Downtown Development – Promoting Creativity & Reducing the Town’s Financial Risks
July 5, 2015 § 2 Comments
Back in 2005, a consortium of firms led by Norton & Scott, LLC submitted an unsolicited proposal to develop the area of downtown Herndon bordering Elden, Center and Station Streets on the one hand and W&OD trail on the other. The developer’s negotiations with the Town were unsuccessful, but, in my opinion, he had put forth the best proposal of the past two decades. It contained two very attractive features:
• A row of 2-story commercial spaces along Station Street and the W&OD trail
The green space over the underground garage would have complemented the Town Green that is located on the other side of the W&OD trail.
IT WOULD HAVE ALSO ADDED A UNIQUE, ATTRACTIVE AND ONE-OF-A-KIND FEATURE TO OUR DOWNTOWN.
Similarly, the commercial space would have provided a street-level shopping destination to our citizens. Together, the two features could have been a magnet for drawing shoppers and visitors from area jurisdictions.
The parking garage would have more than met the parking needs of a development containing a 141 room hotel, a 31,000 sq. ft. Art Center, a 80,000 sq. ft. office building, and 51,000 sq. ft. of retail space. And, after satisfying the needs of the shared parking program, the development would have had enough spaces left over to meet the needs of future growth. What is even more compelling is that the cost of parking ($/space) under this innovative proposal, more likely than not, would have been less than the cost of parking in an above-ground garage.
THIS PHASE OF DEVELOPMENT WILL DEFINE THE DOWNTOWN FOR NEXT 50 TO 100 YEARS.
The type of buildings, the use, the layout of the buildings, the amount of green space, the number of parking spaces, the relationship of the green space to the existing buildings and to the future buildings are important for establishing a “small town feel”, and for ensuring that the area is uplifting and enjoyable. Presently, many of our residents, especially those who participated in the development of the Master Plan are wondering:
• whether a garage would be located behind the ice house café and the Subaru dealership and surrounded by a bunch of townhouses and condos as shown in the Master Plan
• whether open spaces shown in various illustrations of the Master Plan would be realized
• whether developers would create spacious and vibrant plazas?
• whether developers would use the illustrations proffered as a part of the rezoning action taken on May 27, 2014 to propose building cookie-cutter type of townhouses, condos and commercial spaces. (click Proffers Partial Exhibit.pdf for examples)
The administrative record of the Town shows that, over the last 10 years, our political leaders and the Town staff have paid scant attention to bold & innovative designs. Even the creativity expressed in the Master Plan appears to have been set aside. The Town Manager and the Mayor have reportedly met with a few developers recently (at the latter’s requests) to give them preliminary ideas of what the downtown might look like after development. Significantly, they are reported to have used the illustrations approved as a part of the 2014 rezoning process to indicate the type of townhouses or multifamily units or the type of uses that are likely to be acceptable in specific locations.
Promoting Creativity: I strongly believe that the Town should not tell the developers, what type of buildings should be built and at what locations even though it might be tempting to do so. No one in the government, the planning staff, the Town Manager, or the Mayor has the requisite expertise to make development decisions. If they do, developers would earn less profit and the Town would be beset with poorer quality developments. In contrast, successful developers have the expertise to put multi-use developments together, to market them and to minimize their financial risks.
THE TOWN SHOULD TRUST DEVELOPERS’ ABILITY TO CREATE UNIQUE DEVELOPMENTS THAT GENERATE LONG-TERM VALUE FOR TOWNS AND CITIES.
Whatever the process or procedure the Town undertakes to express its desires to developers, it should not restrict their creativity – so long as they follow the general principles behind the Master Plan, the mandates of the Pattern Book, and the requirements of applicable zoning regulations.
In the coming weeks and months, the Town is expected to issue an RFP to invite developers to submit their proposals. The Town should promote greater creativity by (1) encouraging developers to submit multiple proposals, if necessary, (2) allocating, perhaps, as much as 50% of the evaluation criteria to bold and innovative concepts, and (3) creating an evaluation team consisting of reputable architects, uninterested developers, and experienced financial analysts to evaluate the proposals.
Reducing the Town’s Risk: While developers reduce their financial risks, the Town should focus on reducing its own financial risks posed by any proposed development. The 2005 proposal by Norton Scott, in hindsight, would have posed substantial financial risks for the Town. Had it been approved in 2006, the builder and the Town would have had a two-year window for completing the design, arranging the financing and starting the construction. But, then,
THE 2008-2009 FINANCIAL MELTDOWN WOULD HAVE HIT THE ECONOMY AND MOST LIKELY BROUGHT A COMPLETE HALT TO THE CONSTRUCTION OF THE PROJECT FOR ALMOST FIVE YEARS.
The prices of any completed residential and commercial units would have dropped precipitously (as they did in the rest of the economy), the associated tax revenues would have been far smaller than expected, and both the developer and the town could have been weighed down with substantial financial difficulties. However, during that period of high expectations, the administrative record shows, no one in the Town appears to have a mention of potential risks of the project, much less considered evaluating risks under alternative scenarios.
Among other things, one could have rendered the project less risky by reducing the scope of the project or sharing the costs of public amenities equitably. One could have taken the following steps:
• Allocate the cost of the garage and the park area equitably among different uses – hotel, commercial, multifamily residential, office, and the arts.
• Incorporate a smaller art center within the proposed office and commercial spaces and reserve the Art Spaces property for residential development
• Reduce the amount of office space and the number of rooms in the proposed hotel.
A quick evaluation of the 2005 project suggests that only by evaluating the alternative development and financing options can the Town tap into developers’ creativity, determine what is best for its citizens in the long run, and reduce its own financial risks.
A FOCUS ON BOLD AND INNOVATIVE DESIGNS MAY ALSO BE THE LEAST COSTLY ROAD TO FUTURE PROSPERITY.
 The development approved for the intersection of Elden and Monroe would contain mostly townhouses, for example. Further, when the 2012-2014 TC rezoned the then Town-owned properties, it permitted developers to proffer 64’ tall townhouses.
 Such structures, ubiquitous in newer parts of the Loudoun and Fairfax counties, would neither provide a small town feel nor create unique architecture, in the eyes of many builders and citizens alike.
 An examination of the 2008 proposal shows that the staff almost spent 6 months in negotiating the letter of intent (LOI)that the developer eventually submitted to the Town. The negotiations, I believe, led to the inclusion of several financially burdensome clauses to the LOI and increased the risk the developer was required to take.