inflated impression some downtown owners had of the value of their property. He said paying over-market value for a property would trigger expectations that persisted. He felt that real estate investment should be opportunity-driven and cautioned about a jurisdiction inflating values because it was willing to invest in property for social purposes. Mayor Piercy commented that critical mass development could be done incrementally and incremental development could be part of a larger project. She said a developer was a tool to achieve a specific purpose and might not be the ultimate owner of the property. She said there was agreement on the need for critical mass. Ms. Ortiz thanked the panelists and hoped that the discussion clarified some of the issues involved in selecting a developer. Her concern related to what the council would be asking the public to support. Ms. Bettman said she defined critical mass in terms of people and wondered how others defined that term. She agreed with comments that the council should define in a refinement plan what the community and council wanted and then issue an RFP for developers to propose how they could meet those needs. She said there was criticism of the size of public investment in the larger proposal and asked for feedback from panelists on that issue. She also asked for feedback on how to determine how much commercial activity was appropriate and sustainable based on residential density. Mr. Gaydos discouraged discussion of proposal details as those were not yet widely known, but the other issues raised by Ms. Bettman could be addressed. Mr. Bowerman said that it was difficult to define critical mass; it was easier to recognize it when it was achieved. Regarding over-commercialization, he felt it was important to have architectural design and development that provided great opportunity for future adaptability and then allow spaces and activities to dictate the uses. Mr. Diethelm said the amount of commercial use in a nodal development was about 10 percent; downtown was also a regional center and would attract people from throughout the community and would have a higher percentage of commercial uses, although not to the extent of a shopping center. He used the defunct MINUTES—Eugene City Council April 16, 2007 Page 6 Workshop Oregon Research Institute project as an example of development that would have brought many younger workers to the downtown area and perhaps given them an incentive to purchase a home in downtown. He said that providing a subsidy for that project might have been a worthwhile investment in order to achieve residential goals. Mr. Korth said that critical mass involved creating sufficient appeal to provide the best chance of achieving goals. He determined the appropriate level of commercialization by considering factors such as vacancy rates and market trends. Ms. Tate urged flexibility in type and use of space in development projects. Mr. Pryor felt that critical mass was when enough elements were brought together to be self-sustaining and no longer require a subsidy. He said the question was what combination of elements was necessary to achieve critical mass in downtown revitalization. Mr. Prichard remarked that Eugene was the only government, office and financial center outside of Portland and, except for the two blocks in question, there was already significant critical mass, which was a great asset to revitalization efforts. Mr. Poling thanked the panelists for their presentations. Ms. Solomon acknowledged the need for thoughtful discussion, but hoped the City would move forward with downtown redevelopment in a timely manner. Mr. Clark asked about the importance of predictability and political commitment to the achievement of critical mass and how the City would facilitate that. Mr. McLaughlan referred to a large community visioning process conducted in 1997-98 that addressed public policies and investments. He said that 67 percent of respondents were in favor of public investment and incentives were important for things like locating environmentally sensitive businesses in Eugene, building affordable housing and increasing density in development patterns. He asked the council to keep in mind that the community was supportive of its efforts. Ms. Tate recognized the amount of time and energy that councilors gave on behalf of the public. Ms. Bettman thought there had been considerable progress and broad agreement on the appropriateness of subsidies for downtown development. She said the issue was how to go about redevelopment to achieve the best cost benefit for the public. Mr. Zelenka thanked the panelists for helping to better inform the council and educate the public about downtown redevelopment issues. He said his request for a process on downtown development included the panel discussion with people knowledgeable about development. He said other elements of his request were establishing a timeline to assure timely action on options, a financial analysis of the extent and benefit of public and private investments, what type of public investments should be involved and how to educate and involve the public in the process in a meaningful way. Mayor Piercy said the challenge was to determine when it was appropriate to involve the public in the process. She thanked the panelists and councilors for participating in the workshop. She said it would be MINUTES—Eugene City Council April 16, 2007 Page 7 Workshop helpful to see an analysis of the entire downtown that identified what was working well, what could be improved and the extent of any problems. She said the current focus was on a small portion of downtown and the discussion should consider the larger context of downtown. City Manager Taylor said he was working with the mayor and staff to address the other elements of Mr. Zelenka's request. He said the council would have an opportunity on April 25 to focus on a document that described the financial tools that were available for development as well as review the details of proposals. He said information on various timelines issues, such as expiration of options, would also be provided. He said meetings were also scheduled for May 9 and May 14 to discuss process details and make decisions about how to proceed. Ms. Bettman asked if staff would request action or seek direction at the April 25 meeting. City Manager Taylor replied that the council could choose to select a qualified proposal and the timeline information would help inform the council about when actions needed to occur. He had not yet seen proposal details and did not know if he would be making a specific recommendation. Ms. Bettman felt that taking action on April 25 would be premature and not allow for adequate public involvement. City Manager Taylor reiterated that timeline information would help the council determine what actions were required at points in the process. Mayor Piercy adjourned the meeting at 8:10 p.m. Respectfully submitted, Dennis M. Taylor City Manager (Recorded by Lynn Taylor) MINUTES—Eugene City Council April 16, 2007 Page 8 Workshop