|Bellingham Mayor Mark Asmundson said the New Whatcom redevelopment will come with a price tag — the city’s portion alone — of about $200 million, spread out over about 30 years. The port’s portion of the bill is estimated at about $135 million over 20 years; the plan also projects more than $880 million in private development funds.|
At high noon on Sept. 26, a crowd of community members and port and city officials crowded into the Mount Baker Studio Theatre to view a presentation of the preliminary New Whatcom plan and its financial analysis.
The full house anxiously absorbed the first road map for what will be an unprecedented amount of investment into a single development project in Bellingham’s history.
The port and city began creating the master plan for New Whatcom last year. The Waterfront Advisory Group held 14 public meetings from May 2005 to June 2006 to consider the site’s various site-design concepts.
During the summer, the port and city developed a preliminary draft framework plan and corresponding financial analysis for the anticipated long-term costs and revenues of the redevelopment.
The idea for this draft framework plan and financial analysis was to take a step back and “do a little financial reality check,” Bellingham Mayor Mark Asmundson said.
He likened the product of this initial planning process to a template for the future. “It does identify some of the essential elements, but doesn’t flesh out all the details to come,” he said.
The initial financial analysis for this template predicts the total investment from the city, port and private parties to reach $1.2 billion in 2006 dollars.
The draft framework plan
“This is not going to be an exclusive development with condos for rich people, although I’m sure there will be some of those. This will be an extension of everybody’s neighborhood,” Asmundson said.
The site encompasses 220 acres, 137 of which were acquired from Georgia-Pacific in January 2005, and includes 10,000 feet of shoreline.
The plan’s breakdown of ownership leaves 68 percent of the property in public hands.
The majority of the 89.5 acres of port-owned developable land — which is estimated to create 5.9 million square feet of new building construction and brick building reuse — is envisioned for commercial development. This will mostly include commercial office space and residential development.
“We don’t want to compete with retail downtown. We’re not planning on very much retail at all,” Port Executive Director Jim Darling said.
Derek Long, program and development director for Sustainable Connections, as well as a member of the Waterfront Advisory Group, said he appreciated the plan’s emphasis on office space rather than retail so as not to detract from current downtown merchants’ businesses.
“I thought they were being very conscientious about absorption rates and retail because retail is starting to really flourish downtown,” he said.
The draft framework plan forecasts two development phases, the first to be completed in 2016 and the second in 2026.
In its 2026 incarnation, the plan includes street extensions, relocation of the railroad, a marina, a central area for Western Washington University (see article in last month’s BBJ), a marine trade center and an aquarium, as well as 31 acres of parks and trails, including two waterfront parks, each larger than Boulevard Park.
It envisions 3,000 housing units to accommodate an estimated 5,700 residents and is expected to create 2,400 to 4,800 jobs, predicted Hart Hodges, director of Western’s Center for Economics and Business Research. However, these jobs will accommodate less than 6 percent of Whatcom County’s forecasted job growth during that time.
As part of its initial financial analysis, the port and city envision private parties will invest $880 million (in 2006 dollars) toward development on the site.
Darling said he doesn’t know yet who the potential developers will be, but that he’d like them to be local.
“From day one we’ve said we want to develop in a way that local contractors and developers and architects will benefit. That’s our preference — that the local economy benefits the most,” he said.
The amount is based on assessed value for 350,000 square feet of industrial development, 200,000 square feet of warehouse development, and 5.3 million square feet of commercial development (which includes retail, office, hospitality and residential uses), said City Finance Director Therese Holm.
Developer Ted Mischaikov, who said he’s given a lot of thought to developing property in New Whatcom, said the amount of private investment envisioned for this plan seems reasonable.
“It doesn’t seem like a lot,” he said. “I suspect private investment will be above and beyond that, when it’s all counted up at the end of the day.”
Port financial analysis
The port’s 20-year financial analysis for the draft framework plan estimates its total cost at $137 million, with its total revenue at $129 million (in 2006 dollars).
“We’re working with very rough estimates,” Darling said of the analysis. “It’s like saying we’re close to breaking even on the project.”
He said the $8 million gap between cost and revenue will come after the 20-year mark, or costs may not be as high as anticipated, and reiterated that the port’s goal is to break even on the property.
“There are other potential sources of revenue that didn’t go into that model,” said John Carter, port chief financial officer. “For example, we could sell more land earlier.”
Carter reiterated that this financial model is just one of many alternatives.
A majority of the port’s costs for the property will go toward cleanup of the site, and the marina is expected to pay for itself.
In terms of its needed revenue to cover those costs, the port expects more than half, or $67 million, to come from land sales and leases. This figure assumes a value of $8 to $35 per square foot for the sales and leases of a range of land uses.
Some community members think this seems to be an undervalued rate.
“It should be bringing in a premium (rate),” said Anna Hall-Evans, interim director for the Bellingham Bay Foundation. “We wonder why the dollar-per-square-foot seems so low.”
Hall-Evans said she questions whether the port is planning on keeping the rates low so as not to have to anticipate a higher level of cleanup on the site.
But Darling said the level of cleanup and the property’s values are separate issues. He said the Dept. of Ecology would determine what level of cleanup is needed by land use, not land value.
Darling said the port has a fiduciary obligation to be conservative about estimates and said that ultimately, the market would decide rates for the property.
Mischaikov agreed, saying he didn’t think the estimated value was too low.
“The range they’re using is conservative,” he said. “There’s a responsibility to be realistic in terms of revenues and costs. That’s just good common sense.”
While property values in Fairhaven are approaching $100 per square foot, he said, it’s not the port’s job to do “pie-in-the-sky estimates,” and that New Whatcom will likely see similar values to Fairhaven when the property matures.
City shows major revenue gap
The city’s preliminary financial model is based on a 30-year period instead of 20 years, and envisions spending $197 million on parks, streets, bridges, trails and utilities.
This is an unprecedented amount of investment toward one project for the city. By comparison, the city financed Barkley Village’s infrastructure through a total of $5.3 million in bonds for a 310-acre area. Another recent development’s infrastructure, the Cordata Parkway area, was privately financed.
The most notable aspect of the city’s financial analysis is a $76 million gap in funding, or 38 percent of its estimated revenue, to come from as-yet unidentified sources.
Holm said this would likely come from state and federal grants and/or developer contributions, or else certain projects could be cut.
“We’ve identified at least $50 million in projects that are in the ‘nice to have’ category, that if we couldn’t find funding for, we wouldn’t construct or they would be delayed,” she said.
Hall-Evans said she is concerned about this shortfall, and said developer impact fees could potentially make up some of the difference.
Darling said the port and city have yet to agree on whether to institute developer impact fees for the site.
“We will explore them over time,” he said. “This is a lot of property and we want to make it attractive for initial developers.”
The rest of the city’s estimated revenue will come from street funds, Greenways III funds, grants, real estate excise taxes, utility funds, as well as a large portion coming from LIFT, a state-sponsored tax increment financing program.
The port and city adopted the draft framework plan on Oct. 9 to use as a basis for creating the site’s master plan, and also to use during the creation of an environmental impact statement.
Then the Waterfront Advisory Group will hold public workshops regarding the master plan, which the port and city will consider.
Finally, the Port Commission and City Council will approve a final master plan and enter into a development contract by the middle of 2007.
Darling said public discussion and debate over the plan will continue in Waterfront Advisory Group meetings, hearings and open houses over the winter.
For the most part, the initial plan seems to have garnered mostly positive feedback overall.
Mischaikov praised the work that went into the presentation and financial analysis, but added he’d like to see the process move swiftly from here on out.
“There’s a lot more work that needs to be done, and the quicker it can get done — the more resources focused on getting it done — the better,” he said.
Long said he didn’t find anything alarming about the initial plan or financial analysis and, on the contrary, said he was looking forward to the next steps in the process.
“It’s neat to think about where those first likely stages are going to happen,” Long said. “It makes the project seem all that more real.”
But Long also cautioned community members from becoming apathetic about the project now.
“I heard a few people say that it looks like (the final plan) is decided. I think it was (the port and city’s) first shot,” he said.
He said he expects the port and city to present alternative plans with alternative financial models.
“I expect that will be required based on the huge amount of interest from the community,” he said. “People are going to ask for it. It shouldn’t be a problem to look at different scenarios.”
Highlights of the framework plan
Western Washington University
Bayside Harbor Marina
Marine Trade Center
The Marine Trade Center would be located in the Georgia-Pacific tissue warehouse if Georgia-Pacific decides to relocate. It would accommodate marine retail, service and brokerages, such as boat builders and dry storage for small boats.
Deep-water Shipping Terminal
The current deep-water shipping terminal would remain, and port officials are hoping the National Oceanic & Atmospheric Administration will relocate its Pacific Marin Operations Center here. According to commanding officer Jon Rix, NOAA’s lease in Seattle’s Lake Union ends in 2011, and the agency will take bids from Puget Sound ports to relocate on their property. He said NOAA will send out a formal request for bids in 2009.
31 acres of parks and trails
The idea is to connect Fairhaven’s Village Green to the New Whatcom waterfront through a series of parks and trails. Two of the waterfront parks on the site would each be larger than Boulevard Park.