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I-5 Lid Feasibility Study Economic and Financial Feasibility Memorandum August 2020

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I-5 Lid Feasibility Study Economic and Financial Feasibility Memorandum August 2020 I-5 Lid Feasibility Study Economic and Financial Feasibility Memorandum August 2020 Economic and Financial Feasibility Memorandum I-5 Lid Feasibility Study Contract No. PCD19002 Task 5. Economic and Financial Feasibility Analysis Prepared for: Jenny A. Durkan, Mayor of Seattle Samuel Assefa, Director of the Office of Planning & Community Development (OPCD) Prepared by: OJB EnviroIssues HR&A Advisors Magnusson Klemencic Assoc. Framework Shiels Obletz Johnsen Economic and Financial Feasibility Memorandum Acknowledgements Acknowledgements Lead Agencies Seattle Office of Planning and Community Development (OPCD) Washington State Department of Transportation (WSDOT) Consulted Agencies and Organizations Central Area Collaborative Downtown Emergency Service Center (DESC) Downtown Seattle Association (DSA) Equitable Development Initiative Advisory Board (EDI) Freeway Park Association (FPA) Horizon House Residents Council Lid I-5 Steering Committee and Advisory Council Olive Tower residents Seattle Commission for People with disAbilities Seattle Housing Authority (SHA) Seattle Human Rights Commission Seattle Immigrant and Refugee Commission Seattle LGBTQ Commission Seattle Office of Economic Development (SOED) Seattle Public Schools (SPS) Seattle Women’s Commission Washington State Convention Center (WSCC) Technical Advisory Team Seattle City Light (SCL) Seattle Department of Neighborhoods (DON) Seattle Department of Transportation (SDOT) Seattle Fire Department (SFD) Seattle Office of Arts & Culture (OAC) Seattle Office of Housing (OH) Seattle Office of Planning and Community Development (OPCD) Seattle Parks and Recreation (SPR) Seattle Police Department (SPD) Seattle Public Utilities (SPU) Washington State Department of Transportation (WSDOT) I-5 Lid Feasibility Study Committee Al Levine, Affiliate Faculty Member, UW Departments of Planning and Urban Design/Real Estate Alex Hudson, Executive Director, Transportation Choices Coalition Alex Krieg, Sr. Planning & Integration Manager, Sound Transit Anne McCullough, Former Executive Director, First Hill Improvement Association Derrick Belgarde, Deputy Director, Chief Seattle Club Doug Holtom, Interim Executive Director, First Hill Improvement Association I-5 Lid Feasibility Study | Page i Acknowledgements Economic and Financial Feasibility Memorandum John Feit, Lid I-5 Campaign Steering Committee Jon Scholes, President and CEO, Downtown Seattle Association Jonas Sylvester, President/Chief Investment Officer Unico Properties, ULI Liz Dunn, Lid I-5 Campaign Steering Committee Michael Murphy, Project Coordinator, Washington State Convention Center Rico Quirindongo, Pike Place Market PDA Council, DLR Group, AIA member Riisa Conklin, Executive Director, Freeway Park Association Robin Mayhew, Director, Management of Mobility Division, WSDOT Scott Bonjukian, Lid I-5 Campaign Steering Committee Scott Yasui, Board Member, Seattle Chinatown-International District Preservation and Development Authority (SCIDpda) Thatcher Bailey, President and CEO, Seattle Parks Foundation Consultant Team EnviroIssues Framework HR&A Advisors Magnusson Klemencic Associates OJB Landscape Architecture Shiels Obletz Johnsen For further information about this report, contact: David Driskell, Deputy Director, OPCD Lyle Bicknell, Principal Urban Designer, OPCD (206) 684-0763 [email protected] Page ii | I-5 Lid Feasibility Study Economic and Financial Feasibility Memorandum Table of Contents Table of Contents S Executive Summary ................................................................... S-1 S.1 Background ..................................................................... S-1 S.2 Key Takeaways ................................................................. S-2 1. Introduction ............................................................................. 1-6 2. Background and Overview ........................................................... 2-7 2.1 Defining Feasibility ............................................................ 2-8 2.2 Basis of Economic and Financial Analysis ................................... 2-8 2.3 Key Study Assumptions ........................................................ 2-9 3. Existing Conditions and Context .................................................. 3-10 3.1 Demographics .................................................................. 3-12 3.2 Real Estate Market Scan ..................................................... 3-16 3.2.1 Project Context ............................................................. 3-17 3.2.2 Real Estate Market .......................................................... 3-18 3.2.3 Findings: Potential Development Program .............................. 3-22 3.3 Affordability and Risk of Displacement .................................... 3-23 3.4 Environmental Quality ....................................................... 3-27 4. Development Program Test Cases ................................................ 4-28 5. Economic and Financial Feasibility of Lidding I-5 ............................. 5-31 5.1 Economic and Financial Evaluation Approach ............................ 5-31 5.2 Cost Inputs ..................................................................... 5-32 5.3 Revenue from Vertical Development ....................................... 5-44 5.3.1 Analysis of Land Sales Values on Terra Firma ........................... 5-45 5.3.2 Potential Impacts to Land Value in the Surrounding Area of the Project ........................................................................ 5-47 5.3.3 Vertical Development Program & Phasing ............................... 5-48 5.3.4 Revenues from Vertical Development .................................... 5-51 5.4 Financial Feasibility Results ................................................. 5-53 5.5 Economic and Fiscal Impact Analysis ....................................... 5-62 5.6 Societal Benefits .............................................................. 5-68 5.7 Key Financial and Economic Feasibility Takeaways ...................... 5-81 6. Governance Models and Project Delivery Considerations .................... 5-84 6.1 Assumptions for Governance Models and Project Delivery Analysis ... 5-87 6.2 Federal Highway Administration Considerations ......................... 5-90 6.3 Challenges and Opportunities for Test Cases Considered ............... 5-90 6.3.1 Publicly Managed Public Spaces ........................................... 5-90 6.3.2 Privately Managed Public Spaces ......................................... 5-92 6.3.3 Public-Private Managed Public Spaces ................................... 5-93 6.4 Challenges and Opportunities for Test Cases Considered ............... 5-95 6.5 Primary Risks ................................................................ 5-100 6.6 Factors Impacting Governance Model Selection ........................ 5-101 6.7 Summary of Key Project Delivery Methods and Governance Takeaways ................................................................... 5-103 I-5 Lid Feasibility Study | Page i Table of Contents Economic and Financial Feasibility Memorandum 7. Funding and Financing ............................................................. 7-104 7.1 Key Funding and Financing Takeaways .................................. 7-108 8. Glossary ............................................................................... 7-109 9. References ........................................................................... 9-112 10. Appendix A - I-5 Lid Feasibility Study Vertical Development Phasing ..... 10-1 11. Appendix B - I-5 Lid Feasibility Study Vertical Development Feasibility Pro Forma ............................................................... 11-1 Page ii | I-5 Lid Feasibility Study Economic and Financial Feasibility Memorandum Table of Contents Figures Figure 1-1. Study Site .................................................................................. 1-6 Figure 3-1. Aerial View of the Study Site .......................................................... 3-10 Figure 3-2. Land Use and Land Ownership in the Study Site .................................... 3-11 Figure 3-3. Race and Ethnicity in the Study Area and Seattle .................................. 3-13 Figure 3-4. Historical Redlining Map in Relation to the Study Site ............................. 3-13 Figure 3-5. Housing Tenure .......................................................................... 3-14 Figure 3-6. Vehicle Ownership ...................................................................... 3-14 Figure 3-7. Commute Mode of Eligible Labor Force .............................................. 3-15 Figure 3-8. Individual Poverty Status ............................................................... 3-15 Figure 3-9. Representative Real Estate Market Scan Study Areas .............................. 3-16 Figure 3-10. Rent Trends in Downtown Core Neighborhoods ($/SF), 2010-2019 .............. 3-19 Figure 3-11. Downtown Core Share of City Class A Office Inventory, 2010–2018 .............. 3-20 Figure 3-12. Downtown Core Share of City Class A Office Inventory, 2010–2019 .............. 3-21 Figure 3-13. Displacement Risk Index in Greater Downtown, 2016 ............................. 3-23 Figure 3-14. Definitions of Housing Affordability in the City of Seattle ........................ 3-24 Figure 3-15. Displacement Risk Index in Seattle, 2010 and 2017 ................................ 3-25 Figure 3-16. Change in Displacement Risk Index in the Study Site, 2010-2017 ................ 3-26 Figure 3-17.
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