A 10-Step Plan for the old Macy’s Block —
Losing a downtown retail anchor like Macy’s isn’t something cities tend to brag about. But, despite the disappointing loss, many see an opportunity to rehabilitate an old building right in the heart of downtown Spokane. In a future post I intend to explore why Macy’s closed. For now, however, we need to get to work. If leaders in Spokane City Hall are at all interested in leveraging Macy’s closure into an economic development, smart growth, and quality of life opportunity (as I hope they are), there is no time to waste.
Economic development is a game of influencing the market. Whether it’s attracting aerospace manufactures to build around the airport or ensuring some smart growth sprouts from a shuttered downtown retail anchor, it all boils down to incentives.
In the case of rehabbing the old Macy’s block, here’s how to make the magic happen:
1. Identify who is going to lead the initiative, form a team.
Ultimately, it ought to be the city or the Downtown Spokane Partnership (DSP) leading the initiative to redevelop the Macy’s block. However, because the city has all the tools; is the authority on land use controls, permits, and processes; has the capacity, if necessary, to expend a direct cash outlay; owns all public right of ways surrounding the block (not to mention its alleyway); and is the ultimate decision maker regarding public improvements (incentives) to entice quality redevelopment, it’s easy to argue the lead agency ought to be the City of Spokane.
If I were mayor, this is the team I would pull together: the mayor, a city council person, the president of DSP, and a snappy veteran staff person to administer logistics and paperwork, preferably a planner who knows the city’s zoning code and infrastructure surrounding the block. Don’t forget, time is of the essence.
2. Establish a relationship with corporate Macy’s.
This is all about attempting to influence future decisions. As we sit, we’re fairly helpless and at the mercy of corporate Macy’s. The decision maker we’re looking for is likely a corporate real estate manager that oversees a portfolio of properties for the region. Establish contact with that person and develop a relationship. Communicate the city intends to partner with a developer to redevelop the block.
3. Try to gain control of the future.
If Macy’s is willing to entertain the conversation, negotiate an option to buy, which will put the city in the driver’s seat but at the expense of a direct cash expenditure negotiated between the two parties. This step is a long shot but it’s worth the effort. Don’t worry, we’re not going to buy the building, a developer is — we just want to influence who buys it, and this is our tool to do so. If the city can scrape together a couple-hundred grand (or whatever the amount may be) toward an option to buy, the rules of the game will change. The option must stipulate that the city or a partner (developer) thereof may match or beat future purchase proposals from other parties. The money to secure an option will be recouped via Step 10 of this plan. Keep reading.
4. What to do about Spokane Odd Fellows Temple Association?
An outlier owns about 1/4 of the block, otherwise known as the Spokane Odd Fellows Temple Association, and they are now in an influential position. Therefore, rinse and repeat the first three steps of this plan but with the Odd Fellows. If the city or a future developer can gain control of the block, it is wise to merge those parcels together.
5. Identify ideal redevelopment projects.
What sort of project, or range of projects are in the best interest of downtown, the city, and, indeed, the region? It’s important to have a general answer to this question because anything could happen and city council must understand what sort of projects they are willing to provide public incentives for.
6. Identify a scope of possible public improvements (incentives).
Given our range of ideal redevelopment projects identified in Step 5, we can now make assumptions regarding what public improvements will be required regardless of whether incentives are given for them or not. Once the public improvements are identified, it’s easy enough to apply cost estimates. We now have a buffet of improvements (incentives) that we’re willing to pay for. This provides the basis for a future negotiation; it’s also our poker hand.
7. Identify what tools will be utilized to provide the public improvements (incentives).
Here’s where the rubber hits the road. It’s where spreadsheets are created, assumptions are made, and some fairly complicated math takes place. If we tax increment this thing out, what’s the present value? What’s the PV on the sales tax increment? What’s the PV when we use both? Probably smart to establish the base after Macy’s closes, right? Is the PV enough to cover our buffet of public improvements? What other creative, market driven revenue streams — generated by virtue of the new development — can we create or tap into? Does a PDA help at all? How about a historic designation?
These questions are tough to answer until a firm redevelopment proposal emerges but we can at least get into the ballpark.
8. Communicate to the local development and real estate brokerage community what we want and what we’re willing to give for it.
Now we’re being proactive. We’ve done our due diligence and identified what our ideal projects look like, what public improvements (incentives) may come with those projects, and what tools we will utilize to underwrite said public improvements. We are now equipped to walk into any luncheon, board meeting, or committee meeting and share our plans to make downtown a healthier place.
Local developers will quickly understand what the city wants and their ears will perk up when they hear there’s incentives in the mix. And if one of them successfully purchases the block, they’ll know where the city stands and it will influence their redevelopment plan whether or not incentives are provided by the city.
The best part about this step is the development community — all of them — know what incentives the city is willing to provide into the project. It’s fair, it’s transparent, and it’s professional economic development. We’re not just winging it. Similarly, in order to earn those incentives, the developer must rehabilitate the block in a manner consistent with the city’s expectations. Everyone’s eyes are wide open, including the public’s. This will avoid 11th-hour surprises once the project is finished, like we experienced with the Davenport Grande Hotel incentives (and I won’t even mention River Park Square).
9. Partner with a developer that shares our vision.
Somebody has to buy the damn block and actually redevelop it. If the city is out front with their expectations for redevelopment, we’ll attract developers. Remember those relationships we established in Steps 2 and 4? Build bridges, make introductions, and help facilitate a successful purchase transaction.
10. Negotiate and finalize a redevelopment (incentives) agreement with the developer that purchased the properties (and make sure city council votes to approve it).
This is the easiest part. No secrets. Everyone’s cards are on the table. We’ve identified our buffet of public improvements (incentives) and we’ve identified the tools we’ll utilize to pay for them – it’s a contract that will write itself. Also, that couple-hundred grand we spent on an option to purchase in Step 3 of this plan will mature and subtract itself out of any negotiation with a redeveloper. No controversy, no bad press, perhaps the most prominent block downtown is redeveloped, and the region is a stronger place for it. Everyone wins.