Blog posts are the personal views of Letty Hardi and not official statements or records on behalf of the Falls Church City Council 

Dear Friends,

It’s been a tough week to be a Virginian. As an antidote to the discouraging news in the state, I’ve been diving into books. Before getting into this blog’s usual topics (and we’ve got a meaty one this week), I highly recommend “So You Want to Talk About Race” especially for those of you who already think, “But I’m not racist!”. Even progressive Falls Church is not too good for racism, which is deep in our city’s history.

Clearly we have a long way to go and much work to do. It­­­’s not enough to condemn one man’s actions (or in this week’s case, three men’s actions) – we need to collectively acknowledge our history, examine and challenge our own attitudes and actions, and openly discuss, no matter how uncomfortable. On that note, the Social Justice Committee of Falls Church and Tinner Hill Heritage Foundation are hosting a workshop this weekend on having the difficult conversations about race. The event is already sold out, but get on the waiting list to help the organizers gauge demand for a future offerings.

Back to city business. As I alluded in last week’s blog post, the City Council is considering changes to the interim agreement for the West Falls Church Economic Development project (aka, the 10 acre project next to GMHS). We’ve had several weeks of closed sessions while in negotiations and discussed the proposal in open session this week. Read on for the details and my take – I’d love to hear from you before our scheduled vote next Monday.

Best,
Letty

What Happened this Week:

Proposed Amendment to West Falls Church Development Project

Quick refresh:

Since selecting EYA/PN Hoffman/Regency developer team and signing an interim agreement, we have been under a due diligence period in which environmental reviews, land records searches, financing feasibility, etc occur. The project proposed is a 10 acre project under a long term lease, creating new retail, office space, residences, a hotel, and civic spaces. The plan also includes an active public space at the center of the development. See the press release for more details.

What happened:

During the due diligence period, the developers uncovered an issue with financing feasibility and engaged the city on options to keep the project viable. While changes in a complex deal that would span several years were to be expected, it was nonetheless disappointing and frustrating that we were asked to consider changes so early in the process. However, we believe our partners have been ethical and transparent. With a lot of give and take in the negotiations and a commitment to make the city whole in the long run for compromises we’d make, I believe this team still offers us the best set of skills, experience, and ultimately the best project.

What’s changing:

The core material terms remain: the project schedule, phasing, land payments (total base payment of $44.5M – $34.5 for phase 1 + higher of appraised value or $10M for Phase 2), and environmental commitments as presented to the community are still on track. Here is the presentation covering the changes and a fact sheet summary.

1. Real estate tax deferral (commonly referred to as a PILOT = payment in lieu of taxes)

From 2021-2026, $16.5M in real estate taxes are projected to be due, $12M will still be paid, leaving $4.5M proposed to be deferred. In return, the city would receive $200K (with 2% annual escalation) in ground rent from 2029 through the end of the 99 year lease. In comparing the $4.5M deferred tax vs the total value of the $200K annual payment – the annual payments are worth $48M, or $7.1M in present value, so the city should come out ahead, despite the partial tax deferral in the early years.

Also important to note: how does this PILOT impact our ability to defray the cost of the $120M high school, which was one of the primary objectives for the development? Staff projects that the 6 year PILOT will not impact our ability to pay debt service because the $44.5M in land payments are unchanged. The project is still resilient against a stress test of a 2 year project delay, as was previously done.

2. 150K square feet new residential density

An additional 150K square feet in residential density is proposed to help address the financing issue: 50K sf increase in the senior housing density based on the senior housing operators under consideration and 100K sf increase in residential, a combination of condos and microunits. Microunits are small 500-600 sf units geared towards younger demographic as they are more affordable. The commercial square footage commitments remain unchanged.

As for ratios – the original phase 1 commercial to residential ratio was 34%/66% and now would decrease to 30%/70%. Overall phase 1 + phase 2 ratio of 40% commercial, 60% residential (down from 43% commercial, 57% residential).

Initial fiscal impact analysis of this increase in residential density was projected to be positive (ie, the revenue to the city is expected to be greater than the service costs).

Knowing that “density” gets a bad rep, with the housing shortage across the DC region, I assert that additional housing in the city is not a bad, scary thing – especially when the fiscal benefit is positive. For new readers, this is a good time for me to link to our Falls Church specific experience with mixed use and residential density in the city – please check out some older FAQs I wrote about mixed use projects, including actual data on the mixed use projects in the city and the annual “where students live” chart, which helps us do detailed cost analysis by type of housing unit.

3. Additional payments and profit sharing to Falls Church

Finally, the developers have proposed a profit sharing provision where the city would receive 25% of any increase in land value in the financing period before construction and a “capital event fee” to be levied on future condo sales (which was included in the original terms of the deal) would now include the first condo sale, meaning the city would benefit from the revenues from this fee earlier.

What happens next:

If City Council approves these changes next Monday, they will be part of the new, modified interim agreement.

Between now and May, much more work is ahead. Further negotiation and details will need to be ironed out for the Comprehensive Agreement for the land transaction. The special exception application has also just been submitted, which includes the conceptual development plan – a layout of the site, uses, ranges of heights, etc. The plan will be discussed in our subsequent February meetings before boards and commissions review in March, with their input due back to City Council so we can make a final decision in May. After the Comprehensive Agreement is final, the first land payment would be made in May as well.

• City Council Work Session on SEE Application: February 19, 2019
• City Council First Hearing on SEE Application: February 25, 2019
• Planning Commission: April 1, 2019
• City Council Second Hearing: May 28, 2019

What’s Coming Up:

• Monday, February 11 – City Council Meeting (730 pm, Community Center)
• Tuesday, February 19 – City Council Work Session (730 pm, Community Center)
• Friday. February 22 – Campus Coordinating Committee meeting (730 am, School Board offices)
• Sunday, February 24 – Sunday Series Town Hall (2 pm, Community Center)
• Monday, February 25 – City Council Meeting (730 pm, Community Center)