Form revised December 4, 2006

FISCAL NOTE FOR CAPITAL PROJECTS ONLY

Department:	Contact Person/Phone:	DOF Analyst/Phone:
Parks and Recreation	Terry Dunning / 684-4860	Jennifer Devore / 615-1328

Legislation Title:

AN ORDINANCE relating to Discovery Park; authorizing acquisition of real property and acceptance of deeds; authorizing acceptance of certain utility infrastructure and associated easements, clarification of certain existing utility easements and termination of certain private utility easements; and increasing appropriations to the Department of Parks and Recreation in the 2007 Budget; all by a three-fourths vote of the City Council.

Summary and background of the Legislation:

This legislation will authorize the Superintendent of Parks and Recreation (Superintendent) to execute a Purchase and Sales Agreement with Pacific Northwest Communities, LLC (PNC) for the acquisition of the Capehart Naval Housing Area, an in-holding of approximately 24 acres within Discovery Park.  The property is currently used for military housing for the Navy and is occupied by 92 housing units, a base exchange store and a maintenance building.

The Navy entered into an agreement with American Eagle, LLC to form a joint development group known as PNC for the purpose of developing replacement housing for Naval personnel housed in the Puget Sound Area.  The personnel housed in homes on the in-holdings within Discovery Park (Montana Circle, Washington Avenue properties and Capehart) are among those whose housing will be replaced.  In return for development of this replacement housing, PNC will receive title to these properties.  The Montana Circle and Washington Avenue housing areas are designated as historically significant and are within a Historic District.  These homes will be sold subject to the historic restrictions that apply to the District.  Additionally, certain portions of the water and wastewater infrastructure currently serving the Montana Circle and Washington Avenue housing areas are believed to be in deteriorating condition, beyond their useful life, and do not meet current Seattle Public Utilities (SPU) infrastructure standards.  As part of its development project, PNC or its successor will make the necessary improvements to bring the water and wastewater infrastructure servicing these areas up to current SPU standards and then convey the ownership, operations and maintenance rights and responsibilities, together with any necessary and related easements, to SPU.  This is standard development practice and there will be no direct fiscal impact of this activity to the City of Seattle (City).

The Capehart Housing Area is not historic and this area is to be sold to the City for incorporation into Discovery Park.

On December 21, 2004, the City and PNC entered into a Memorandum of Understanding (MOU) that set out the basic business terms that would be the foundation of the City’s acquisition of the Capehart Naval Housing Area and spoke to the mutual commitment of the parties to protect the historic character of the Historic District houses.  On June 20, 2006, the parties executed an Addendum to the MOU modifying the terms.  The amended terms included extending the deadline for completing an agreed upon Purchase and Sales Agreement to June 30, 2007; and a modification in the price.  This change reflected the fact that no “trade” property was currently available in the City’s inventory that would satisfy the original MOU’s intent to include a parcel of land as partial compensation to PNC.

During the intervening months, the City and PNC have continued to negotiate the details of the transaction, complete the City’s environmental due diligence processes, and await the Navy’s completion of various environmental reviews and documents that are prerequisite to their conveyance of the property to PNC.  The City’s due diligence efforts have not revealed any significant environmental risks.

The agreed upon Purchase Price in this transaction was set in 2004 by the terms of the MOU.  The adjustment that occurred in 2006 with the Addendum reflected the value of City land that was originally proposed as partial compensation for Capehart.  The purchase price of the property is supported by an independent fee appraisal prepared under contract to the City in 2004.  The price has remained the same since the Addendum, although the value of the property likely has increased significantly since the original agreement date.

In addition to the purchase price and typical terms related to closing the transaction, the agreement also provides for PNC’s removal of the homes down to their foundations prior to closing.  Additionally, the Agreement calls for the acquisition to be phased (as shown on the attached map) with an initial parcel of approximately 6 acres to be acquired by November 30 for a purchase price of $2,775,000.  The second parcel will be acquired by the end of 2009 (depending on the exact date the replacement Navy Housing is available and the houses can be demolished).  The City will make a deposit of $1,225,000 toward that second phase along with the purchase price of the initial parcel.  This deposit will be retained in escrow until the close of the second phase and will be credited to the final payment of $8,325,000 plus closing costs.

As noted below, several fund sources are being used to cover the purchase of this property.  The City has been very successful in attracting grants and support from other agencies including the State Capital Budget (CTED); the State Interagency Committee; and King County Conservation Futures Funds.  Further discussion of funding is provided below.

Project Name:	Project I.D.	Project Location:	Start Date:	End Date
Discovery Park – Capehart Acquisition	K731231	3801 Government Way	1^st Quarter 2005	4th Quarter 2009

· Please check any of the following that apply:

____ This legislation creates, funds, or anticipates a new CIP Project.

____ This legislation does not have any financial implications

_X__ This legislation has financial implications.

Appropriations:  (In 000’s)

Fund Name and Number	Department	Budget Control Level	2007 Appropriation	2008-09 Anticipated Appropriation
Cumulative Reserve Subfund – Unrestricted (IAC Grant) 00164	Parks and Recreation	West Point Settlement Projects K72982	$500	$0
Cumulative Reserve Subfund – Unrestricted (Sale of City Property) 00164	Parks and Recreation	West Point Settlement Projects K72982	$2,117	$0
Cumulative Reserve Subfund – Unrestricted (CTED grant) 00164	Parks and Recreation	West Point Settlement Projects K72982	$ 689.5	$0
Cumulative Reserve Subfund – Unrestricted (CFT grant) 00164	Parks and Recreation	West Point Settlement Projects K72982	$1,300	$0
Cumulative Reserve Subfund – Unrestricted 00164	Parks and Recreation	West Point Settlement Projects K72982	$1,308.5	$0
TOTAL			$5,915	$0

Notes:  This legislation requests $5,915,000 of appropriation ($500,000 related to a Washington State Interagency Committee for Outdoor Recreation (IAC) grant; $2,117,000 from the sale of City property (Ordinance 122253); $689,500 from a second CTED grant; $1,300,000 million from a second King County CFT grant), and $1,308,500 from grants or other fund sources that have yet to be determined.

Spending Plan and Future Appropriations for Capital Projects:  (in 000’s)

Spending Plan and Budget	2007	2008	2009	2010	2011	2012	Total
Spending Plan	4,317	20	7,263	0	0	0	11,600
Current Year Appropriation	5,685						5,685
Future Appropriations	5,915	0	0	0	0	0	5,915

Notes:  Spending Plan:  Through 2007, the Department of Parks and Recreation (DPR) plans to spend approximately $4.317 million related to the acquisition of the Capehart property, which includes $2.775 million to acquire the initial six acre parcel; $1.225 million to be held in escrow as a deposit on the second parcel; and $317,000 for pre-acquisition, staffing and closing costs.  In 2008, DPR anticipates spending approximately $20,000 in staffing and other costs to resolve remaining property or acquisition issues.  In 2009, DPR anticipates spending $7.1 million in direct costs and $163,000 in pre-acquisition, staffing and closing costs to acquire the second parcel (approximately 18 acres) of the Capehart property.

Current Year Appropriation:  DPR currently has $5.685 million in appropriation including $2 million from the Shoreline Park Improvement Fund; $2.7 million from a King County CFT grant; and $985,000 from a Washington State CTED grant. 

Future Appropriations:  See the Appropriation Section above.

Funding source: (in 000’s)

Funding Source (Fund Name and Number, if applicable)	2007	2008	2009	2010	2011	2012	Total
Shoreline Park Improvement Fund (King County Settlement)	2,000*	0	0	0	0	0	2,000
Shoreline Park Improvement Fund (CTED Grant)	985*	0	0	0	0	0	985
Cumulative Reserve Subfund - Unrestricted (CTED Grant)	689.5	0	0	0	0	0	689.5
Cumulative Reserve Subfund - Unrestricted (Two CFT Grants)	2,700* 1,300	0	0	0	0	0	4,000
Cumulative Reserve Subfund - Unrestricted (IAC Grant)	500		0	0	0	0	500
Cumulative Reserve Subfund - Unrestricted (Sale of City Property)	2,117	0	0	0	0	0	2,177
Cumulative Reserve Subfund –Unrestricted	1,308.5	0	0	0	0	0	1,308.5
TOTAL	11,600	0	0	0	0	0	11,600

Notes:

*Funding that has been appropriated prior to this legislation.

Shoreline Park Improvement Fund:

King County Settlement:  About twenty years ago the City entered into an agreement with King County under which King County provided several million dollars in funding as mitigation of the West Point Treatment Plant.  In 2006, the City received the final payment for this agreement.  With support from the West Point Citizens Advisory Committee, the City has reserved $2 million of the final mitigation payment for the acquisition of the Capehart property.

CTED Grant:  In 2005, the State approved a Community, Trade, and Economic Development (CTED) grant of $985,000 for the Capehart acquisition.  This grant was appropriated in 2005 via Ordinance 121993.

Cumulative Reserve Subfund - Unrestricted:

CTED Grant:  In 2007, the State approved a second CTED grant of $689,500.  This grant is being appropriated with this legislation.

CFT Grant:  In 2005, King County approved a $2.7 million Conservation Futures Grant (CFT) for the Capehart acquisition.  This grant was appropriated in 2007 via Ordinance 122358.  In 2006, King County approved a second CFT grant for $1.3 million.  The second grant is being appropriated with this legislation.

IAC Grant:  In 2007, the State approved a grant of $500,000 from the Interagency Committee for Outdoor Recreation (IAC).  This grant is being appropriated with this legislation.

Sale of City Property:  In 2007, the City sold property at 2010 South Jackson and deposited a portion of the proceeds into the Cumulative Reserve Subfund (see Ordinance 122253).  This legislation appropriates these funds for the acquisition of Capehart.

To Be Determined: This project requires an additional $1,308,500 from grants or fund sources that are yet to be determined.

Bond Financing Required:  N/A

Type	Amount	Assumed Interest Rate	Term	Timing	Expected Annual Debt Service/Payment
TOTAL	N/A

Uses and Sources for Operation and Maintenance Costs for the Project:

O&M	2007	2008	2009	2010	2011	2012	Total
Uses
Start Up			$7,036				$7,036
On-going	$4,288	$17,798	$31,641	$74,173	$75,978	$77,498	$281,376
Sources (itemize)
Park Fund (00100)	$4,288	$17,798	$38,677	$74,173	$75,978	$77,498	$288,412

Notes:  The existing housing units, roadways and parking lots on the site will be demolished and the site converted to a meadow open space interspersed with thickets and coniferous forest. 

This legislation does not result in additional operation and maintenance (O&M) costs, but reflects a change in online dates.  O&M costs associated with phase one of the acquisition will begin October 2007 and phase two of the acquisition will begin October 2009.  In 2009, there is also a one time vehicle purchase cost. 

Periodic Major Maintenance costs for the project:

Major Maintenance Item	Frequency	Cost	Likely Funding Source
Restoration of the property, including removing roadways, pavement and utilities; and grading and seeding the property (see project K731242 in 2007 Adopted CIP, “Discovery Park – Capehart Site Restoration”)	One-time	$500,000	Shoreline Park Improvement Fund
TOTAL		$500,000

Notes:  Funding from the Shoreline Park Improvement Fund for the restoration of this property is planned for 2009.

Funding sources for replacement of project: 

Not Applicable.  As real property, this acquisition will not be subject to replacement.

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE Impact:  NA

Position Title and Department*	Fund Name	Fund Number	Part-Time/ Full Time	2007 Positions	2007 FTE	2008 Positions**	2008 FTE**
TOTAL

Notes:  Not applicable.

Do positions sunset in the future?  Not Applicable.

What is the financial cost of not implementing the legislation:  If this legislation is not implemented, the property will likely be sold to and developed by a private party.  The costs to the City of providing public services to a private in-holding of an unknown number of homes within the core of Discovery Park are impossible to ascertain at this time, since we do not have information addressing the nature of the development that would occur at this location.

What are the possible alternatives to the legislation that could achieve the same or similar objectives:  There are no alternatives to this legislation that could achieve the consolidation of property into Discovery Park as outlined in the Discovery Park Plan.

Is the legislation  subject to public hearing requirements: Yes, this legislation is subject to a public hearing because it involves a capital project that will cost more than $5 million.  This hearing will be scheduled by the City Council, following a 10-day public notice period.

Other Issues:  This legislation is accompanied by another separate ordinance laying off certain roadways in Discovery Park and Park Boulevards in order to provide public access to the Historic District Homes and other private properties adjacent to Discovery Park. 

Please list attachments to the fiscal note below:

Attachment 1:  Discovery Park Capehart Housing Acquisition Phases - Map