HomeMy WebLinkAboutItem B: East Broadway Development Update
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Work Session: East Broadway Development Update
Meeting Date: February 8, 2006 Agenda Item Number: B
Department: Planning and Development Staff Contact: Nan Laurence
www.eugene-or.gov Contact Telephone Number: 682-5340
ISSUE STATEMENT
This work session will provide information on the Whole Foods Development Project. The
council is asked to provide direction to the City Manager to begin negotiation of 1) a land
transaction with the Shedd Institute for the Arts; and 2) a development agreement and other
related legal documents between the City, Broadway High Associates (representing the G
Group) and Gerding/Edlen Developers (GED) specifying the terms of the development and the
City’s participation. This is the first of two work sessions anticipated for this project.
BACKGROUND
The Downtown Plan promotes a vision for a strong, active, distinctive urban center, and
collaborative public/private projects. The proposed Whole Foods Development Project is a
significant step towards implementation of that vision. The proposed project addresses the
City’s commitment to working with private developers and using economic tools such as parking
to leverage desired development. This proposal will contribute to the revitalization of the east
end of downtown and the Courthouse District. The proposal will also add to the character and
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activity along Broadway and 8 Avenue, both identified as Great Streets in the Downtown Plan.
The project will result in a new downtown destination and additional parking in a key location to
stimulate future investment.
The Whole Foods Development Project will occupy the entire block bounded by High and Mill
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Streets, 8 Avenue and Broadway (Attachment A provides a project location diagram.) There are
three main elements of the project: land assembly, development plan, and project costs. These
elements are discussed below. Based on council action, these will become the basis of a
development agreement between the City, GED and Broadway High Associates and a land
transaction between the City and the Shedd Institute for the Arts.
Land Assembly
Currently, the property proposed for this project is in three separate ownerships: The Shedd
Institute for the Arts, the G Group, and the Oregon Central Credit Union. Gerding/Edlen
Developers, working under the direction of the G Group, negotiated a letter of intent with the
credit union to participate in the project. The G Group has proposed that the City engage in a
land transaction to exchange property owned by the City immediately across High Street with the
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Shedd property. After the Shedd property is under City ownership, it will become the general
location for a publicly financed public garage and associated commercial space.
In anticipation of this land transaction, City staff contracted for two separate appraisals of the
City-owned property and the Shedd property, both of which are 25,600 square feet. The first
appraisal determined a value of $38/square foot for the Shedd property and $39/square foot for
the City property. The second appraisal determined a value of $33.50/square foot for both the
Shedd property and the City property.
Development Plan
The G Group is proposing to build a grocery store structure for Whole Foods, a multi-level
parking garage for the City, and ground floor commercial space for Oregon Central Credit Union
(see Attachment B: Conceptual Development Site Plan). Including the land, the value of the
proposed development is approximately $28,000,000. The major components of the project are
described below.
A. Whole Foods Grocery Store
Whole Foods Grocery Store, a natural and organic foods supermarket, will be the major
anchor tenant of this development. The grocery store has been designed to provide a
pedestrian-friendly, inviting streetscape along Broadway, High and Mill Streets. The design
will contribute to the desired high quality urban environment, with a tall first floor, minimum
setbacks, significant proportion of display windows and major entrances at Broadway and
Mill and Broadway and High (see Attachment C: Conceptual Elevation of Whole Foods).
The store will occupy 52,000 square feet, and employ approximately 250 employees. Two
levels of parking will be constructed above the store, providing an estimated 240 spaces for
Whole Foods customers. The G Group has secured a lease with Whole Foods, which is
dependent on the City’s participation in the development project.
Whole Foods is known for its high quality products as well as its commitment to
sustainability and environmental stewardship. It is the largest corporate user of renewable
energy in the United States, specifically through the purchase of wind energy credits. Whole
Foods is listed as #15 on Fortune Magazine’s list of the 100 best companies to work for. As
a downtown and regional destination, Whole Foods has been credited with providing the
catalyst for revitalization of urban areas, including the Pearl District in Portland.
B. Public Parking Garage and Optional Commercial Space
The public parking garage will provide spaces to support the Federal Courthouse and
adjacent uses, including any future City Hall renovation or replacement. The public parking
garage is also intended to encourage further redevelopment of nearby properties in the east
end of downtown. The need for parking in this area is discussed in Attachment D: Parking
Study Summary. Based on the parking study, there is projected to be a deficit of 500 spaces,
after redevelopment of the Whole Foods site and nearby surface lots. The Whole Foods
Development Project would contribute more than 400 spaces.
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There are four options for configuration of the public parking garage, as follows:
Estimated Commercial Estimated
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Parking Space at 8 Cost of
Option Description Spaces and High Garage
1 Smaller Garage 192 No $4,810,000
Smaller Garage with
2 186 Yes $5,180,000
Added Commercial Space
3 Larger Garage 266 No $6,320,000
Larger Garage with Added
4 260 Yes $6,700,000
Commercial Space
Staff recommends Option 4. This option includes a larger garage which would provide
greater efficiencies and more encouragement for future development envisioned in this area
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of downtown. This option also includes commercial space at the corner of 8 Avenue and
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High Street, to support desired pedestrian activity along 8 Avenue, Eugene’s Great Civic
Street.
C. Credit Union
The G Group has secured a letter of intent from the Oregon Central Credit Union to
participate in the development project. The credit union will occupy approximately 5,000
square feet of privately-owned commercial space. This space will be on the ground floor of
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the public parking garage, at the corner of 8 Avenue and Mill Street, and will be in addition
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to any publicly owned commercial space on the northwest corner of the garage at 8 Avenue
and High Street. The credit union will employ an estimated six people. The design of the
credit union will include a drive-through.
Project Costs
The total cost for public participation in this project is estimated to range between $6.1 and $8.1
million, depending on the size and configuration of the garage. This includes the cost of
purchasing the garage and additional costs for the City’s project-related expenses, such as legal
fees, debt service reserves, utilities, project management, and 1% for art. This amount is in
addition to the value of the land upon which the parking garage will be built.
Riverfront Urban Renewal District funds are the primary source of financing for this project.
Based on the final design and configuration of the garage, the total costs will determine the
details of the financing strategy. If the larger garage with ground floor commercial space is
determined to be the preferred option, funding sources in addition to urban renewal funds will be
required. Attachment E presents the estimated costs and the financing strategy for the project.
Due to the possibility of urban renewal expenditures, the Eugene Redevelopment Advisory
Committee (ERAC) reviewed the Whole Foods Development Concept on December 15, 2005,
and January 18, 2006. ERAC members acknowledged the need for a parking structure in this
location, and voted to support the use of urban renewal funds for that purpose. ERAC members
also supported the inclusion of publicly owned commercial space in the northwest corner of the
City’s parking structure.
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Financial and/or Resource Considerations
The Whole Foods Development Project involves significant financial and resource considerations.
The project requires the use of public land and dollars to construct a public garage as a key
component of the full block redevelopment project.
The use of Riverfront Urban Renewal District funds to build parking is permitted, as described in
Section 600A.6 of the Riverfront Urban Renewal Plan:
6. Public Parking and Public Transportation Facilities
The Agency is authorized to participate in funding the acquisition and construction and
enhancement of public parking and public transportation facilities within the renewal
area. The precise location and type of facilities will be decided after further study.
Timing
In order to meet the current timeline of opening the grocery store, credit union and parking
garage in the summer of 2007, City Council direction to the City Manager to begin negotiating
the terms of the development and the land transaction is requested at this meeting. The final
terms of the land transaction, the development agreement and related legal documents, as well as
the financing strategy will be presented to the council for review and approval at the second
work session for this project, scheduled for February 22, 2006.
RELATED CITY POLICIES
This project addresses implementation strategies and policies from the Downtown Plan, Growth
Management Policies, and Goals and Objectives from the Riverfront Urban Renewal District
Plan. This project does not directly address or affect council goals or priorities.
The Downtown Plan policies emphasize downtown Eugene as a strong regional center and a
diverse, dense, economically strong urban center. Relevant Downtown Plan policies include:
Downtown development shall support the urban qualities of density, vitality, livability
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and diversity to create a downtown, urban environment.
Actively pursue public/private development opportunities to achieve the vision for an
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active, vital, growing downtown.
Facilitate dense development in the Courthouse area and other sites between the core of
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downtown and the river.
The following project is listed in the Downtown Plan as an example of a possible action to
address the Implementation Strategies in the plan:
Construct a new parking garage to support the east side of downtown and the new
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Courthouse district.
Relevant Growth Management Policies include the following:
Policy 1 Support the existing Eugene Urban Growth Boundary by taking actions to
increase density and use existing vacant land and under-used land within the
boundary more efficiently.
Policy 2 Encourage in-fill, mixed-use, redevelopment, and higher density development.
Policy 3 Encourage a mix of businesses and residential uses downtown using incentives
and zoning.
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The Goals and Objectives of the Riverfront Urban Renewal District Plan list the following
applicable goal:
4. To stimulate development activity and amenities near the new federal courthouse.
COUNCIL OPTIONS
City Council options include:
1.Direct the City Manager to negotiate a land transaction, development agreement and related
legal documents for the Whole Foods Development Project with public garage development
Option 4;
2.Direct the City Manager to negotiate a land transaction, development agreement and related
legal documents for the Whole Foods Development Project with a different public garage
development option; or
3.Decline to support the project at this time.
CITY MANAGER’S RECOMMENDATION
The City Manager recommends moving forward with negotiations for the land transaction,
development agreement and related legal documents for the Whole Foods Development Project
based on public garage development Option 4.
SUGGESTED MOTIONS
1.Move to direct the City Manager to negotiate a land transaction between property owned by
the City and property owned by the Shedd Institute for the Arts, LLC for the purpose of
participating in the Whole Foods Development Project, and to bring back final terms for
council approval.
2.Move to direct the City Manager to negotiate a development agreement and related legal
documents with Broadway High Associates and Gerding/Edlen Developers for the Whole
Foods Development Project, based on the public garage development Option 4, and to bring
back final terms for council approval.
ATTACHMENTS
A.Project Location Diagram
B.Conceptual Development Site Plan
C.Conceptual Elevation of Whole Foods
D.Parking Study Summary
E.Financing Strategy for Purchase of Garage and Optional Commercial Space
FOR MORE INFORMATION
Staff Contact: Nan Laurence
Telephone: 682-5340
Staff E-Mail: nan.laurence@ci.eugene.or.us
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ATTACHMENT D
Parking Study Summary
Under contract with the City of Eugene, Rich and Associates, Inc. analyzed parking supply and
demand in downtown in the fall of 2001. Based on their report published in May 2002, there is a
projected need for additional parking downtown, particularly in the area of the block proposed
for the Whole Foods Development project. This report is currently being updated. Additional
information will be presented at the council work session on February 8, 2006.
The Rich and Associates study considered downtown in two zones. Zone A encompasses
primarily the northern half of downtown, bordered by 2nd Avenue to the north, Lincoln Street to
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the west, 7 Avenue to the south, and EWEB, the Courthouse area and the potential Whole
Foods block to the east. Zone B includes all of downtown, including property within Zone A.
The report concludes that there is an overall deficit of 1,016 spaces. Many of the blocks in the
immediate vicinity of the site proposed for Whole Foods lack adequate parking, including the
existing Federal Building, the Lane County Courthouse, and the new Wayne Morse Federal
Courthouse.
Based on the analysis completed by Rich and Associates, there is a projected need for additional
parking in downtown in the vicinity of the Whole Foods Block. This need exists prior to the
Whole Foods Development but is exacerbated by the 299 spaces that will be lost as a result of
this development and the resultant activities that increase the demand for parking. For Zone A
only, the report notes that with possible development of the block now being considered for
Whole Foods, the adjacent block (which now includes the Shedd) and possible redevelopment of
nearby surface lots, the deficit in this zone is 500 spaces.
As part of their study, Rich and Associates analyzed the southern half of the block proposed for
Whole Foods as the site for a structured parking facility. Development costs associated with
adding 530 structured parking spaces on this lot were estimated on a per space basis of $16,220
(approximately $18,420 in ’06 dollars, assuming inflation of 4%). Since the existing 299 spaces
on this block would be lost, the net cost for adding additional spaces increases to $23,240
($27,190 in ’06 dollars). These figures assumed a full half block parking structure, and did not
include any land costs.
If the Whole Foods Development Project goes forward, it will contribute over 400 spaces to the
downtown area. Existing uses in the immediately vicinity of the Whole Foods development site
will benefit from additional parking, including the existing Federal Building, City Hall, the Lane
County Courthouse and the Wayne Morse Federal Courthouse. Nearby development oppor-
tunities will also benefit from additional parking, such as Courthouse area properties (including
two City-owned parcels), privately-owned property south of Broadway, and a new or expanded
City Hall.
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ATTACHMENT E
Financing Strategy for Purchase of the Garage and Optional Commercial Space
The financing strategy set out in this attachment is a description of the general approach that the
City and the Urban Renewal Agency could take when paying for the garage project. An addi-
tional optional financing strategy is included at the end of this attachment.
Certain aspects of the financing strategy cannot be finalized at this time. For instance, the pay-
ment to the developer could change up until the time that the development agreement is signed.
Staff is working with the developers and the utilities to determine if there are ways to minimize
the costs for utility upgrades and relocations. The amount of money that the City or the Urban
Renewal Agency could borrow will depend on resources available and market conditions at the
time of the borrowing (more than one year from now). Due to these uncertainties, the strategy
set out in this attachment could change.
Cost of the Garage
Four public garage development options are described in the council materials, along with the
associated payments to the developer for the purchase of the garage, which represents the largest
cost for the project. There are a number of other costs for the project, however. The estimated
costs for the options are set out in the chart below:
Option 2 – Option 4 –
Option 1 – 186 spaces Option 3 – 260 spaces
192 spaces with retail 266 spaces with retail
Payment to Developer $4,810,000 $5,180,000 $6,320,000 $6,700,000
City Project Manager 50,000 55,000 65,000 70,000
City Attorney 75,000 75,000 75,000 75,000
1% for Art 50,000 55,000 65,000 70,000
Environmental Assessment 25,000 25,000 25,000 25,000
Relocation/upgrade of Utilities 570,000 570,000 570,000 570,000
Debt Issuance Costs 75,000 75,000 75,000 75,000
Miscellaneous/Contingency 50,000 50,000 50,000 50,000
Total Project Costs $5,705,000 $6,085,000 $7,245,000 $7,635,000
Debt Service Reserve Fund $400,000 $400,000 $400,000 $400,000
Total Funding Need $6,105,000 $6,485,000 $7,645,000 $8,035,000
Payment to Developer:
This is the largest component of the project cost, representing
payment to the developer for purchasing the garage with between approximately 190 and 270
spaces for public ownership, with optional publicly-owned commercial space. This payment
includes the all costs of completing the garage, such as the cost of site work, design, permitting
and construction.
City Project Manager:
The City should have a staff representative that works with the
developer and their architect and construction team to ensure that the garage will meet City
standards for garage projects, and that the components of the project will be compatible with
other City garage components. This is similar to what the City did when the Pearl Street Garage
was built and subsequently purchased by the City.
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City Attorney:
The City Attorney will work with staff and the developers to draft the
Development Agreement and the Condo Agreement and any other legal documents required for
the project.
1% for Art:
The City must contribute 1% for art on this project.
Environmental Assessment:
For the land swap transaction, the City will have to provide
an environmental assessment of its property.
Upgrade and/or Relocation of Utilities:
The alleys on the development site contain a
storm water line and a steam line. These utilities will need to be either upgraded or relocated in
order to complete the development project. The costs for the utilities will be shared between the
City and the developer. The amount shown in the chart represents the City’s share of the costs.
Debt Issuance Costs:
There are costs to the Urban Renewal Agency for entering into
debt, which could include items such as offering documents, rating agency fees, bond counsel
fees, financial advisor fees, loan fees, and so on.
Miscellaneous/Contingency:
This is a small amount (less than 1% of the City’s total
costs) to allow for potential changes in the project or for City costs that have not yet been
identified. The developer included a separate contingency in the overall project budget.
Debt Service Reserve Fund:
The Urban Renewal Agency’s lender will probably require
funds to be held in reserve to protect bondholders during the time the debt is outstanding. That
amount is normally equal to 10% of the amount of the borrowing, or one year of debt service.
Funding Sources
To the extent possible, staff recommends that the Riverfront Urban Renewal Agency should pay
for as much of the garage as it can afford. That includes both a cash contribution of available
funds at the time of purchase and issuance of urban renewal revenue bonds. The proposed
financing strategies for the options are set out in the chart below.
Option 2 – Option 4 –
Option 1 – 186 spaces Option 3 – 260 spaces
192 spaces with retail 266 spaces with retail
Urban Renewal Contribution
-Urban Renewal Revenue Bonds $3,870,000 $4,000,000 $4,000,000 $4,000,000
-Reprogram of Funds to Purchase Riparian Area 400,000 400,000 400,000 400,000
-Cash Available in FY06 & FY07 1,110,000 1,110,000 1,110,000 1,110,000
Total Urban Renewal Contribution 5,380,000 5,510,000 5,510,000 5,510,000
City Contribution
-Stormwater Funds (for upgrading storm line) 250,000 250,000 250,000 250,000
-Library Debt Service Fund – Debt Service Reserve 475,000 475,000 475,000 475,000
-Facility Reserve 0 250,000 1,410,000 1,800,000
Total City Contribution 725,000 975,000 2,135,000 2,525,000
Totals $6,105,000 $6,485,000 $7,645,000 $8,035,000
Descriptions of the specific funding sources suggested for inclusion in the financing plan are
described below.
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Urban Renewal Revenue Bonds:
The Agency will issue revenue bonds backed by the
future tax increment revenues in the Riverfront District. Existing tax increment revenues are
about $0.5 million per year. The Whole Foods development is estimated to add $0.15 million
per year in new tax increment. It is estimated that the debt service payments on the bonds will
essentially use up all of the available tax increment revenues, after paying for district admin-
istration costs. The bonds will most likely be 15 year bonds, but could go as long as the ending
date of the district in 2024. The lender will probably require that the agency maintain a debt
service reserve fund during the term of the bonds.
Urban Renewal Cash Contribution:
The Riverfront Urban Renewal District has several
places where a cash contribution could be generated for the garage project. In the FY06 budget,
$400,000 was allocated for purchase of the riparian area in connection of a sale of the EWEB
property for a hospital. Because McKenzie-Willamette has chosen an alternate site, the funds
allocated to purchase of the riparian area on the EWEB site could be reprogrammed as part of the
purchase of the parking spaces. In addition, there is estimated to be about $400,000 in
unallocated funds in the FY06 budget, and an additional $350,000 is estimated to be available in
FY07. The total estimated cash contribution from the Riverfront Urban Renewal District is
$1,110,000.
Stormwater Funds:
The City would use approximately $250,000 in available balances
in the Stormwater Fund to pay for a relining of the storm water line that runs through the project
boundaries.
Library Debt Service Fund – Debt Service Reserve:
There is currently about $475,000
in a debt service reserve in the Library Debt Service sub-fund. This is in addition to $2.5 million
that is held in reserve in the Downtown Urban Renewal District’s funds. Payments on the library
obligations total about $2.5 million per year, and the payments will end with the final payment
on 12/1/2009. Because the final payment date is drawing near, and because there is a one-year
reserve in the Urban Renewal Agency funds for this purpose, it would be reasonable for the City
to use these funds to provide for debt issuance costs and a debt service reserve for a different
financing.
Facility Reserve Fund:
The City has been setting aside funds for renovation or re-
placement of City Hall for several years. As a result, the current balance in the Facility Reserve
is a little over $24 million. The City could use some of these funds to pay for a portion of the
garage project. The Urban Renewal Agency would commit to reimbursing the City for this pay-
ment over time, as funds are available in the district.
Optional Financing Strategy
The City received confirmation from the U.S. Department of Housing and Urban Development
(HUD) in late January that it had been awarded a $2 million Brownfield Economic Development
Initiatives (BEDI) grant. This grant must be used in connection with a HUD “Section 108
Loan”, which is a federal loan program backed by Community Development Block Grant
(CDBG) funds. Staff is in the process of determining the costs and requirements associated with
the Section 108 Loan program.
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Staff is exploring the possibility of using the combination of HUD Section 108 Loan and BEDI
grant money for the Whole Foods Development Project as an optional strategy. In order to move
this project forward, however, it will be assumed in the financing strategy and any associated
budget requests that the project will be funded using urban renewal revenue bonds and Facility
Reserve funds. In the event that staff would recommend the use of the optional financing
strategy using the HUD Section 108 Loan and BEDI grant, council approval would be required.
Operating and Maintenance Costs
Although not part of the plan for financing the capital costs, it is important to consider how the
City will pay for the operating and maintenance costs of the new garage. In general, given the
current parking rate structure and the payment to the General Fund, the revenues collected from
the users of parking garages in the City have been sufficient to cover only the operating and
maintenance costs for the garages. Those revenues and costs are accounted for in the parking
enterprise funds. It is anticipated that this will also be the case for the City’s portion of the
garage connected to the Whole Foods development, and there will not be any significant funds
available from parking revenues to pay for the costs of purchasing the garage.
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