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CITY OF VANCOUVER ADMINISTRATIVE REPORT |
Date: |
July 17, 2003 | |
Author: |
Marco D'Agostini | |
Phone No.: |
873.7716 | |
RTS No.: |
03538 | |
CC File No.: |
5051/1363 | |
Meeting Date: |
July 31, 2003 |
TO: |
Standing Committee on Planning and Environment |
FROM: |
Director of Current Planning in Consultation with Director of Real Estate Services and Director of Financial Planning and Treasury |
SUBJECT: |
Request from Owners of 44 and 48-56 Water Street Seeking Heritage Incentives |
CONSIDERATION
- A. THAT Council reaffirm the approved policy for calculating the extent of civic support to be provided under the Gastown Heritage Management Program be applied to the properties at 44 and 48-56 Water Street.
OR
B. THAT Council support the request from the owners of 44 and 48-56 Water Street that the property value input for calculating the extent of civic support to be provided under the Gastown Heritage Management Program be determined by a 3rd party appraisal, subject to the satisfaction of the Director of Real Estate Services.
GENERAL MANAGER'S COMMENTS
The General Manager of Community Services submits A and B for Council's CONSIDERATION.
COUNCIL POLICY
On July 10, 2003 Council approved the implementation of a heritage incentives program for Gastown and Chinatown including policies and procedures that utilize a number of guiding principles to ensure that all applications are treated fairly, objectively and consistently.
PURPOSE
This report presents a request (Appendix A) from Jon Stovell, representing the owners of 44 and 48-56 Water Street, that an exception to the calculation methodology for determining the extent of support available under the Gastown Heritage Management Program be given for these two properties.
BACKGROUND
Since the incentive program was approved in principal in 2002, there has been considerable interest among property owners. In the case of these two properties, the owners have had discussions with staff before and after their purchase, and they began preparing rehabilitation schemes in anticipation of implementation of the heritage incentives.
When the report Heritage Incentives Implementation for Gastown and Chinatown became public, these two property owners advised staff they believed there is a contradiction between how staff indicated that property value would be determined for the program and input and how they have. The owners have written to state that, in their view, circumstances around these two sites are exceptional and merit a different approach. They have requested that a market appraisal be used for the property value input for their properties. Staff also met with these owners to review their concerns.
DISCUSSION
The amount of heritage incentives required (shortfall cost) to make a heritage rehabilitation project viable is to be determined through a development pro forma analysis. Applicants will be responsible for preparing the information for review and concurrence by Real Estate Services. The shortfall cost will be determined by deducting the costs of the project, land, building, and profit from the projected market value after renovation. This formula is sensitive to changes in any of the input values. For example, if project costs or land and building values are higher, more incentives will be required, whereas if these are lower, less incentives are needed. To estimate land values in the pro forma analysis, there are various approaches that can be taken. Council recently endorsed the approach of using British Columbia Assessment Authority (BCAA) values as being the most prudent and practical.
However, when reporting on the policies and procedures for heritage incentives, staff acknowledged that BCAA values often lag behind the market. To deal with this, a transition policy was recommended, and approved by Council. The policy states that for the period up to March 15, 2004, the input for the property value figure will be the figure published by the BCAA plus 20%. Afterwards, as the information on how property values will be determined is more widely known, it is expected that the market will adjust accordingly and from then on the BCAA values will be utilized.
The owners at 44 and 48-56 Water Street feel that this approach still does not respond to their particular circumstance. The owners are of the opinion that an appraisal approach would be a more accurate indicator of property value. Staff has some concern due to the potential for creating artificial inflation of property values which in turn could result in more density bonus being required to support rehabilitation. There is also concern with making exceptions to a recently approved program.
In favour of the owners request to use an appraisal approach is that the market was performing unusually when these properties traded and resulted in purchase prices considerably higher than assessed values. This likely was partly in anticipation of how the incentive program would work and of other activities in support of revitalization in the area and, in part, to the expectations of vendors. BCAA advises that the higher values paid will be considered in the next Assessment Roll.
Should the appraisal approach not be supported by Council, the owners will have to decide whether to proceed now, wait until revised assessments from the BCAA are issued early in 2004, or abandon their rehabilitation projects. Waiting for the new assessments could result in the projects being delayed for 6 months or longer. The owners will also have to consider that delaying the projects will incur additional carrying costs.
Conversely, support for this request will mean that additional incentive will be required. It is estimated that the additional value for 44 Water Street is approximately $200,000 and for 48-56 Water Street approximately $300,000. This "value" will, in all likelihood, be in the form of bonus density for transfer and the net effect will be more density vested in the density bank. It is anticipated that the assessed values for these properties will increase in 2004 and the owners will be able to realize an incentive amount that will be somewhere between the current assessed value and the appraised value. Finally, support for this request would likely set a precedent for additional special requests to be made for other circumstances that may be considered exceptional by other developers or owners.
CONCLUSION
Council has received a letter from the owners of 44 and 48-56 Water Street requesting that a different approach be used in determining the value of heritage incentives for their properties. This report outlines the implications of the request and provides Council with options.
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