TO: Roger L. Stancil, Town Manager
FROM: J.B. Culpepper, Planning Director
Gene Poveromo, Development Manager
SUBJECT: UNC Innovation Center, 110 Municipal Drive, Special Use Permit Application
DATE: October 27, 2008
INTRODUCTION
Tonight the Town Council continues the public hearing from September 17, 2008. Adoption of the attached revised resolution would approve a Special Use Permit to allow a three story 80,745 square foot building and 214 parking spaces on an 8-acre portion of University of North Carolina at Chapel Hill Carolina North campus, north of Estes Drive and west of Martin Luther King Jr. Boulevard. The site is identified as Orange County Parcel Identifier Number 9779-88-6375.
Adoption of Revised Resolution A would approve the application with conditions.
DISCUSSION
We have identified several key issues related to this development. Each is discussed below.
In addition, the Greenways Commission met on September 24, 2008 and asked that comments regarding greenway plans for the future Carolina North proposal be forwarded to the Town Council during consideration of the Innovation Center application. We have attached the Commission’s comments and discuss them below.
1. Long Range Transit Master Plan Relative to the Innovation Center and Future Development on Surrounding Property: Council members asked for an update on the Town’s Long Range Transit Master Plan as it relates to the Innovation Center.
Comment: We are completing the final phases of the Long Range Transit Plan and anticipate a final report in December, 2008. The final Report will include an implementation plan and a financial plan. With its submission in December, Chapel Hill, Carrboro and the University will have an opportunity to review and adopt the final Plan. We have reviewed the Innovation Center with regard to consistency with both the Carolina North Master Plan and the preliminary recommendations of the Transit Study. Based on the information provided by the applicant to date, the Innovation Center proposal is consistent with the preliminary recommendations and the anticipated implementation of the Plan.
2. Pedestrian Refuge Island Cost: A Council member requested confirmation that the proposed payment amount of $50,000 for the construction cost associated with a proposed refuge island in Martin Luther King Jr. Boulevard between Estes Drive and Piney Mountain Road was sufficient.
Comment: We have reviewed the estimates for construction costs and believe the $50,000 payment amount is sufficient.
3. Provision of Bike Lanes or Right-of-Way on the East Side of Martin Luther King Jr. Boulevard: A Council member asked about the Bicycle and Pedestrian Advisory Board’s recommendation that bike lanes or right-of-way for bike lanes be provided on the east side of Martin Luther King Jr. Boulevard. There was some discussion of rational nexus for off-site improvements. The staff agreed to meet with the applicant to determine whether the University would voluntarily provide these improvements.
Comment: Typically we recommend improvements on-site and immediately adjacent, such as along a road frontage contiguous with the proposed development, and with the value of improvements roughly proportional to the traffic mitigation deemed necessary to offset projected traffic increases attributable to the proposed development. The rational nexus test involves the factors of need, attribution, and rough proportionality. (For a statement on this standard, please see the attached excerpt from Land Use Law in North Carolina, 2006, UNC School of Government, David P. Owens, pp. 40-41.)
Sometimes, off-site improvements are also recommended. If the applicant agrees to such off-site improvements, it is not necessary for there to be an evaluation as to whether the improvements are warranted based on the standards of rational nexus and rough proportionality. In the case of the Innovation Center application, the applicant agreed to make a payment to the Town for improvements to nearby bus stop(s) which already exist in specific locations near the proposed development site.
Regarding the Bicycle and Pedestrian Advisory Board’s recommendation for bike lanes or right-of-way on the east side of Martin Luther King Jr. Boulevard, the applicant has not agreed to provide bike lanes or right-of-way on the east side of the boulevard. Thus, the rational nexus test is applicable. We do not believe the tests for need, attribution, and rough proportionality could be met. Regarding proportionality and attribution, we note that the current road cross-section is not wide enough to accommodate restriping to include a bike lane, and so right-of-way would need to be acquired and the cross-section of the boulevard would need to be widened. UNC does not own the land on the east side of the boulevard. Staff believes that the cost of right-of-way acquisition and bike lane construction is not proportionate to the increase of bicycle traffic attributable to the operation of this 80,745 square foot office building and that the current bicycle traffic in this corridor, and any increase generated by this project, has a sufficient off-road bicycle facility in place, as noted above.
For these reasons, in Revised Resolution A for the Innovation Center, we have not included a provision for bike lanes, or right-of-way for same, on the east side of the boulevard. We note that the Town recently provided a “sharrow” (share-arrow) in the street right-of-way on the east side of the boulevard.
We believe that future development of university-owned lands surrounding the Innovation Center site may increase bicycle traffic to such an extent that the advisory board’s recommendation could be revisited at a later date.
4. Context of Staff Recommendation on Bike Lanes/Right-of-Way on East Side of Martin Luther King Jr. Boulevard: A Council member asked if the staff recommendation was in part dependent on whether the application was for a stand-alone Special Use Permit versus within a larger context such as a Master Land Use Plan or a Special Use Permit application subsequent to a Master Land Use Plan approval.
Comment: Yes, as noted above. (Please see the answer to Key Issue #3 above.)
5. North-South Corridor on Surrounding Property: A Council member inquired as to the utility of a north-south corridor shown on Carolina North plans, extending from a location west of the Innovation Center site northward to Homestead Road.
Comment: In an email response the applicant stated the following:
“The north-south road is not included in the Innovation Center application. The proposed road is part of the 50-year Carolina North Plan. It is not anticipated for use in the early years for transit or transportation, but may eventually accommodate some of the traffic between Carolina North, park and ride destinations, and other locations in and around Chapel Hill and Carrboro.”
6. Proposed Transit Station: A Council member inquired about plans for locating a future transit station and whether it would be near the Innovation Center.
Comment: In an email response, the applicant stated the following:
“No mass transit station is proposed with the Innovation Center, nor is there a transit station proposed at this location in the 50-year Carolina North Plan. The context plan for Carolina North includes multiple opportunities for a transit station on the campus.”
We note that through the ongoing development of the Chapel Hill Long Range Transit Plan, the Town and the University continue to discuss the appropriate locations for transit centers that will serve the Carolina North project. We anticipate these future transit centers could include locations internal to the Carolina North development and along Martin Luther King Jr. Boulevard.
7. Porous Pavement: A Council member asked about the use of porous pavement as part of an overall stormwater management strategy.
Comment: In an email response the applicant stated the following:
“Porous paving is included in the Special Use Permit application on Sheet SUP-4.”
Revised Resolution A includes a stipulation requiring the applicant to include porous pavement as part of this proposed development.
8. Stormwater Utility Fees: A Council member asked for staff analysis of the possible benefits of the University paying into the Town’s stormwater utility program. He also asked the University to consider voluntarily participating.
Comment: This is a question which has been raised in previous discussions unrelated to this project. Some of the points that Town staff has raised about this issue are listed below and on the attached document (Attachment #2).
· The Town’s stormwater utility program funding pays for a variety of services currently enjoyed by UNC, such as development plan review; technical assistance for compliance with applicable local, state, and federal regulations; public right-of-way stormwater drainage system improvements and maintenance; National Flood Insurance Program administration and oversight; hazard mitigation planning; floodplain management; storm sewer inventory; data management, mapping, and maintenance; regional watershed (stakeholder) activity coordination; and capital improvements program. These programs and activities serve UNC, its employees, families and students, as well as the general citizenry.
· The Town and UNC stormwater systems are connected and affect each other.
· UNC’s stormwater management efforts are focused primarily on new construction occurring on the main campus and hospital areas, not on the individual properties owned by the university. These initiatives do not relieve the burden on the Town’s stormwater system from existing university development that was constructed with minimal or no stormwater controls for volume and quality.
· If UNC paid into the Town’s stormwater management system, a mechanism could be established by which UNC would be credited for measures taken above and beyond requirements.
Regarding the University volunteering to pay into the stormwater utility, in an email response, the applicant stated the following:
“The applicant states that the project has been designed to handle stormwater as required by town regulations. The University will maintain the stormwater management facilities consistent with its permit for University property. It is the University’s position that any discussion whether or not the university should participate in the town’s stormwater utility should occur in the context of the whole system - not in connection with just one project.”
We believe that discussions on the University’s participation in the Town’s Stormwater Management program should be held in the context of the anticipated Development Agreement between the Town and UNC regarding development of the properties surrounding this site.
9. Stipulations Regarding Property Taxation: A Council member requested a stipulation be added to Resolution A calling for the future building owner to pay property tax. Another Council member asked whether the taxation details would be included in the Special Use Permit such that taxes could continue to be assessed even when building use changes in the future.
Comment: The following was excerpted from the applicant’s Statement of Justification:
“The Innovation Center building will be owned by Alexandria Real Estate Equities Inc. and will be a taxable property contributing directly to the local economy. In addition, the goal of the Innovation Center will be to streamline the development and to accelerate the commercialization of novel technologies by companies that can then become independent entities. The Center will have a management team, along with facilities, amenities, and technical and business development resources needed. The Center will be a place to successfully identify, evaluate, launch, capitalize and manage emerging companies across many different areas of technology represented within the University’s research programs. In addition to research and office space for emerging companies, it is anticipated that the Innovation Center will also provide office space for the University.” [Applicant’s Statement]
We understand from the applicant that the State of North Carolina will ground lease the 8-acre Innovation Center property to The University of North Carolina at Chapel Hill Foundation, Inc., a 501(c)(3) NC non-profit corporation, for 40 years with a 10 year renewal option. The Foundation would then sublease the land to a for-profit entity (in this case, Alexandria Real Estate Equities, Inc.) for the 40-50 year period. This entity would own and operate the building for 40-50 years, and would lease space within the building to a variety of tenants, both for-profit and University offices. At the end of 40-50 years, the ground lease and subleases would terminate and the building could once again become the property of the State/University.
During the 40-50 year period of private ownership, improvements to the property improvements (i.e., building, parking, landscaping) would be subject to ad valorem taxes, and the Town would receive revenues related to its tax rate.
We recommend the following stipulation, which has been included in Revised Resolution A, to address this issue:
Stipulation #3: That so long as the Innovation Center building is privately owned, the building shall be subject to ad valorem taxation per North Carolina General Statutes. In addition, in the event the building reverts to public ownership and subsequently is transferred back to private ownership, it shall again be subject to ad valorem taxation for any periods in which it is held in private ownership.
10. Property Tax Evaluation and Assessment: A Council member asked the following taxation questions relating to the Innovation Center, and that clarification on the answers be added to Resolution A.
Comment: The land associated with the proposed Innovation Center is not taxable, but the building would likely be taxable.
The land is owned by the University of North Carolina, a unit of government. According to the Orange County Tax Assessor’s Office, the land is therefore eligible for an automatic exemption for the land per North Carolina General Statute 105-278.1(c)(2)(b). There is no application required and there is no "use" test for the exemption.
Under the University’s above described ownership structure, the building is intended to be owned by the sub-lessee of the land, which would be a for-profit entity. While under private ownership by a for-profit entity, the building would be taxable to that entity. If the Foundation were to become the owner and continued to use the building as a business incubator, the building would be taxable under current tax law. If and when the ownership transfers to back to the University (not the Foundation), the building will be tax-exempt. The Assessor further notes that though personal property owned by the taxable building owner would be taxable, inventory would not be taxable.
The Tax Assessor also states it would be possible that the building could be exempt if owned by the Foundation and used for an exempt purpose. However, this is not the ownership structure scenario described by the applicant.
We believe taxation issues can be part of the Development Agreement discussions, as the University and the Town contemplate development of surrounding properties.
We note that current taxation law may change in the future to allow business incubators to apply for tax exemptions. We have included a stipulation in Revised Resolution A to clarify the proposed ownership structure for the Innovation Center, with a clause stating that business incubators would not apply for tax exemption if in the future this becomes an option:
Stipulation #4: That so long as the building is privately owned by a for-profit entity, and that entity is, under future taxation law, considered to be eligible to apply for tax-exempt status, the entity shall not apply for tax-exempt status during this 40-50 year period. The University shall inform the Town Manager annually as to who owns the building and whether the owner is tax-exempt.
11. Taxation Under Three Scenarios: Another Council member asked under what circumstances UNC-related businesses could be taxed. He posed an example under which a research entity was located on UNC’s main campus, then moved to the Innovation Center, then moved out of county.
Comment: Please see the answer to Key Issues #9 and #10 for background on tax evaluation and assessment. According to the Orange County Tax Assessor’s explanation of taxation scenarios, we believe that the research entity, if non-profit and operating on UNC-owned land, would be tax exempt. If the research entity then grew into a for-profit company operating in the Innovation Center as a tenant, under the University-described ownership structure for that building, the owner of the building (sublessee of the land) would continue to be taxed, with revenues accruing to the Orange County and Chapel Hill. When the company moved out of the county, another tenant could move into the Innovation Center. Since the taxation is based on the building ownership, not the tenants, there would be no change in taxation between two tenants.
12. Process for Future Modification of the Innovation Center: A Council member asked if the Special Use Permit for the Innovation Center could be written in such a way that future changes associated with the proposed Carolina North development did not require approval of a Special Use Permit Modification.
Comment: The Land Use Management Ordinance allows for minor changes to a Special Use Permit with Town Manager approval. Significant changes would require Town Council approval of a Special Use Permit Modification.
We believe that a Master Land Use Plan and/or Development Agreement between the Town and the University, either of which could include the Innovation Center site, could be written such that specific stipulations could be applied to the Innovation Center, and the Special Use Permit for the Innovation Center could be abandoned.
13. Energy Efficiency: A Council member suggested requiring The American Institute of Architects (AIA) 2030 Challenge as a standard to reduce energy consumption by 50% or to require 20% below American Society of Heating, Refrigeration, and Air Conditioning Engineers (ASHRAE) 90.1 2004, whichever is more stringent.
Comment: In an email response, the applicant states:
“The building is being designed to LEED Silver standards for Core and Shell.”
We note that on April 23, 2007, the Town Council passed a resolution requiring the review and approval of Energy Management Plans with rezoning applications. Though the Innovation Center does not involve a rezoning, the applicant has agreed to provide an Energy Management Plan and to incorporate a 20% more energy efficient feature into the Plan relative to ASHRAE 90.1 2004 as amended or in affect at the time of building permit issuance. The applicant’s Statement of Justification includes statement of intent to apply for Leadership in Energy and Environmental Design (LEED) Silver Core and Shell Certification to reduce energy use. We will not know the extent of energy reductions relative to code until the applicant provides more building design detail, which we anticipate at the Final Plans stage.
We have included stipulations in Resolution A which provide for ways the applicant could reduce energy consumption. Please see Stipulation # 33 which clarifies the University’s intent to apply for LEED Silver standards, and Stipulation #34 which spells out some of the tools (e.g., 20% below ASHRAE 90.1 2004 as explained through an Energy Management Plan) by which the University might achieve the energy-related credits necessary to qualify for LEED Silver certification for Core and Shell.
Regarding the comparison between ASHRAE standards and the standards for the AIA 2030 Challenge, the AIA has determined that the ASHRAE code equivalent to achieve the AIA 2030 Challenge for commercial buildings demands a performance of 30% below ASHRAE 90.1 2004, or 25% below ASHRAE 90.1 2007.
14. Building Elevation: A Council member asked for a graphic representation of the building elevation as viewed from the south, looking northward along Martin Luther King Jr. Boulevard.
Comment: The requested image is attached.
15. Greenway Commission Recommendation: On September 24, 2008 the Greenway Commission stated its desire to continue working on a Greenways Master Plan for the future Carolina North project on the university-owned land surrounding the Innovation Center. Absent completion of such plan, the Commission felt that making a greenway-related recommendation for the Innovation Center site would be premature. The Commission further requested that a Greenways Master Plan be included as part of the overall Master Land Use Plan for the future Carolina North.
Comment: We believe this comment is applicable to future development on lands surrounding the Innovation Center.
PROPOSED MODIFICATION OF REGULATIONS
Landscape Buffer: Table 5.6.6.-1 of the Land Use Management Ordinance specifies that a 30-foot Type D landscape bufferyard is required along the Martin Luther King Jr. Boulevard frontage, the eastern boundary of this site.
As part of the Martin Luther King Jr. Boulevard streetscape, the applicant proposes landscaping between the road and the building which may not meet the opacity standard for a Type “D” 30-foot Landscape Buffer, whether standard or alternative. Therefore the applicant is requesting a modification to the regulations, LUMO subsections 5.6.2 and 5.6.6., to allow for a different landscaping scheme.
A preliminary streetscape concept under consideration by the applicant includes bike lane and curb and gutter along the western side of Martin Luther King Jr. Boulevard, a landscaped strip (lawn and ornamental trees), a sidewalk, a low Chatham stone wall reminiscent of the stone walls on the perimeter of the older parts of the main UNC campus, and additional lawn and shade trees between the sidewalk/stone wall and the building. The applicant has stated the streetscape design is in the conceptual stage, and the design has not been finalized. The applicant’s justification for such a modification is that the opacity standard required for a Type “D” buffer would be at odds with the applicant’s intent to provide a transit-friendly streetscape.
Comment: The Council has the ability to modify the regulations, according to Section 4.5.6 of the Land Use Management Ordinance. The Council could modify the regulations if it makes a finding in this particular case that public purposes are satisfied to an equivalent or greater degree. We believe that with respect to the applicant’s request to modify the landscape buffer regulations, the Council could make a finding that public purposes are satisfied to an equivalent or greater degree because the applicant is proposing a landscape theme that is pedestrian, bicycle, and transit-friendly, attempting to connect the building to proposed sidewalks, bikeways, and transit stops. Revised Resolution A includes the requested modifications to the regulations.
PROCESS
We anticipate that further evidence may be presented for the Council’s consideration as part of the continued public hearing process.
The Land Use Management Ordinance requires the Town Manager to conduct an evaluation of this Special Use Permit application, to present a report to the Planning Board, and to present a report and recommendation to the Town Council. We have reviewed the application and evaluated it against Town standards; we have presented a report to the Planning Board; and tonight we submit our report and recommendation to the Council.
The standard for review and approval of a Special Use Permit application involves consideration of four findings (description of the findings follows below). Additional evidence will be presented tonight. If, after consideration of the evidence, the Council decides that it can make each of the four findings, the Land Use Management Ordinance directs that the Special Use Permit shall then be approved. If the Council decides that the evidence does not support making one or more of the findings, then the application cannot be approved and, accordingly, should be denied by the Council.
EVALUATION OF THE APPLICATION
Tonight, based on the evidence in the record thus far, we provide the following evaluation of this application based on the four findings of fact that the Council must consider for granting a Special Use Permit. We believe the evidence in the record to date can be summarized as follows:
Finding #1: That the use or development is located, designed, and proposed to be operated so as to maintain or promote the public health, safety, and general welfare;
Evidence in support: Evidence in support of this finding includes the following points from the applicant’s Statement of Justification:
· “…this 85,000 square foot building is estimated to generate fewer vehicle trips than previously generated at the site by the Town of Chapel Hill municipal yard and transit operations.” [Applicant’s Statement]
· “The Innovation Center improvements are designed to reduce the amount of impervious surface already existing on the site. Furthermore, the plans include the reestablishment of natural systems to handle stormwater and site drainage.” [Applicant’s Statement]
Evidence in opposition: We have not identified any evidence offered in opposition to Finding #1.
Finding #2: That the use or development would comply with all required regulations and standards of the Land Use Management Ordinance;
Evidence in support: Evidence in support of this finding includes the following points from the applicant’s Statement of Justification:
· “All applicable requirements for driveway access, setbacks, building heights, and other zoning regulations will be met in development of the site, with the exception of landscape buffer requirements.” [Applicant’s Statement]
Evidence in opposition: We have not identified any evidence offered in opposition to Finding #2.
Finding #3: That the use or development is located, designed, and proposed to be operated so as to maintain or enhance the value of contiguous property, or that the use or development is a public necessity;
Evidence in support: Evidence in support of this finding includes the following points from the applicant’s Statement of Justification:
· “The site of the Innovation Center was formerly occupied by the Town of Chapel Hill’s municipal operations yard and transit operations…The proposed Innovation Center is scaled in keeping with the surrounding apartment complexes and other non-residential development along the entire length of Martin Luther King Jr. Boulevard and it is well separated from the nearby Glen Heights residential area by natural areas thus reducing potential conflicts between uses.” [Applicant’s Statement]
· “The building site accommodates current and future transit use. Sidewalks and crosswalks are included in the design to facilitate the use of current transit routes by occupants and guests of the Innovation Center and surrounding neighborhoods. The setback along Martin Luther King Jr. Boulevard will also allow for future transit corridor development, when appropriate.” [Applicant’s Statement]
· “The surrounding property is owned by the State of North Carolina/UNC. The new building on this site is designed to complement nearby building s and natural areas through the use of material, color and scale. Furthermore, the new building and associated site improvements will improve the appearance and functioning of the former municipal yard. It is not expected that the Innovation center (will) have a negative effect on the value of surrounding properties. [Applicant’s Statement]
Evidence in opposition: We have not identified any evidence offered in opposition to Finding #3.
Finding #4: That the use or development conforms to the general plans for the physical development of the Town as embodied in the Land Use Management Ordinance and in the Comprehensive Plan.
Evidence in support: Evidence in support of this finding includes the following points from the applicant’s Statement of Justification:
· “The Innovation Center is located in an OI-2 zone and is permitted with a Special Use Permit. The office building is, therefore, in conformance with the general plans for the physical development of the Town and it has been designed in conformance with the current zoning district. The proposed improvements improve the character of the site and are in keeping with the goals of the Comprehensive Plan. The site is identified for institutional and university use in the Land Use Plan of the Town of Chapel Hill’s Comprehensive Plan. Furthermore, it is one of the selected sites of Martin Luther King Jr. Boulevard identified as a development opportunity in the goals and objectives of the Town’s Comprehensive Plan (section 8.38A-1)” [Applicant’s Statement]
· “The Comprehensive Plan identifies this site in several sections as an area where mission fulfillment will be accompanied by growth of the University (2.2 Major Themes), where the Town and the University will cooperatively plan for this growth (2.2,3-A,4.1) and where the Town and UNC will work to “identify opportunities for private entrepreneurial activity related to University research’(6C-1). The Innovation Center is the first effort in fulfilling these goals.” [Applicant’s Statement]
· “The Innovation Center is not located in the Resource Conservation District. As a part of the University’s ongoing commitment to alternative transportation, pedestrian, bike and transit connections will be included with this project. The use is in conformance with the land use plan, as described above, and is located within the urban services area.” [Applicant’s Statement]
Evidence in opposition: We have not identified any evidence offered in opposition to Finding #4.
We anticipate that further evidence may be presented for the Council’s consideration as part of the continued public hearing process. Please see the applicant’s Statement of Justification for additional evidence in support of the four findings.
SUMMARY
We have attached a resolution that includes standard conditions of approval as well as special conditions that we recommend for this application. With these conditions, we believe that, with the requested modifications to the regulations, the Council could make the four required findings necessary to approve the application. Our recommendation, Resolution A, incorporates input from all Town departments involved in review of the application.
RECOMMENDATIONS
Revised Staff Recommendation: We recommend that the Council approve the Special Use Permit application with the adoption of Revised Resolution A, which includes the following two tax-related stipulations and a stipulation regarding energy efficiency following the September 17, 2008 public hearing:
· Add a stipulation clarifying that the property improvements shall be subject to ad valorem taxation: That so long as the Innovation Center building is privately owned, the building shall be subject to ad valorem taxation per North Carolina General Statutes. In addition, in the event the building reverts to public ownership and subsequently is transferred back to private ownership, it shall again be subject to ad valorem taxation for any periods in which it is held in private ownership.
· Add a stipulation prohibiting application for tax exempt status: That as long as the building is privately owned by a for-profit entity, and that entity is, under future taxation law, considered to be eligible to apply for tax-exempt status, the entity shall not apply for tax-exempt status during this 40-50 year period. The University shall inform the Town Manager annually as to who owns the building and whether the owner is tax exempt.
· Add a stipulation specifying steps to be taken in order to achieve LEED certification.
See Stipulation #34.
· Clarification that porous pavement will be used. See Stipulation #25.
Greenways Commission Recommendation: The Greenways Commission met on September 24, and voted 5-0 to recommend sending the following comments to the Town Council:
· The Greenway Commission stated its desire to continue working on a Greenways Master Plan for the future Carolina North project on the university-owned land surrounding the Innovation Center. Absent completion of such plan, the Commission felt that making a greenway-related recommendation for the Innovation Center site would be premature.
· The Commission further requested that a Greenways Master Plan be included as part of the overall Master Land Use Plan for the future Carolina North.
No stipulation for approval of this development was requested. Please see the attached Summary of Greenways Commission Action.
Resolution B would deny the application.
A matrix comparing the differences between staff and advisory board recommendations is included at the end of this memorandum.
ATTACHMENTS