Form revised December 9, 2004

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	DOF Analyst/Phone:
Legislative	Rebecca Herzfeld, 615-1674

Legislation Title:

AN ORDINANCE relating to land use, amending Seattle Municipal Code Section 23.49.011 to allow the use of development rights from a major performing arts facility on the same basis as transferable development rights from low-income housing in certain Downtown zones.

· Summary of the Legislation:

This bill would amend the Land Use Code to permit the remaining 100,000 square feet of transferable development rights (TDR) from the Benaroya Concert Hall to be used on the same basis as housing TDR, rather than on a basis that competes with TDR from Landmarks or open space, to add chargeable floor area above the base Floor Area Ratio in Downtown Office Core 1 and 2, and Downtown Mixed Commercial Zones. This action would increase the value of the remaining concert hall TDR (CHTDR) in the City’s TDR bank, the proceeds of which the City has committed under its Lease with Benaroya Hall Music Center.

· Background:

In October 1995, the City executed, pursuant to Ordinance 117855, a Master Agreement with the Seattle Symphony Orchestra regarding the development and construction of a new City-owned downtown concert hall for primary use by the Symphony. In June 1996, pursuant to Ordinance 118112, an amendment to the Master Agreement was adopted, acknowledging expectations that $5,000,000 would be received from sale of TDR from the concert hall site, and that this amount would be needed to fully fund concert hall construction. It also gave the Symphony the right to obtain additional funds from the City in an amount equal to the difference between $5,000,000 and the proceeds received from TDR sales by July 31, 1998. Benaroya Hall Music Center (BHMC), a nonprofit organization, was recognized in September 1996 by Resolution 29438 as the entity responsible for the construction of the concert hall, and in September 1997, the City executed, pursuant to Ordinance 118732, a Lease and Concession agreement with BHMC. BHMC agreed to pay all debt service and other transaction costs borne by the City in making the $5,000,000 available.

In June 1998, the City executed, pursuant to Ordinance 119051, the Second Amendment to the Master Agreement, and a First Amendment to and Restatement of the Lease and Concession Agreement (hereinafter the “1998 Agreement”), both with BHMC. The 1998 Agreement stated that any CHTDR sales proceeds above the amount required to repay the principal of bonds issued by the City to raise the $5 million would first be used to repay BHMC for any payments it made to the City in reimbursement for interest on the bonds, and any amount beyond this would be split evenly between BHMC and the City, with the City’s funds being devoted to additional maintenance and operation expenses for Benaroya Hall, above a base level for which the City is obligated to reimburse BHMC under the Agreement.

In August 1998, the City, pursuant to Ordinance 119042, issued $5,000,000 in bonds for the concert hall. In 2000 the City received $4,055,396 from the sale of CHTDR. The City used these proceeds, and some earnings thereon, to redeem a portion of the 1998 Bonds. In August 2001, pursuant to Ordinance 120169, as amended by Ordinance 120398, the City issued bonds and allocated $835,000 of the proceeds towards the refinancing the remaining concert hall debt. In July 2004, the City received $147,630 from the sale of CHTDR. Of the $5 million in bonds, the debt remaining is $660,000, which now consists of an interfund loan pursuant to Ordinance 121544, plus accrued interest of $40,000. BHMC also has paid the City approximately $500,000 in interest since 1998. 100,000 square feet of CHTDR remain to be sold.

In August, 2001, in Ordinance 120443, the City modified development regulations in downtown zones to provide, among other things, that in the principal Downtown commercial zones, for a project to achieve chargeable floor area exceeding the base Floor Area Ratio (FAR) by more than one FAR, a developer would use transferable development rights from housing, and/or bonuses for voluntary agreements to provide housing and child care, for 75 percent of such additional chargeable floor area (with certain exceptions).

Ordinance 120443 also removed major performing arts facilities such as Benaroya Hall as eligible sending sites for TDR. However, it allowed the use of remaining TDR from a facility that had already satisfied conditions for transfer (as Benaroya Hall had done), to add floor area to projects to which prior Code provisions would apply, or to add floor area to new projects generally on the same basis as TDR from Landmarks and open space.

· Please check one of the following:

____ This legislation does not have any financial implications. (Stop here and delete the remainder of this document prior to saving and printing.)

X This legislation has financial implications. (Please complete all relevant sections that follow.)

Appropriations: This table should reflect appropriations that are a direct result of this legislation. In the event that the project/ programs associated with this ordinance have appropriations that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below.

Fund Name and Number	Department	Budget Control Level*	2005 Appropriation	2006 Anticipated Appropriation
TOTAL

Anticipated Revenue/Reimbursement: Resulting From This Legislation: This table should reflect revenues/reimbursements that are a direct result of this legislation. In the event that the issues/projects associated with this ordinance/resolution have revenues or reimbursements that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below the table.

Fund Name and Number	Department	Revenue Source	2005 Revenue	2006 Revenue
Development Rights Subfund 00179	Finance	CHTDR Sales	$2,000,000	NA
TOTAL			$2,000,000	NA

The figures above are estimated. The net amount after bonds are retired and the amount the City would be obligated to pay BHMC immediately is $400,000, to be devoted to additional maintenance and operation expenses for Benaroya Hall, in addition to the approximately $450,000 budgeted in 2005 and 2006.

Notes: The effect of this legislation would be to increase the value of the remaining 100,000 square feet of CHTDR in the City’s TDR bank. The TDR value is contingent on the market and whether there are developers interested in purchasing the rights. The chart below is based on the following assumptions:

• If the proposed legislation is adopted, CHTDR value would increase to the value of housing TDR in the most recent sale of rights (July 2004). The actual value could be higher or lower.
• If the proposed legislation is adopted, there are enough interested developers to purchase all remaining CHTDR in 2005, in part because it could be used to provide up to 75% of additional chargeable floor area.
• If the legislation is not adopted, and CHTDR can only be used to provide up to 25% of additional chargeable floor area, fewer CHTDR would be sold. If there is demand for 100,000 square feet of housing TDR or voluntary agreements to provide housing and child care (to meet the 75% as assumed above), 33,000 square feet of CHTDR could be sold to meet demand for the other 25% in 2005.
• If the legislation is not adopted, at least $205,000 in concert hall debt and accrued interest would carry over to 2006.

Potential Return from Concert Hall TDR in 2005

	NO ACTION $15/s.f. (price of CHTDR in 2004)	BILL ADOPTED $20/s.f. (price of housing TDR in 2004)
Total return from sale	$495,000	$2,000,000
Remaining debt and back interest	$705,000	$0
City’s portion of sale proceeds, to be used for Benaroya Hall maintenance and operations	$0	$400,000

· What is the financial cost of not implementing the legislation? (Estimate the costs to the City of not implementing the legislation, including estimated costs to maintain or expand an existing facility or the cost avoidance due to replacement of an existing facility, potential conflicts with regulatory requirements, or other potential costs if the legislation is not implemented.)

If the assumptions outlined above are accurate, the financial cost to the City in 2005 of not implementing the legislation would be approximately $400,000. These funds could be used to maintain and operate Benaroya Hall, over and above the amount already allocated by the City for this purpose. BHMC repayment of debt, and reimbursement of BHMC for past interest paid, would progress more slowly. In addition, it may take much longer for the City to sell approximately 6,000 square feet of housing TDR currently in the TDR bank (or any new housing TDR purchased by the City). Such housing TDR could not be sold until all remaining CHTDR are sold, according to the 1998 Agreement.

· What are the possible alternatives to the legislation that could achieve the same or similar objectives?

NA

· Is the legislation subject to public hearing requirements: (If yes, what public hearings have been held to date, and/or what plans are in place to hold a public hearing(s) in the future.)

Yes, a public hearing is required and is planned for April 2005.

· Other Issues (including long-term implications of the legislation):

Because only 100,000 square feet of concert hall TDR remain, and the Land Use Code no longer permits transfers from performing arts halls, this legislation does not have long-term implications. In the short term, a potential impact of the legislation is that approximately $2,100,000 that otherwise would be made available to support affordable housing and/or child-care downtown would be diverted to CHTDR.

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