August 9, 2001
Rx for Seattle’s growing pains: Collaboration
By THOMAS B. PARSONS
As the Puget Sound continues to grow at a frenetic speed, so too do the growing pains. The desires to provide housing, maintain the region’s natural beauty and preserve our standard of living must balance with ensuring that the region stays competitive and becomes a world-class destination for commerce.
Smart growth management plans strive to address these and other issues. More importantly, we need to work together to focus current growth so we are satisfied with the direction our region is headed.
A blueprint for the city
The Transfer of Development Rights (TDR) program was initiated in 1985, as part of Seattle’s “Downtown Plan.” The plan established 11 new zones to guide future development in downtown. These zones were expected to accommodate the most significant share of growth and change in the city.
“Incentive” provisions, such as the TDR program, were included to increase density in certain zones. Developers could increase their commercial project density by adding additional floor area through the purchase of development rights. In return, the developer would provide public benefit features such as open space, amenities, landmark preservation, wider sidewalks and affordable housing.
The success of the TDR program is evident from projects such as the Millennium Tower and Madison Financial Tower; as well as 1700 Seventh Avenue, the first downtown development to have housing as part of its master plan.
Since its inception, the TDR plan has received modifications. In October 1999, the city and King County passed a transfer program that allows the sale of development rights for land in rural King County to developers for use in the Denny Triangle.
This change is known as the Transfer of Development Credit (TDC) program, which channels the focus of the TDR program from public use amenities towards housing. While the city receives an increase in housing next to the downtown core, the TDC program allows the county to preserve farm land. The TDC differs from the current TDR in that it only allows for additional residential density. The TDC program cannot be used by commercial projects to increase non-residential floor area above existing limits.
Under this program, developers can increase their building heights up to 90 feet if they provide housing, explains Gary Carpenter, chief operating officer of Bentall — which has several projects planned in the Denny Triangle, including 1925 Ninth, an office building with residential units.
“The TDC program revives the importance of having available housing in the Denny Triangle,” states Carpenter. “The goals of the TDC mirror those of the Denny Triangle neighborhood plan to create hundreds of housing units.”
Changes to the program
The city is currently exploring changes to the TDR program.
One change is the expansion of the TDR program beyond the Denny Triangle area. This change reflects an efficient use of the TDR program. The expansion of the TDR program will help keep development in downtown attractive, while helping to stem the tide of suburban growth.
Currently, neighborhoods adjacent to the downtown core without TDRs are economically more attractive for development because fewer mitigation efforts are required to offset additional floor space. The expansion to the TDR program will level the development playing field.
“The expansion of this program encourages regional cooperation in urban growth management,” says Richard Stevenson, chief operating officer of Clise Properties. “It recognizes that growth in one area impacts another. It provides an insight into how we can all work together to successfully manage growth in the region.”
However, another proposed change may counter the positive impacts of expanding the TDR program.
Currently, the cost of “purchasing” additional floor space through the TDR program is $11-$13 per square foot. Under the proposed change, this rate would double to $22 per square foot. Proceeds from the expanded TDR program will go towards the city’s goal of creating 900 or more units of affordable housing in downtown.
Developers and building owners are concerned that a rate increase will jeopardize the economic viability of developments in downtown. Increased costs will inevitably need to be recouped, usually in the form of increased rental rates. And increased rates make downtown less attractive to businesses.
The TDR and TDC programs use private-sector revenues (a large portion from developers) to ease difficulties brought on by population growth and to reduce urban sprawl. Because of their role in these programs, developers are in the unique position to assist the city in planning strategies for achieving housing goals that remain consistent with preserving the city’s economic viability.
Involving input from developers early in proposed code changes could be an effective method to balance housing and urban growth needs with economic vitality.
Energy code impacts
Like the proposed changes in the TDR program, the city’s proposed energy plan also has the potential to impact the cost of new developments in Seattle.
The proposed 2001 Seattle Energy Code is designed to save significant amounts of energy. However, the proposed code places the burden of new power resources on the owners and developers of commercial projects by creating a longer “payback” period.
“NAIOP shares the city’s goal of responsible energy use,” says Douglas Howe, president of Touchstone Corp. and a member of NAIOP’s board of directors. “However, we also want to make sure that the city stays competitive regionally and nationally.”
The proposed code goes well beyond what other municipalities and the Washington State Building Code Council are considering. In fact, much of what is being proposed in Seattle has already been abandoned elsewhere.
Howe states that NAIOP has stayed abreast of these issues and would welcome the chance to collaborate with the city on an energy code that increases energy efficiency and is still cost-effective. Because many of NAIOP’s members are active within the city in the development, ownership and management of commercial buildings, they are in a unique position to assist the city to fully evaluate and understand the impacts of code changes to new commercial buildings.
“By bringing in members of the real estate development community early in the process, we can all work collaboratively to create changes to the energy code that keeps Seattle competitive while meeting our collective goals of energy conservation and increased building efficiencies,” Howe said.
Ultimately, the cost-effectiveness of new development not only affects developers, but also the city (in terms of attracting and retaining business), residents (by providing more housing options), businesses (having competitive rental rates) and visitors (by their views and perspectives of the city and region).
Since urban development has a significant impact on housing and energy, developers are eager to take a leadership role in helping to shape the future of our region.
Thomas B. Parsons is the president of the Washington State Chapter of the National Association of Industrial and Office Properties (NAIOP), an organization representing over 400 members of the local commercial real estate development industry.
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