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Home My WebLink About2011-0606 Study Session PACKET CITY OF ASHLAND CITY COUNCIL STUDY SESSION AGENDA Monday, June 6, 2010 at 5:30 p.m. Siskiyou Room, 51 Winburn Way 5:30 p.m. Study Session 1. Look Ahead Review 2. Does Council have questions about and/or comments on the first phase of the Feasibility Study? [60 Minutes] In compliance with the Americans with Disabilities Acl, if you need special assistance to participate in this meeting, please contact the City Administrator's office at (541) 488-6002 (TTY phone number 1-800-735- 2900). Notification 72 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to the meeting (28 CFR 35.102-35.104 ADA Title I). COUNCIL. ,\IEETINGS ARE nROADC\ST LIVE ()N CI.I/\NNEL 9 VISIT TIlE CITY ell' ASI.IL\ND'S \\Tn SITE ."1' WWWASI.IL\ND.CJR.US ~ I ~ ." m <C m -01 il' ~ .; gg.g 0-. Ch o ~ ~. "9., 0 Il> => "'~ ~ lD m fa ~J 3a.~ g 5'~ (it (Ccnl Q) I>> m => => .. a. CD 9. 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ZIti) 0 U)~~ ~ ~ ~ ~~ ~ ~~~I~~M~~II~I ;~ I r~i I ~ I .I~ .. I .. I I :1 .1 I~I ~ ~~~II z z z z . I I I I I I I I I I I I I I o N N iO N " N . ~ m a. ~ :!l e 0.. Ii ~ i5 ~ I:! 5 ~ ~ "" , I::. ~ ~ '6 l~ g m .~ 5 - ~~::: I~ ~'e e ~"E.~ g ~ IS:g ~ ~ lU u: ~ ~ .~ ~ U) 'iij 5 '3: o6il:I:c: :5 .. :5 .9 .~~.~~~ o 0 tIl u) ll.. '~'~:6 ~I'~ Q1 Q1.! 21~ ~"' ~ .g.g:S.5 US USUS~~I- CITY OF ASHLAND Council Communication Preliminary Infrastructure and Urban Renewal Feasibility Study Meeting Date: June 6, 2011 Primary Staff Contact: Bill Molnar Department: Community Development E-Mail: molnarb{al.ashland.or.us Secondary Dept.: None Secondary Cont~ct: Maria Harris Approval: Martha Bennet Estimated Time: I hour Question: Does the Council have questions about and/or comments on the first phase of the Feasibility Study? Staff Recommendation: This is presented as a discussion item. Background: The Economy section of the 2011-2012 City Council Goals includes the following goal: "Complete the feasibility study for urban renewal and tax increment financing as a method of funding infrastructure, public facilities, and economic development programs for the Croman Mill District, the railroad district, and the downtown." The 20] 0-2011 City Council Goals included a similar goal regarding an implementation strategy for funding infrastructure for economic development projects. Additionally, the Croman Mill Site Redevelopment Plan includes "Identify the feasibility of creating an Urban Renewal District and Urban Renewal Plan" as a next step which is needed to implement the redevelopment plan. The first step in considering tax increment financing is to determine the eligibility and financial feasibility of an area for urban renewal. Tashman Johnson LLC was selected as the outside consultant to prepare the feasibility analysis (i.e. Preliminary Infrastructure Financing Plan and Urban Renewal Feasibility Study). The consultant team met with the Council at the February] 4 study session for the "kick-off' meeting to discuss the scope and outcomes of the study, how the study fits within the Council's goals and the concept of urban renewal and tax increment financing. The following day the consultant team met with the stakeholder group, comprised primarily of the other taxing districts in Ashland, and key property owners in the two study areas. The consultant team has completed several of the key elements of the feasibility study, and will present this information at the June 6 Study Session. ]n addition, the team and staff will be meeting with stakeholders and key property owners to review the same information. This first phase of the study includes: . Boundaries of Urban Renewal Study Areas . Real Estate Market Assessment . Tax Increment Revenue and Financing Capacity Projections . Analysis of Major Infrastructure Needs in Study Areas . List and Evaluation of Financing Alternatives The attached "Work Session #2" Memo swnmarizes the key findings and recommendations of the real estate market assessment and the tax increment revenue projections. Also are attached are the more Page] of2 ~~, CITY OF ASHLAND detailed Real Estate Market Assessment and Tax Increment Revenue and Financing Capacity Projections reports. Next Steps After the June 6 Study Session, the consultant team will complete the tasks below and compile the draft Feasibility Study. . Produce Preliminary Infrastructure Financing Plan Compile previous work products in the form of a revenue and expenditure projection for the build out of the study areas. . Analyze Remaining ORS Requirements Analyze study areas for conformance with the statutory definition of "blighted areas", conformance with statutory limits on amount ofland and assessed value in a municipality that can be placed in an urban renewal area, and general level analysis of impacts of tax increment financing on overlapping taxing districts. . Financing Plan and Urban Renewal Feasibility Study Prepare draft report including conclusions and options as how to proceed. The draft Feasibility Study will be presented at the July 18 Council Study Session to gain feedback for the preparation of the final study. At the August 2 Council Meeting, the final Preliminary Infrastructure and Urban Renewal Feasibility Study will be presented to the Council. Related City Policies: 2011-2012 City Council Goals 2008 Croman Mill Site Redevelopment Plan Council Options: This is an informational item, and no action is requested. Attachments: Work Session #2 Memo Real Estate Market Assessment Tax Increment Revenue and Financing Capacity Projections Page 2 of2 ~~, .. T ashman Johnson LLC . _ Consultants in PoIUy. Planning & Projro ManagnMnt Downtown/RR Property and Croman Mill Urban Renewal Feasibility Study Work Session #2 June 6, 2011 I. WHERE WE LEFT OFF At the February 14 kick-{)ff Council work session and the next day's stakeholders' meeting, we discussed the scope and schedule for the Downtown/RR Property and Croman Mill Urban Renewal Feasibility Study, possible study area boundaries, concepts of tax increment financing and urban renewal and how we would approach the real estate market assessment and tax increment revenue projections. At this Council work session and, separately, with the stakeholders we will present for discussion key elements of the Feasibility Study: . boundaries of Urban Renewal Study Areas . the Real Estate Market Assessment, . the Tax Increment Revenue and Financing Capacity projections, . the analysis of major infrastructure needs in the Study Areas . a list and evaluation of financing alternatives We will also discuss the preliminary financing plan which will bring together the above elements. The Council's next work session is scheduled for July 18, when it will review the draft Feasibility Study. II. STUDY AREAS The Study Areas boundaries are only for the purpose of the Feasibility Study. They are not intended to be urban renewal area boundaries. If the Council decides to prepare an urban renewal plan, the delineation of the boundaries will be a deliberate process with public and Council input. For the Feasibility Study we worked with staff to define appropriate Study Area boundaries. The two Study Areas are shown in Figures 1 and 2 below. For the Downtown/Railroad Property Study Area it made sense to combine the two .subdistricts. because of the close geographic and functional relationships between them. The Railroad Property itself benefits greatly from its proximity to Downtown and Downtown will continue to draw people who work and/or live north and south of the RR tracks. In addition the corridors connecting the two sub districts on the west (Oak, Water and Helman Streets) can be included in one Study Area. For the Croman Mill Study Area it made sense to include, in addition to the former Mill district itself, the primarily light industrial property north of the railroad and east of Tolman Creek Road and the primarily commercial property north and south of Ashland Street, as these areas will be affected by development of the Croman Mill property itself. Jeff Tastunen . 503.407.7443. tash81!l!lcomcasLneI@comcasLnet Nina Johnson. 503.407.5983. ninai9%llcomcaslnet WNW.tashmaniohnson.com Council Work Session #2: Urban Renewal Feasibility Study Figure 1: Downtown/Railroad Urban Renewal Study Area r I ~.. .." ..~.,. I I I I I I o 300 600 , 1 200 Feet ..\ Tashman Johnson LLC 2 June 6, 2011 Council Work Session #2: Urban Ren!lwal Feasibility Study Figure 2: Croman Mill Urban Renewal Study Area 1\ \ l~ r------- /\ " QTlFAreas TIF _area_taxlots )::' Zoning .0.1 .0.1.0 .eM . E.' ...., Iiil SPlIT ~~,... ;, , 1 L l~~ I ' I I I o 300 600 1 I 1 200 Feel Tashman Johnson LLC 3 June 6, 2011 Council Work Session #2: Urban Renewal Feasibility Study . III. REAL ESTATE MARKET ASSESSMENT Tax increment financing of urban renewal projects is based on the expectation that assessed value growth from new development and rehabilitation of existing buildings, along with the. appreciation of existing properties within the 3% maximum, will produce tax increment revenues that will cover a share of the costs of the needed public investments. As a basis for our projections of tax increment revenues, we assessed real estate market conditions for Southem Oregon and the city of Ashland as they pertain to the Downtown/Railroad Property and Croman Mill Study Areas. The Market Assessment is contained in the Council Packet. With a goal of forecasting long-term real estate development, the analysis examines: . Historic measures of growth and development . Forecasts of employment and population . Current real estate market conditions, particularly in light of the extended recession . Opportunities and obstacles for new development . Existing expansion plans for local businesses The Economic Opportunity Analysis (EOA) updated in 2009 and adopted in 2010 provides a solid background of supply and demand of buildable lands, as well as a review of Ashland's overall economic and employment base. However, projections of real estate development presented in this analysis are 'closer to the ground; i.e. specific sites and parcels are identified as candidates for development or redevelopment. The localization of projected new development within the Study Areas focused on 'opportunity parcels." Opportunity parcels are those parcels thai" could be candidates for development within the 20-year projection time horizon. For vacant parcels, this likelihood is based on a combination of factors including: active development activity; active planning activity, proximity to recent successful development, location within a fully developed area, strong commercial location with high traffic counts, and many other factors. For parcels with some improvements, the factors include: low improvement-to- land (I:L) ratios (the ratio of the real market value of the improvements (I) to the real market value of the land (L), proximity to high value development, economic age of improvements, low intensity uses in an area with higher density commercial development, etc. As the real estate bubble and subseoUlint imolosion demonstrated. oredictions of arowth can be overootimistic when based on orice trends rather than underlvina economic reality. In view of this. these oroiections use conservative estimates of emolovment arowth as a baseline. In addition, projections are not specific to exact locations and timing, but are presented within 5-year increments. The projections of full development in each Study Area are shown below, in terms of square feet (SF) of industrial, retail and office space and numbers of dwelling units (DU's) for housing. Shown is full development of the opportunity parcels, followed by the projected development over twenty years in five year periods. Finally the table shows the estimated current real market value per square foot or DU. Tashman Johnson LLC 4 June 6, 2011 Council Work Session #2: Urban Renewal Feasibility Study Downtown/Railroad Prooertv Studv Area 0lIlce Retail Res Units Lod In Industrial Full Develo menl Rounded SFlDu's 335.000 140.000 155 115 31.000 Pro ected Dev Time Frame Years 0-5 20.000 5.000 15 0 10,000 Years 6-10 40,000 15.000 25 15 10.000 Years 11-15 40.000 25.000 25 100 11.000 Years 16-20 40.000 15.000 25 0 0 Total 140.000 60.000 90 115 31.000 Real Markel ValuelSFlUnil $225 $260 225,000 $110,000 $125 C M'II SI d A roman I UlV rea Industrial Office Relall Residential Full Oevelooment Rounded SFlDu's 600,000 325,000 200,000 90 Projed Dey Time Frame Years 0-5 60,000 ~ 10,000 25.000 0 Years 6-10 80,000 25,000 60,000 0 Years 11-15 80,000 25,000 40,000 0 Years 16-20 80,000 25.000 25.000 80 Tolal 300.000 85.000 150.000 80 Real Market Value/SF/Unll $125 $200 nos $95,000 IV. TAX INCREMENT REVENUE PROJECTIONS The Tax Increment Revenue and Funding Capacity memo is contained in the Council Packet. It starts with an explanation of key concepts in tax increment financing and how the amount of revenues are calculated and collected. It then describes the projections of annual tax increment revenues and the resulting funding capacity. The tax increment revenues are projected based on the projected increase in real market values from the Market Assessment. These are converted to assessed values and inflated. Projected increases in assessed value of existing properties are added and the growth in assessed value in each Study Area is multiplied by the projected tax rate to determine annual tax increment revenues. The projected annual tax increment revenues for each study area are shown in the graph below. All projections are shown in year-of-receipt dollars, meaning that the dollars are inflated. A year-of-receipt dollar has a value of less than a current dollar. Tashman Johnson LLC 5 June 6, 2011 Council Wor!< Session #2: Urban Renewal Feasibility Study Projected Annual Tax Increment Revenues - Both Study Areas .(Year of Receipt$) 3,500,000 500,000 -TI Revs Croman 3,000,000 2,500,000 2,000,000 1,500,000 -TI Revs DT/RR 1,000,000 o ~ ~<o ~'b rt,<:> :V rt,... ~<o rt,'" :>,<:> ~"" ~~~~~~~~~~ These revenues result in total funding capacity of an estimated 24 million+ for the Downtown/Railroad Property Study Area and an estimated $11+ million for the Croman Mill Study Area. As can be seen from the chart above, the revenues are low at the outset of the projection period and rise as development occurs. V. INFRASTRUCTURE AND PUBLIC FACILITY NEEDS AND ESTIMATED COSTS While previous elements of our analysis focused on the revenue capacity of tax increment financing, in this section we begin to focus on the infrastructure and public facility needs of the two Urban Renewal Study Areas. For the most part, this analysis of needs is based on existing City plans and studies including the Croman Mill Site Design And Use Standards and the Downtown Plan Phase II. These sources have been supplemented by information from the ongoing updates of the Transportation System plan and other Master Plan updates as well as our analysis and recommendations. The Study Areas are clearly very different in character. The Downtown/Railroad Property Study Area has extensive existing infrastructure and its future needs are in the nature of upgrades and enhancements. Within the Croman Mill Study Area, the Croman Mill property itself requires entirely new systems of access and some utilities. Lists of infrastructure needs and estimated costs in current dollars. for the two Study Areas were developed by staff and reviewed by the consultant team. Tables 1 and 2 show the lists. The costs are based on unit costs of similar projects and not on specific designs for the projects. The costs include design and administration. Tashman Johnson LLC 6 June 6, 2011 Council Work Session #2: Urban Renewal Feasibility Study Downtown/Railroad Prooertv Studv Area The table below shows the infrastructure needs identified by staff and our consultant team. Infrastructure Needs and Cost Estimates - Downtown/Railroad Pro StNets i 2-lanene9lborhoodccmmerclalcolledor Fourth 51. Cl'O$$ilg of BiIroad tracksIROW S 2,420,(0) Extend Clear Creek Or. IoMot.rJtainAve. WIler ~ .i,~~iY!>>.-'i'fiji:.>i:l"'~..~#'f;' \:i-:<-'J #~;",\:-. WatIf for dIYeIopmtnt m I f;Omt or connect to ulstlng sptem off of aear CrNk Dr (r lIntl and N. Mountain Aven.... W lnel $ 240,000 8ft';:-. .-~ -:_',L::~'~~h,:_:L*Ji::';;;~,~;:d~L>}';'-::_::;_.._, ,., .' ,~,,~,_';'",,';::~;_ __l .,. .'.'." -..-- ...., II h. g CIIIt Crnk Dr cr Un.), Rog:UI PIacI (r 01'11) and N. Mountain Annul S 180,000 (0."") StOmiDilmt.:,;,,;~<,; , R1parlanRntomiofl EIiCtilc'l~<;';C';~;:,:,{ Connoctoxlstlng _ . '::':.,~':.tt\- ."',(;.SJi ,';;':'.:":<'.. Re,1<<ItIon .Iong Mountain Crttll ':F:-'-:-:,~;'~::';~f,f(!k'~1P'-~t:~ ,~~,," ampms. ..,.. need to bI connKted cbrough property. S 30,000 /-',' $ 370,000 .......... %' Intersection improvements ... m .... roundabout and change fonn 3.Jane lo2-Gne in projects #15-17 Repair, ttSize and replace landscaping in planlert Replace Sll'eelfirniture(lighlpoIn,lra$hreceptades,e1c.) $ 2,110,000 S 1.080,000 Planter aOO street bndure irrcJrovements For the Downtown, Intersection Improvements were identified in the Downtown Plan Phase II, which has not been formally adopted by Council. The current Capital Improvements Plan lists this project but it is far in the future and unfunded. Planter and Street Furniture Improvements are neither expensive nor seen as critical to support the projected development. What may be critical, pending further study and as part of a comprehensive parking management program, is additional parking. The TSP update is examining the Downtown Plan Phase II and notes that many projects have not been implemented. However, it is a fact that the surface lots on Lithia Way have been and are anticipated to continue to be developed. The old Copeland Lumber/City Parking property north west of the Post Office is an opportunity parcel projected to redevelop during the twenty year time frame of an urban renewal plan. The property on East Main and Water Street, opposite Bluebird Park, is not identified as an opportunity parcel in our projections but was cited as part of the Downtown Plan Phase II as a site for a "landmark building". Other surface parking lots on Lithia Way may likely be feasibly redeveloped for more intensive uses in the tutu reo As these properties redevelop over time, they will likely simultaneously reduce the existing supply of parking and increase the demand. Though onsite parking is required under terms of the C-1 zone that pertains to the Copeland Lumber/City Parking site, other sites in the C-1 D zone do not require onsite parking. Tashman Johnson LLC 7 June 6, 2011 . Council Work Session #2: Urban Renewal Feasibility Study While we have not included any specific parking projects in the project list above, it is our recommendation that the Council would consider, in connection with a future urban renewal plan or otherwise, to proceed with evaluating parking needs and management strategies for downtown. Regarding the Railroad Property the Fourth Street railroad crossing is a critically needed improvement for the future development of this area. The project would also benefit the general public by increasing circulation and access for cars, bikes and pedestrians and as such would be appropriate as a key urban renewal investment. Croman Mill Studv Area The table below shows the shows the infrastructure needs identified by staff and our consultant team. Note that there are three subphases of the Central Boulevard shown below the overall project, and that the cost of the project when done at once is lower than the sum of the costs of the phases (and not accounting for inflation.) 3<lno""-1atlerial) On-weetparking both sides Upgrade existing sectioo of remaining 10" steel mainrme from Siskiyou Blvd IoAdroilofflce all85Ms11etoe Rd. GAlen ..... Phase , Central BodwatrJ: AetJetoe to Sitkiyou & lW'CJdes to Ms1IetDe AlistJetoe 10 SisAi)'OCI r.,CfPJ ~Alis1/etoefi'om Totnan follOlthemboudatyrJCIJ.OE Add ltm /ana to T~oe 8'50% d8ve1cpnent SignafzationallS"dfMllopmenl PhaseIlCentralBooIevBld: ToirlarlloPhut' OOOTyarrJreIocatiooend,:xopedyllCqui$llon ReAxate CentnM 8ooIefoW ..._~ -""'" Pha3e II Mist11etoe Upgtsde ~ to MittJefoe from not1hem booodatydCM-OE zone to SWdyou Repave 8t1d add ay standard sidewalks AI grade aossing iclentlied In Croman Dislricc standards $ 6.760,000 S 6. 130.001 $ 3,050.000 WashingIonSt.extemionoverrailroadtracks T_nISisItiyou~tion [mClP) .... Slreel Connedion from Tdman to WasIington Extensicrl ofCentralAstlland Bike Palh fn:tmToIman IoCrowscr1 fnCIP) HamillonCteek MullHJsePa\l'lwJ.~tlOOd eonnecIions Witii:ji_i~':;:\;)''::'; 2.Janeneq.tlothoodccrnmercialcolledor 16'widernulli-u$epathl2O'ROW 1(J' wide mulIi-use patM4' ROW S 1.810,000 S 340,000 $ 400.00> $ 750.00> $ 680,000 S 540,000 t:.di:!~,~~~,:._tx',.:;" ' ,',' {~i}:. Upgrade portion of ,llatIng mainline sewer; Upgrado....... of.IIotIng_1lnt StiirinDiiiii::, RlparIan_ EliCti1i';: IX gll 0 n , B/Yd to AdroIt offJCI II: 115 MlstJetot Rd. Of U $ 130,000 :.;:,~fi(::_':",~''':-:;::~lX;,---' - .0 9 hancDt IddltionaI flow added by dnelopmtnt of . $ 460.00> c~f~'f';;:i2~.<!.e'~,~I~~~~&~~; ",','_J""'" Rtstotation elong HalnIlton end Golf Coune Cneb $ 220.00> :'>:::;~d;;,~~~':~~.l~;;X~':.~r22~g:-::~,:" _..._'11......._-- n runs nttdIlo be I'II'OUtId from the 1-5 Oftr-erossing on Crowson Rd 10 Tolman Cnek Rd $ 1.200.00> Tashman Johnson LLC 8 June 6, 2011 Council Work Session #2: Urban Renewal Feasibility Study The infrastructure needs for the Croman Mill Study Area have been identified in detail in the amendments to the Land Use Code for the Croman Mill District. The single most significant project in terms of facilitating development of the Croman Mill property itself is the new Central Boulevard. Other projects that are key to the design standards for the new land use district are the Central Park, "green streets" and multi-use accessways. Finally a transit plaza may become key if plans for commuter rail service on the Central Oregon & Pacific (CORP) tracks are implemented. Though the Croman Mill District Standards refer to the initial phase of Central Boulevard as "developer constructed," it is likely that additional funding will be needed for the full project. An Immediate Opportunity Fund application is under consideration at this time for up to one million dollars but this funding would not cover the costs of construction, as shown in the table above. We would therefore recommend it be considered as a potential urban renewal for the purposes of the Feasibility Study. The Central Park and parking structure are public facilities that would appropriately be considered as urban renewal investments. We would not assume that all the costs of these public facilities would be public costs to be funded through urban renewal but rather that the Feasibility Study should consider some level of participation in the development of these facilities as they are required for the area to develop as called for in the Land Use Code. VI. FINANCING ALTERNATIVES For both the Study Areas, Tax Increment Financing (TIF) is likely to provide one revenue stream among others to meet the funding needs for infrastructure, public facilities and other programs and projects necessary to overcome development obstacles. This is commonly the case in urban renewal areas, as the costs of public improvements has increased (although not in the immediate past) and the revenues from TIF have been constrained, primarily by Ballot Measure 50 in 1998. Another very common reason that a combination of funding sources is needed is that Tax Increment Revenues from anyone development project begin to flow to the Urban Renewal Agency only after a project is complete and on the tax rolls and property tax revenues are collected. While Tax Increment Revenues flow after completion of a project, commonly the infrastructure and public facility investments precede the beginning of a project. A very important consideration for the use of any funding source is that the funding should come from those who are benefitted by the project. The funding sources discussed below are described in terms of their use for projects where the people paying and the people benefitting are to a large degree the same. There are imoortant DOlicv issues related to the followine fundine sources that would have to be discussed and resolved orior to imolementation. For the two Ashland Study Areas, we would see a combination of funding sources, in addition to TIF. For both areas: Tashman Johnson LLC 9 June 6, 2011 Council Work Session #2: Urban Renewal Feasibility Study . Street and utility funds, receiving moneys from SDC's and other sources for the relevant transportation and utility needs, could participate in the cost of system- wide improvements that benefit the whole city. . Improvements made by the property owner and/or developer as a condition of a building permit would contribute to the cost of streets and utilities that primarily serve adjacent development, as opposed to system wide improvements. . Grants and other contributions from govemment and non government organizations could add funding under very specifiC conditions, e.g. infrastructure with a direct link to job creation or innovative green design efforts. . General obligation bonds could provide a part of the funding for public facilities that benefit the whole city, in those cases where it is likely the citizens would see a substantial and tangible benefit from the public facilities. Following is a discussion of how these funding sources and others could be used in the two Study Areas. Downtown/Railroad Prooerlv Studv Area The Fourth Street RR crossing is project with City wide circulation benefits and important land use benefits. Commercial, residential and employment activities in the Railroad Property Area and the retail, restaurants, services and offices and Downtown would be linked in a manner that would benefit both areas and the city as a whole. Given these considerations, TIF could be combined with Street Fund revenues and property owner contributions to cover project costs. In particular some property owner contributions could be in the form of an advance or loan which then would get repaid with TIF revenues. The Clear Creek Road project would have primarily local benefits, providing access to adjacent pr:operties, but to some degree it provides an alternative circulation option to Hersey Street for east-west travel. The quieter nature of the street would be especially attractive to bicyclists and pedestrians. This project could be funded by property owner contributions to the extent of the costs of a local street, and supplemented by TIF as necessary to complete the project. Improvements in excess of local street improvements could be financed by a property owner contribution to be repaid with Tax Increment Revenues. Downtown, the identified needed street and intersection improvements could be funded in part by the Street fund and TI F, but would this project could perhaps be financed in part by a Local Improvement District (LID). This combination would reflect the mix of local and city wide benefits for this project. The same approach could be taken for the improvements needed to planters and street furniture. Parking improvements, if found to be needed and feasible as part of a parking management plan, could be financed by TIF and an LID. While parking revenues are another source of funding, typically these revenues are used for operation and maintenance as opposed to capital costs. Tashman Johnson LLC 10 June 6, 2011 Council Work Session #2: Urban Renewal Feasibility Study Croman Mill Studv Area The Land Use Code for the new Croman Mill District refers to funding of the critical Central Boulevard by the developer. It is likely that additional sources of revenue will be needed, with or without an Immediate Opportunity Fund grant. There are aspects of the Central Boulevard as a Boulevard that provide benefrts beyond local access, by connecting Croman Mill to the existing boulevard system and to downtown. These wider benefrts indicate a participation role for TIF in the development of this project. Again, from a financing basis, part of the initial investments by the property owner can be repaid at a later date with Tax Increment Revenues. The Central Park (cost estimate to come) and the Multi-use Pathway are projects that could be considered for funding in part from a General Obligation Bond. They are designed to have city-wide benefits which makes GO Bond financing potentially acceptable. Possibly part of the costs of green streets could be included in such a bond issue. A Croman Parking Structure (cost estimate to come) will primarily serve commercial and industrial users of space in Croman Mill District buildings. The capital cost of the structure should primarily fall on the developers and or property owner. However, participation in the cost of the structure with TIF proceeds can be justified on the basis of the facility needing to be developed in advance of the real estate market supporting sufficient rents. Again, a repayment of some initial developer contributions by tax increment revenues could be an appropriate arrangement. VII. PRELIMINARY FINANCING PLAN With the benefrt of Council discussion of the above material, we will develop a preliminary financing plan that will be included in the draft Urban Renewal Feasibility Study. Tashman Johnson LLC 11 June 6,2011 Real Estate Market Assessment Ashland Urban Renewal Feasibility Study A real estate market assessment provides an economic background and foundation for a projection of future tax increment financing. As growth in assessed value ("increment") is generated primarily by new development (appreciation in the assessed value of existing property is limited to 3% annually), projecting new development within an urban renewal study area is a key element in the feasibility analysis. With projected increases in real market values and assessed values, annual tax increment revenues and the resulting borrowing capacity can be calculated. This borrowing capacity is weighed against the costs of required public improvements to ascertain how much tax increment financing can contribute to public infrastructure and facilities financing needs. For this assessment of the City of Ashland's two urban renewal study areas, the analysis covers a 20-year time horizon. With a goal of forecasting long-term real estate development, the analysis examines: . Historic measures of growth and development . Forecasts of employment and population . Current real estate market conditions, particularly in light of the extended receSSIOn . Opportunities and obstacles for new development . Existing expansion plans for local businesses The Economic Opportunity Analysis (EOA) updated in 2009 and adopted in 2010 provides a solid background of supply and demand of buildable lands, as well as a review of Ashland's overall economic and employment base. Projections of real estate development presented in this analysis are "closer to the ground," i.e. specific sites and parcels are identified as candidates for development or redevelopment. Opportunity parcels are identified through a combination of: . Active development plans . Inventory of platted and available parcels . Extent of planning process . Disparities of current vs. potential market value . Patterns of recent development As with any forecast, there are caveats and limitations. As the real estate bubble and subsequent implosion demonstrated, predictions of growth can be over-optimistic when based on price trends rather than underlying economic reality. In view of this, these projections use conservative estimates of employment growth as a baseline. In addition, projections are not specific to. exact locations and timing, but are presented within 5-year increments. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts Urban renewal study areas The City of Ashland, in conjunction with the Tashman Johnson team of consultants, identified two separate areas for study: the DowntownlRailroad Property and the Croman Mill District as shown in the Figures I and 2. Downtown/Railroad Property With 373 individual parcels and nearly 115 acres, the DowntownlRailroad urban renewal study area (URD) is overwhelmingly commercial by land use, with 80% of the area in commercial use or zoned for future commercial use, including nearly 25 acres of vacant commercial land in the Railroad Property (see Table I). As shown in Figure I, zoning is split between C-I and C-I-D along the E MainlLithia Way c1lUplet and E-I for the area along both sides of the Union Pacific Railroad. Table 1: Proposed DowntownlRailroad District %0/ Total %0/ Land Use Residential Commercial Industrial Multi-Family Exempt (Public/Nonprofit) TOTAL Parcels 36 292 2 5 38 373 Area (ACJ 4.79 93.16 2.02 0.61 13.53 114.11 Area 4.2% 81.6% 1.8% 0.5% 11.9% 100.0% Total MV $10,658,120 $210,829,770 $823,650 $1,393,450 $16.391.420 $240,096,410 TMV 4.4% 87.8% 0.3% 0.6% 6.8% 100.0% Source: City of Ashland; Urban Land Economic3 Total market value in the area is $240 million, which is about 7% of the total real market value in the City of Ashland. . Patterns of development and market conditions are sharply divided between the two halves of this proposed urban renewal area: Downtown Downtown development has been driven by the growth of the internationally acclaimed Oregon Shakespearean Festival. From its beginning in 1934 in a replica of the Globe Theatre in London, the Festival now runs nine months a year in three venues and is responsible in large measure to the vibrancy of Ashland's downtown. Lodging and restaurants are major elements of the downtown, as are high quality apparel and gift shops. Another component of the local economy is agriculture and specialty foods. These products are also featured in local businesses catering to the tourism. Another Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 2 source of market support is Southern Oregon University, with an enrollment of 6,400 and located 2.5 miles south of downtown Ashland. Figure 1 OowntownlRailroad Urban Renewal Study Area ~~ I I I I I o 300 eoo , 1200Feet 21 Downtown is comprised primarily of one and two stories buildings, with a strong link to the early 20th century when many of the buildings were constructed. Historically, the commercial core is E Main Street with Lithia Park on nO,rth end and the Ashland City Library anchoring the south end. More recent commercial development has occurred on Lithia Way, the northbound half of the E MainlLithia Way couplet. Another concentration of historic structures is located along A Street on the south side of the railroad track. Many of these buildings have been the focus of extensive upgrading and adaptive reuse for a variety of professional services and retailers. Although outside the boundaries of the DowntownlRailroad urban renewal study area, the historic Railroad District neighborhood provides a strong residential flavor to Downtown Ashland as well as some of the highest unit values (per square foot) of Ashland's real estate market. Downtown residents provide also some market for commercial development. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 3 Railroad and nearby properties. This portion of the urban renewal study area lies north of the Union Pacific lines (no . longer in service) up to W. Hershey on the north, as shown in Figure I. It was the location of rail yards and storage buildings and facilities for the UP operation. With crossings only on Oak and Water Streets, the railroad lines create an effective barrier between the Railroad Property and downtown Ashland. This barrier is a significant impediment to complete development of this area. Historically a transportation and industrial setting, the Railroad Property and surrounding properties are currently being developed in two ways: I) large lots on W Hershey as light industrial and flex space; and 2) smaller subdivisions along Clear Creek Drive as mixed- use buildings with office/retail space on the ground floor and residential units on the upper floor. These buildings along Clear Creek Drive are some of the newest developments in Ashland, taking advantage of the residential overlay zone in the area and the previously strong demand for housing. Croman Mill District Compared to the proposed Downtown/Railroad URD, the proposed Croman Mill URD is larger, but has fewer parcels and lower total real market value, as shown in Table 2. However, it shares a strongly commercial character with the downtown, but at lower densities and lower valuations. There are three basic sub-districts in the Croman Mill URD: Table 2: Proposed Croman Mill Urban Renewal District % of Total Area 0.3% 4.0% 43.4% 42.6% 0.0% 9.7% 100.0% Land Use Historic/miscellaneous Residential Commercial Industrial Multi-Family Exempt (publiclNonprofit) TOTAL Parcels I 3 67 20 o II 104 Area (AC) 0.49 6.38 68.57 67.30 0.00 15.40 158.14 Croman Mill Source: City of Ashland; Urban LaruJ Economics Total MV $0 $1,829,810 $78,077,800 $10,659,700 $0 $7.799.760 $98,367,070 %of TMV 0.0% 1.9% 79.4% 10.8% 0.0% 7.9% 100.0% As shown in Figure 2, the mostly undeveloped Croman Mill Plan zone is the major designation in the urban renewal study area. The Croman Mill Plan specifies high quality office and industrial park development, with public parks, structured parking and well- landscaped boulevards. The northwestern comer of the Plan is slated for high-density multifamily development and a small commercial parcel. There is some light industrial Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 4 and commercial storage development within the CM Plan area, as well as an Oregon Department of Transportation Maintenance facility. r------, ~ a TIFAreas TlF _area_taxlots ~, Zoning . C-' . . C-'-D . eM .E-1 . .., ~ SPLIT '" T 1 ~ ~i ~ r j l~~~ I I I I I 1 o 300 600 I I 1.200 Feet Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 5 Washington/Jefferson Just north of Croman Mill, there is office and light industrial development accessed off Ashland Street by Washington Street and Jefferson Avenue. Development has been active in this area in the past several years. Completion of Jefferson Avenue (now under construction) will allow further development here, with one parcel planned for Brammo Inc. headquarters building. Ashland Street/Tolman Creek Road More typical highway- and neighborhood-oriented commercial development defines the area around the intersection of Ashland Street (Hwy 66) and Tolman Creek Road. With an 1-5 interchange at Ashland Street, auto and lodging development have located here, with neighborhood shopping centers at opposite corners of Ashland/Tolman Creek. . However, development/redevelopment opportunities exist, particularly on the under- utilized BiMart property and along Tolman Creek Road. Economic Background Economic measures provide a background for long-term development although growth is never steady or linear. As employment-driven land use forecasts are a primary tool in growth projections for the urban renewal feasibility analysis, historic population and employment data are presented as background. Population In the 30 years between 1980 and 2010, the City of Ashland has gained more than 5,000 residents, with current population estimated at 21,460, as shown below in Table 3. Jackson County's population grew about 70,000 during these same three decades, so approximately 7% of the County's population growth occurred in Ashland. Table 3: State, County and City Population: 1980-2010 Aver Ann Growth Rate 1980 1990 2000 2010 1980-2000 2000-2010 Oregon 2,639,915 2,842,321 3,421,399 3,825,657 1.30 1.12 Jackson County 132,456 146,389 181,269 201,286 1.58 1.05 Medford 39,746 46,951 63,154 71,168 2.34 1.20 Ashland 14,943 16,234 19,522 21,460 1.35 0.95 Ashland as % 11.3% 11.1% 10.8% 10.7% Jackson Co. Source: us Bureau of Ce1f$UJ; Orego" Office of Economic A1I01)'$u; Urban Land Economics As also shown in Table 3, Medford had a much higher growth rate than Ashland, with a 2.34% average annual rate between 1980 and 2000, while falling to 1.2% in the Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 6 subsequent 10 years. In the past 10 years, Ashland has seen a net increase ofabout 1,000 residents, for an average annual increase of 0.95%, slightly less than the County's growth during the same period. Previous studies have pointed to Ashland's high cost of housing and limited supply of multifamily housing sites as a barrier to population growth. Housing affordability is indeed an issue for possible new residents, with many of the employment opportunities in the services sector, where many jobs are minimum or just above minimum wage. Population Forecasts Jackson County's projections of very slow population growth for Ashland has been questioned in the 2007 Economic Opportunities Analysis and by the City's planning staff. According to the County's 2006 population forecasts, Ashland will grow at an annual rate of 0.32%, far less than historic growth rates shown above. Table 4: Population Forecasts, Oregon and Jackson County: 2010 to 2030 Chanlle 2010-2030 2010 2015 mIl 2025 2030 Totat %/Yr Oregon 3,831,074 4,095,708 4,359,258 4,626,015 4,891,225 1,060,151 1.22% Jackson County 203,206 223,464 238,865 253,881 268,385 65,179 1.40% Ashland 1/ 20,980 21,915 22,846 23,781 24,716 3,736 0.82% Ashland Z/ 21.216 21.558 21.905 22.258 22.616 1.400 0.32% Difference -236 357 941 1,523 2,100 2,336 11 Based on City of Ashland 1989 Comprehensive Plan forecast of 181 new ~sident:ll per yeat. 2/ Based on 2006 Jackson County population forecasts allocations. Source: US Bureou ofCensw; Ashland County: City of Ashland; Urban Land Economics Population forecasts for the State of Oregon, Jackson County and Ashland are shown above in Table 4. Two forecasts for Ashland are presented: I) Based on the City's 1989 Comprehensive Plan which has population growing at 187 per year; and 2) Based on the County's growth rate projection of 0.32% per year. With population counts now available for 2010, the expected population in Ashland according to the County's 2006 forecast would be 21,216, or 244 residents short of the actual count. By the year 2030, this very low rate of growth would result in 2,336 fewer residents than the forecast based on the 187 annual increase in population assumed by the City. (The Comprehensive Plan forecast for 2010 of20,980, also shown in Table 4, is less than actual population by 480 residents. However, the Comprehensive Plan forecast is'shown to maintain consistency with the City's projections.) Based on historic growth rates, as well as actual population increases since 2005, the City's forecasts appear to be more reasonable than the County's allocations and will be used in the analysis. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRaiiroad Districts 7 For housing forecasts, an annual population increase of 187 translates into approximately 80 housing units, of which an estimated 22 would be multi-family units. Employment The transition away from a resource-based economy to a service economy has been well documented in Jackson County and elsewhere, as timber and fishing jobs have been lost to supply constraints, foreign competition and other factors. The continuing weakness in employment as a result of the protracted recession is also well discussed. For Ashland and other communities, securing family-wage jobs will an on-going effort. Many factors, including access to a well-trained labor force, access to markets, tax environment, housing costs, quality of life and others, play into the decision of where to locate businesses. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 8 'C' ~1 . '" "$. "$. ~ $~' ~ "$. ~ "$. "$. t!' ;s ~ . . ... 0 t'ii .... 00 00 .... '" ... ... 00 0 vi 0 <7 0 N . '"I 0 0 ~ e ;S <-! '~i <-! ~ ~ lrl 0 0 0, 0 ~I 0 ~ ~ 0 0 M ~ ... M ~ 00 .... M N '7 '" ~~ cij rf \,j...... ~ 0 0 ~, 0' 0 0 0 :is 0 "'I M ..., 1:'-'''' ... 00 '" 00 00 ~, 00 -'r---, ~ '" ~ ;S .. N N vi"1 N 00 N N .~ ... .... '" i I 0 8 01 :is ~' 0 :is :: :is N M' .... ~I .... '" ~ ~ ",' .... ~ 00 vi" ..; M "'\ 00 N N 0 .... '" I '" , ~i 0 8 ~, ~: 0 0 ~. ~I 00 M '" M. N '" -, .... i ~ '" .. r--~; N N :l 00 '" 0 g 0 ::8! 0 0 ~ 0 0 "I <; ::3' :;:: M .... .... \O:"t"-': 00 .... "'! 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I,;, I~f k :::l .. 1 '" .- III ! :::g ~ ~ - ~ ;; ~ ~ .Q ~ B ~~ [il " . .0 . >>'0 ~ of e Eo< = .,.~. ""' ::> u Table 5 shows some of the comparisons among employment sectors in Jackson County for 2000 to 20 I O. As shown, the sectors with the highest employment growth were transportation/warehousing/utilities, financial services and education and health services which together added nearly 3,000 jobs to the County's employment base even after the high job losses since 2007. The weakest sectors were manufacturing, construction and information, with job losses over the decade, due to the recession that brought construction to a standstill and resulted in many lost jobs. Figure 3: Employment Change by Sector Jackson County 2001-2010 2,500 o J. ~ 2';{b 40 -730 200 IlU o 1~ -240 II 70 -100 80 . ... f If - a '" OIl '" :5 0; fJ " 0. " E :;; .5 ] I '" " '" '" . '0 .>! .>! 0 .>! g ~ ~ ~ ';, 'ii ~ E 1l b b ." b E ]. <:: " -a oB ii: r/1 r/1 ii r/1 '" fl i!9 " .-: " ..c ~ ~ i f.- '" u "0 '" " - ~ Ii ~ -5 Q ~ ~ e 0 f.- e t!: 'il " ill 0 z 15 f.- 2,000 1,500 1,000 500 -500 -1,000 -1,500 -2,000 -2,500 Total changes in sector employment between 2000 and 2010 are shown in Figure 3. Following peak employment in 2007, many of Jackson's counties employment have modest net gains or losses in employment over the past decade, with the obvious exception of the strong education and health services and manufacturing. Health care, because of an aging population, continues to be a strong employer. The government sector experienced almost no change in employment; however, budget cuts in local government may soon be reflected in reductions in the public sector. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 10 Figure 4: Jackson County Total Employment 90,000 85,000 80,000 75,000 70,000 65,000 60,000 55,000 50,000 ",,\ 1.)" _,,"> oJ. "",,> I.)b I.)~ I.)'b ""q ~IIJ ~~ ~~~ ~ ~ ~ ~~ ..... - ". .... ,.. ...... "- - -Total Nonfarm Employment -Total Private Just how deeply the recession has cut into Jackson County employment is shown in Figure 4. Total Nonfarm and Private employment rose steadily after the 2001 recession until 2007, at which point the demand for housing fell severely, bringing down production and employment in many related sectors. . Building Permit History Another source of data on development are building permits issued by the City of Ashland. Table 6 summarizes permit statistics from fiscal year 2000-2001 to March of 2011. Table 6: Total and Avera2e Annual Value of BuiIllin2 Permits Total Value 2000-2011 $132,832,601 $35,801,014 $142,455,612 Commercial Multi-Family Residential Single Family Residential Source: City of Ashland: Urban Land Economics Average Annual Permits 25 to 69 Annual Averalle $12,356,521 $3,330,327 $12,123,882 Commercial and single family permits were very similar in value over this II-year time frame, with an annual average of approximately $12,000,000. Multi-family permits averaged about $3.3 million. One caveat: permit valuations are generally given minimum estimation by the developer in order to minimize building permit fees. Consequently, permit valuations shown above almost certainly under-represent actual market value of the new development. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts II Figure 5: Annual Building Permits City of Ashland 140 120 II 100 e .. &: 80 ... 0 .. 60 .. '" E " 40 ;Z 20 _Commercial ....Multi-Family Residential __Single Family Resideutial o "j).... ~... ~"> ~.st'.~ ,<t- ~ A~ '!>.~ ~.... ...~ ...~.... ...~... ...~ ...# ...,p ...# ...~^'..." ...# ....':'~ .)>~ ~Vf ~ An annual breakdown of permits by category shown in Figure 5 aptly illustrates the boom and bust of single-family construction in Ashland over the last decade. After reaching a high of more than 120 permits in FY 2004-05, single-family permits fell to fewer than 20 in FY 2008-09 and are now slowly increasing. Multi-family construction followed a similar trend, but at much lower amplitude. Commercial permits have had a somewhat . less dramatic fall, but commercial development activity has yet to return, at least in terms .of the volume of commercial development projects. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 12 Figure 6: Annual Permit Valuation City of Ashland 530,000,000 $5,000,000 ~Commercial $25,000,000 $20,000,000 $15,000,000 $10,000,000 ......Multi-Family Resideutial .......Single Family Residential $- .)).... $)'" $)'" ~ . -t> . ~..,." 'I' _~ :$' '1>,..... ...~ ...<1'-'; ...<I''V ...<1' ...# ...<P ...~ ...# ...' ...# ....':~ ,p" 'I>,.<:{ ~ Finally, annual permit valuations by type of development are shown in Figure 6, illustrating the "lumpiness" of development in a small community, particularly for commercial projects. There are fewer projects, but their average value is higher, so the swings from more than $20 million in one year (FY2008-09) to nearly zero in the next year are to be expected. Employment Forecasts The first step in estimating how much commercial land will be needed to accommodate increases in employment is forecasting employment by sector. Table 7 shows the latest employment forecast from Oregon Employment Department for Jackson and Josephine Counties (Region 8) for the period 2008-2018. Consistent with recent trends, the EducationlHealth Services sector is projected to lead the way in new job formation, with Trade!TransportationlUtilities and Leisure and Hospitality also providing strong growth potential. Professional and Business Services, although currently a relatively small sector of the economy with only 8.3% of jobs in 2008, is projected to experience a 15.1% increase in jobs over this 10-year period. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 13 Table 7: Employment Forecasts for Jackson/Josephine Counties Total Payroll Emp EdulHealth Services Prof/Bus Services Leisure and Hosp TradeITranslUtil Government Other Services Financial Construction Manufacturing Mining/logging Information 2008 108,570 16,660 .9,100 12,200 24,160 15,650 3,640 6,070 5,550 10,290 3,320 1,930 2018 119,790 20,150 10,470 13.880 26,350 16,830 3,910 6,520 5,870 10,510 3,380 1,920 Source: Oregon Employment Department; Urban Land Economics Chanl!e 11,220 3,490 1,370 1,680 2,190 1,180 270 450 320 220 60 -10 % Chanl!e 10.3% 20.9% 15.1% 13.8% 9.1% 7.5% 7.4% 7.4% 5.8% 2.1% 1.8% -0.5% Manufacturing, with historic declines in employment, is projected to tread water when it comes to job creation. However, within this total sector are subgroups of industries that may lose employment (such as wood products) while other manufacturers are adding jobs. So the anemic larger picture of the manufacturing sector does not suggest that basic industries have no future in southern Oregon. A review of historic employment in Jackson and Josephine Counties reveals that Jackson County has provided a consistent 76-77% share of Region 8 employment in the past 10 years. This history allows a dependable assumption that 77% of forecasted employment shown in Table 7 will occur in Jackson County. The State of Oregon does not publish employment statistics for individual cities, but proprietary data on Ashland employers was obtained for the 2007 Ashland Economic Opportunities Analysis. Based on this information, approximately 16.5 % of Jackson County's employment is located in Ashland. For the purposes of these projections, it is assumed that this share remains constant for the next 20 years. Employment Forecasts by Land Use for Jackson County and City of Ashland Employment and land use are closely linked, particularly for nonretail commercial and industrial uses. Although developers in the past could construct office buildings on speculation and wait for tenants to arrive, underwriting standards and prudence both require that new development be substantially leased or sold to end users prior to construction. Retail development is a secondary use to population increases and/or traffic patterns and creates employment rather than responding to it. Housing, of course, responds to demand from new residents who locate to a community for education, employment or retirement. Urban Renewal Feasibility Study - City of Ashland Croman MiII and DowntownlRailroad Districts 14 - In addition, many industrial or light industrial buildings, particularly in a small market such as Ashland, are owner-built and occupied. Local enterprises can purchase land for future development, and when the need for expanded or improved facilities arises, can build on it. Other new industrial development can occur from outside the market, as businesses choose a location for new manufacturing, distribution or office space. In both internal and external markets, new employment drives the need for new development. Key to translating employment forecasts into demand for new real estate development is projecting what type of space various job sectors require. In general, the options are: commerciaUretail, commerciaUoffice and industrial. However, these categories are not distinct in reality (e.g., an insurance office in a shopping center) and, more importantly, do not allow for the many people who work in nontraditional or non-real estate settings. This latter category is large and growing, particularly as infonnation and networking technologies provide highly portable infonnation and communication. Home offices are common for many professionals and contractors. But there are also many construction, repair, service and installation contractors and employees who work out of trucks, vans and on job sites. Table 8: Land Use Demand Generated by New Employment Cbange Com Retail Offiee Industrial Otber II 2008-2018 % Emo % Emo ~ Emo % Emo Total PayroU Emp 11.220 EdulHealtb Services 3,490 0 0 80% 2,792 0% 0 20% 698 ProfIBus Services 1,370 0 0 60% 822 20% 274 20% 274 Leisure and Hosp 1,680 80"10 1,344 10"10 168 0 0 10"10 168 TradeffranslUtU 2,190 61% 1,342 5% 108 28% 608 6% 131 Government 1,180 0"10 0 75% 885 15% 177 10% 118 Other Services 270 30"10 81 20% 54 30% 81 20% 54 Financial 450 3% 14 88% 396 6% 27 3% 14 Construction 320 0 0 15% 48 35% 112 50% 160 Manufacturing 220 0 0 0 0 100% 220 0 0 Mlnlngllogglng 60 0 0 0% 0 0% 0 100% 60 Information -10 10% =l 30% -3 30% -3 30% -3 Total 11,220 2,780 5,270 1,496 1,674 Jackson Co. Sbare <if Total Emp @77% 8,639 2,140 4,058 1,152 1,289 Asbland Sbare of Jack Emp @ 16.5% 1,426 353 670 190 213 11 WOrlcinR at home, in vehicles, on iob sites, Source: Oregon Employment Department; Urban Land Economic!I Urban Renewal Feasibility Study - City of AsWand Croman Mill and DowntownlRailroad Districts 15 To more accurately translate employment to demand for new development, a detailed distribution by employment sector was made in four categories: retail, office, industrial and other, the last category requiring no commercial or industrial space. This distribution is shown above in Table 8 and is based on a detailed survey of the employment sector subcategories. All employment sectors include subsectors with varying space needs and these variations are reflected in the distribution. Also shown in Table 8 are the resulting shares of Jackson County and Ashland employment by various locations of employment. With a total new employment of 1,426 between 2008 and 2018 in Ashland, 353 of these new employees are projected to work in various commercial retail buildings, 670 in office (including medical) buildings, 190 employed in industrial buildings and 213 will not occupy a traditional work environment. Table 9: Employment-Generated Real Estate Demand for Ashland EmpllOOO sf Soace Reouired (SF) Bid!! 2008-2018 Per vear Total New Employment Commercial Retail Office Industrial Other 2008-2018 1426 353 670 190 213 3.0 3.5 1.0 0.0 117,726 191,302 190,060 o 11,773 19,130 19,006 o Source: Urban LamJ Economic$ Finally, demand for each type of real estate development is shown in Table 9. Under these assumptions, projected new employment in Ashland will generate annual demand for approximately 20,000 square feet each of office and industrial space and approximately 12,000 square feet of commercial retail space. Although the employment forecasts extend only until 2018, employment forecasts from the Economic Opportunities Analysis project an unchanged rate of growth for the period 2007-2027, so it is reasonable to assume that these forecasts can be extended beyond 2018. These forecasts are not a prediction, however, and are subject to some ofthe following conditions: . Slow economic recovery continues and there is not another severe recession to dampen economic growth . City of Ashland responds positively to economic development opportunities . Industrial sites are improved and available for new development These forecasts are not intended to be dealt out or allocated in market shares to various areas within Ashland, but to serve as a guide, or a reality check, against projections of development potential within the urban renewal stUdy areas. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 16 Commercial Real Estate Market Conditions This section of the feasibility analysis covers those sectors of the real estate market that relate to potential development in the urban renewal study areas. Consequently, the focus is on industrial, office and retail development. Multi-family market conditions are presented as they relate to potential units in small mixed-use projects, rather than large apartment developments. Because of the wide variety of commercial development types in the study areas and the multitude of market segn:tents they represent, a detailed supply vs. demand analysis of each segment is beyond the scope of this study. One of the primary goals, however, is to estimate current valuations of the relevant market segments. The recessionary effects on the commercial real estate market complicate this task, as the number of transactions has been reduced. An effort is made to provide realistic valuations, in line with current market conditions, as it appears unlikely that another real estate bubble is likely to form soon given the constrictions on capital and looming increases in interest mtes. Residential Market Although the opportunities for residential development are limited in the two urban renewal study areas, a look at housing prices (for all unit types, including condominiums) in Ashland over the past 15 years illustrates: I) the cost of housing in Ashland relative to elsewhere in the state, and 2) the steep decline in these values since 2007. Figure 7: Housing Values Index 5450,000 5400,000 $350,000 $300,000 5250,000 5200,000 5150,000 5100,000 I- I "" j ~ '" l..I I"- / 1/ "" .... ... 17 .,; 7' '" . -Ashland -Oregon ....~ ....<fI'l> ...# ...~... ....# ...# ...~'l> ~....~ Source: zillow.com; Urban Land Economic.! As shown in Figure 7, housing values in Ashland exceeded those of Oregon in 1996, but the margin was about $30,000. Beginning in 200 I, housing prices in Ashland started to soar, becoming one of the most expensive in the state. Since then, prices have fallen approximately 33%. The steep rise in prices is due to: I) the luxury market attracted to Ashland for its climate, natural surroundings and cultural amenities, and 2) the relative Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownJRailroad Districts 17 lack of new development at the other end of the price scale. Ashland's housing stock maintains a premium over statewide values of approximately 35%. Industrial Real Estate Market The industrial real estate market can include a very wide variety of products, from massive distribution warehouses to smaller flex, light industrial buildings with a large office' component. The largest industrial parcel in the study areas, Croman Mill, is planned for a high-amenity office/industrial park, so major distribution centers are unlikely to locate here because of site costs. Property Sales Very few industrial property sales have occurred in the Ashland market area recently. TablelO describes two sales, with the property on Clover (just outside the Croman Mill area) providing the most relevant example at $153.59 per square foot, although the sale was over two years ago. Add,ess: 550 Clover 588 Parsons (Medford) Table 10: AshlandlMedford Industrial Properties Sold Price Total Per SF $2,800,000 $153.69 $1,430,000 $75.31 . Tvoe OffIWH WH y, Built 2003 1997 Size 18,218 18,988 Date Sold 2/7/09 9/30/10 Source: lOOp7let.com: Urban Land Economics Properties for Sale Table II lists industrial properties currently for sale in both Ashland and Medford, with asking prices ranging from $89 to $170 per square foot. The property at 645 Washington is fully leased, with the US Forest Service as the prinle tenant with a long-term lease. Such properties with quality tenants on extended leases have higher value because there is very little short-term vacancy risk and a guaranteed income stream. Most of the buildings, however, are being marketed for approximately $110 per square foot, even for new buildings. Urban Renewal Feasibility Study - City of Ashland Croman Mill and Downtown/Railroad Districts 18 Table 11: AshlandlMedCord Industrial Properties Cor Sale Address: TVDe 645 Washington (A) II OfficelWH 1130-1140 Helicopter (M) WH 1912 United Way (M) Ind ParkIWH 2025 Commerce (M) Ind Park 2019 Commerce (M) Ind Condo II Fully leased. USFS maior lenant. Source: loopner.com; Urban Land Economics Commercial Office Market Price Built 1967 2008 2007 2009 2008 Size (SF) 12,300 43,092 7,900 6,062 9,016 Total $2, I 00,000 $5,156,300 $815,000 $540,000 $950,000 PricelSF $170.73 $119.66 $103.16 $89.08 $105.37 The commercial office market also includes a variety building types and sizes. However, in a small market such as Ashland, there will not be large midrise or high-rise office buildings. The majority of the commercial office buildings will be less than 10,000 square feet and often the space will be located in a mixed-use building with retail on the lower floor. The one potential exception to this is an owner-occupied building, such as a headquarters building where the size and configuration could be whatever is suitable for the owner. Property Sales As with the industrial market, few transactions have occurred recently in the commercial office market. As shown below in Table 12, prices range from $137 to $266 per square foot, although the latter property's value is based on the large parcel ofland and not on the structure. From these transactions, miu-ket value per square foot for new construction is between $200 and $225 per square foot. Table 12: Ashland Office Buildin2s Sold Address: 400 Williamson Way 1746 Ashland 542 Washington 831 Ohare (Medford) Year Built NA 1955 2006 2008 Source: /oopnel.com; Urban lAnd Economics Properties for Sale Size (SF) 4,400 1,126 4,512 5,580 Price Per SF $136.80 $266.43 $207.23 $210.57 Date Sold 7/21/09 11/30/07 3/31107 12/30/10 Total $601,900 $300,000 $935,000 $1,175,000 Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 19 Ashland office buildings currently on the market are shown in Table 13. These listings indicate the relationship between size and price, with the smaller buildings priced higher per square foot than larger buildings. On a per square foot basis, medical office buildings command a higher price as there are more tenant improvements. Table 13: Ashland Office Buildin2s For Sale Address: 283-303 E Main 2262 Ashland 400 W Hershey 1617-1661 N Hwy 99 Tvoe of Bldf! Office Med Office Off Condo Office Year Built NA NA NA 2008 Size (SF) 20,578 2,520 930 3,783 Price Total Per SF $2,950,000 $143.36 $650,000 $257.94 $225,000 $241.94 $947,100 $250.36 Source: Joopnt!t.com; Urban Land Economic!I The listings also include an office condo, a relatively new product on the market. Office condos can provide the small business owner with the advantages of an equity investment, or they may be marketed to investors. More office condos may be built in the future in Ashland, although they are more expensive to develop and the market may be shallow. Commercial/Retail Market Retail properties common in the Ashland market include various configurations of shopping centers, smaller single-tenant buildings and retail space in mixed-use buildings. All of these formats may be part of new development in the urban renewal study areas. Current market conditions reflect a downward pressure on rents, as tenants are requesting rent reductions in order to ride out the recession. As commercial property values reflect capitalized income, rent reductions and uncertainties are depressing investment property values. However, there is still an active market for well-located buildings in Ashland. Recent Property Sales There have been several retail property sales in the past year in Ashland, as shown in Table 14, with prices ranging from $140 to $291 per square foot. (These sales were evaluated as most comparable to the types of retail properties that would be developed in the urban renewal study areas.) , Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 20 Table 14: Recent CommercialJRetail Property Sales Price Address: 744 N Main 399 E Main #201 1784 Ashland 37 N Main 561 Rock 90 N Pioneer 2611 Biddle (Medford) Size (SF) 1,318 1,037 932 8,000 1,818 4,089 37,459 Sou~: Joopnet.com; Urban lAnd EconomiC$ Total $270,000 $212,500 $170,000 $1,117,500 $530,000 $1,165,000 $6,725,000 Per SF $204.86 $204.92 $182.40 $139.69 $291.53 $284.91 $179.53 Date Sold 4/1/11 4/1/11 2/4/11 6/30/10 6/30/10 5/14/10 12/10 All of the Ashland sales are for small buildings, including commercial condos. It should be noted that the 37 N Main building includes basement space, reducing the price below the value of other buildings in downtown Ashland. Properties Currently for Sale Table 15 below described two properties within the urban renewal study area that are currently on the market. The Jasmine Building on Lithia Way includes unsold commercial condominiums at slightly less than $200 per square foot. Table 15: CommercialJRetail Properties for Sale Address: 2200 Ashland 1/ Jasmine Bldg 2/ 1/1.2 Be redevelopment sile 2/ 9 unit commercial condo Source: loopnet.com; Urban Land Economic", TVlJe StripCtr Storefront Yr. Built 1967 2005 Other Potential Development Types Size 5,350 7,500 Prie. Total Per SF $850,000 $158.88 $1,495,000 $199.33 Aside from industrial, office and commercial/retail development, other types of development are likely in the urban renewal study area, including lodging and housing. According to Union Pacific Railroad property managers, a convention hotel has been suggested for part of their site. With a large site and a strong base for tourism, such a use has potential. In addition, condominiums are likely to continue to be developed within the Clear CreeklRailroad property areas. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 21 Lodging Few sales for comparable lodging properties were found for the Ashland/Jackson County market, so a wide net was cast to estimate future valuations. As shown in Table 16, sales prices per room vary with the type of lodging, with bed & breakfast inns and historic properties commanding higher prices. For more standard lodging, the effects of the recession are apparent with the purchase prices for Medford Holiday Inn Express and the Best Western Grand Manor in Springfield, both similar size and character. In the a little over two years, the price per room fell by approximately one-third. Table 16: Lod2io2 Sales Prices Price Yr Location: Tvoe Built ~ Total Per room Date Sold 312 Helman B&B NA 6 $850,000 $141,667 NA 41 Rogue R Hy (Gold Hill) B&B 1890 5 $548,000 $109,600 NA Medford Holiday Inn Express Motel 1999 63 $6,206,000 $98,508 9/30/08 Best West Springfield Motel 1991 65 $4,450,000 $68,462 1115/2011 Columbia Gorge Hotel His!. Hotel 1921 39 $4,500,000 $115,385 11/30/09 830 N 5th Jacksonville Motel NA 27 $1,200,000 $44,444 12/31/09 Source: /oopnet.com; Urban Land Economic$ For potential lodging development in downtown Ashland, a high quality, but not luxurious facility, is likely to be developed, with per room valuations in the $100,000 to $125,000 range. Condominiums According to the residential real estate service, zillow.com, condominium values in Ashland are currently $185,300, a 35% decline from the peak value of$284,700 in 2006. This drop in price has occurred in virtually every market and reflects overbuilding as well as all the other economic ramifications of the current recession. In particular, the luxury market has been hard hit. Nonetheless, Ashland's highly attractive downtown should continue to attract new residents and provide a market for new housing development in downtown. Within the past year, two condominiums on Clear Creek Drive sold for $262,000 and $315,000, or about $200 per square foot. Condominiums currently on the market are shown below in Table 17. (It is believed that none of these properties is subject to foreclosure or auction that would significantly depress the price.) Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 22 As shown, prices range from $172 per square foot for the largest unit to $289 per square foot for the smallest unit, with total prices averaging about $275,000. (Final sales prices will very likely fall 10-15% below asking prices.) Table 17: Condominiums Currently on the Market Price 952 Golden Aspen 832 Plum Ridge Van Ness 479 Russell #201 622 Fair Oaks Ct #16 2299 Siskiyou Size (SF) 1,078 1,497 936 604 2,046 882 Total $255,000 $349,500 $181,999 $174,500 $351,900 $249,000 PricelSO $236.55 $233.47 $194.44 $288.91 $171.99 $282.31 Source: Real Estate Brokers; Urban Land Econom;c!I Several factors go into estimating average value for future housing development in the urban renewal study area, but the most important ones are: I) mix of condominiums and apartments and 2) future strength of the luxury market. New apartments are valued at approximately half the value of new condos, because they are generally smaller and have less expensive unit and building features. Certainly, a luxury condo could be valued at up to $1,000,000, but such a project is unlikely to be built in downtown Ashland. An estimated average market value of $225,000 was chosen, assuming that there will be a mix of apartments and condominiums and that the luxury market would be a minor component of future development. Opportunity Parcels Opportunity parcels are those parcels that could be candidates for development within the 20-year projection time horizon. For vacant parcels, this likelihood is based on a combination of factors including: active development activity; active planning activity, proximity to recent successful development, location within a fully developed area, strong commercial location with high traffic counts, and many other factors. For parcels with some improvements, the factors include: low improvement-to-Iand (I:L) ratios (the ratio of the real market value of the improvements (I) to the real market value of the land (L), proximity to high value development, economic age of improvements, low intensity uses in an area with higher density commercial development, etc. Typically, urban renewal potential focuses on !:L ratios, with the assumption that a rational property owner will leverage the value of the land and build to the maximum allowable density. Certainly, if there is no improvement on the parcel (unless it is parking in support of an adjacent use), the property owner has little or no income from the asset. Consequently, a privately-owner urban parcel with an I:L ratio of 0.0 can be safely assumed to be a target for future development. However, the judgment becomes less certain when there is some development, but perhaps not to the value of similar parcels in the market. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 23 One very important factor, particularly for parcels already developed, is the interest and motivation of the property owner. A low improvement-to-Iand ratio can be meaningless for a propertylbusiness owner in a well-established location who is not ready to retire or sell the property for possible redevelopment. Relying heavily on I:L ratios to identify opportunity parcels can also overstate the depth of the market in a small local economy such as Ashland. It also ignores the value of historic buildings and a small-scale downtown. Another consideration against removal of existing buildings in favor of higher density or higher quality structures is that it is the exception and not the rule. Even in much higher density real estate markets, existing structures are upgraded unless: I) there is a big increase in allowable floor area ratio (FAR) and 2) the market is very strong. Given the economics of new construction combined with a slow economy, adaptive reuse and remodeling are much more likely to be financially feasible than full removal and redevelopment. For these reasons, opportunities were identified primarily among vacant parcels. For both urban renewal study areas study areas, there is a strong inventory of improved vacant lots as well as unimproved tracts. It should be noted, of course, that not all of the identified parcels would develop in the 20-year time horizon. Projections of future development are described in the following section. Downtown/Railroad Property Based on the criteria described above, the proposed DowntownlRailroad Property urban renewal area has 43 separate parcels totally nearly 38 acres that have strong development potential in the next 20 years, as shown below in Table 18. Table 18: Summary of Opportunity Parcels, DowntownlRailroad Property Subarea Zoninl!!Overlav Current Use Parcels Area Employ north of RR UP RR Prop EI/Res Vacant 2 19.64 Russell St. EI/Res VacantlMin Imps 6 2.52 HersheylWilliams E I/Res Some Imps 2 4.04 Clear Creek Dr. EI/Res Vacant 14 3.93 Ashland Lumber EI/Res Commercial I 1.79 Water St EI/Res Comm/Ind I 0.58 Employ south of RR Van NesslWater E l/Res CommlIndlSF 8 2.24 Downtown LithialFirstIPO CI Parking 5 2.1 Misc parcels CI Vacantllmps 1. 1.09 Total 43 37.93 Source: City of Ashland; Urban Land Economia Urban Renewal Feasibility Study - City of Ashland 24 Croman Mill and Downtown/Railroad Districts The largest area is the unimproved Union Pacific property, with nearly 20 acres in two parcels. However, the employment area north of the railroad tracks has numerous improved parcels of varying sizes awaiting development. Prior to the recessions, parcels along Clear Creek Drive were developed as small, mixed-use projects, often with housing over office space. The downtown portion of the urban renewal study areas has slightly over 3 acres in nine parcels identified as opportunity parcels. The major site is on Lithia, across from the post office, a parcel that has been planned for major development. There are other small parcels in downtown that are also potential development.sites. Market valuations according to Jackson County assessments are shown in Table 19. About half of the subareas have little or no improvement. South of the railroad tracks, but still within the EI zone are several parcels with low I:L ratios. The average I:L for all the opportunity parcels is 0.05, representing land value with very little improvement, and. therefore, and upside economic potential in light of the location in or adjacent to a thriving retail and tourist center. Table 19: Market Value of Opportunity Parcels, Downtown/Railroad Market Value Subarea Area /mo Land /:L Employ north of RR UP RR Prop 19.64 $0 $4,709,480 0.00 Russell St. 2.52 $89,430 $4,912,440 0.02 HersheylWilliams 4.04 $179,860 $702,920 0.26 Clear Creek Dr. 3.93 $0 $1,995,530 0.00 Ashland Lumber 1.79 $190,710 $681,430 0.28 Water St 0.58 $48,370 $243,140 0.20 Employ sauth of RR Van NesslWater 2.24 $217,380 $1,358,370 0.16 Downtown LithiafFirstIPO 2.1 $16,160 $3,168,430 0.01 Misc parcels 1.09 $157550 $1.835.590 0.09 Total 37.93 $899,460 $19,607,330 0.05 Source: City of Ash/and; Urban Land Economic" The following summary describes the downtown/railroad property areas where development is likely to occur: Union Pacific Railroad PrODertv: These two parcels are unimproved and are currently undergoing environmental remediation. According the UP Real Estate representative, the remediation is scheduled for completion in 2011, but he is assuming it will contiilUe into 2012. He was not certain that full remediation to allow unrestricted uses would be Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 25 obtained; however, that is the City's position and assumption. The issue is important because lodging and housing are both logical uses for at least some of the site. It is assumed that the pattern of development that has occurred along Clear Creek Drive will continue into this site: small mixed use buildings with office on the ground floor and . either apartments or condominiums on the upper floors. In addition, the site is suitable for a 100-room hotel or retirement housing as well as retail space, particularly if there is a railroad crossing at Fourth Street. In fact, it is likely that a direct crossing into downtown is necessary for significant development and this projection assumes the crossing will be constructed. Russell Street: This area is just north of the railroad property and includes improved lots, . only one of which has been developed. It is bank-owned and currently on the market. Mixed-use office and housing is proposed, continuing the current development type. HershevlWilliams: This area has two large undeveloped parcels where a mix of industrial and office development will occur. This is the only area within the DowntownlRailroad district that is assumed to have light industrial development, matching existing development patterns. Clear Creek Drive: There are several vacant lots along Clear Creek Drive, where mixed- use buildings of office and housing were built in the past five years. Future development is proposed to follow this same development type on the relatively small lots. Ashland Lumber: This is a prominent site on Oak Street at the entrance of Clear Creek Drive. A mixture of retail and office has potential here. Water Street: This is a single parcel of underdeveloped property on the north side of Water Street, suitable for office development. Van NesslWater: On both sides on Water Street south of Van Ness Avenue are underutilized parcels that can redevelop into a combination of office, retail and some lodging, such as a bed & breakfast. LithiaiFirst: This 2. I-acre site sits across from the post office and is the only major redevelopment site in downtown. High-density development of retail and office is anticipated here, with structured parking. Croman Mill Table 20 summarizes the opportunity parcels in the Croman Mill urban renewal study area. As shown, the majority of the property is located in the area governed by the Croman Mill Plan. Other areas of opportunity include parcels along Washington and Jefferson Avenue, and commercial parcels around the intersection of Ashland Avenue and Tolman Creek Road. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownIRailroad Districts 26 Table 20: Summary of Opportunity Parcels, Croman Mill Gross Net Current Subarea Area Zoninl! Use Parcels Area 1/ Croman Mill Croman Mill Site 54.9 CMP Vacant 8 41.2 ODOT 6.4 CMP Storage, off I 4.8 Other Prop. Owners 7.8 CMP Vacant 6 7.0 Subtotal 69.1 53.0 East of Tolman, North of RR Washington ProCPlaza 0.8 El/CI Vacant 6 0.8 Jefferson A venue 12.4 EIIMI Vacant 5 11.1 IPCO 6.8 EI Vacant 3 QJ. Subtotal 20.0 18.! Tolman/Ashland Bi-Mart area 6.7 CI Some dev. 3 6.7 Tolman LLC l! CI Some dev. 1 l! Subtotal 8.5 8.5 TOTAL AREA 97.6 33 79.6 1/25% deduction for unplatted Croman and ODOT parcels to.1low ro ROW, parks, etc. 10% deduction for other unimproved parcels Source: City of Ash/and: Urban Land Economia The gross area of the urban renewal study area is 97.6 acres; however, the net developable area is estimated to be 79.6 acres to allow for the numerous public improvements (right-of-way and parks) called for in the Croman Mill Plan. Most of the parcels are currently vacant. As with the opportunity parcels in the downtown/railroad property, not all of these parcels can be expected to fully develop, particularly in Croman Mill, which is a very large site with heavy infrastructure requirements. Table 21 shows the real market value of the opportunity parcels. Of note is the high ratio of improvement- to-land value of the ODOT site, or 3.38. This reflects the very low value of this publicly owned parcel, not the worth ofthe improvements. For the remainder of the opportunity parcels, there are few improvements and the totall:L ratio for these net 79.6 acres is 0.08. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 27 The following summary describes some of the development opportunities that are likely to occur in the Croman Mill urban renewal study area: Table 21: Market Value of Opportunity Parcels, Croman MiD , Market Value Subarea Net Area /mo Land /:L Croman Mill Former Croman Mill Site 41.2 $36,980 $2,948,370 0.01 ODOTII 4.8 $121,750 $35,970 3.38 Other Prop. Owners 7.0 $96,210 $1,854,180 0.05 Subtotal 53.0 $254,940 $4,838,520 East of Tolman, North ofRR Washington Prof Plaza 0.8 $0 $1,422,470 0.00 Jefferson Avenue 11.1 $0 $3,770,820 0.00 IPCO 6.1 $100,490 $2,127,850 0.05 Subtotal 18.1 $100,490 $7,321,140 Tolman/Ashland Bi-Mart area 6.7 $631,480 $3,489,500 0.18 Tolman LLC 1.8 $318,750 $1,002,300 0.32 Subtotal 8.5 $950.230 $4.491.800 0.21 TOTAL AREA 79.6 $1,305,660 $16,651,460 0.08 ll.u-res.fOr'", Land Value i3 likely in error and f(TeQt/v underulimole3 true market value. Consequently. I:L ratio i.J mu/eadinK. Source: City of Ashland; Urban Land Economia . Former Croman Mill: All of this area is under the Croman Mill Plan and is owned by Dwain & Bud, LLC. A very intensive development plan calls for parks, light rail stations and structured parking, as well as an elaborate street system, with the "Signature Road" connecting Mistletoe and Siskiyou Blvd. Negotiations are underway for sale of an initial parcel to Plexis Healthcare Systems of Ashland. In addition, application has been made to the State for Immediate Opportunity Fund (IOF) grant to help finance construction of the signature road. The property owners also plan to commit the proceeds from the 10- acre sale to Plexis to building the signature road. It is assumed in the phasing schedule that the initial building for Plexis will be under construction in three to four years. ODOT: Replacement property for the ODOT facility is unresolved and development of this property is assumed to be far into the future. This delay is assumed not just because of the need to relocate ODOT, but because this parcel is planned for high-density residential and commercial development that is unlikely to be warranted until significant office and industrial development has occurred on the rest of the Croman Mill site. As noted in Table 21, the land value provided by the Jackson County Assessor is an anomaly and greatly underestimates the actual market value ofthe property. Other Croman Area ProDerties: Other properties are scattered along Mistletoe and may be more independent of the infrastructure needs of the larger property. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownJRailroad Districts 28 Washinlrton Professional Plaza: These are small platted parcels within an existing planned office park development. They share parking, so there is a higher FAR for these lots and they should develop fairly quickly, but represent only a small level of new construction. Jefferson AvenuelIPCO Parcels: Most of the Jefferson Avenues parcels will be ready for development when the Jefferson Avenue extension (currently under construction) is completed. Brammo Inc. owns three of the five parcels. In about 18 months, they plan to construct a 40,000 square foot headquarters building on one of the parcels zoned MI to replace their leased space. According to the company, they will likely subdivide the EI lot in the future and maybe sell the third lot Other vacant parcels are location behind the Les Schwab store on Ashland Street. One of the parcels fronts on Tolman Creek Road and is a good candidate for commercial development. BiMart Shopping CenterITolman LLC: These parcels are the vacantlunderutilized parcels next to Bi-Mart and north of Ashland Avenue. The Bi-Mart parcel itself is not included in the redevelopment area. Although it may well be improved in the future, it is unlikely to be razed and replaced by a use with higher density. Projected Development in the Urban Renewal Study Areas Zoning, market factors, existing development patterns and overall demand are aU factors in projecting how much and what kind of development will occur in the urban renewal study areas. Many of the opportunity parcels, especially in the E I zone with a residential overlay, allow a range of development types and mixed-use buildings. For other parcels, for example in the Washington/Jefferson area, future development is a more predictable mix of office and light industrial uses. For these projections, percentage allocations for each land use are presented for each opportunity parcel and converted to square footage based on assumptions of floor area ratio (FAR). This calculation results in total build-out of aU opportunity parcels. However, actual development is estimated from the employment-generated projections of demand presented earlier. For these projections, there is no specific prediction that the development will occur on one specific parcel or another. Lastly, the 20-year time horizon is grouped in 5-year segments. Projected development in the two urban renewal study areas are presented separately, with more detailed discussion on development and timing assumptions. Downtown/Railroad Properties Allocation of future development for each subarea of the Downtown/Railroad district is displayed in Table 23, based on zoning and surrounding uses. Urban Renewal Feasibility Study - City of Ashland Croman MiU and DowntownlRailroad Districts 29 Table 23: Allocation of New Development on DowntownlRR Opportunity Parcels Net New Develoomeot Tvoe Suharea Area CAC) Office Retail Housinl! Lodl!iol! Industrial Emp north of RR UP RR Prop 1/ 14.73 40% 20% 15% 15% 0 Russell St. 2.52 25% 0 75% 0 0 HersheylWilliams 4.04 50% 0 0 0 50% Clear Creek Dr. 3.93 40% 10% 50% 0% 0% Ashland Lumber 1.79 50% 50% 0% 0% 0% Water St 0.58 100% 0% 0% 0% 0% Emp south of RR Van Ness/Water 2.24 40% 40% 0% 20% 0% Downtown LithiafFirstIPO 2.1 80% 20% 0% 0% 0% Misc parcels 1.09 0% 20% 80% 0% 0% Source: Urban Land Economic$ How these allocations translate into full development is shown in Table 24, based on total capacity as defmed by area and FAR. As shown, total development in the opportunity parcels is approximately 765,000 square feet. Of this total, 338,000 square feet, or 44% would be office space, 138,000 square feet (18%) would be retail space and industrial space would total about 31,000 square foot. Housing, with 155 units, and 115 lodging rooms round out the mix. Some of the development assumptions for this urban renewal study area include: " . The current economic recession slowly eases, but relatively little development occur in the early years of the urban renewal district to allow for absorption of vacant space and increases in rent levels. . Although more light industrial development could occur, it is assumed that land values near downtown Ashland will encourage more office development, with the Crornan Mill area being more appropriate for future industrial development. . A railroad crossing at 4th Avenue is assumed, providing the opportunity for lodging and associated restaurant and other retail development on the railroad property. . Residential development on the upper floors of mixed-use buildings will continue to be built. Some smaller units will be built to maintain lower price points, while other developments will serve the higher-end market with large units. . Most development will not require structured parking, with the exception of the Lithia Way site and some of the Railroad property and some interior parking in small mixed use buildings as has already occurred. . Environmental mitigation on the Railroad property is successfully completed to allow for unrestricted residential development. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts 30 51 .., ~ ." :: - J - .~ 00 .., 0 :r; 0 0 0 0:;1 ." '" .., ." . - ::> t '" ;; 00 .... 000 0 001 ~ 'E '" .... . 0 0 . .., ... '" . - ~ ~ .... 00000 0 001 "" ::> 1t .., ,. 00 t '" ,.: .a . '" < .:l .... ;;; 0 .... 00 0 0 ~j .~ 1t '" '" "'l 1 ,.: N I! '" .., '" 1 c:l .... 00 ~ .., 0 ~ '" ~ t ~ '" .., ;; ~ N "': '" c:l ... ~ .a s- ~ M i .. .... ... ,. - ..Cl .. ~ ~I ~.., .... .... '" .., .., f6 '" 01'" ... " .... '" 00 '" :lS ;l; "I. ,. M '" .... o. " '" .... C) ~ s- o '" ,,; M ,,; ::l .. .., " '" == ~ i .., 00 " :; '" .., ~j '" 00 ~ '" 00 :lS ~ 00 .... '" "'. .... '" ] "i M ::0 g ,,; ,,; ~ M ;z " .., .., .... ~ . .., .... C) .. ... c:l ~ '" C) ~ Q :jjjJ!l ell' .. ~I '" '" '" '" '" .. '" < " .., '" .., .., .., <.S ., .,; .,; .,; .,; .,; .,; .,; .,; .,; ~ '- <Il " o ._ c:l j '" ~ N ~ !:! '" " '" ~j - ?;>o ,. .., 00 '" .... .... ." .- '" ..l = '" .... '" '" N '" "': U '" E ...:g;- vi ,.: vi ,.: ~ .. I e ::1: - ~ .... .... N '" ... ~ .. it - .., N ;g .., '" 00 ;:'; 51 N .... on '" .., '" N 0 ?;> C) ]I~ ..; N ..; ...; .,; N ..; .~ ._ 0 ... ]~ ] J .- gj 0 Q ..0 = ~ ..8 ~ ....'" = :! :! ! ~ - ~ .... ::: . a ~ ~ ~ .!<l . ~- ~ .... ....~ ~ Q.J:-= 1- ~ i!..J .~ i 5::E M ~ ~ t' "'0 ci) ~ ~ ~ ~~ .. ~ ~]~~~! 2 z a t~ .l ~ - . -< ..Cl . t t~ j .. ~ ,. '" ~:I: U ~ ;.:j ::!1 0 of e Eo< . '" "l "l .. ::>u Phasing of projected development in five-year increments is shown below in Table 25. (A comparison of how this and the projected development on the Croman Mill District relate to total demand in Ashland will be presented at the end of this section.) Total build-out by land use is shown at the top of the table. As can be seen, none of development categories is projected to be fully built within 20 years. Table 25: Schedule of New Development: DowntownlRailroad Urban Renewal Study Area Office Retail Rn Units LocIIliD2 Industrial Total FaD Development (roaaded) 335,000 140,000 155 115 31,000 Projected Dev Time Frame Years 0-5 20,000 5,000 IS 0 10,000 Years 6-10 40.000 15,000 25 IS 10,000 Years II-IS 40,000 25.000 25 100 11,000 Years 16-20 40,000 15.000 25 0 0 Total 140,000 60,000 90 115 31,000 Market Value/SFlUait $225 5260 5225,000 5110,000 $125 Real Market Valae of New Development Years 0-5 54,500,000 5 I ,300,000 53.375.000 $0 51,250,000 510,425,000 Years 6-10 59,000.000 53,900,000 55,625,000 $ 1,650.000 5 I ,250,000 521,425,000 Years 11-15 59.000,000 56,500,000 55,625,000 511.000,000 51,375,000 533.500.000 Years 16-20 59.000,000 53,900.000 55,625,000 50 50 $ 18.525,000 Curreot RMV orLand Dev. 1/ Years 0-5 $536,140 $134,035 5402.105 SO 5268,070 $1.340,350 Years 6-10 $ 1 ,072,280 5402,105 5670.175 $225,179 5268,070 $2,637,809 Years 11-15 $ 1,072,280 5670,175 5670,175 51,501,192 5294,877 54.208,699 Years 16-20 51,072.280 5402,105 5670,175 SO 50 52,144.560 Incremental Real Market Value of New Development Years 0-5 53,963,860 51,165,965 52,972,895 50 5981,930 59,084,650 Years 6-10 57,927,720 53,497.895 54,954,825 51,424,821 5981.930 518.787,191 Years 11-15 57,927,720 55.829,825 54.954.825 59,498,808 51.080,123 $29.291.301 Years 16-20 57,927,720 53,497,895 54.954.825 50 $0 516.380,440 II Based on llVc:nt~C value per square foot of land and cxistinA improvements. Source: Urban Land Economic$ With relatively conservative estimates of valuation per square foot and per unit, total and incremental valuations of new developments are shown in Table 25, With development proceeding slowly in the first five years, total incremental market value is estimated to be approximately $9 million, increasing to $18.8 million in the following period, with the highest level of new development projected for years 11-15. This bump in development is largely due to the assumption that a hotel or senior housing project is built on the railroad property within this time frame. The final five years bring increased value to the urban renewal study areas of $16.3 million. Urban Renewal Feasibility Study - City of Ashland Croman Mill and Downtown/Railroad Districts 32 (roman Mill Area Allocation of future development for each subarea of the proposed Croman Mill urban renewal district is displayed in Table 26, based on zoning and surrounding uses. Table 26: Allocation of New Development in Croman Mill Area Parcels New Development Tvpe Subarea Area(ACl Zoninl! Industrial Office Retail Housinl! Croman Mill Former Croman Mill Site 41.2 CMP 60% 40% 0% 0% ODOT 4.8 CMP 0% 0% 34% 66% Other Prop. Owners 7.0 CMP 90% 10% 0% 0% East o/Tolman, North 0/ RR Washington Prof. Plaza 0.8 EIfCI 0% 100% 0% 0% Jefferson Avenue 11.1 EIIMI 65% 35% 0% 0% IPCO 6.1 EI 30% 30% 40% 0% Tolman/Ashland Bi-Mart area 6.7 Cl 0% 0% 100% 0% Tolman LLC 1.8 CI .0% 0% 100% 0% Source: Urban Land Economic3 In comparison to the Downtown/Railroad district, there is a much heavier concentration of industrial. Retail development is focused on the parcels along Ashland Avenue and intersection of Ashland and Tolman Creek Road, based on zoning and existing patterns of development and traffic. There is little housing, except for the portion of the Croman Mill Plan currently occupied by the ODOT facility. How these allocations translate into full development is shown in Table 27, based on total capacity as defined by area and FAR. As shown, total development in the opportunity parcels is approximately 1,250,000 square feet. Of this total, approximately one-half would be industrial space; 370,000 square feet (30%) would be office development; and 202,000 square feet (16%) would be retail space. Housing, with 92 units, would be a modest element of the mix. The development projections were based on the following assumptions: . Owners of the Croman Mill site will sell the initial IO-acre to Plexis or another buyer in the next year and immediately begin planning and engineering for the Signature Road, with construction of the first building in three to four years. . Employment growth is consistent with the projections made by OED for Jackson County and Ashland continues to get its historic share of new employment. . City of Ashland, the Chamber of Commerce and private real estate brokers work actively to market Ashland as a place to do business. . The current economic slowdown improves very slowly. Urban Renewal Feasibility Study - City of Ashland Croman Mill and Downtown/Railroad Districts 33 ~J '" . ~ !I .. ... 'C .. .l!l Q i .. l:l ~ l:l 00 .Cl .. ;;l ~ 5l <:) e =- ~ l:l is e ~ ~ ~ l:l 00 ...:l ~. t 0( ~~ ~ ~I 0( '" <:) - .. .. .. Q = =' r- ~ N .. - .Cl 00 "" ~I o N 01 N '" '" o 0.. 01 0\ .. .. oC 00 '" '" o 0\ 01 01 ;.. ~ on vi ~ ~ ~I ~OO~t'~ o ...: on '" N N .. 'E . . '" . - ~O~2 ~ ..,. ~~~~ \0 jl ~ ~1I"'l~ odd o '" ~~ ~ ~ to- lI"'l t"\ ~~~g t"--.. N t't'l ~ ~ : ~I ~ '" on B v; 11 ~ t~ II .g ~ tIl ~~ ~ a ~ 8 .. e u 0 ~ u o 0 01 0 o 0 01 0 OO~N N N ~ ~ .... ,..: ~ ~ ~ ~j ~ o~&~~ ot'--aS N ~ ~ ~ ~I ~ ~~1~ ~C'I~ \0 ~ ~ ei <:> d ~i~; ~ ~I r-- ~ - :cil oC ~ .. ~ ~ is:: Z " M Ii J: 5 ! . > . ~ ~ ] ~1~8~ ;~~e: '" o 01 0 ~ ~~a '<T '" o 01 0 t: ... o 01 <:> ... - '" - - '" ~ ~I ; ; s ~1 ~ ~ "l. - ~ ~I ~ ~~~~s M\Oo;r-- ~ r-.~ ~ ... ] ~l!l tIl " <.j; ..... '" o ._ l;>0 ._~ u 0 I .... ii .~g :5 ~ .~ 0 ..0 ~'"tl <; [;j ~- 0:-= l:l:;E ~ [;j ~ of 0 ;:JU ~ ~I ~ ~ .... o .~ ~ ] 1~~] ~ ]<~j~:;! ~ .~ ~ ... 11 ~Ol ::"5 . Bramrno Inc. moves ahead with its corporate headquarters. . Per unit market valuations the Croman Mill URD differ slightly from those used in the downtown district: I) office space is valued less as the cost of land is less and rents would be lower than in the central district; 2) industrial land valuations are the same; 3) commercial valuations are slightly less as rents are likely to be less (although if national tenants locate in this area, the rents could be rnuch higher) and 4) per unit housing valuation is less as the downtown could have a mix of luxury housing and smaller apartments while the Croman Mill housing is projected to be moderately priced apartments only. Phasing of projected development in five-year increments is shown below in Table 28. As in the Downtown/Railroad district, development begins at a modest pace, with a boost from the planned headquarters development for Brammo. After the first five years, development is projected to occur at a steady of between $20-$25 million for each of the remaining five-year periods. Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntownlRailroad Districts c 35 Table 28: Schedule of New Development: Croman Mill Urban Renewal Area Industrial !!!!is!! !k!!!! Rn. Units !!!!!! Full Development (rod) 600,000 370.000 200,000 90 Project Dev Time Frame Years 0-5 60.000 10,000 25000 0 Years 6-10 80.000 25000 60.000 0 Years 11-15 80000 25000 40000 0 Years 16-20 80000 25000 25000 80 Total 300,000 85,000 150,000 80 M.rketJSFlUail 5125 5200 5205 595.000 Value of New Development Years 0-5 57.500.000 52,000,000 55,125.000 50 Years 6-10 510,000.000 55,000.000 512.300,000 50 Years 11-15 5 I 0,000.000 55,000,000 58.200,000 50 Years 16-20 510,000,000 55,000.000 55,125,000 57.600.000 eorreDt MV of Laadllmp Years 0-5 5726,788 5121,131 51.051.084 SO Years 6-10 5969,050 5302,828 52.522.60 I SO Years 11-15 5969.050 5302,828 51.681.734 50 Years 16-20 5969,050 5302.828 51,051,084 50 (ncrem-eDtal Market Value 01 New Development Years 0-5 56,773.212 51.878,869 $4,073,916 50 512,725,997 Years 6-10 59,030.950 $4.697,172 59,777.399 SO 523,505,520 Years 11-15 59,030,950 $4,697,172 56.518.266 SO 520,246,387 Years 16-20 59030950 54697 172 54.073.916 57 600 000 525402038 Total 533.866,061 515,970,384 524,443,497 57.600,000 581,879,942 Source: Urban LAnd Economics Table 29 summarizes the development projects and compares them to the total employment and population driven land use projections for the City of Ashland. This comparison shows that there is unallocated demand for 175,000 square feet of office space, 69,000 square feet of industrial space and 270 multi-family housing units that could be built elsewhere in Ashland. Only in the retail category is projected development in the two urban renewal study areas higher than the overall demand, albeit only 4,500 square feet per year. The large 103-room hotel assumed for the Railroad property puts built supply beyond nominal demand. However, this apparent over-development is not worrisome. Some types of development, such as lodging facilities, can be built in advance of full demand and may replace older facilities that close or are converted to another use. . Urban Renewal Feasibility Study - City of Ashland Croman Mill and DowntowniRailroad Districts 36 Table 29: Comparison of Total Demand in Ashland with Development Projections Employment-driven Land Use Needs Omce Industrial fu!!!!! Multi-Familv 1/ Total for City of Ashland Per Year 20,000 20,000 12,000 22 Per 5 Years 100,000 100,000 60,000 110 Per 20 years 400,000 400,000 240,000 440 DowntawulRailroad 20 years 140000 31000 180000 90 Croman Mill District 20 years 85,000 300,000 150,000 80 Subtotal 225,000 331,000 330,000 170 Unallocated Demand 175.000 69,000 -90,000 270 II Based on projected population increases of 186 pcryear and shnn:: of multi-family to total bousinR units. SoU1'Cf!: Urban Land Economics For the other land uses, there is ample demand for medical and other office developments beyond the two study areas. Although the Croman Mill Plan encompasses the vast majority of vacant industrial property, there remains nearly 70,000 square feet of unallocated industrial demand in the next 20 years. Multi-family development in the urban renewal study areas also absorbs only 38% of total demand. Urban Renewal Feasibility Study - City of Ashland Croman Mill and Downtown/Railroad Districts 37 II! J.~~~~~~o~~,~~~~n~ ~~roj'd Monagunent REVISED DRAFT TAX INCREMENT REVENUE AND FINANCING CAPACITY PROJECTIONS ASHLAND URBAN RENEWAL FEASIBILITY STUDY As part of the ongoing Ashland Urban Renewal Feasibility Study for the Downtown/Railroad Property and Croman Mill Urban Renewal Study Areas, we have undertaken a projection of po- tential future tax increment revenues and the resulting financing capacity for projects. This me- morandum explains tax increment financing as a means of paying for infrastructure and other urban renewal projects and describes our projections of the potential tax increment revenues from each ofthe two Study Areas. Using the methodology and assumptions described in this memo, we project the funding capaci- ty of the Downtown/Railroad Property Study Area to be $24,886,895 and the funding capacity of the Croman Mill Study Area to be $11,365,233, both figures in year-of-receipt (inflated) dollars. I. WHAT IS TAX INCREMENT ANANCING? Urban renewal is unique in that it can be funded by Tax Increment Financing (TIF). TIF is a mechanism used by Urban Renewal Agencies to borrow funds to pay for the urban renewal projects authorized in the Urban Renewal Plan. Funds borrowed are repaid from annual Tax Increment Revenues. Funds may be borrowed by issuing tax increment bonds, receiving ad- vances from the City or any other legal type of borrowing. Tax Increment Revenues are the property taxes generated by the increase in total assessed values in the urban renewal area from the time the Urban Renewal Plan is first adopted. The assessed value of an urban renewal area at the time the plan is adopted is called the "frozen base". Growth above the base is called the 'increment." This is shown below In Figure 1: Jeff Tashman . 503.407.7443. tash81/liloomcast.net/liloomcastnet Nina Johnson. 503.407.5983. ninai99/liloomcast.net WNW.tashmaniohnsoo.com DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY Assessed Value In an Urban Renewal Area Figure 1. Growth in Assessed Value Over Time Assessed Value When Plan is Adopted Total Assessed Value in Urban Renewal Area The process by which the County Assessor allocates funds to the Urban Renewal Agency is called "Dividing The Taxes". The Assessor divides taxes so that the Agency receives the prop- erly tax revenues on the Increment and taxing districts (e.g. the City, the County, the School District) receive properly taxes on the Frozen Base. The diagram below in Figure 2 shows how this works. The "adjusted total tax rate" excludes the Local Option Levies and GO Bond Levies shown in the bottom row. Tashman Johnson LLC 2 June 6, 2011 / DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY Figure 2: Dividing The Taxes Though the amount of tax increment revenue is detennined by the growth in assessed value inside the urban renewal area, the taxes are actually allocated from all property taxes paid with- in the city. An "Ashland Urban Renewal" will appear on property tax bills, but it won't represent additional property taxes'. This was the case in Ashland during the years that Jackson County financed its White City Urban Renewal Plan with lax increment financing. A "Jackson County Urban Renewal" line appeared on on tax bills in the entire County. The financial limits on tax increment financing take the fonn of a "Maximum Indebtedness" that be issued or taken on under an urban renewal plan. This is effectively a dollar limit on expendi- tures of annual tax increment revenues for any use other payment of interest on debt. The Max- imum Indebtedness must be stated in the Urban Renewal Plan and included on the city-wide notice of the Council's public hearing on the ordinance approving the Urban Renewal Plan. Af- ter the Urban Renewal Plan is adopted, any increase in the Maximum Indebtedness must be approved by the same process used to approve the initial Urban Renewal Plan. 1 A minor exception to the "no additional taxes" rule is that the rates calculated by the Assessor for GO Bonds approved prior to October 5, 2001 will not include increment in an urban renewal area and may be slightly higher as a result. Tashman Johnson LLC 3 June 6, 2011 DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY II. HOW IS THE AMOUNT OF TAX INCREMENT REVENUES DETERMINED? The annual amount of tax increment revenues is equal to the growth in assessed value or In- crement times the Adjusted Total Property Tax Rate which excludes levies for General Obliga- tion (GO) Bonds or Local Option Levies approved by voters prior to October 5, 2001. In Ash- land for this fiscal year, the Adjusted Total Property Tax Rate would be $12.0345 per $1 ,000 of assessed value. Using this rate, for every increase in assessed value of $1 ,000,000, the Tax Increment Revenues would be $12,034.50. Page 14 of this memo discusses the projection of the future Adjusted Total Property Tax Rate, which is shown in Table 8. III. HOW ARE FUTURE TAX INCREMENT REVENUES AND TIF AMOUNTS PROJECTED? The projections described below assume a twenty year period of tax increment financing, start- ing in Fiscal Year 2013/2014. This assumes that an Urban Renewal Plan is approved prior to December 31, 2012. Future tax increment revenues are projected by multiplying the projected Incremenl by the pro- jected Adjusted Total Property Tax Rate. The Increment includes all growth in assessed value over the Frozen Base, including the increase in assessed value from the maximum increase of 3% in the assessed value of existing property and the added assessed value from property that is developed, subdivided or used in a way that is permitted by a change in zoning, referred to here as "New Development". This is shown in the diagram below (Figure 3). Tashman Johnson LLC 4 June 6, 2011 DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY Figure 3: Detennining Amount of Tax Increment Revenues ':,'_~f~iti~;o . Prop8rty,:(Mlix 3!'Nj D.~velopin,ent ~ @ToAy.(f~ G:0J7 "(Q2i . c, ill l . . . [~I The assessed value of a property is its value for property tax purposes and is not necessarily equal to its real market value, (Real market value is "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowled- geably, prudently, and without compulsion" as defined by Intemational Valuation Standards.) Ballot Measure 50 in 1997 unlinked the assessed value of a property from its real market value. For residential and commercial property, the assessed value is generally quite a bit lower than . real market value. This fiscal year, on average throughout Jackson County single family resi- dential was assessed at just over 75 percent of its real market value and commercial property was assessed at just over 50 percenl of its real market value. These percentages or ratios are called 'Changed Property Ratios" or 'CPR"'s, If a property is developed with a new single family house with a real market value of $400,000 its assessed value will be about $300,000. A new commercial building with a'real market value of $1,000,000 will have an assessed value of about $500,000. Tashman Johnson LLC 5 June 6, 2011 DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY The projection of growth in assessed value from New Development is based on the Real Estate Market Assessment. That work took into account the economy of the region and recent regional and local real estate market trends (notably the boom and bust of the last decade). The as- sessment included determining what parts of the Urban Renewal Study Areas were most likely to develop or redevelop over the next twenty years. These areas were projected to develop to a certain extent (not necessarily full build out) for uses conforming to Ashland's Comprehensive Plan and land use ordinances. The amount of development was calibrated to the overall de- mand in the city and the region. The current real market value of the future uses was estimated using sales of comparable prop- erties and rental rates that are achievable in the local market. The projections of the real market value of new development were then expressed in five year segments. These projections of real market value for each study area are shown below in Tables 1 and 2: Tashman Johnson LLC 6 June 6, 2011 DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY Table 1: Projected Real Market Value New Development Downtown/Railroad Property OffIce Retail Res Units Lodging Industrial Full DevelODment Rounded SF/Du's 335,000 140,000 155 115 31,000 Pro ected Dev Time Frame Vears 0-5 20,000 5,000 15 0 10,000 Vears 6-10 40,000 15,000 25 15 10,000 Vears 11-15 40,000 25,000 25 100 11,000 Vears 16-20 40,000 15,000 25 0 0 Real Mart<ol ValuelSFlUnil 5225 5260 5225,000 5110,000 5125 Value of New DeveloDment Vears 0-5 4,500,000 1,300,000 3,375,000 0 1,250,000 Vears 6-10 9,000,000 3,900,000 5,625,000 1,650,000 1,250,000 Years 11-15 9,000,000 6,500,000 5,625,000 11,000,000 1,375,000 Vears 16-20 9,000,000 3,900,000 5,625,000 0 0 Total 31,500,000 15,600,000 20,250,000 12,650,000 3,875,000 CU"entReaIMa~etVmue Vears 0-5 536,140 134,035 402,105 0 268,070 Vears 6-10 1,072,280 402,105 670,175 225,179 268,070 Vears11-15 1,072,280 670,175 670,175 1,501,192 294,877 Vears 16-20 1,072,280 402,105 670,175 0 0 Total 3,752,980 1,608,420 2,412,630 1,726,371 831,017 Increment Marteet Value of New Devetooment Years 0-5 3,983,980 1,165,965 2,972,895 0 981,930 Vears 6-10 7,927,720 3.497,895 4,954,825 1,424,821 981,930 Vears 11-15 7,927,720 5,829,825 4,954,825 9,498,808 1,080,123 Vears 16-20 7,927,720 3,497,895 4,954,825 0 0 Total 27,747,020 13,991,580 17,837,370 10,923,629 3,043,983 Tashman Johnson LLC 7 June 6, 2011 DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY Table 2: Projected Real Market Value New Development Croman Mill Industrial Office Retail Residential Full Develonment Rounded SF/Du's 600,000 325,000 200,000 90 Proiect Dev Time Frame Years 0-5 60,000 10,000 25,000 0 Years 6-10 80,000 25,000 60,000 0 Years 11-15 80,000 25,000 40,000 0 Years 16-20 80,000 25,000 25,000 80 Total 300,000 85,000 150,000 80 Real Market Value/SF/Unit 125 200 205 95,000 Value of New Develonment Years 0-5 7,500,000 2,000,000 5,125,000 0 Years 6-10 10,000,000 5,000,000 12,300,000 0 Years 11-15 10,000,000 5,000,000 8,200,000 0 Years 16-20 10,000,000 5,000,000 5,125,000 7,600,000 Total 37,500,000 17,000,000 30,750,000 7,600,000 Current Real Market Value Years 0-5 726,788 121,131 1,051,084 0 Years 6-10 969,050 302,828 2,522,601 0 Years 11-15 969,050 302,828 1,681,734 0 Years 16-20 969,050 302,828 1,051,084 0 Total 3,633,939 1,029,616 6,306,503 0 Incremental Market Value of New Develooment Years 0-5 6,773,212 1,878,869 4,073,916 0 Years 6-10 9,030,950 4,697,172 9,777,399 0 Years 11-15 9,030,950 4,697;172 6,518,266 0 Years 16-20 9,030,950 4,697,172 4,073,916 7,600,000 Total 33,866,061 15,970,384 24,443,497 7,600,000 These projections of added real market value were used to project the annual assessed value of new development as follows: . The real market values for five year segments were divided by five to project annual real market values. ' . The annual real market values were inflated by two percent annually. . The inflated annual real market values were converted to assessed values by applying the projected Changed Property Ratios that would be used by the County Assessor to determine the assessed value of new development. These ratios are shown below in Table 3: Table 3; Projected Changed Property Ratios (CPR) Ratio Industrial 0.90 Office 0.50 Retail Residential 0.50 0.70 Tashman Johnson LLC 8 June 6, 2011 DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY (There are two separate ratios for single family residential and multi-family residential. These were combined into a single CPR for this analysis.) -, The projected assessed values of new development for each of the Study Areas are shown be- low in Tables 4 and 5. The timeframe is in calendar years which is how the development was projected. When this information is used to project Increment the timeframe is Fiscal Years. E.g, development during calendar year 2012 would be reflected in the Increment in FY 2013- 2014. The assessed value for FY 2013/2014 are based on the value of property on January 1, 2013, effectively equal to the end of calendar year 2012. Tashman Johnson LLC 9 June 6, 2011 ~ ~). ll!o ....~ ~~ ~~ ~(;) ~~ u.... o~ ~~ ~lt U ..::> Ii: ~ - c: l1l CD CD E< 0.>- .Q.., CD :> >- CDcn 0- ~ l1l CD ~ Zc: _CD 00:: Ulc: CDl1l ..:!-e ~::l "'e- 3l11i Ul e 3la. .:2.., ale u'= CD l1l .~o:: e-c ~~ """_ CD c: :c~ ~o ~ ~~ ~ '" N N 0 ~ Ol N :ll'; f;f ri ... ~N "'- CD ri ~ -i 0 ~&l ~ CD N 0) ;;; 1i1 Ol'" Ol No) ,.: N "'''' 0 0) ~N "'- on ri ~ -i Ol Sl Ol on CD ~ Ol Ol fil 0 .... CD N N ;:: ~ ~ N Ol 0 N ~. ., ri ~ -i 0) ... 0) '" l& (; CD !!l ... "'- q ., N ~ 0 ~ ~ q '" CD N ~ ., '" ~ -i ... ~ CD ... 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NOM ~~~ M N8i~ g ....0> .... ...:,..: lri OlNCOOcn -30 CD ~ .""'". ~ ;3'" 8l ....(/; .... ...:...: ri COlOltlom c;CZu; t:t N~~ ~ ....'" ., "":T"': M ,......... 00 ''If .....N.... .... ~~C"{ C"{ on.... ~ "'''' "'., ...:...: cw; ~~(f)OS; l<l"'~ '" !:l~ III ill.., 0 ...: N ono~ o~~ '" . . ti~ ~ ...,caCDO"" .....(f).... N ONto en N -. . ....'" ., on~ .... U)~ ~ ~"'~0:3 O~cO ..... N . - . U ~ .,.: .,.: "'....., ~~.., ~~"lf_ ~18 ~~ ~ ~ >- ~ z w- :;l.~ "iI OG):al:e E E" H .....cn~cnN ~~"'!~~ ~:3~ill CO"lfcocn N"':"; g;g~~1O O'ltI()O~ Nailli....:r-: ~;~PJ T"':N....:1li g:~l!!!~ l<l . . - - 818fllt:l M(O')ION "':rJ"":lri ~ ~ o N <D Ol e: ::J ..., re~~:l~ 0,...,...<0.... N~...:ai...: ....N...N ('11(0')10.... "":N"":1li ........"'....('1") ~~~ll\~ 1;ll!?ml<l N"'''tO "":N...:1Ii \ON....gm S~f8 C; N~~ ! on", ., "':N ri .... '" ... ..; ;; N ~ ~ u')(n ~ 0 CJ) ~:3iiS ~ N~~ ?i on~ .... "':N (<") ~~~o..... o.../JI :ll "'~:t :8 on~ '" "':N ri Mfrimo<o Sco;& ~ "'~l:i ~ ...~ on "":N (f') 0> on N o <l\ ~ "'~....oon '" ~ .... ~ _~ ''It. o~ ... on", ~ "'0 on '-:N M ~ J >- ~ o z w- :;l'~"iI~ O~Eil Ii ~~ <:s"l!r>: () ..J ..J e: o III e: r. a ..., e: OJ E r. III ~ DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY Once the assessed value of New Development is projected, the next step is to project the rate of increase in the assessed value of existing property. Though the assessed value of property that is assessed well below its real market value will increase by the maximum three percent annually, the assessed value of property that is assessed at or near its real market value will not necessarily increase by three percent or at all. As the CPR's show, most residential and com- mercial properties are assessed sufficiently under their real market value (50 - 70%) to allow for a three percent increase annually. Industrial properties mayor may not be assessed sufficiently below their real market value (92%) to allow for the automatic increase. Personal property, utili- ty property and mobile homes are assessed at 100% of their real market value and do not expe- rience an increase in assessed value unless their real market value increases. The relationship between real market values and assessed values for each property in the two Study Areas was analyzed to determine what properties could be expected to continue to grow in assessed value by the three percent maximum and which could not. Based on this analysis, the growth rates for the assessed value of existing property was projected at 2.85% for the Downtown/Railroad Study Area and 2.5% for the Croman Mill Study Area. The Frozen Base of each Study Area was calculated from existing assessed values and indexed by the same per- centages. Putting together the projections of New Development and the growth in assessed value of exist- ing properties results in the following projections of Increment in each Study Area as shown in Tables 6 and 7. Tashman Johnson LLC 12 June 6, 2011 III l!! <( >- "C ::J Ul ~ ~ 8- ~).. e ll. ~~ "C III ~~ g 'iij llj~ 0:: 1 3;0; ~~ - c: I.l.... ~ o~ 0 !@ c oiij - c: "'IX Gl bli E l!! ~" 0 .s: Ii: "C ~ Gl ~ '[ ll. cO Gl J5 ~ MM"#. OMil!!:l~ lila;::l ;n~N ~ mN g~~g;t ~ NIDID.....,. ~ .n..;~~r: N-"#. ~~M~8\ lil:;::2 ~-- "'MCOII) !eN ~~~~~ 8" ";..;~.n": ...;:(1) -~!!i U::i!:l N lil:!i.oo il ~N ~sfcni 0 ~..,..lE;.... ~. 0 ~ """"8~ III ~~"#. ~ ~ ii!:l ~ :;!.. giJ ~~H~ N ~ ..; >.f ~ ~ ~ ~U;~ ~!!gn 2C'tco '" . t;j:t~g;: ~N ~ _MN...O ! ,;";~.nci ...;::.., ~~~ 1ll.-!:lN ~.. M 2~<<! C't....<"t ...,.. 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N .,..:", . :: ~ U'HD ~~~~in~ ~ N";'$;:ig ~ 0"" 0 Sl~ ~''''O>'''N ~.._ <r!.r~~~~ "N"'''''''!:l~ ill :;;-ililll1l S N -g;t;K (~ - c c , ~ ~ ~ ! d~) ~!im1ill Hs r ~~I i I~L () ...J ...J C o ell C s::; o -, C tIl E s::; ell ~ DRAFT PROJECTIONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBILITY STUDY The annual tax increment revenues are determined by multiplying the projected increment by the projected Adjusted Total Tax Rate, which we are projecting as consisting of the permanent rates of each of the overlapping taxing districts. These projected rates are shown below in Ta- ble 8. Table 8: Projected Adjusted Total Tax Rate Taxino District JACKSON COUNTY 2.0099 JACKSON COUNTY BONDS (Before 20011 VECTOR CONTROL 0.0429 EDUCATION SERVICE DISTRICT 0.3524 ROGUE COMMUNITY COLLEGE 0.5128 ROGUE VALLEY TRANSIT DISTRICT 0.1772 JACKSON COUNTY SOIL & WATER CONSERVATION 0.0500 CITY OF ASHLAND 4.2133 CITY OF ASHLAND BONDS (Before 2001l ASHLAND SCHOOL DIST 4.1601 Total 11.5186 Multiplying the projected Increment by the projected rates shown above results in the annual tax increment revenues in year-of-receipt dollars for each Study Area shown in Tables 9 and 10. The graph below (Figure 4) shows the same data for both Study Areas. The final part of these projections is projecting the borrowing capacity of the stream of annual tax increment revenues. The borrowing capacity is assume for this purpose as being a mix of long term and short term debt. The short term debt is financially equivalent to "pay as you go." The assumptions for the long term debt are as follows: . Annual interest rate of 5.5%. . Term of 15 years . . "Coverage" - ratio of tax increment revenues to amounts pledged for debt - of 1 .25 Tables 11 and 12 below show the annual amounts of borrowing in year-of-receipt dollars that are supported by the tax increment revenues and the financing assumptions just presented. Tashman Johnson llC 15 June 6, 2011 DRAFT PROJECT/ONS OF TAX INCREMENT REVENUES URBAN RENEWAL FEASIBIUTY STUDY Figure 4: Annual Tax Increment Revenues, Both Study Areas 3,500,000 3,000,000 2,SOD,ooo 2,000,000 1,500,000 1,000,000 SOD,OOO Tashman Johnson LLC o -6>~ -6>~ -6>~ ~~ -6>'1." ~~ -6>1J> -6>~ -6>-.f> -6>~ 16 -rl Revs Claman -rl Revs DT{RR June 6, 2011 01 ~ >- "C ::> ii5 ~ Q) c. e 0. ~ "C 01 => g ai "'). ~ ~(:\ >-~ c: ii'i'" ~ ~~ - c: O::.,J ~ o III ~(;) Cl ~~ Xl u..... ::> O~ c: ~~ ~ g U - c: Q) E ..::s I!! t:: 0 ~ .E (:\ >< 01 .... 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