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Developers, Salt Lake City clash over fees, parking rules

Published January 9, 2014 10:19 am

Downtown • Rules prevent them from green-lighting projects, developers say.
This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

As downtown Salt Lake City grows, a major clash has emerged over how to fill gaps in its urban smile.

Nearly two years after the $1.5 billion LDS Church-owned City Creek Center shopping complex opened on two city blocks, downtown advocates and some of Utah's most powerful developers are frustrated over policies they say thwart construction on land surrounding the new mall.

Their vexation focuses on two city ordinances limiting surface parking lots and demolition of old buildings downtown, as well as a massive boost in fees on residential and commercial projects to pay for roads, parks and other municipal services.

Developers say the rules and impact fees — some of which quadrupled — are hampering downtown construction, just as Utah's real estate markets start to rebound.

"We're trying not to get red-faced about it, but we're very concerned," said Bruce Bingham, a founder of Hamilton Partners, the firm that developed and now manages 222 Main, the 22-story high-end office tower northwest of the Wells Fargo Center on Main Street.

City leaders say the measures, which took effect a year ago, help share the burdens of growth and are crucial to ensuring an attractive, green and vibrant downtown.

"Quality city services and public spaces are exactly what people want when they move downtown and developers know that," said Councilman Luke Garrott, whose District 4 covers much of the inner city. "We just want to spread the pain around while we're building our future."

Several new developments sprouted in 2013 around City Creek, which reportedly modified its early plans at the city's urging to include more access points from the surrounding downtown.

City leaders announced a new Utah Performing Arts Center to be built on Main near 100 South. Tech-oriented Neumont University opened a new campus in the refurbished Ezra Thompson Building at 143 S. Main, former home of The Salt Lake Tribune.

But developers said potential for a larger impact around the mall remains unfulfilled.

The impact fees have developers threatening to move to other cities, halting projects and even talking about legal action against City Hall, according to staff for Mayor Ralph Becker, who wants the City Council to reconsider the fees when it swears in three new members Monday.

The mayor remains a supporter of impact fees, his spokesman Art Raymond said, but has called for a more gradual approach.

Providing facilities and services that attract and serve residents downtown — green areas, plazas, schools, grocery stores — "can and should be done at least in part through impact fees on new growth," Raymond said. "The question then becomes one of scale and appropriateness."

Becker's proposed fees, Raymond said, are "more palatable to the development community."

Death by parking • Less than a block from City Creek, with broken windows and a boarded-up exterior, the 105-year-old Arrow Press Square building on West Temple looks like a rotten tooth. Nobody knows better than its owner that the decaying four-floor edifice — in full view of visitors to the Salt Palace Convention Center across the street — is an eyesore.

"It's dangerous. It's dilapidated. The building next door caught fire and damaged this building," said Vasilios Priskos, founder of InterNet Properties and co-developer of the Neumont site, with partner Michael Ferro.

Even if Priskos poured millions into improving Arrow Press Square, he said, "as much as I want to, I can't save it."

"It has become a public nuisance," said Priskos, "and we have to do something about it."

But he said the city's demolition rules won't let him tear it down — not without a building permit in hand for what will go up in its place. Nor can developers flatten structures and put in parking lots while they figure out what else to build, under a prohibition on new surface lots in the city's central business district. Parking lots are not allowed even as a moneymaking transitional use.

The rules have two goals, city planners say. One is balancing convenience for motorists with keeping downtown worth visiting.

With more than 25,000 off-street parking spots, another 2,000 metered spots on the streets and excellent public transit connecting to urban attractions, downtown has enough available parking, according to Wilf Sommerkorn, director of the city's planning department.

Too much parking, "and in essence you could wind up killing your downtown," Sommerkorn said. "If it's nothing but parking, then there's not reason to come."

No more 'Sugar Holes' • Another motive for parking limits is avoiding so-called ``broken teeth'' along the city's lengthy blocks, which, thanks to Utah's pioneer planners, are up to three times longer than in other large cities. Gaps between storefronts disrupt the flow of pedestrian traffic along sidewalks, with broad effects, planners and city leaders say.

Property records show vacant land makes up at least 82 acres of the downtown's nearly 700-acre footprint, not counting streets and the area's largest green space: Pioneer Park.

Whether vacant lots or blighted buildings, "missing teeth are a very big problem, maybe the biggest problem the downtown faces," Garrott said. "For downtown Salt Lake City to be a real city, it can't have that many missing teeth."

The demolition ordinance addresses the same issue, with an eye on the city's so-called "Sugar Hole" experience.

Starting in 2008, developer Craig Mecham tore down everything on a 4.5-acre patch at 2100 South and Highland Drive (1100 East) in the heart of the Sugar House community, only to see financing for a mixed-use facility he planned collapse with the real estate bust.

The land sat empty for years, although Mecham gradually filled in the hole and put landscaping around it.

Construction of the 45,000-square-foot retail and residential Sugar House Crossing resumed in 2012 and it is set to open this year. But the episode hurt the Sugar House commercial district and the city wants to avoid a replay.

"Every time you break up the street face with a hole, you risk losing activity,'' Councilman Stan Penfold said. ``You can plant all the trees and flowers you want and it's just not going to be interesting.''

Too often, Penfold said, "temporary" parking lots last a generation or more, as developers buy up and bank downtown land, piece parcels together and speculate on future development.

"The council recognizes a transitional use," Penfold said. "Thirty years is not a transition."

Garrott said the city has been "very permissive" toward landowners who buy properties and let them deteriorate. He said City Hall may resort to heavy blight taxes "so it becomes a liability rather than an investment."

"Love it or list it," he said. "Land bankers who are neglecting their property are helping our community how?"

Unintended consequences? • But developers and downtown boosters warn the ordinances are backfiring. Limiting the supply of new parking makes existing lots more lucrative, killing incentives for lot owners to build. And the demolition rules, they say, keep abandoned and ugly buildings standing.

Some of Salt Lake City's junkiest buildings — Arrow Press Square, the Yardstick on 300 South between State and Main, the old Zephyr at West Temple and 300 South, and the Shamrock Bar on 200 South between 200 West and 300 West — would be better off razed and turned into landscaped parking, the head of city's Downtown Alliance said.

In some cases, Downtown Alliance Executive Director Jason Mathis said the city and its Redevelopment Agency are letting their own properties sit empty and undeveloped. The city also ignored its own demolition standard when it bought and unnecessarily tore down structures before putting up the new Public Safety Building at 475 S. 300 East, he said.

The rules "would not allow a private developer this same flexibility,'' Mathis wrote in an October 2012 letter to then-City Council Chairman Soren Simonsen. "This may be a situation where Salt Lake City is asking developers to live up to standards that city projects have not also met.''

'Killing' surprise • Key players all agree Salt Lake City needs more people living downtown to bolster an existing population of about 4,000 residents, improve retail demand and energize night life. But they differ on how to make it happen.

Meant to raise funds for making downtown more livable, the city's one-time impact fees also are adding sizable costs to single-family and multi-unit residential developments, right as builders are announcing hundreds of new housing units, many of them in the city's core.

Some 182 new dwellings went up in 2013 in the city's urban heart, bounded by North Temple, Interstate 15, 500 South and 300 East, according to a tally by EquiMark, which analyzes residential construction. Another 240 downtown homes, most clustered in high-density multifamily housing, were underway as 2013 closed or proposed for 2014, Equimark said.

Effective January 2013, the City Council raised park fees on residential units from $681 to $3,999 per dwelling, for a 487 percent increase. Residential fees for roads shot up from zero to $424 on single-family homes and from zero to $249 per dwelling in multifamily housing.

The council also broadened its charges of road fees, which were previously levied solely on infill development, Salt Lake City's west side and its northwest quadrant. A single roadway fee structure now applies citywide, hitting some kinds of projects for the first time.

Bingham, with Hamilton Partners, said prior impact fees levied by the square foot on commercial construction added $250,000 to the price tag for 222 Main, "and we did not say one word about it."

The Chicago-based firm's latest project, a new 24-story office tower at 111 Main adjacent to the new Utah Performing Arts Center, will cost $1 million more than planned, Bingham said. The jump has complicated securing tenants for the new tower, he said.

"An extra million dollars is big, big money when that translates down to a lease rate," Bingham said.

Though the city held its usual public hearings, several developers said the fees caught them off-guard.

"The thing that kills us in this business is surprises," said Jake Boyer, president and chief executive of The Boyer Co,, which built One Utah Center at the corner of Main Street and 200 South and The Gateway Mall on downtown's west edge.

"You're counting on what the city said was your number will stay your number," Boyer said. "Our council is well-meaning. I'm just not sure this was fully vetted as to what the negative impacts could be."

He said the roadway fees seemed particularly burdensome for proposals downtown, given that roads downtown are already built.

Dave Robinson, a Holladay-based architect of industrial and office buildings in Utah, said the fees put new buildings with large square footages at a sharp competitive disadvantage with existing sites. Higher lease rates alone, Robinson said, have slowed several downtown plans.

Even with the hikes, Salt Lake City's total impact fees are well below the national average for major U.S. cities and those in nearby states, judging from a 2010 study by Boise-based Galena Consulting. But they currently exceed the average of fees charged by 14 of Utah's largest cities, the study found.

"Impact fees have to be used where there's growth and downtown is growing," said Mike Akerlow, the city's director of housing and neighborhood development. "Do the impact fees help in developing a good city? Yes. Should we be looking at this in many ways? Absolutely.

"The city is concerned," Akerlow added, "and we're listening."

tsemerad@sltrib.com

Twitter: @Tony_Semerad —

Parking

In November 2012, Salt Lake City passed a ban on demolishing buildings in the city's central business district for surface parking lots. The new ordinance also prohibits surface lots and parking structures on block corners downtown and along Main Street. Lots midblock must be behind a building or set 75 feet back from the front property line.

Demolition

In December 2012, the city changed its demolition ordinance to require timely completion of demolitions and subsequent property improvements. It also put limits on tearing down buildings without an approved reuse plan for the land.

Source: Salt Lake City Council meeting minutes