SALT LAKE CITY ECONOMIC REVIEW PANEL Minutes of the Meeting
Held at 451 South State Street, Room 126
An onsite field trip was scheduled for 12:00 Noon and attended by Rich Hall, Robert White, Elizabeth Giraud, and Nelson Knight.
Present from the Economic Review Panel were Rick Howa, Rich Hall, and Rob White. Present from the Planning Staff were William T. Wright, Planning Director, Joel Paterson, Preservation Supervisor, Elizabeth Giraud and Nelson Knight, Preservation Planners.
The meeting was called to order at 12:30 P.M. by Ms. Giraud. She said that the Economic Review Panel convened to hear a petition from Jeff Jonas of American Housing and Development Company to review the evidence of economic hardship in relationship to the Historic Landmark Commission Case No. 026-98, which is a request for approval to demolish seven structures in the Central City Historic District at 517, 524, 527, 528, 532, 533, and 538 East Vernier Place; and that the Economic Review Panel convened, pursuant to Section 21 A.34.020(K)(3) of the Salt Lake City Zoning Ordinance, a copy of which was filed with the minutes of this meeting.
A roll is being kept with the minutes of all who attended the Economic Review Panel meeting. Tapes of the meeting are available and will be retained in the Salt Lake City Planning Office for a period of one year, after which they will be erased.
Ms. Giraud pointed out that this meeting was opened to the public, but public comment would not be allowed, unless otherwise directed by the Panel.
Ms. Giraud stated that Mr. Rich Hall with R.K. Hall Construction, was selected by the applicant, Mr. Jeff Jonas, to represent American Housing Development Corporation (Winthrop Court, L.C.) throughout the economic hardship process. She said that Mr. Robert White, Trustee for the National Trust for Historic Preservation, was selected by the Historic Landmark Commission to represent the City, and the two representatives chose a third member of the panel, Mr. Rick Howa with Howa Construction Company. Ms. Giraud suggested, at this time, that the three members elect one person to act as Chair for the duration of this review so the meetings would be conducted in an organized and orderly manner.
Mr. White nominated Mr. Howa to the office of Chair of this Economic Review Panel. Mr. Hall seconded the nomination. Therefore, Mr. Howa was elected as Chair by acclamation.
Ms. Giraud said that the Economic Review Panel was to review the financial data, which had been submitted by the applicant, and make a decision whether or not it would be an economical hardship for the applicant to maintain the structures at 517, 524, 527, 528, 532, 533, and 538 East Vernier Place. Ms. Giraud stated
that the Economic Review Panel's responsibility was to make findings, based on the criteria in the ordinance. She pointed out that the findings of the Economic Review Panel will be submitted to the Historic Landmark Commission to review; and that Commission will make a decision to either accept or not accept the findings of the Panel. Ms. Giraud added that the only way the Commission cannot accept the findings of the Panel is if the Panel acted in an arbitrary manner or there was an erroneous finding of material fact.
The balance of the meeting was turned over to the new Chair, Rick Howa.
Mr. Jeff Jonas, the applicant, was present. Mr. Howa asked Mr. Jonas to present an overview of the documents he had submitted to the panel members and the staff, a copy of which was filed with the minutes of this meeting. The documents are available for review in the Salt Lake City Planning Office
Mr. Howa said that they should proceed through Section 21 A.34.020(K), which states the following:
Section 21A.34.020(K) Definition and Determination of Economic Hardship. The determination of economic hardship shall require the applicant to provide evidence sufficient to demonstrate that the application of the standards and regulations of this section deprives the applicant of all reasonable economic use of return on the subject property. A copy of the ordinance was filed with the minutes.
Section 21A.34.020(K)(2) Standards for Determination of Economic Hardship. The Economic Review Panel shall apply the following standards and make findings concerning economic hardship:
a. The applicant's knowledge of the landmark designation at the time of acquisition, or whether the property was designated subsequent to acquisition.
Discussion: It was determined the applicant had knowledge of the landmark designation at the time he purchased the property. Mr. White said, that creates a fairly important hurdle. It is actually in the code to consider whether or not the applicant knew that this was under landmark designation." Mr. Howa inquired why Mr. Jonas continued when he knew the property was under landmark designation. Mr. Jonas said that he had already been through the economic hardship process on other portions of the property site. He said, "He knew that there was a
'caveat' if there was an economic hardship review, which is one of the options given a property owner."
Finding: Mr. Howa moved that the applicant had knowledge of the landmark designation at the time he purchased the property. It was seconded by Mr. Hall. It was a unanimous vote of approval by Mr. Hall, Mr. Howa,and Mr. White. The motion passed.
b. The current level of economic return on the property as considered in relation to the following:
i. The amount paid for the property, the date of purchase, and party from whom purchased, including a description of the relationship, if any, between the owner of record or applicant, and the person from whom the property was purchased;
ii. The annual gross and net income, if any from the property for the previous three years; itemized operating and maintenance expenses for the previous three (3) years; and depreciation deduction and annual cash flow before and after debt service, if any, for the previous three years;
iii. Remaining balance on any mortgage or other financing secured by the property and annual debt service, if any, during the previous three (3) years;
iv. Real estate taxes for the previous four years and assessed value of the property according to the two (2) most recent assessed valuations by the Salt Lake County Assessor;
v. All appraisals obtained within the previous two (2) years by the owner or applicant in connection with the purchase, financing or ownership
of the property;
vi. The fair market value of the property immediately prior to its designation as a Landmark Site at the time the applicant is filed;
vii. Form of ownership or operation of the property, i.e. sole proprietorship, for-profit corporation or not-for-profit corporation, limited partnership, joint venture, etc.; and
viii. Any state or federal income tax returns on or relating to the property for the previous two years;
Discussion: Mr. Jonas said that the purchase price of the homes ranged from $63,600 to $185,000. A discussion took place regarding the purchase price and the alternative choices a developer would have had with the property. Mr. Jonas said, "The exit strategy was if it doesn't work financially to renovate the houses, then apply for an economic hardship and demonstrate that then do something else with them" Mr. White suggested that the properties could have been sold. Mr. Jonas said, this gets back to the argument we have had on every one of these {economic hardships). This is different than buying a single house in a single place. This was all part of a development. To leave it {the bock of properties), would not have made sense. We bought the Lunt Motel Annex. We bought the properties on the east side of the block, and we bought the property from Pembroke. To leave these properties in someone else's ownership, with no control, and in any state of disrepair, or to sell them off, individually, makes just as little sense/' Mr. Jonas said that the properties had not been offered for sell, as individual home sites.
Mr. Jonas remarked that the Multi-Ethic Corporation proposed to move the houses on Vernier Place to Pugsley Street but the RDA (Redevelopment Agency) "pulled the agreement". He continued by saying that the process has taken one year. Mr. White said, "That was a lousy deal for the applicant". Mr. Jonas indicated that he not only would have donated the homes, but also would have paid the moving costs.
Mr. Wright said that there was concern about the Multi-Ethic Corporation doing the complete project and the end use of the houses. He said that the City Council did not believe that moving those houses on the Pugsley Street properties made economic sense. Mr. Wright added, "In my opinion, I wonder if the decision would have been different if there had been a stronger applicant that showed a little more financial means to complete the project." Mr. Howa mentioned that that it would have been difficult to find someone to move those houses for less than $55,000.
Mr. White said that the "numbers" the Multi-Ethnic Corporation had for renovation costs were about "half or less than Mr. Jonas' construction costs after the move". Mr. Jonas said that he believed the lower numbers was one of the problems. He said, "I don't think that the City Council believed the numbers." Mr. White stated, "There are people who do that kind of preservation all over town. We see houses, like those houses, being renovated every day." Mr. Hall said that there is a question of how much "sweat equity" would be in those projects, unless they would be owner/occupied.
Mr. White talked about the economic hardship ordinance. He said that it seemed to him that the purpose of the ordinance is not to have developers assume that when they buy a certain property and "if I cannot make it pencil, I will just tear them down". Mr. White said that he does not believe that the purpose of the ordinance is aimed at that circumstance. Mr. Jonas agreed that he did not believe that the City anticipated a development, such as the one he was proposing. Mr. Jonas said he realized that what the City "envisioned were individual, single family, homes" for the subject properties. Mr. White said, "We might differ on the conclusion. The conclusion that he drew was that there was no hardship because other people in other circumstances could do that project. Those houses could be renovated at some reasonable number with some sweat equity."
A discussion took place regarding the interpretation of the ordinance and the fact that the applicant could have tried to sell the block of properties.
Mr. Wright said, "It was important to look at the facts, as far as these properties were concerned in terms of single and multiple ownerships, conditions, and reinvestments these properties were owned by a variety of different people over the past twenty years. They are the ones that did not reinvest in the property that, perhaps, brought us to this stage." Mr. Wright continued by saying, "We can't force someone to give up their property " Mr. White said that he did not interpret the ordinance as to "force an applicant to give up their property". He said, "The code asks if the applicant tried to sell it."
Mr. White said that the buildings are actually the applicants and not Mr. Jonas. Mr. White said, "I don't know what a good policy answer to that would be. I think preservation in general really wrestles with that issue. You can't force anyone to preserve a building”. Mr. White said that if the owner knew that the properties were in an historic district. Mr. Howa said that the owner has that "option to apply different uses to that property under the ordinance. Ms. Giraud said, "In an overlay district, preservation is the over arching (can we think of a better word??) concern regardless of the overlay zoning that allows higher density and more profitable uses”. Mr. Wright said that information is a piece of evidence provided to the Economic Review Panel, and it is up to the Panel to analyze all the data to determine if an economic hardship exists for the property.
Mr. White said that there are other ways the property could be developed and make economic sense, such as selling the block of properties, using the properties for low-moderate income and be eligible for tax credits, or partnering with the same people who tried to move the houses. Mr. Jonas said that the last two had already been explored.
There was a lengthy discussion regarding the costs of renovating the houses. Mr. Jonas said that the houses could be renovated for approximately $60 per square foot. Mr. White said that owner/occupied contractors, who were in the business of fixing up old houses, could renovate the houses for much less. ·
Mr. Jonas said that if the properties were in the Avenues, that would be a whole different set of circumstances. He added, "The problem is where they are located." Mr. White said that there were areas throughout the city where "little streets are being turned around. Mr. Jonas argued that is happening with "incredibility disappointing results".
Mr. Wright said that the City had zoned most of those little courts SR-3 (Special Development Pattern Residential District), which means that the only use would be single-family homes on very small lots, with or without a detached garage and no more than three to six houses in a row, but Vernier Place was zoned for multi-use, at a higher density, because there were other uses available in the area. Mr. Wright said that history would show that Central City had been zoned R-6 which allowed 80 units per acre for 40 to 50 years. He continued by saying that the zoning was inconsistent because little homes existed on the inner courts. Mr. Wright said that the goal of the City was to make the "vision a little clearer". Mr. Wright said that it was recognized that east downtown would be a mixed use-residential opportunity for higher density opportunities.
Finding: Mr. White moved that the applicant had sufficiently answered Subsection (b). It was seconded by Mr. Howa. It was a unanimous vote of approval by Mr. Hall, Mr. Howa, and Mr. White. The motion passed.
c. The marketability of the property for sale or lease, considered in relation to any listing of the property for sale or lease, and price asked and offers received, if any, within the previous two years. This determination can
include testimony and relevant documents regarding:
i. Any real estate broker or firm engaged to sell or lease the property;
ii. Reasonableness of the price or rent sought by the applicant; and
iii. Any advertisements placed for the sale or rent of the property.
Discussion: Since these standards were already discussed, Mr. White moved that the applicant insufficiently answered Subsection (c). After a short conversation, Mr. White withdrew his motion.
Finding: Mr. Hall moved that the Economic Review Panel accepts the information submitted in Subsection (c). It was seconded by Mr. Howa. Mr. Hall and Mr. Howa voted for approval. Mr. White was opposed. The motion passed.
d. The infeasibility of alternative uses that can earn a reasonable economic return for the property as considered in relation to the following:
i. A report from a licensed engineer or architect with experience in rehabilitation as to the structural soundness of any structures on the property and their suitability for rehabilitation;
ii. Estimate of the cost of the proposed construction, alteration, demolition or removal, and an estimate of any additional cost that would be incurred to comply with the decision of the Historic Landmark Commission concerning the appropriateness of proposed alterations;
iii. Estimated market value of the property in the current condition after completion of the demolition and proposed new construction; and after renovation of the existing property for continued use;
iv. The testimony of an architect, developer, real estate consultant, appraiser, or other professional experienced in rehabilitation as to the economic feasibility of rehabilitation or reuse of the existing structure on the property;
Discussion: Mr. White said that the information was there, but he found that the estimates were high, and said that llpeople renovate houses every day for much less". Mr. Hall said that in his experience for commercial development, he believed the applicant had “very conservative estimates". Mr. Hall said that there were estimates that were assumed expenses such as seismic upgrading, and such that were not included in the costs.
Ms. Giraud mentioned that she checked with the architects from the State Historic Preservation Office and also with Roger Evans, that seismic upgrading was not necessary to renovate the single-family houses.
Mr. Hall said that the applicant recommended to repair deteriorated brick walls, to attach the roof properly to the structure, to repair foundations with new concrete, repair floor joists, and to anchor the sagging floors were for stabilizing the structures. He again said that there were no seismic upgrading in the structural costs.
Mr. Hall stated that an engineer's report was required by the ordinance, and that Mr. Hall had priced out the construction costs from the report.
Mr. Howa said that there appeared to be a discrepancy in the construction costs, but with his experience, he has found that people can look at the construction costs in different ways. Mr. White added that people would be reviewing the costs with a "different scope". Mr. Howa indicated that some people would simply paint over a rotted window sill, and others would repair or replace the rotted window sill.
Mr. Howa said, “For the purposes of this economic hardship and per the ordinance, I don't think these costs are wrong." Mr. Hall said that unit costs that were generated in the current report reflects quality work that would have needed to be done.
The discussion again turned to the Multi-Ethic Corporation estimated costs which had been submitted to the City. Mr. White said that that corporation's costs and the applicant's costs were submitted for the same houses.
Mr. White changed the subject and said that he was confused about the wording of this section of the ordinance and that the language needed to be clarified. A lengthy discussion regarding the meaning of the ordinance and how the standards were to be interpreted.
Finding: Mr. Howa moved that the applicant complied with Subsection (d}(i through iv.}, based on the evidence submitted. It was seconded by Mr. Hall. Mr. Hall and Mr. Howa voted "Aye". Mr. White was opposed. The motion passed.
Mr. White said that just for the record Subsection (d) needed to be clarified. Mr. Wright said that the staff would work on the interpretation. Mr. White said he believed that alternative models for development could be explored which would have the potential to be economically viable.
e. Economic incentives and/or funding available to the applicant through federal, state, city, or private programs;
Discussion: Mr. Jonas said that the maximum tax credit could be 20% federal tax credit if the properties were rental units. Mr. White pointed out that, although the results would be the same, the applicant had the tax credit information backwards. He added that the federal tax credits would only be eligible for structures with a multi-family use, and not owner-occupied.
Finding: Mr. Hall moved that the applicant had considered other incentives and substantially complied with Subsection {e). It was seconded by Mr. White. It was a unanimous vote of approval by Mr. Hall, Mr. Howa, and Mr. White. The motion passed.
Mr. Howa inquired if the other members of the Panel needed additional information from the applicant or if they were ready to make a decision.
Mr. White said that he wanted to state his position for the record: ''I really still do believe that this ordinance was written to provide for a different kind of hardship then we see here. The idea of not having a set of houses pencil for a given density or a given idea for development doesn't seem to me what this ordinance was written for and therefore should not apply to this case. For that reason, I will vote against the finding of an economic hardship. I wish Mr. Jonas well and I think the City's policy of encouraging higher density is a really good one. I think it is conflicting within its own policies of how to move forward on this and I would urge how the City thinks about upgrading the densities in neighborhoods like this, but I don't think this is the correct vehicle to do it. I don't think the hardship ordinance was written to provide relief in this kind of case."
Mr. White moved to deny economic hardship. The motion died for the lack of a second.
Mr. Wright asked that this is for the record: “The analysis that has been done has been done to renovate and reoccupy the houses. It hasn't been done to simply justified putting more density on the property. I think you did the analysis that you were asked to do under this hardship ordinance. These single family houses you have analyzed the condition, what it costs, what they are worth after the renovation, if there is or is not, You have not done it so as to justify that there ought to be 30 units per acre here."
Mr. White said that maybe an Economic Review Panel should explicitly say, "If this is that much more valuable, then they ought to come down. Subsection iii is actually suggesting that and requiring, it's odd because this doesn't actually require us to take a values decision and maybe it should, or maybe Landmarks itself return, whether they are trying to renovate old buildings or new buildings." Mr. White said, "I have no problem with that." Mr. Howa said, as he pointed to the a copy of the ordinance, "If someone could make a greater return on their capital by creating new homes, I think they would be doing it. Why would somebody not do that? That is the irony of this whole thing. I think we, as a Panel, take exception as to how a developer wants to make his money when he has risks his capital, and we have to do it based on these words here. That is our biggest challenge. People who risk their capital are not always taking advantage of the City's ordinance and the Panel members." The discussion continued.
FINDING: Mr. Howa moved that the Economic Review Panel finds that there is an economic hardship, based on the analysis and findings of fact, relative to the standards for the definition and determination of economic hardship, included in Section 21A.34.020(K)(2)(a through e) of the Salt Lake City Zoning Ordinance. It was seconded by Mr. Hall. Mr. Hall and Mr. Howa voted "Aye". Mr. White was opposed. The motion passed.
As there was no other business, the meeting was adjourned at 1:45 P.M.