EDA Member Challenges Housing Project’s Value to City

By STAN FENDLEY
Falls Church Times Staff

February 5, 2010

A member of the Falls Church Economic Development Authority challenged the wisdom of the proposed affordable housing project, “The Wilden,” Tuesday night, indicating that the City could gain over $1 million a year with a different approach.

At the organization’s monthly meeting EDA member Mike Novotny presented a 15-slide presentation considering alternative uses of The Wilden property at 350 South Washington Street, along with adjacent properties at 360 and 370 South Washington Street.  Earlier this week, City officials disclosed that the new owner of 360 South Washington, Bob Young of McLean-based Jefferson One LLC, intends to construct a new commercial building in a consolidated site plan with The Wilden.  The Wilden property is owned by the Falls Church Housing Corporation, which will team with Boston-based The Community Builders to construct the affordable housing project.   Falls Church Housing Corporation is seeking a $2 million 15-year loan from Falls Church taxpayers to support The Wilden.  City officials indicate that Young has discussed the possibility of the City renting space in his new building.

Novotny’s presentation estimates that together 350, 360 and 370 South Washington Street currently bring revenue of approximately $59,000 a year to the City, which could grow to approximately $95,000 a year as a result of the coordinated effort between Young and The Wilden partners.  Alternative scenarios, Novotny says, could raise as much as $1.3 million a year for Falls Church coffers based on modeling used by the City.

Falls Church Housing Corporation CEO Carol Jackson was present at the EDA meeting and subsequently offered to host a forum for Novotny to present his ideas to “a diverse group of community stakeholders.”

The Falls Church Times conducted the following interview with Novotny Wednesday concerning his presentation.

FCT:  Why did you present this alternative analysis?

Novotny:   The City Council asked the Economic Development Authority to review and make recommendations on the special exception proposed for the Wilden project. In response I tried looking at the broader economic impact by comparing the project with alternatives that are more consistent with the City’s future land use plans.

FCT: Why do your alternative schemes include office and retail uses but no residential?

Novotny:  First, the Wilden parcel is zoned for business use, and the City’s Comprehensive Plan calls for business use throughout that area. In fact, this portion of the City is one of only three main areas that are proposed for significant amounts of business use.  The other two are in the West End near West Falls Church Metro station and the East End near Seven Corners.

Second, attracting high-quality office and retail development on a scale that befits our community would do a lot of good for our City. These uses create significant new tax revenue while not burdening our schools or City services.

Third, in the big picture of our City’s finances, 75% of our real estate tax revenue comes from residential and 25% from commercial. We are not diversified with commercial development, so our residents pay an excessive portion of our overall real estate taxes as a result.

Consider that in Arlington 15% of the land pays for 50% of the taxes. They are using their commercial areas wisely and have achieved a better balance of commercial uses to residential.

To move even to a 70% residential/30% commercial ratio, we would need to add about one million square feet of commercial space – about ten new office buildings of 5-stories each.  And to get to a 65% residential/35% commercial ratio, we would need two million square feet – about twenty buildings.

That’s a significant amount of new commercial space in a City that’s only 2.2 square miles, and since we only have a few areas that are really suitable for commercial development, we would be smart to plan them really well and encourage that type of use.

FCT: Why do you think we could attract Class A offices to that area?

Novotny: You don’t have to look far outside of the City to find great examples of other jurisdictions that have planned specific commercial areas, put the right incentives in place, and successfully attracted class A commercial development. Falls Church is a well-located and desirable place, and I believe we can use similar strategies to attract high-quality development.

FCT: What would it take for the city to accomplish the kind of development there that you envision?

Novotny: We need to start with very detailed long range planning. I’ll quote the Columbia Pike Initiative main page to show the process they used:

Through the course of numerous meetings with the community in 2000 and 2001, a long-range vision and plan was established that focused on economic development, land use and zoning, urban design, transportation and public infrastructure initiatives, as well as existing and future open space and recreational needs.  The development of the resulting two-volume Columbia Pike Initiative – A Revitalization Plan, adopted in March 2002, was a cooperative effort between County staff, the Columbia Pike Revitalization Organization (CPRO) and area residents, business and property owners.

To plan areas like the South Washington Corridor in a more comprehensive way and to attract high-quality development, we need to follow a planning process like the one used for Columbia Pike. The alternative is keep bumping along and deciding our future on a project-by-project basis.  Occasionally we’ll get lucky and get a good development project, but more often we’ll be disappointed with the outcome.

FCT: With the office market down why would your proposal make sense?

Novotny: Now is the best time to plan while the market is down.  Real estate is cyclical, when the market turns back we need to be ready.

—

Novotny finished the interview offering to meet with other key City decision makers to exchange ideas about the South Washington Street area.

Novotny’s complete presentation appears below, followed by reactions from EDA members Bob Butchko, Phil Duncan, and Andy Rankin, as well as FCHC CEO Carol Jackson and developer Bob Young.

—–

REACTION TO NOVOTNY PRESENTATION

Bob Butchko, EDA Member:

Mike’s aggressive “development zone approach” is completely refreshing and spot on. It has worked well in many jurisdictions. most notably, Arlington County, a extraordinary success story.

This approach gives the city a chance to take the bull by the horns, and reach out to developers with a plan not, just a prayer.

—-

Phil Duncan, EDA Member:

I really appreciated the effort Mike put into his presentation at EDA last night. It stimulated the sharing of some very useful information about the challenges the City has faced through its history in accomplishing economic revitalization.

One thing Mike said that stood out to me is that the City’s economic viability hinges on a very aggressive campaign to encourage new, revenue-generating development (including 2 million square feet of office space, I believe he said).

To my mind, redevelopment on this scale is more likely to be proposed by developers, and would more likely be supported by the citizenry, if we encourage it to occur on the City’s west and east ends, on the land in the City that is closest to the East and West Falls Church Metro stations and I-66 access. I think it would be very valuable for Mike to apply his “visioning” approach to the City’s perimeters, so citizens could begin to see how we could generate significantly more tax revenues by capitalizing on our proximity to Metro & I-66, while still preserving at the heart of Falls Church the “small town” feel that is so widely cherished.

Listening last night to the various points of view, which were consistent with what I’ve heard many times in my 25 years as a City resident, I wondered if we might attract more developer interest in, and citizen support for, revitalization of the City Center area if we focused there on uses of what I’d call a civic nature — government services, social outreach (to elderly, youth, workforce, etc.), indoor and outdoor community gathering spaces, educational and recreational facilities, arts/culture/heritage venues and amenities, and neighborhood retail/restaurant/services. These are the kind of uses that can help Falls Church retain the special sense of place that so many hold dear.

—-

Andy Rankin, EDA Member:

From an EDA perspective I worry about using land in that area for the Wilden project – Mike’s analysis shows why we need to be careful about how the limited commercial areas in the City are used.  If the potential problems for the Wilden encourage Bob Young to put a small office building on the other lot then that’s a good thing – although if he mostly rents it to the City then that’s not a great thing (if the City needs office space, there is already some available for rent).  Bob’s office building would be a ton better than having the Wilden stuck next to the existing 360 building (although it seems like such an arrangement might not ever have gotten through), but ultimately it will do little to encourage additional redevelopment in that area.

It didn’t get discussed in the meeting too much but apparently the owner of 370 has no intention of selling/redeveloping – which isn’t good.  If the City put incentives in place to try and consolidate the lots on that block you could eventually get to the point where the economics would sway 370 to sell (everyone has a price).  However, with the Wilden and a Bob Young building next door it sounds like 370 will sit there forever.  It will be hard for anyone to justify buying it for a price that would sway the current owner, and the current owner says he’s staying put.  I think that would be too bad – those buildings do not benefit the City aesthetically or economically.

From a non-EDA perspective (i.e. my personal point of view) I think it’s too bad that the FCHC has been trying to get stand alone buildings built instead of doing more to get affordable units included with the mixed use developments.  I haven’t been around long enough to know the history, and obviously it’s easy for me to say this now – after the recent projects in the City have been completed – but I really think it would be better for the City and the affordable housing residents if they could be integrated and not concentrated.  Ultimately, I think City residents should pay a similar amount in taxes dedicated to affordable housing as people in Fairfax County and Arlington County do – but that might mean supporting affordable housing initiatives in those jurisdictions where they might have more appropriate spaces for dedicated buildings (although I still think it’s a bad approach).

—-

Comment of Carol Jackson, CEO, Falls Church Housing Corporation

I would like to thank Mr. Novotny, Rick Goff and the EDA for giving us all some meaty food for consideration as we contemplate the bigger economic development picture and decisions made to foster our city as a truly sustainable community for the future.

There have been many discussions and plans put forward in pursuit of this topic during the 32 years my family has lived in Falls Church.  There is always room for one more, and I think we should make a holistic effort to chew on this as soon as possible for the sake of our city’s land owners and citizens and decision-makers.

To that end, Falls Church Housing is interested in hosting an informal forum where Mr. Novotny will be invited to present his ideas to a diverse group of community stakeholders.  I make note of Phil Duncan’s response to you today as another good idea that deserves vetting in the same context.

Personally, I am a progressive who has always wanted our community to embrace change and the decisions that make sense in context with our long term community values.

Professionally, I represent an organization whose mission is to serve the City’s goals for providing and sustaining a continuum of housing opportunities for those who live, work and want to retire in their community no matter their income nor life stage.  The FCHC tag line is “defending our City’s historic strength; preserving affordable housing choices”.  Until this community instructs us differently, we are dedicated to that challenging mission and the people we serve.  In the meantime, the joint venture partners proposing The Wilden believe that our project as now proposed will serve as a catalyst for additional redevelopment in an area that has seen lots of effort but little results.

—-

Bob Young, developer, Jefferson One LLC, and new owner of the property at 360 S. Washington Street

I admire the thought that Mike has put into this topic because, as we all know, it is critical to our Little City’s future.  Unfortunately, Mike does not (like many others) have the benefit of knowing the history of development in the City, especially for the last decade or so during which I have been involved.  While I cannot tackle providing a detailed history here, I just want to point out that I got the first major project approved in the City for perhaps 20 years or so in July, 2000.  That was a 120,000 sq. ft. office building on the land now occupied by the Spectrum.  I note that the City agreed at that time to invest $1.5million in the parking garage of that proposed building to (hopefully) make it feasible.  I sold the land to Akridge which is what brought them to the City in the first place.  As big and sophisticated as they are combined with the fact that we were at the peak of the market for that cycle, they still were unable to prelease any of the space and eventually abandoned the project.

The point here is that I simply do not understand why anyone would think that anything has changed since then, except for the worse.  That certainly is the case for the office market.  There is no question in my mind that millions of square feet of new office space would be great for the City.  Unfortunately, I don’t see that ever happening—at least not for the next 20 years or so.  The demand by large (over 20 or 25 thousand square foot) users for office space in the City is virtually nil and always has been, notwithstanding the unique cases of Tax Analysts and Kaiser.  If anyone can find such users, I will be the first to stand in line to build buildings for them. I just do not see it happening and analyses that “prove” that high (2.5) density office buildings are “the way to go” I’m afraid rather miss the point.  We need to attract the development we can rather than always holding what might be but virtually never is.

I believe in this circumstance that the proposed FCHC/TCB project is a good one to help kick off redevelopment of that part of the City and I hope to be able to develop a modest 100% office building concurrently but even that is uncertain at this time.  Our project would be a 1.0 FAR, not 1.5 or 2.5.  That’s just what might be feasible.  I would love to talk to anybody who can show me how to prudently build a 2.5 FAR instead.

Finally, I want to point out that my company is in the Falls Church office and retail market all day, every day.  That often includes weekends.  I believe we have a good sense of the market.  And, as a result, we believe that the City MUST attract mixed use projects to survive, at least for the next decade or two.  It has now been proven that they do not flood the schools with new kids, they provide a significant net income benefit to the City and they bring absolutely needed new professional residents to the City.  People wonder why we have so much vacant retail space.  The answer is, among other factors, that we do not have the population to support all the new goods and services our citizens would like to see in the City.

There are many more points to make and hope to be able to continue to contribute to what I believe is an important and robust community discussion that I hope we can bring to a conclusion soon.

–

Additional information regarding the City’s consideration of The Wilden proposal is available here.  The City Council and Planning Commission will schedule meetings to consider the project over the next few weeks.