City eyes incentives to attract North Kelsey buyers

Monroe city staff is proposing six incentives for prospective buyers eyeing its surplus North Kelsey properties north of U.S. Highway 2.

The outside marketing team hired by the city helped develop the materials that were presented to the Monroe City Council last Tuesday. City administrator Deborah Knight said they would potentially offer the incentives to a buyer or developer in a sale agreement, as long as there is a benefit to the community, which the council stressed as important.

The city is focused on selling six lots that sit near Lowe’s hardware store. They are part of an area that was combined with 23 acres bought from Snohomish County in 2005. The plan was to pair the land and existing city property to make way for offices, retail and a community commons, according to council documents. 

There are 10 parcels remaining — about 11 acres. They sit along Tjerne Place Southeast.

“The City has not sold any parcels since 2013,” according to council documents. “The market for retail and office space has fundamentally changed since the recession and the growing dominance of on-line sales and ecommerce retailers such as Amazon.”

Lowe’s opened up in 2006, but then the Great Recession hit. Galaxy Theaters, Providence Medical Center and a Walmart were built by 2013.

The city brought Bob Stowe of Stowe Development and Strategies, LLC on to its marketing team in November. He worked on town center transformations as a city manager, including for Bothell. Stowe, along with Seattle-based brokers from Lee and Associates Commercial Real Estate Services and West Coast Commercial Realty, developed the incentives.

The marketing team agreed on the city offering any of the six incentive options, Knight said, if it can get the right package, or a business that residents have been requesting shows interest. The city will start the process by sending out a request for proposals, she said.

The first option would be offering the properties at below-market value. The strategy worked to bring the McMenamins hotel and pub chain to downtown Bothell, which aided the sale of neighboring lots, according to council documents.

The other motivators proposed in the marketing team’s packet include tax exemptions for developers who build multifamily units — the exemptions would require a code amendment, Knight said — letting a buyer forgo the city’s first-come-first-serve policy for priority applications, and adding infrastructure or park space in the area, according to council documents. Costs to the city would depend on the incentive or size of a project.

The final two options would be to waive various construction fees on an individual basis, which are already offered to businesses in the downtown district. Transportation impact fees, which help pay for projects that account for increased road use, could be reduced or waived, according to council documents. Either incentive could mean a loss to the city’s general fund, according to council documents.

The marketing packet states visitation to future North Kelsey developments would be supported by nearby hotels, restaurants and retailers.

“In addition, the Highway 2 Corridor serves as a sub-regional retail center trade area for residents to the north, south, and east, since large-scale retail is limited,” according to the packet.

Traffic counts average about 24,000 vehicles on U.S. Highway 2 and State Route 522 every day, according to the packet. About 36,000 people, with a median income of nearly $94,000, live within a five-mile radius of the properties.

The city is looking for a developer whose goals align with Monroe’s, according to the packet. That includes growing the commercial district and adding to the health of the community, “setting the bar for new development in Monroe.”

Looming debt payments are part of the reason the process to get the land sold was started late last year.

The city will have to pay nearly $1.4 million this September, and make another nearly $2.9 million payment in 2020. The second will be the final payment for the loan the city took out to buy the properties.

Knight tells the Monitor the revenue from the sales will hopefully cover the debt. She has brought multiple proposals before the council since November to support and speed up the process.

Most recently a site plan was designed, and the council approved $95,000 for environmental and traffic studies in the event code is adopted to allow construction of mixed-use multifamily units in the North Kelsey area. The city council has approved at least $147,000 to spend on tools and contracts for selling the properties, so far, but the amount will increase after a sale.

The broker contract includes a 5 percent commission split between the selling broker and buyer’s broker, according to council documents. That equates to about $25,000 split two ways for every $500,000 made in the sale. Stowe was also offered 1.25 percent of the final sale for each parcel sold.

“The City Council’s goal is to market and sell the North Kelsey property and pay off the debt as quickly as possible,” according to council documents.