Intermountain Health’s request for an upzone at 754 S State Street, the former location of a 1950s-vintage Sears Roebuck department store, is about to get a vote at the City Council.
The local healthcare nonprofit is asking the city to allow Downtown-core heights on its 9 acres between 700 and 800 South, Main and State, as well as relief from ground-floor activation rules and a ban on hospitals in the D-1 zone.
Since the city council last discussed the proposal in a public meeting in July, Intermountain’s representatives have met several times with City Council Members to address their concerns that the development’s conceptual plans do not activate the street sufficiently.
Compounding IHC’s difficulties, the Planning Division has told the Council that Intermountain’s new street-level activation proposals still fall short of the requirements in the D-1 zone.
Despite the City’s activation concerns and IHC’s conceptual plans not conforming to the requirements of its new zoning category, the City Council may approve the upzone accompanied by a development agreement, which would sanction certain exceptions to zoning rules.
From a public policy perspective, the Council is deciding whether Intermountain is offering sufficient public benefits to deserve what’s been estimated as a $39 million upzone.
Let’s take a look at the latest proposal, as well as an issue not addressed in the city’s discussion: the lost property tax collection on the nonprofit’s large, 9-acre site.
How much revenue will the city be losing from nine acres in central south Downtown not being assessed property taxes?
The Council has scheduled the item in its work session discussion on Tuesday, as well as a possible vote during its formal meeting later in the evening.
New street activation proposals
In June we broke news of Intermountain’s proposals–massing drawings and conceptual site plans that didn’t much impress urbanists or the City Council.
IHC’s architects/designers, VCBO and Stantec, have since produced updated plans that aspire to satisfy the City Council’s demands for ground-level activity.
Images courtesy VCBO and Stantec
Designers claim to be activating 50-70% of street frontage on its four sides. Those potential uses include, according to City Council staff, “a minimum of one acre of public open space such as healing gardens and outdoor wellness areas on the property, mid-block walkways through the property, a year-round food truck park, food market, coffee shop, cancer care salon, outpatient pharmacy, and a community room available to non-profit organizations.”
“Hospital related ground floor activation,” the report notes, “includes emergency department/InstaCare/clinic reception, hospital reception and admitting, and an outpatient pharmacy.”
But Council Staff also reports that a Planning Division review “noted that some uses such as walkways, lobbies, and reception areas are not considered active ground floor uses in City code.”
Thus, Intermountain’s 50-70% activation claim is not accurate–and code dictates substantially more.
D-1 requires 90% of a building’s ground-floor use to be “active,” or 80% active with another 10% providing “visual interest.”
Some of the parking designs for the “urban hospital” also are running afoul of D-1 zoning rules. Intermountain plans a 125-stall surface parking lot fronting 700 South – also called out by planners as not conforming to the D-1 zone. Those 125 surface stalls would be in addition to 1600 parking spaces planned for a garage fronting the west side of Main at 800 South.
Development Agreement?
City Council Members will let us know on Tuesday whether they’re ready to vote on Intermountain’s proposal – which only includes the upzone to D-1 and a use-table change allowing hospitals, accessory lodging, and ambulance services in the zone.
No design approval is part of the current zoning change proposal. But the upzone includes a significant gift in land value, and getting concessions for public goods up front may be in the City Council’s playbook.
The Council has three choices, according to staff:
- Deny the petition, keeping the properties zoned D-2.
- Pass the ordinances with “a condition that Intermountain enter a development agreement with the City requiring inclusion of specific features that may include a minimum of one-acre of publicly available open space such as healing gardens and outdoor wellness areas, a year-round food truck park, or others if a hospital is developed on the property. The Council could also require that the ordinances are not published until the development agreement is approved by the Planning Commission and ratified by the Council.”
- Pass the changes with no additional conditions. Property owners seeking to develop the property would have to meet current D-1 standards, with the ability to submit a planned development proposal that allows successful petitioners to make minor adjustments to zoning rules to meet development designs and site constrictions.
Budget Impact: “None”?
As is the norm with all Administration proposals for ordinance changes, including zoning changes, the Department of Community and Neighborhoods, the parent department of the Planning Division, was required to report the budget implications of the proposal.
It reported “None.”
Admittedly, it’s difficult to accurately project the increased property- and sales-tax income to the city as the result of an upzone while also accounting for the increased city expenses in servicing more people and heavier usage of public spaces.
But in the case of a nonprofit owning and developing property, the lost value in property tax income is clear. That’s stone cold cash forfeited by the city, along with the other beneficiaries of property tax in the county–like schools, libraries, and recreation centers–because property owned by nonprofits like Intermountain Health can’t be taxed.
How much will the city be losing?
By examining the tax bills for properties on four nearby blocks, Building Salt Lake found that, averaging the four blocks, $773,919 yearly would be forfeited by property taxing entities.
City Hall lays claim to approximately 30% of that amount. Schools in Salt Lake City receive approximately 25% plus an allotment from a 12% state school collection. Libraries in the city benefit from about 6% of property taxes collected, and Salt Lake County: 12%.
Those losses?
Yearly, if property tax collection was averaged between four other nearby south Downtown blocks, with Grand America at the top end ($1,405,648) and the block south of the Sears Block at the bottom ($243,948), a new commercial development on the Sears Block would likely rack up $773,919 in yearly property taxes.
That’s $232,176 yearly, with its 30% cut, that City Hall will forego thanks to nonprofit development on the block.
A previous proposal, under a different owner, envisioned a multi-phase project that would have added hundreds of living spaces and likely tens of thousands of retail SF on the block.
No payments in lieu of taxes seem to be on the table in negotiations between the City and IHC for the requested zoning changes.
A year-round food truck park and an acre of open space may be all the City Council asks for.
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