Downtown Decision
Should city pursue shopping mall or local diversity on Broadway?
By Alan Pittman

Should the city try to save downtown Eugene by giving $50 million in subsidies to a mall-like megaproject by a single developer or go with more local, incremental and smaller scale redevelopment and retenanting?

That’s the big question the city council and community are facing with two competing proposals for downtown. The megaproject approach is favored by the business community and city planning staff establishment, while progressive critics favor the local, incremental approach.

The Eugene City Council could decide the direction for downtown as early as April 25. Here’s a look at the costs and benefits of the competing approaches.

KWG Proposal

 

Megaproject

The megaproject was proposed to the city by KWG Development Partners of Portland. KWG proposes to redevelop more than two full city blocks of downtown along Broadway and across from the library into a mix of housing, retail, large grocery store, restaurant, nightclub, high-end hotel and 12-screen cinema uses in three- to five-story buildings.

The development will “transform a blighted West Broadway into a hot spot of activity with restaurants, retail, nightclubs, and a variety of housing types, creating a 24 hour community,” KWG writes in its proposal.

City staff and the downtown business establishment back the project as providing the necessary “critical mass.”

The “critical mass” approach of the massive redevelopment is the key to success, argues city development manager Denny Braud. “It would be hard to do it one building at a time.”

Jack Roberts, head of the local Metropolitan Partnership business recruitment group and owner of the Taco Time building downtown, and Rob Bennett, owner of the Downtown Athletic Club, agree with the critical mass approach. Without the critical mass, developers and retailers don’t want to take the risk, Roberts said. “I just don’t think you can get that incrementally.”

But on March 12, the City Council balked at immediately committing the city to the megaproject approach, voting 5-4 to demand more cost and other information before deciding.

The biggest uncertainty is cost. The staff and the developer haven’t provided a comprehensive estimate, but the subsidy tab to taxpayers for the KWG approach could top an estimated $50 million or more.

KWG wants the city to pay for four underground garages for the project, with a total of 700 parking spaces. KWG principal Thomas Kemper said that “could well cost $15 to $20 million.”

KWG also wants the city to pay for the land for the project to the extent necessary to provide KWG a 13 percent profit on the development. That could cost the city a total of about $20 million.

Here’s how that land cost breaks down: The city has purchased options to buy eight of the existing properties downtown for a total of $14 million. But KWG also wants seven more properties that the city doesn’t have options on. If the owners of that property demand similar prices, taxpayers would have to pay about $5 million more. The total land cost also doesn’t include the cost of tearing down all the existing buildings, which could cost the city several million more dollars.

KWG is also demanding 10-year property tax breaks worth about $10 million and several million more dollars in utility relocation, road improvements and possible affordable housing subsidies.

 

Good deal?

Is $50 million for what KWG proposes a good deal?

Normally, government bodies make sure they are getting a good deal through a competitive bidding process. But despite the large amounts of money involved, Eugene city staff decided against such an approach in favor of requesting qualifications for a “public-private partnership” with a developer.

“This is absolutely corrupt in my opinion,” said Paul Nicholson, a local bike shop chain owner and former city councilor. “There’s a reason why we have private entities and public entities, and I don’t think the two should be mixed.”

In negotiating a partnership with KWG, the public appears to be at a disadvantage. In contrast to city staff, KWG officers, some with law degrees or a Harvard MBA, have decades of experience in tough-nosed real estate deals.

Rob Bennett, owner of the Downtown Athletic Club, said the city should be very careful it’s not getting ripped off, “absolutely not.”

Bennett said the city should hire widely respected outside experts, perhaps from ECONorthwest consultants, to crunch the numbers. “If it’s public money, what does the community actually get back?” he asked.

City development manager Denny Braud said the city plans to “do a cost-benefit analysis” of the project — but only after big decisions on selecting the developer, project concept and development approach are already decided.

“Our city has not done due diligence,” Councilor Bonny Bettman said. “A lot of the claims they [staff] have made are based solely on what the developer has said.”

Critics also question whether the city is getting a good deal on the property purchase options KWG wants the city to buy for them. For the eight properties the city has options on, the city would pay a markup of about 58 percent, or $5 million over real market value, based on assessor valuations.

Local developers Tom Connor and Don Woolley stand to make the largest profit. They own the entire south side of Broadway from Willamette to Charnelton streets. The $7.9 million price they are demanding for the property is 77 percent, or $3.4 million, more than the tax assessor’s real market value.

Last year, Connor/Woolley abandoned a proposal to redevelop the entire area when the developers said other property owners were demanding the company pay unreasonable prices. But this year the two developers are demanding a similar markup for their property, much of which is vacant.

Roberts offered to sell his Taco Time building for close to the assessed market value. The prices for many of the other options are “way in excess of where the market is,” Roberts said.

It’s also unclear whether KWG really needs the 700 additional garage spaces. The development area is adjacent to the 729-car Broadway Place city garage, which is 80 percent empty. Within two blocks, three other half-empty garages combine to offer a total of 1,556 spaces.

Planning experts and local critics say too much downtown parking increases pollution, congestion, pedestrian danger, energy consumption, global warming and housing costs and makes for a dead, unpleasant and ugly city center. Donald Shoup, a UCLA planning professor and leading parking expert, came to Eugene two months ago to lecture on many of these ills, but there’s no evidence his talk had any impact on city planning.

Kevin Matthews, president of Friends of Eugene, questions the economic justification for a massively subsidized redevelopment of downtown. “It’s socialism for real estate investors.”

The developers say their proposal doesn’t make business sense to them without big subsidies. But Matthews said that should be a “red flag.”

“If the projects don’t have a sound economic basis, why are we investing in them in the first place?” Matthews asks. “Don’t expect the public to be able to indefinitely prop up something that doesn’t fundamentally make sense.”

If the public does decide to invest in the investment risk, it should share fairly in the profits, Matthews argued. “Why should the private investors be guaranteed a minimum profit and the public investors not be guaranteed a minimum profit?”

 

Incremental

Matthews and other critics say the city has another, cheaper and better option to restore its ailing downtown. That approach would rely on incremental redevelopment employing a strong diversity of local businesses with a unique character that would compete with suburban malls.

The proposal from Beam Development of Portland is more incremental. Beam, which specializes in reusing historic urban buildings, proposes to renovate and restore the Center Court and Washburne buildings on one block of the south side of Broadway. Beam would build ground floor retail and offices above and build a new one floor retail building with surface parking in the adjacent pit. A possible future Beam phase would tear down the buildings across Willamette for a new building with ground floor retail, an embedded parking garage and one or more floors of upstairs offices.

Beam hasn’t asked for the city to pay for more garages but does want the city to pay about $5 million to buy the purchase options on the south Broadway property from Connor/Woolley.

If the city doesn’t give KWG control of the entire area, KWG said it’s still interested in redeveloping the Sears pit across from the library with condos. The proposal said KWG would also like to extend that project to the full block with a possible theater, grocery, office and residential mix.

Critics fear that massive redevelopment of the entire area under a single ownership, as staff and business interests are pushing, could produce uniformly high rents. They fear that a diversity of local and national stores and local people would be replaced by a mall monoculture.

“What we’re talking about is not reviving downtown; we’re talking about eliminating downtown,” said Nicholson.

The Bridgeport lifestyle mall KWG did in the Portland suburbs “is absolutely soulless,” Nicholson said. “We already have a half dozen shopping centers,” he said. “We need some local character.”

The high rent concerns have produced little more than shrugs from city staff and KWG. Asked whether local stores will be able to afford the rent in his new development, KWG principal Thomas Kemper replied, “That’s a good question.”

Terry McDonald, the local director of the nonprofit St. Vincent de Paul Society, said he wanted to renovate and retenant the vacant Center Court building for a downstairs antique and book store and upstairs offices four years ago. But McDonald said he pulled out after city staff, Bennett and Russ Brink, director of the city-funded Downtown Eugene Inc. (DEI) business group, told him they didn’t want his lower-income businesses.

“I was told I wasn’t welcome there,” McDonald said. “It hurt.”

“I don’t think the city staff or the group that is down there are particularly interested in anything we would propose” for the area, McDonald said. “Clearly the intent is not to have a diversity of people, to have only the right people downtown.”

Councilor Andrea Ortiz said the city shouldn’t be trying to make downtown exclusive. “There’s a perception that we only want desirable people downtown, and I’m really offended at those kinds of [exclusive] comments.”

Roberts said Eugene thrives with its mix of tie-dyes and coat and ties downtown. “That’s Eugene, and that ought to continue to be Eugene,” Roberts said. “It would be crazy to try and come in and try to turn this into a shopping mall downtown.”

But that’s exactly what critics worry is going to happen.

The massive KWG proposal that city staff back would create an “economic monoculture” shopping mall of high rents, said Matthews.

 

Strength in Diversity

A stronger, more robust approach would be to pursue a diversity of businesses and property owners downtown using an incremental approach, according to Matthews. If one business failed, others would be there to take its place and adapt, he said.

“By proceeding incrementally you minimize your risks, you maximize your return,” Matthews said. Portland and Vancouver, British Columbia, have successfully pursued such trial and error, iterative approaches in their downtowns, he said. “By waiting and seeing what happens organically, then there’s the opportunity to do the next thing in reaction to them.”

The city’s “bigger is better” mindset hasn’t worked downtown in the past, Matthews points out. The massive urban renewal project downtown four decades ago is widely criticized for destroying downtown’s historic character and deadening the business area.

The city has a “terrible track record” of repeated failures downtown, said Nicholson. “They’ve already failed with the same approach downtown; it will have all the same problems.”

Instead of focusing on developer’s big building projects, the city should focus on the real issue: getting tenants back in empty buildings, said Greg Bryant, who helped fill a building on Broadway with the nonprofit Tango Center. With a system of small grants to local citizen groups and businesses with a long-term commitment to the area, “There’s a lot of stuff that could be subsidized that could be put in that empty space,” Bryant said.

One problem, however, would be getting landlords with boarded up property to agree to rent or sell. One of the worst problems on Broadway is the largely vacant Connor/Woolley building at Charnelton St., Bryant said, but the developers refused to sell for the redevelopment project.

Councilors Bettman and Betty Taylor tried and failed to get the council to consider a tax on unoccupied space to push nuisance landlords to rent or sell.

Another approach to bring people downtown would be to enhance its attractiveness with new parks. Local architect Jerry Diethelm has proposed a corner public square with an interactive water fountain across from the library.

Matthews said the city should also take a broader look at what ails downtown. The suburban shopping malls and big box stores that killed downtown were created with subsidized freeways and other infrastructure, he said. Trying to equalize the playing field with only downtown subsidies and not fees for sprawl is too expensive, Matthews said. “The public ends up paying three times over, and the development community laughs all the way to the bank.”

But staff and business interests have long resisted reform. DEI’s Brink wrote a recent op-ed in The Register-Guard opposing a public planning process and more parks as causing delay and security problems. “Let’s put a stop to those ideas right now.”

Before a decision of this magnitude in cost and impact, “there should be dramatically more public input,” Matthews said.

That doesn’t appear likely. The council plans to hear from a community panel selected by staff on April 16 with a decision on the developer and concept by April 25. City Manager Dennis Taylor told the council, “There’s a lot of sentiment to try and stay within this ambitious timetable.”