Town Center Moratorium: Economic Analysis Revised Outputs and Legislative Options Consideration

Now is the time for everyone to pay attention to what’s planned for Towncenter. These decisions will impact Islanders for the next 50 years, or more. Few people are paying better attention than Victor Raisys, co-owner of Island Books.

This is the letter he sent to the MERCER ISLAND city Council ahead of the July 6, 2021 scheduled meeting:

Mercer Island City Council Members – At Tuesday’s city council meeting you will be discussing AB 5910 regarding the Town Center Moratorium at the July 6th meeting. It’s my understanding that no action will be taken in the July 6th meeting however, direction will be given to the staff for future legislative options to address the Town Center moratorium. I have a number of comments. In the section of the staff report titled “ECONOMIC ANALYSIS REVISED OUTPUTS”, the last sentence of the section reads: “Utilizing the revised and updated data, a key output of this additional economic analysis is that the amount of supportable TC retail square feet increased slightly from 29,930 to 34,840.” I believe this is incorrectly stated and should be the amount of *additional* supportable TC retail square feet (which is in addition the retail square footage lost with the proposed Xing Hua development and also the ~80k square footage currently drawn out of the TC core south of SE 29th St.). In the section of the staff report titled “LEGISLATIVE OPTIONS CONSIDERATION”, there is a reference to “no net loss” option for legislative options. While “no net loss” is a great north star and a great guiding principle, I’m absolutely NOT A FAN of this as a legislative option/code language because I’ve already seen exactly how “no net loss” can be gamed and played in our TC. The proposed plans for the Xing Hua introduced the concept of “in-use retail” and/or “active retail” (https://mieplan.mercergov.org/public/DSR20-001%20&%20SEP20-002/Submittal%202/Mercer%20Island-Public%20Comments%20Response_Final.pdf):

“The total proposed retail + restaurant area in the project is 13,490 sf. and 1,827 sf. outdoor eating. The existing in-use retail area on site is 13,823 sf. and 1,681 sf. outdoor eating (because some of the current available space is vacant), which is very close to our proposal. In other words: the new proposed project will provide a greater amount of active commercial space than the existing condition.”

Note: there is currently 19,100 sf of commercial space on the site (per King County tax records here: https://blue.kingcounty.com/Assessor/eRealProperty/Dashboard.aspx?ParcelNbr=5315101316 and https://blue.kingcounty.com/Assessor/eRealProperty/Dashboard.aspx?ParcelNbr=5315101326). So the “play” is very simple, clear out retail prior to the sale or development of a site and then claim to be replacing the existing retail for the parcel resulting in “no net loss” of retail for the development.

As you discuss the options laid out in the staff report, I would ask that you consider the following comments/questions:

• Option #1 (Do nothing): In short, this is unacceptable. Previous city councils repurposed a significant portion of our TC and former commercial area and rezoned it for residential use. To allow this to stand and not correct this is completely unacceptable. I hope this gets very little discussion airtime in your July 6thmeeting.

• Option #2 (Amend the TC Sub Area Plan and Zoning Map to remove the moratorium area from the TC and rezone to an exclusive commercial zone such as “General Commercial,”“Community Business,”or “Neighborhood Business.”): I’m a big fan of simplicity and this seems to be a simple solution. However, it is unclear to me how city staff came to the conclusion that with this solution “no progress would be made toward meeting identified future demand of commercial retail space.” So, if a site in this rezoned exclusive commercial zone is redeveloped (and let’s not lose sight of the fact that this entire discussion is about future development), we think the site will be redeveloped with exactly the same footprint? Seriously? I look forward to hearing the analysis from city staff that led to that conclusion.

• Option #3A (Figure 2 to require blanket “retail street frontage” throughout the TC or only blanket throughout the moratorium boundary): I’m sure you’ve all heard the saying “Fool me once, shame on you. Fool me twice, shame on me”. That seems to apply here. With the proposed Xing Hua development, we’ve seen a thin veneer of retail street frontage planned around the entire building with the majority of the ground floor dedicated to non-retail, non-commercial uses. In addition, with the proposed Xing Hua development we’ve seen retail space shrink from 19,100 sf to 13,490 sf. So how exactly does this option preserve existing retail? The definition of insanity is doing the same thing over and over again and expecting a different result. I again look forward to hearing the analysis from city staff that lead to the conclusion that this option somehow preserves retail; in addition, hopefully the analysis will include data on how well this requirement has worked for previous developments in the TC (including Xing Hua).

• Option #3B (Amend MICC 19.11.020 Figure 2 to complete surgical additions / deletions to the current map): It is unclear what the proposed surgical additions/deletions are here so it’s difficult to have a point of view on this option.

• Option #3C (Repeal MICC 19.11.020 (B)and Figure 2 that require “retail street frontage” in the TC and replace with the regulations existing prior to the adoption of Ordinance No. 16C-06): Ordinance No. 16C-06 repeals one portion of the code, adopts another portion of the code, then amends two more chapters of code and then this option itself (#3C) vaguely proposes “updating and modernization of the former language related to public parking”. I look forward to city staff explaining, in plain English that all the citizens of Mercer Island can understand, what exactly is being proposed with this option, the impacts to the TC, and the justifications.

• Option #4 (Amend MICC 19.11.020 to add a “no net loss” commercial retail square footage requirement throughout the TC administered on a parcel-by-parcel basis): See my comments above with regard to “no net loss” of commercial retail square footage.

• Option #5 (Amend MICC 19.11.020 to add a “commercial floor area ratio” requirement for properties subject to the requirement in Figure 2): In addition to Option #2 above, this potentially seems to be one of the more interesting options proposed. However, as I’ve learned, the devil is always in the details. In this case the viability of this option hinges on the Commercial Floor Area Ratio. The example cited in the staff report seems to use a ridiculously low Commercial Floor Area Ratio of .25. I look forward to city staff providing an actual realistic proposed range for what the Commercial Floor Area Ratio would be. I think this option will live or die based on that proposed range.

Update: The op-ed was modified on July 10, 2021 with the following information:

In the retail demand analysis done by CAI that is in the meeting packet, the report only considers Mercer Island population growth and neglects to look at regional population growth. I believe that the same mistake was made in the 2016 analysis that was done by the city (and I believe that that report concluded that a city of the size of Mercer Island couldn’t support a Town Center of the size we had). I find this a bit ironic because I’ve listened for YEARS as the city has talked about regional growth and yet in this one report by CAI we only look Mercer Island population growth. Seems a bit myopic and incredibly inconsistent. Mercer Island is sandwiched between two of the largest cities in Washington State. As Seattle continues to limit car traffic into the city and as traffic gets more congested on the Eastside, I would expect more demand for retail in the Mercer Island Town Center as we become the Town Center not only for Mercer Island but also Leschi, Mt Baker, Madrona, Enetai, Beaux Arts, and Newport. For context, 24% of Island Books business comes from off Mercer Island – here’s the data: :https://www.facebook.com/mercerislandbooks/posts/10155229151722133 Therefore, I view the 34,840 sf of additional estimated supportable retail square feet quoted by CAI to be the absolute floor and low-end of the range of the retail that could be supported. I suspect the real number is much greater than that.