[BoulderCouncilHotline] Community Benefit and Affordable Commercial Space

[Wallach, Mark]

With respect to the issue of Community Benefit, I have previously expressed my view that providing affordable commercial space detracts from what I believe is the more important mission of creating affordable housing. Because a portion of the commercial linkage fees payable upon the development of a commercial building  (which would otherwise be available for affordable housing),  will be traded in exchange for such space, and because  affordable housing funds can be leveraged through existing federal programs to create even more resources for housing, the use of such funds for affordable housing creates a far bigger bang for the buck, and addresses what is almost universally seen as the most significant problem facing Boulder.

However, as it is the previously expressed will of this Council to explore and hopefully adopt an affordable commercial space program as a defined Community Benefit, my current focus is that we design a program that actually works; one that clearly defines the need and creates a mechanism to address that need. If we are going to do this, we should do it right.

That is the source of my deep disappointment with the memorandum on this subject that is part of our information packet. For a program that is recommended for our approval, this one is full of uncertainties and unresolved issues. It is the rare program whose purpose can be accepted in concept by both the Chamber of Commerce and Plan Boulder, yet so heavily criticized by both groups in terms of its actual provisions. Given their divergent approaches to growth and development, their joint criticism (although from different directions) is both illustrative and remarkable. (Is this a harbinger of the Apocalypse?)  The memorandum states that the business community supports the “intent of an affordable commercial option”, but a closer look at the comments clearly indicates that they do not support much of what is actually proposed.

As a matter of process, the program in its current form was rejected 5-2 by the Planning Board. The memorandum lists the concerns that were the basis for that rejection, but does not address them. Would it not make more sense to be responsive to these concerns, and more respectful of the Planning Board’s input before asking Council to move forward and approve it at First Reading? We are promised a response to these concerns prior to Second Reading, but Planning Board’s issues are sufficiently substantive to warrant clarification before initiating the approval process.

In addition to the eight concerns specified in the Planning Board resolutions, all of which should be carefully addressed, I have a number of additional concerns, which I will discuss below:


  1.  On more than one occasion I have requested that there be some analysis of what portion of the arts community and social services organizations can actually benefit from a rent set at 75% of market rent. In 2019 the average retail rent was $27 per square foot (hereafter referred to as psf). At that level the discounted rent would still be $20 psf. How many arts groups are capable of paying that level of rent? Visit Artist’s Alley in North Boulder (just behind Moxie’s); will $20 psf be a reduction in rent for them? Do we have any understanding of what percentage of our arts groups will find the opportunity to lease space at that level to be a benefit? What about our social services organizations: how many will experience a rent reduction at the level of $20 psf? Maybe all of them will be eager to rent at this level, but at this point we have no basis to assume that. If the groups that we intend to assist cannot practically utilize the program, we have created a solution that does not address the problem we are trying to solve.


  1.  If memory serves, the space to be leased will be delivered as a white box to the tenant. As I understand the concept of a white box (from my days as a developer and even earlier days as a real estate attorney), it means the space is delivered with concrete floors, no partitions for rooms, and with all utility connections brought to the demising wall of the premises. Interior wiring, plumbing, ductwork, sheetrock, finished floors and lighting and other fixtures are all the responsibility of the tenant. I am not current on construction costs in Boulder, but I would be shocked if all this could be done for less than $100 psf. Which means that finishing out a 1,000 sf space (a relatively small space) would cost the tenant $100,000. How many of our arts groups and social services organizations have the capital or borrowing capacity to incur this expense? Maybe all of them, but again, we do not presently know.



  1.  Currently, when a developer requests a height modification, the commercial linkage fee applicable to that bonus space increases by 43%. Under this proposal, when a developer makes a similar request, we will trade that 43% increase for the affordable commercial space. I understand that for a 10,000 square foot addition we will receive a 700 sf space. For a request to add 20,000 square feet (on a building with a larger footprint), the commercial space would be 1,400 sf. At the Daily Camera building the developer was able to add just shy of 30,000 sf, which would require 2,100 sf of affordable commercial space to be provided. Could we see a chart that illustrates the dollar value of what we are trading (the increased linkage fee) for the commercial space we are receiving? In addition, my recollection of the prior discussion is that we were looking at affordable commercial space in the amount of 9% of the bonus footage; now it appears to be 7%. Is my memory deficient or has there been a change? If so, why?



  1.  Other issues: will the amount of the in-lieu option be greater than or less than the amount Boulder would have received under the current scenario of a 43% increase in linkage fees for bonus space? Why was the off-ramp fee set at the same level as the in-lieu fee? Should it be more? Or less? What is the reasoning?



  1.  For 10,000 sf of bonus space in a Class A office building we receive 700 sf of affordable commercial space. At the numbers discussed in Paragraph 1, that means the developer is foregoing $7 of rent each year per square foot. Over 10 years that is $70 psf of rent he could have obtained at market rates. For the 700 sf of space that is $49,000 in rent he could have received, but did not, over that period.  In exchange he is receiving full rent – say $50 psf – for his bonus high floor office space. That is $500 psf over 10 years (let’s keep it simple and ignore rent escalations). For the 10,000 sf that is a total of $5,000,000 in revenue that would otherwise have not been received without the height modification. In essence, we have imposed a fee on that revenue of just under 1%. Is this an accurate analysis? If not, why not? If it is, does this speak to the adequacy of the Community Benefit we are receiving in exchange for additional height?



  1.  Do we have a projection of how much affordable commercial space this program is estimated to provide? And how does that amount compare to the staff time needed to initiate this program and to operate it on an ongoing basis? What are we likely to get for all this effort? Will it be more than a tiny smattering of 700 and 1,000 sf spaces? Will it move the needle for the groups we hope to assist? Would it not be easier and more effective to take the additional linkage fee we are trading away and put it in an evergreen fund to assist arts groups and social services organizations with their ongoing expenses, or to fund a facility where many of them can locate and operate together?



  1.  The memorandum also contains proposals for significant land use revisions that have apparently been vetted with the development community (and I do not suggest any impropriety), but with little analysis or public engagement on the subject. I understand why these changes would be beneficial to developers, but who is analyzing if they are beneficial to the community? And if they are, where is the support for that claim? One in particular stands out: the recommendation that open space requirements be reduced by 50% for affordable housing. Have we concluded that the open space needs of the economically disadvantaged are different from everyone else? Is this consistent with our equity instrument?



  1.  Finally, I have great concern with the suggestion that we should pass the ordinance and invest the City Manager with the administrative authority to flesh it all out later: to define the standards for applicability for inclusion in the program, to define the cash-in-lieu requirement and more. Approving an ordinance with the problems that this one presents in the hope that the City Manager will clean it up and pull our chestnuts out of the fire, merely to get something on the books, is not the type of governance to which we should aspire.  For a Council that believes itself to act on a data driven basis, I believe such a step would be contrary to our values.


The one area of agreement between the Planning Board and staff is with respect to the termination of Appendix J and the moratorium on additional height requests. Both suggest that the moratorium be revised to expire on January 1, 2022, and that clarifying language be added to ensure that additional height requests and the Community Benefit program be applicable to those areas of Boulder that are most appropriate for additional height and density. This is a common sense proposal on the part of both, and It should be adopted. My only question is why this clarifying language requires an extension to January, 2022? Can we not do this more expeditiously? If we do adopt this proposal with protective language, there is less pressure to resolve all Community Benefit issues in conjunction with the expiration of the moratorium, and we can take the time we need to fully develop the program.

Again, as Council wishes to stand up a program for affordable commercial space, it is not my objective or intent to derail that effort. It is to have us recognize the enormous complexity of the issue and to treat it with the care that it deserves. We should do the work, then pass the ordinance, not the other way around.  Where we are is simply not good enough.



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