AGENDA #7
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Summary of Key Issues: Employer/Employee Housing Proposal
DATE: July 2, 2001
Attached is a Planning Staff Report reviewing the Employer/Employee Housing proposal as presented by UniDev, L.L.C., to the Town Council on April 30, 2001. At that time, the Council asked for a review of key policy issues raised during the work session.
The development proposal as presented by the consultant contains the following objectives:
· Work with the University and the UNC Healthcare System to produce housing for employees.
· Promote development in the West Rosemary Street area, including condominiums and townhouses, offices, retail development and parking.
· Provide Class A office space, enabling the University to move out of 440 West Franklin Street.
We highlight below our key preliminary conclusions after review of the materials and consideration of related issues.
· The Master Development Plan could include:
o The appropriate mix of uses (residential, office, retail) for specific properties;
o The amount of development intensity desirable at key locations;
o The amount of public and private parking at key locations;
o The inclusion of public spaces (and/or public art);
o Visualization of the proposal’s scale and relationship to existing development and to the streetscape;
o Provision of pedestrian connections (east/west and north/south); and
o Analysis of neighborhood impacts.
We recommend that the Council adopt the attached resolution scheduling a work session on this subject in late August or early September.
A RESOLUTION SCHEDULING A WORK SESSION TO REVIEW PROPOSED EMPLOYER-EMPLOYEE HOUSING DEVELOPMENT (2001-07-02/R-11)
WHEREAS, the Town Council first considered an Employer/Employee Housing concept in 1999 as a means to implement the Downtown Small Area Plan vision for West Rosemary Street; and
WHEREAS, the Town, University of North Carolina and UNC Healthcare System have funded a study on the concept; and
WHEREAS, the consultant has presented the parties a proposal for developing housing, offices and retail on downtown sites, including Town-owned properties; and
WHEREAS, the proposal relates to many Comprehensive Plan and Downtown Small Area Plan issues, such as parking, transit, land use, neighborhood impacts, historic preservation, public amenities, and urban design;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council agrees to schedule in late August or September a work session, the specific date, time and place to be determined, to consider the Town-University-UNC Healthcare System Employer/Employee Housing development proposal and related matters.
This the 2nd day of July, 2001.
PLANNING STAFF REPORT
SUBJECT: Policy Issues Report: Review of Employer/Employee Housing Proposal
DATE: July 2, 2001
This report provides the Council with a review of key policy issues concerning the Employer/Employee Housing proposal presented to the Council on April 30, 2001. The report is organized into the following sections:
· Introduction
· Comprehensive Plan Policy Basis
· Review of Housing Issues
· Review of Office/Retail Issues
· Review of Concept and Policy Options
· Assessment of Risks and Benefits
· Next Steps
The analysis of policy issues is drawn from questions and comments made by Council members during the April 30, 2001 work session.
INTRODUCTION
The Town Council first considered this idea in 1999 as a way to begin implementing the new Downtown Small Area Plan vision for West Rosemary Street. The vision, then in draft form, included goals to foster new residential development on West Rosemary Street, to encourage more office and retail on West Rosemary Street, to provide more housing downtown, and to further Streetscape objectives. A key idea was the participation of the University in such efforts.
Subsequently, the Town, the University of North Carolina, and UNC Healthcare System agreed in 2000 to fund an initial $100,000 study conducted by Myron Curzan of UniDev, L.L.C., along with Julian J. Studley, Inc. On July 11, 2000, UniDev presented the results of its preliminary findings to the Council in a work session. At that time, the consultant presented four conceptual scenarios and concluded that housing with associated above grade structured parking and separate retail, with office space and below grade parking appeared to be the best scenario. In addition, the consultant presented information that surveys of Town, University and Healthcare System employees indicated a demand for the project.
In the fall of 2000, the University and the Healthcare System raised a concern that the demand analysis was not conclusive for the University and Healthcare System employees surveyed. UniDev then conducted additional market analyses and focus groups through the spring of 2001. On April 30, 2001, UniDev presented the results of the studies and its conclusions to the Town Council in a work session. (Please refer to Attachment 1 for a summary of the proposal prepared by UniDev.) The materials were then forwarded to the Town Manager for an evaluation of issues. This report addresses this request.
The development proposal as presented by the consultant contains the following objectives:
· Work with the University and the UNC Healthcare System to produce housing for employees.
· Promote development in the West Rosemary Street area, including condominiums and townhouses, offices, retail and parking.
· Provide Class A office space, enabling the University to move out of 440 West Franklin Street.
On April 30, the consultant presented additional information on survey and focus group work that indicated there is a significant demand for housing. The conclusion was that about 20% of employees of each of the three institutions would consider purchasing a moderately sized and priced new housing unit in downtown Chapel Hill in the next five years. The consultant also concluded that the market for office space in downtown is relatively healthy, although for Class A office space, the major tenant would likely need to be the University. Retail demand was also considered healthy, but needed facilities like a grocery store to attract residents to downtown.
The consultant then recommended beginning implementation of the Downtown Small Area Plan by undertaking a phased physical development plan with the participation of the Town, University and the Healthcare System. The phases (please see Attachment 2 for map of sites discussed in the proposal) would include:
· Phase I: Using Town Parking Lot #5 (Rosemary and Church Streets), construct office, retail and structured parking (see Attachment 3).
· Phase II: Using 440 West Franklin, provide housing units, possibly retail, and parking; or provide office, retail, housing, and parking (see Attachment 4).
· Phase III: Using Town Parking Lot #2 (Rosemary and Columbia Streets), construct Class A office space, with retail on the ground floor, and parking to support the retail and office uses (see Attachment 5).
· Phase IV: Finding additional sites, build more affordable housing downtown.
As presented, the phasing plan would allow the University staff currently occupying 440 West Franklin to relocate to new office space on Lot #5, freeing up the 440 site for the second phase. The third phase would be oriented to private office and retail tenants.
This section provides a summary review of the 2000 Comprehensive Plan and the 2000 Downtown Small Area Plan. Also included is a review of the 1997 Parking Lot #5 Charette as requested by the Council. Please see Attachment 6 for a detailed review.
2000 Comprehensive Plan
The 2000 Chapel Hill Comprehensive Plan provides policy guidance for the Town to address many of the potential issues related to the development of employee housing and office and retail space in downtown. Table 1, below, summarizes key Comprehensive Plan issues as they relate to the proposal.
The concept of a joint Town-University employee housing development would accomplish several strategies supported by the Comprehensive Plan, including fostering a Town-Gown relationship, developing affordable housing for a broader income range, developing under-utilized Downtown properties, and potentially reducing traffic impacts by locating employees close to work. Other key Comprehensive Plan issues include the impact on adjacent neighborhoods, the supply of parking, and the provision of public spaces and public art.
|
POLICY/STRATEGY |
WHAT IS PROPOSED |
KEY ISSUES/RELATED IMPACTS |
|
Promote affordable housing (Strategy 7A) |
Construct condominiums sold to Town, UNC, and Hospital employees at below market prices with caps on future appreciation |
· Complies with Comprehensive Plan strategy to work with housing providers to “aggressively develop” affordable housing · Limited to Town, UNC and Hospital employees |
|
Cooperative planning with University on off-campus employee housing (4B-2) |
Establish a Town/UNC/ Healthcare System partnership for off-campus employee housing |
· Plan: pursue a joint employee housing development on West Rosemary St. · Plan states that as a “Measure of Progress” construction is to initiated by 12/31/2001 |
|
Neighborhood protection (3A) |
Development of 440 North Lot adjacent to Northside neighborhood |
· Development of 440 North should account for impacts on Northside, a Residential Conservation Area on Land Use Plan |
|
Multi-modal street and highway system (10A) |
Development to include parking spaces, including structured parking |
· How much parking should be provided, where and what type? · Transit, bicycling issues |
|
Implement “percent for art” program for capital improvement projects (3D-1) |
No mention of art component (not part of the charge to the consultant) |
· Should Town pursue inclusion of public art in development? Is so, where? |
|
Development of “opportunity areas” (8A-1) |
· Would implement Plan’s strategy to develop higher density housing (up to 15 units per acre) in W. Rosemary St. “opportunity area” |
2000 Downtown Small Area Plan
The Downtown Chapel Hill Small Area Plan provides a detailed policy guide for the Downtown area, including specific recommendations for the future use of the properties under consideration in the development proposal. Table 2 on Page 5 summarizes key issues related to the Small Area Plan. An analysis of Phases I, II and III as they relate to the Downtown Small Area Plan is included as Attachment 6.
We believe the redevelopment of the parking lots identified in the proposal clearly supports one of the core goals of the Downtown Small Area Plan: the preservation and enhancement of the economic vitality of the Downtown area. The Plan states that one way to promote economic vitality is through the redevelopment and development of Downtown properties, “designed in accordance” with the Downtown Plan.
Several of the major parcels being considered in the Town-University joint development proposal – the 440 North and South parking lots, Lot #5 and Lot #2 – are identified in the Small Area Plan as “opportunity areas” for new initiatives.
The possible use of the 440 West Franklin Street office building – whether the building is renovated or torn down – is one of the major unresolved questions of the proposal. The Small Area Plan is clear on this point – the preservation of 440 West Franklin Street is the preferred option. The Plan has designated 440 West Franklin in one of several Preservation Areas—areas where preservation of existing structures is strongly encouraged in the Plan. However, the condition of the building and the environmental mitigation requirements associated with renovation of it may lead to the conclusion that demolition is the more efficient means of redeveloping the site.
Other elements of the Small Area Plan that should be given consideration in moving forward with a Town-University development include the following:
Mix of uses. The Plan encourages developments that provide office, retail and residential space. As a whole, the development proposal would combine office, retail and residential units, though the degree of integration would vary from site to site. Lot #5 would be predominantly office, while the 440 West Franklin Street area would be primarily residential.
Open spaces. The Plan states that open spaces should be incorporated in future development, “providing some relief to building frontages with judicious placement of small open spaces” such as paved courtyards or “green” open space.
Parking. The Plan cites Lots 5 and 2, both of which provide public parking, as potential locations for future parking decks, which could be incorporated in a future development.
Transitions. The Plan states that locating office/residential development on the north side of West Rosemary Street would help achieve a “smooth, orderly transition” from the intensive Downtown commercial uses to the adjacent Northside neighborhood.
Transit Transfer Center. Lot #2 is mentioned as a possible location of a transit transfer station providing passengers an area for transferring between buses. The center would include sufficient spaces for transit vehicles and for layover and waiting passengers.
|
POLICY/STRATEGY |
WHAT IS PROPOSED |
KEY ISSUES/RELATED IMPACTS |
|
Development Opportunity Areas (Lot 5, Lot 2, 440 West Franklin Street, 440 North and South Lots) |
·Office space leased by UNC ·Housing ·Retail ·Parking |
· 1997 Design Workshop shows options for configuring development on Lot 5 · McDade House not an issue for Lot 5 · Would meet Small Area Plan’s Economic Vitality and Town Character/Land Use goals · Lot 2 identified as potential location of transit transfer station |
|
Inclusion of 440 West Franklin Street building in a Preservation Area |
· Either raze and rebuild or renovate/expand the Williamsburg-style building |
· Expansion and renovation is the preferred option according to principles of the Small Area Plan · Plan states that development in a Preservation Area “should be undertaken only with the idea of protecting the existing buildings, and should be harmonious with and integrated into the existing fabric.” |
|
Downtown Design Guidelines |
·Design-related issues unclear as no building elevations or site plans have been submitted
|
· Design Guidelines provides guidance on building mass, setbacks and other issues |
|
Enhance/Create north-south pedestrian connections |
· Development of area with existing north-south connections |
· Pedestrian connections (new and existing) are not specifically addressed |
|
Provide open space/public gathering space |
· 440 West Franklin Street park only public open space that exists in the area under consideration
|
· Provision of open space and future of the 440 West Franklin Street Park not addressed in the proposal |
|
Transitions |
· Develop housing and parking on the 440 North Lot, which is adjacent to Northside |
· Proposal to put housing on the 440 North Lot seems to comply with the Small Area Plan, which seeks a “smooth, orderly transition” between downtown and surrounding residential districts |
Design Guidelines
The Downtown Chapel Hill Design Guidelines document was adopted concurrently in March 2000 with the Downtown Small Area Plan. The Design Guidelines state that the intent is “to articulate what design objectives are expected as new development and redevelopment occurs in Downtown Chapel Hill. It is intended that this document will provide guidance to both designers and citizens in the preparation, review, and approval of plans.” The Design Guidelines should be consulted as site plans and building elevations are developed for each phase of the project.
The guidelines address a variety of design issues, such as building mass and height, entrances, roof design, façade treatment, building materials and lighting. The 11-page document stresses the importance of the following design elements:
· No more than 2 stories in height at property line. (Requiring additional stories to be set back from the street building line).
· Include alcoves, special treatments at entrances.
· Storefront-type windows adjacent to sidewalk.
· Build to property line.
· Natural materials on exteriors.
Without a specific site plan for the project, several key Downtown Small Area Plan issues remain unknowns, including the provision of pedestrian paths and public open space, building mass and height, and the location of development in relation to the Northside neighborhood. The Plan supports the option that would preserve the 440 West Franklin Street building. More information is also required regarding the plans for a downtown transit transfer center.
1997 Design Workshop Concepts: Parking Lot #5
In April 1997 the Town sponsored a Design Workshop to generate ideas for incorporating future development on Parking Lot Number 5, a 76,000-square-foot area bordered by West Franklin, Church and West Rosemary Streets. The workshop challenged participants to accommodate the relocation of the McDade House onto the site, either by itself or in the context of a larger, intensive development. A summary of the workshop is included as Attachment 7.
A major purpose of the workshop – accommodating the McDade House on Lot #5 –no longer is applicable. The owner of the dismantled structure, Thomas H. Heffner, informed the Town in a May 30, 2001 letter that it would not be financially feasible to locate the McDade House on Lot #5. Rather, the owner has plans to rebuild the house as a private residence elsewhere (see Attachment 8).
Review of Housing Issues
The proposal submitted to the Council for consideration recommends converting 440 West Franklin Street into housing and possibly retail space for Town, University and UNC Healthcare employees.
The proposal estimates that the sale price of the three-bedroom homes would be approximately $133,000. The consultant has provided the following information:
First Mortgage Amount 100%
First Mortgage Interest Rate 7%
First Mortgage Terms 30 years (Fixed), or 7 years adjustable, or 5 years
(adjustable)
Private Mortgage Insurance (PMI) 0%
Closing Costs/ Prepaids 3% of Mortgage Amount
Points 0%
Assistance loan (from land and employer) $10,000 (total)
10%-15% Mortgage Credit Certificate Grant $927-$1,391
Annual Housing Costs (3 Bedroom $133,000 Unit)
First Mortgage Debt Service (at 7%) $10,618 $10,618
Property Taxes (to the Town and Orange County) $ 2,346 $ 2,346
Insurance $ 350 $ 350
Private Mortgage Insurance (PMI) $ 0 $ 0
Condominiums Fees $ 500 $ 500
Assistance Loan ($ 4,000) ($ 4,000)
Mortgage Credit Certificate Grant (10% 1st year) ($ 0) ($ 927)
TOTAL $ 9,814 $ 8,887
Income Required (at 33%) $29,471 $26,688
Average House to Income Ratio 4.5 to 1 5.0 to 1
Down Payment $ 0 $ 0
Closing Costs / Prepaids $ 3,990 $ 3,990
Points $ 0 $ 0
TOTAL $ 3,990 $ 3,990
During the discussion at the Council work session, the consultant also provided the Council with the following information:
The consultant also stated that if the Town participated in this housing program, it would provide housing for employees at $0 out-of-pocket cost.
We offer the following comments to the Council for consideration:
· The pro forma suggests allowing a debt-to-income ratio of 33% for homebuyers. We believe that this ratio may be high if the assistance program intends to provide homeownership assistance to households earning less than 80% of the area median income. If higher income employees are targeted for the program, the 33% suggested debt-to-income ratio might be acceptable. Typically, lending institutions allow up to 28% of income to be committed to housing debt, and 33% including all other debt.
· The proposal also states that there would be one parking space provided for each unit. Because of the limited parking downtown, this may deter households with two cars from purchasing the units. However, one space per unit may be acceptable in an urban location.
Housing Issues
On April 30, 2001, the Council raised the following issues:
1. Assistance to the Project; Five-Year Declining Balance Approach.
According to the proposal submitted by the consultants, the Town would contribute to the project for five years. Each year, this contribution would decrease, and would cease in the fifth year. The pro forma presented does not include specific figures on how the annual costs would change. We recommend asking the consultant for this information.
We believe that providing assistance that would decrease over time could cause a financial hardship for homebuyers that may not realize significant salary increases over a five-year period. We offer the following alternative approaches:
Under current homeownership assistance programs, the Town provides assistance at the time of the original sale. Payments are deferred until the property is sold or ownership is transferred. At the time of sale or transfer, the principal loan amount plus a portion of the appreciation is returned to the Town. These funds would then be re-used for other affordable housing projects.
Homeownership Grants
On June 25, 2001, the Council adopted a new policy to grant funds to organizations for land trust projects that ensure long-term affordability through a 99-year renewable ground lease. Using this method ensures that the house will remain more permanently affordable.
Down Payment and Closing Cost Assistance
Funds could be provided to eligible employees for closing costs and down payment assistance. The partners could also consider implementing a program where funds saved by an employee are matched by their employer.
2. Policy Guidelines for Eligibility
We would recommend that the Town and University use guidelines similar to those used for the Town’s Community Development program to determine eligibility.
The eligibility requirements could include:
We would also suggest that the non-profit organization established as part of the project provide homeownership counseling, or work with a local non-profit organization to provide such a service to employees.
We would also recommend that the partners develop a priority system for selecting employees for housing.
3. Marketing of Units: Faculty vs. Lower-Income Households; Upwardly Mobile vs. Stable Income Households
According to information presented by the consultant, the affordability of the units would be structured as follows: 10%-20% very low income; 60% low income; and 20%-30% moderate and higher income. The consultant also suggests providing a range in the size of the units from 750 square feet to 1,300 square feet.
It appears that the proposal presented by the consultant is geared more towards upwardly mobile employees. We are concerned that the decrease in the subsidy over a five-year period as proposed could have a significant impact on households earning less than 80% of the median that may not realize significant increases in salary over time. If it is determined that the program would be marketed towards households earning less than 80% of the median, we would recommend that the partners consider providing a long-term subsidy for homebuyers.
The consultant suggests that 10%-20% of the units will be provided for very low- income households. We believe that providing homeownership opportunities for very low-income households could require a high level of subsidy. The Town may have to invest additional funds in the “very low-income units” so that they could be purchased.
An alternative could be to provide affordable rental units for the very low-income range. The same land lease as suggested for the owner-occupied units could also apply to the rental units. The provision of rental and homeownership opportunities could create a more diverse, mixed income community.
We believe that providing housing for a range of income ranges to create a mixed income community would be desirable. By providing a mix of units, lower income, upwardly mobile, and stable income households could all live in the same environment. We would suggest that the consultant further define very-low; low and moderate income in terms of the area median income (i.e. 50%-80% for low income). This could help us determine how many employees could qualify for the proposed housing.
We would also suggest that we explore additional funding options such as the federal Freddie Mac Employer-Assisted Housing Program to determine if this program could assist in providing homeownership assistance. Freddie Mac currently works with organizations that wish to provide housing for its employees and can tailor a program to meet the employer’s goals and financial resources. Freddie Mac’s affordable mortgage loan products are available to support employer-housing initiatives.
Depending on the level of assistance the partners choose to provide, the Freddie Mac program could assist with developing a program that provides: (1) education and counseling support; or (2) a savings plan, including an Individual Development Account (IDA) program; or (3) loans or grants.
4. Regulation of Long-Term Employment Status
According to the proposal submitted by the consultant, the ground lease would control who may own units. We would suggest that once an employee purchases a home, they would be allowed to remain in the home as long as they wished, regardless of future employment status.
The demand for housing of this type as shown in the consultant’s surveys indicates that the participation of the University and the UNC Healthcare System is critical for the housing component of the project to succeed.
Based on the survey of Town employees, only 12% (23/181) stated that they would consider purchasing a housing unit within the next five years within the price range and size range described by the consultants. There may not be enough interest from Town employees for the Town to develop a housing program without the other partners. If the Town were to consider proceeding independently, the following are options for consideration:
The Council could choose to offer the program to Town employees as presented. If Town employees have not qualified for units by a specified time, the Town could allow the units to be marketed to University or Hospital employees.
The Council could choose to not participate in the employer assisted housing program and work with the University or independently to develop or encourage development of office and retail opportunities as presented in the proposal.
Review of Office/RETAIL Issues
The Town asked several area real estate professionals who are familiar with the retail and office market in Chapel Hill to comment on the assumptions in the consultant’s office market analysis (see Exhibit C, Pages 35-39 in the April 30 memorandum, Report on Project Plan for Employer-Employee Housing Project (see Attachment 10)). In general the data and assumptions were said to accurately reflect the conditions of the local market. Some of the issues that were raised included differences in opinion on the specific numbers and percentages used.
General comments included:
· The office project is feasible only with the University’s support as the main tenant.
· Tearing down the 440 West Franklin Street building may not be a good idea.
· Include enough parking for office and retail.
· The housing component is promising.
· There is a market for residential in downtown, including high-end housing.
· Get a private developer to do the project.
· Do not apply suburban thinking to an urban situation.
· The market for office space downtown is in a state of flux currently, with significant vacancy levels.
· A grocery store should be in the west end of downtown, but not necessarily part of the development for Lot #2 or Lot #5.
· Establish clear parameters for Town participation in the project.
· Allow flexibility for innovative ideas.
Office Space
We anticipate that the office space needs of the University could be accommodated in the development on one or more of the lots identified in the proposal, and that risks to the Town would be minimized through a long-term lease with the University for the space. A key issue with regard to the proposal is whether the development should contain speculative office space in addition to the square footage occupied by the University.
Based on our review of the consultant’s study and the opinions of local real estate professionals, we have arrived at three preliminary conclusions regarding the inclusion of office space as part of a development on Town-owned property:
· The office project will not work without a long-term lease agreement with the University for the office space it would occupy in a development on Lot #5 or Lot #2. A long-term lease with a large, stable tenant would significantly reduce the risks associated with constructing office space by guaranteeing rents for recovering development-related costs.
· The Town should not build speculative office space due to the potential difficulty in filling the space. Based on the current and anticipated future supply of office space available in the Chapel Hill area, we recommend against including speculative office space in a Town-University development.
· The Town should explore the feasibility of providing sufficient office space to enable the University to move its offices out of some of its downtown storefront locations, which could then be made available for retail establishments. While office space for the private sector could be difficult to fill, the Town could consider building more office space than discussed in the proposal in order to provide sufficient space for the University to move out of downtown locations (such as the former location of First Citizens Bank). These spaces could then be made available to lease as private office or retail space. Discussions with the University would be needed to determine the feasibility of this option.
According to a spring 2001 Orange County Economic Development Commission analysis, the office vacancy rate in the Chapel Hill-Carrboro market is about 6.2 percent, with about 115,055 square feet (out of a total of 1.8 million square feet) available for lease. In the Triangle area, a vacancy rate below 10 percent is considered healthy (see Downtown Chapel Hill Small Area Plan).
The amount of total office space will increase substantially when construction is completed on office buildings in the Meadowmont and Vilcom developments. The new space could absorb more than the existing demand and create vacancies in other Chapel Hill office buildings. Office projects that have been approved or proposed are listed on the following page.
· Meadowmont Office Park: 202,500 square feet, approved January 1999
· Meadowmont Village Center: 102,400 square feet, approved July 1997
· Sage Road Offices: 62,000 square feet, approved April 2001
· Prestwick Place: 26,000 square feet, approved February 2000
· Campus at Vilcom: 240,836 square feet, approved November 1999
· UNC Airport Drive Office Building: 78,000 square feet
· Eastowne 501 Office Building: 36,709 square feet
The spring 2001 office space analysis by the Economic Development Commission lists six downtown office locations available for lease, including 2,000 square feet (at $20 per square foot) on the second floor of The Fountains on West Rosemary Street.
Retail
Including storefront retail space in the development for lease to private businesses would be less risky for the Town than providing private office space due to a relatively strong market for downtown retail properties. The Town could further reduce risk by getting a private developer to develop the retail space. A retail component also could meet a major goal of the Downtown Small Area Plan by providing retail space on Lot #5 along Franklin Street, forming a “visual bridge” by filling in a significant gap in the streetscape (this issue is discussed on Page 4 of Attachment 6).
Historically the market for downtown retail space has been healthy, with these properties having among the lowest vacancy rates and highest average per-square-foot rents of the retail areas in and around the immediate Town limits (see Downtown Small Area Plan). The downtown retail space vacancy rate generally is one half the County rate, or 0.5 percent to 1.0 percent.
However, currently several retail properties have been available for lease for longer than what is normally expected, though the Downtown Commission says the length of the vacancies could be due to unusually high rents sought for some of the available spaces.
Downtown Franklin Street retail space available for lease listed in the spring 2001 Economic Development Commission analysis included:
· 213 West Franklin Street (former Hardee’s), $28 per square foot (3,700 square feet). (The property has since sold.)
· 149 East Franklin Street, $25 per square foot on the first floor, $20 per square foot on the second floor (2,305 square feet per floor).
· 462 West Franklin Street (former site of the Avid Reader), $12,500 per month for 7,500 square feet on three levels.
The consultant’s report discussed the possibility of a grocery store, such as a Harris Teeter Express, being included in the Town-University development, possibly on Lot #5 fronting Franklin Street. Harris Teeter Express stores are smaller than the typical Harris Teeter grocery store, which on average are in the 35,000-square-foot range, according to Harris-Teeter. The smallest Harris Teeter Express – of the three that have opened – is on Providence Road in Charlotte, totaling 12,200 square feet. Another Harris Teeter Express is in downtown Decatur, Ga., a 15,000-square-foot store. (Lot #5 is about 76,000 square feet in size.)
Mary Lauthefaine, a real estate site location analyst with Harris-Teeter, said the Harris-Teeter Express concept allows more flexibility on design considerations, such as parking and architecture, as compared with the larger stores. The feasibility of locating a Harris-Teeter Express on Lot #5, she said, would be determined through a market analysis that would take into account, among other factors, new residents moving into an area.
Based on our review of the consultant’s surveys and comments from the local professionals who have been consulted, we believe the inclusion of office space for lease to private tenants would be too risky a prospect to incorporate in the proposed development.
The amount of office space should correspond with the long-term needs of the University. The Town and the University could consider whether to provide additional office space – beyond the space required to accommodate the 440 West Franklin Street offices – in order to enable the University to move out of occupied storefront properties on East Franklin Street.
Another issue is whether the Town should support the University occupying large downtown space that the University eventually could own, making it tax exempt.
A retail component is not only less risky, but is also an opportunity to enhance the vitality of downtown. Retail is an important component of the development of Lot #5, in particular along Franklin Street, as this would form the “visual bridge” sought in the Downtown Chapel Hill Small Area Plan, and would attract residents to downtown.
This section examines the concept of building projects which provide a mix of uses (housing, office, and retail) using a variety of Town-owned and University-owned land in the downtown area. Key issues are reviewed below.
1. Impact on Existing Parking: Need and Policy
A key question is the use of Town-owned and University-owned sites now used for public parking for the proposed plan, and the effect on public parking needs and policy.
The Town of Chapel Hill provides significant public parking in the Rosemary Street parking deck and Lots #2 and #5, supporting the surrounding retail uses, restaurants and in some cases office activities. Although data indicates that some of this parking is underutilized, particularly Lot #5, Lot #2 is utilized at capacity during most weekdays.
The parking deck on Rosemary Street appears to have some excess capacity (about 20%). Some of this capacity may be reduced with the opening of new restaurants on Henderson Street. The general philosophy guiding the development of these facilities in the past has been that the Town will provide the parking needed to support existing and future retail development in the Town Center, maximizing the use of limited land for productive development. In addition, the policy has been to support the provision of short-term parking in the downtown.
A basic question raised by the Employer-Employee Housing proposal is whether after parking is set aside to serve the residential and office/retail development included in the development of Lots #2 and #5, will there be enough parking available to the general public to support existing uses and accommodate future development. If the answer is no, what additional public parking might be acquired and developed to meet that existing and future demand?
Lot #5 currently provides leased parking spaces for employees of the FGI building and others. Public parking is restricted and use is regulated through the use of meters. Lot #2 provides 104 parking spaces to the general public.
2. Impact on Town Parking Fund
A key issue is the potential impact of the proposal on the Town’s Parking Fund and overall debt. Currently, the Town is responsible for bond payments of $547,000 per year on consolidated Certificates of Participation for all the Town’s parking lots. Generally, revenues net of expenses to operate the facilities have been sufficient to pay the annual debt payment. A key question is whether revenue from the employer/employee housing proposal will be sufficient to pay the annual debt expense of $547,000 per year.
3. Mix of Uses
The phasing plan suggested by the consultant would result in a combination of housing, office, retail, and associated parking in the aggregate on several sites. In general, however, the plan would not achieve a “vertical integration” of all uses on any one specific site. The one exception proposed is an alternative option for Phase II in which the consultant suggested providing office, retail, housing and parking using the 440 West Franklin Street site.
A decision for the Council is the extent to which it wants to promote a vertical integration of uses on the sites. A related decision is whether the current proposal provides a sufficient emphasis on the provision of housing in the downtown. As proposed on April 30, one of the first three phases has housing (Phase II). Phase IV is proposed to provide additional housing on sites as yet to be identified.
Based on the consultant’s April 30, 2001 report, it is not clear how much public and private parking is proposed to be associated with the phasing plan, and therefore it is difficult to evaluate the effect of the proposal on the Town’s current parking program. It would be helpful if the concept were developed to the next level so that impacts could be determined. The relative levels of public and private parking also would affect the Town’s revenues and costs in the Parking Fund.
With regard to provision of on-site or off-site parking the retail/office uses, what is the ratio of employees/square footage to parking? For the residential development there is a provision of 1 space per unit, a reasonable amount for a Town Center location. Could these spaces be reserved and leased to the tenants, so that in any given year some number would not be utilized by the residents and used for public parking? If a grocery store is provided on Lot #5, on-site parking may be needed. The consultant’s report suggests that a Harris Teeter Express would require approximately 12,000 square feet of space and 36 parking spaces.
Another unknown is whether we expect any private sector development to provide parking that might be available to the public in the Town Center.
A key policy issue for Council consideration is further definition of parking—how much, where, how many levels, and what it serves. The answers will also impact how high the project building envelope is, and how well the building fits into the fabric of downtown.
5. Use of Lot #2 before Lot #5
The consultant proposes to use Parking Lot #5 first to construct office, retail, and structured parking. On April 30, the Council discussed the idea of using Lot #2 instead of Lot #5 for this purpose in Phase I.
If Lot #2 is used for office and public parking, it is unclear how much of the parking would be devoted to the office uses. Current use of Lot #2 suggests that it is the most attractive location for public parking. If the current total of 104 spaces were replaced through the development of the site the Town would be maintaining the current supply.
Another option would be to provide additional public parking as part of the development, which would help absorb any future growth in parking demand in the east end of the Town Center. Without an expanded supply of public parking, growth in parking demand would have to be satisfied by the limited excess capacity of the Parking Deck.
If housing were provided at the site of the University 440 building and office/retail at Lots #2 and #5, it is anticipated that this would generate additional development in the surrounding area.
Under the Phase II development scenario that constructs housing and some retail on the 440 property, parking provided on site would largely serve the residents, with some public spaces for the on-site retail and surrounding retail. The main transportation impact of developing this site could be the need to provide public transit services to this site, connecting it with the eastern portion of the Town Center and University campus area. This service would also serve the residential development to the east on Rosemary Street.
6. Use of Lot #5
A related key Council question discussed on April 30, 2001 was the possibility of reserving lot #5 (or scaling back what goes there), and transferring the density to lot #2. In this respect, the Council received a petition suggesting that lot #5 be developed as a “village green” (please see Attachment 9).
The 1997 Design Workshop for this site included the objective of siting a location for the McDade House, with associated public space. Various design scenarios generated that day for projects with a mix of housing, office, retail, and parking included public open space. The 2000 Downtown Plan also includes references to incorporating public green spaces into any future development (please see Attachment 6, Page 7 for specifics).
Scenarios that go beyond these concepts to include reserving the site or not building on any of the site are policy questions for the Council’s discussion. Conceptual work done to date indicates that an objective of developing a mix of uses can be compatible with the objective of developing public space (which may or may not be “green”).
Transferring density to lot #2 could work, although at this point we do not know the magnitude of the building envelope that would result from the current proposal. It would seem important to understand the impact on the scale of the 100 block of East Franklin first. This conclusion again points to the desirability of obtaining further design details of the conceptual plan before proceeding.
7. Bridging East and West Franklin Street
If Lot #5 is included in the development plan, it would have the effect of creating a bridge between East and West Franklin Street. The 2000 Downtown Small Area Plan highlights this “bridging” as a key policy concept. The idea is to develop the site such that the streetfront of buildings and/or public space encourages people to continue down Franklin Street and connect two active areas of pedestrian activity. Such a concept would support the idea of developing Lot #5, rather than reserving it only for open space. These ideas could be further developed for the site.
8. Potential Demolition of 440 Building
An issue identified in the planning staff review of the Town’s Downtown Small Area Plan concerns the option in Phase II of demolishing the 440 West Franklin Street building rather than renovation of it. The April 30 report by the consultant suggested that demolition is the more probable scenario.
The Downtown Small Area Plan includes this building in a preservation area. Any new building would need to be sensitive to the area, and incorporate existing buildings as much as possible. Use of the building for housing purposes could be compatible with preservation, with new construction on the Rosemary Street side of the site. In addition, the existing park on the site is identified as one of the few green areas existing in downtown currently in the Downtown Plan, and the Plan calls for its preservation as well.
These adopted policies further suggest the need for exploring options for this site.
An issue emerging from the planning staff review of the Town’s Downtown Small Area Plan is the effect of the proposal on the continuing need to provide a transfer facility for Chapel Hill Transit. Both Lots #2 and #5 have been suggested for this type of use, although Lot #2 would have the best access for this facility. Although the provision of bus transfer areas would result in some loss in developable space or parking spaces, the Federal Transit Administration has supported innovative financing plans that allow federal funds to be used to purchase and construct a facility that includes office and retail uses. Revenues from these activities are then used to support transit operations.
More exploration of the potential inclusion of a transfer facility and possible financing options could be pursued as part of the conceptual design.
The Council on April 30 discussed the idea of developing a conceptual plan so that the community can visualize the proposal. At this point, the recommendation of the consultant to the Council is very general. Although in July 2000, the consultant initially put forward some numbers (square footage of uses, amount of parking, costs), the conceptual proposal has changed since that time.
The Downtown Small Area Plan also recommends that new development employ modeling or computer visualization to determine how buildings might fit into the existing downtown and protect and enhance those areas defined for preservation. Such an approach may be beneficial here, along with developing a more specific development program for the sites.
In this light, one suggestion has been made that a next step be the creation of a Master Development Plan for downtown that would provide more specifics for the public and University sites the Council selects for that purpose.
Such a master plan could include:
· The appropriate mix of uses (residential, office, retail) for specific properties;
· The amount of development intensity desirable at each location;
· The amount of public and private parking at each location;
· The inclusion of public spaces (and/or public art) in the development;
· Visualization of the proposal’s scale and relationship to existing development and to the streetscape;
· Provision of pedestrian connections (east/west and north/south);
· Consideration of a transit transfer center; and
· Analysis of neighborhood impacts.
Risks
Risks to the Town could include legal, process, market, economic, and financial factors.
· A sudden increase in available office space in the Chapel Hill area could make it difficult to lease speculative office space to private tenants. The amount of office space under construction or permitted in the Chapel Hill area, as discussed earlier in this report, increases the probability that the available supply will exceed demand, making construction of speculative office space for private tenants unattractive.
· Absent a long-term lease with the University for office space in the development, the Town could struggle to fill space the University vacates. Locating another tenant, or tenants, for filling vacant offices left by the University could be difficult given the amount of space the University is expected to occupy.
· An eroded real estate market causing sales to fall short of expectations could occur. A decline in area housing prices due to a weakened market would increase the availability of affordable housing elsewhere in the community, decreasing demand for units provided as part of a Town-University development. As a result, sales of the units in the development could fall short of projections as employees look to buy elsewhere. However, it is possible that employee demand for the housing could be strong despite weakening market conditions elsewhere - as inexpensive, for-sale condominiums are uncommon in the Town Center.
Therefore, under certain market conditions, the partners may need to be willing to agree to market the units to others in a manner not originally contemplated.
Benefits
NEXT STEPS
On April 30, 2001, UniDev suggested the following next steps:
The nonprofit entity would be created by the Town with all three of the institutions represented on its board, but with control remaining with the Town.
Before proceeding with the project next steps outlined above, we believe key questions need resolution:
1) A determination needs to be made by each potential party to the agreement of what its objectives, resources, and commitments to the project will be; and negotiations of the terms of that agreement need to occur. We note that the UNC Healthcare System has indicated it will participate (see Attachment 11). Alternately, a decision by each party to proceed independently, but in a coordinated manner, might also be made.
2) If an agreement is reached, key points to ensure project success would include:
3) The Town Council may want to consider further developing conceptual plans for the Town-owned sites to assist the parties in arriving at a decision. The Town Council could authorize the development of a Downtown Master Development Plan to implement the Town’s Comprehensive Plan and Downtown Small Area Plan for some or all of the “opportunity sites” shown on the Downtown Small Area Plan. Options for undertaking such a project include:
o Option A: Hiring a consultant to prepare a master plan through a request for proposals process;
o Option B: Preparing a master plan with existing staff resources, with additional design services;
o Option C: Conducting a design competition such as the recent Gateway project;
o Option D: Issuing a request for proposals for private development of the sites.
o Option E: Combine the process of developing a Master Plan to identify key objectives and preparing a request for proposals for private development.
Option A would be time-efficient, but could be costly. Option B could be done with additional design resources, but it would take longer and involve tradeoffs with other Council priorities. Options C and D could result in a variety of innovative ideas, but may not produce results that meet project/partner objectives. Option E could be similar to the Franklin Street corridor study as to the development of key objectives in a Master Plan.
The University and UNC Healthcare System could choose to participate in such a master planning process, with emphasis on the 440 West Franklin site, one of the opportunity areas of the Downtown Small Area Plan.
Preparation of a Downtown Master Development Plan would implement the strategies of the 2000 Comprehensive Plan and 2000 Downtown Small Area Plan. Strategy 3C-1 of the Comprehensive Plan calls for beginning the implementation of the Downtown Small Area Plan as a short-term strategy (0-2 years). A Downtown Master Development Plan would help accomplish the recommendations of the Downtown Small Area Plan to pursue opportunities for redevelopment and preservation, and to construct a physical scale or use computer-aided visualization as a tool for examining issues, opportunities, problems and possibilities.