Development of Suzuki property estimated to cost $4.2 million

It will cost more than $4.2 million to develop the city of Bainbridge Island’s Suzuki property into a new neighborhood that can support the eventual construction of 54 homes, according to the city’s developer on the project.

Olympic Property Group has advised the city that the total development cost for the Suzuki property is now estimated at $4,247,000 — or $78,648 per unit.

Those figures do not include the cost of the homes themselves, but rather street and utility improvements, land clearing, and other pre-house construction activities.

The city of Bainbridge Island hopes to create a new neighborhood on the 13.83-acre undeveloped property at the southeast corner of New Brooklyn and Sportsman Club roads. Choosing a developer for the land began in late 2015, with Olympic Property Group eventually getting the nod from the city council to take on the project.

While city officials earlier had hoped to sell the property to a developer — and attach conditions on how the property would be developed so affordable housing could be built on the land — city officials are now considering an agreement where the city would retain ownership of the Suzuki property, but pay Olympic Property Group for its work to get the land ready for home-building.

Officials from Olympic Property Group sent a letter to the city last week with the company’s suggested changes to a proposed development management contract with the city.

In that Dec. 8 letter, Olympic estimated that 36 townhomes on the property and 18 single family homes could provide net revenues between $5.9 million and $6.9 million.

Most of that money would go to Olympic under the proposed agreement.

Olympic, which would recover its costs under the proposed contract, would be paid $4.2 million for its work.

According to a table of cost estimates, Olympic expects construction to total $2.6 million, with soft costs adding up to $783,236.

Soft costs include architect fees, surveying, tech work, legal fees, and other fees.

Soft costs in the estimate also include “overhead” costs of $249,990 for Olympic, which include salaries and benefits for the company’s employees on the project, as well as other overhead costs.

Additional project costs include permit, utility extension and approval fees, which result in total project costs of $3.5 million.

Olympic estimates its profit at $647,826 (or 18 percent of the project costs) for a total development cost of $4.2 million.

The proposed agreement does not guarantee that any housing will be built on the Suzuki land.

Instead, home construction is expected after building lots are sold.

Any homes built on the property will go through a separate permitting process undertaken by third-party developers who purchase lots after Olympic is finished installing infrastructure and prepping the property for housing.

Affordable housing on the land would be done by Housing Kitsap or another nonprofit entity, which would have two years to get grants for homebuilding from the date of the approval of the project’s preliminary plat.

According to the proposed agreement, the city would start paying Olympic for its project costs after building lots are sold.

The proposed contract also includes provisions to end the agreement, including one that says the project must be completed within 10 years.

On its end, Olympic can decide to exit the agreement if the city denies any permits for the project “or imposes on any project approval such conditions or mitigation measures that the completion of the project becomes impractical or unfeasible.”

Olympic can also end the contract if “the city takes any action, including without limitation the adoption of any zoning or other ordinance or resolution, that materially impairs the feasibility of the project or materially increases the project costs.”

Under the agreement, Olympic also expects to construct only one vehicle access point into the new neighborhood, and that all trails will be natural earthen paths. The company is also asking that the project not be phased, and there be only one set of lot-sale closings.

Other conditions include that there be no appeal of the project; that construction would start in spring 2019; and that Olympic would not pay excise taxes on the sale of lots because it would never take title or ownership of the property.

The city council will review the agreement at its meeting Tuesday, Dec. 12.

The council has three options; suggest changes to the contract, take no action or table the agreement to a future meeting; or give the city manager the OK to sign the contract with Olympic.

Some have suggested tapping the brakes on the fast track to an agreement, however.

At the council’s last briefing on the agreement, when the council had yet to see a budget of the project costs, Councilman Ron Peltier asked the council not to rush its decision to get it done before the end of the year. A new city council will be seated in January.

Peltier’s request echoes that of Councilman-elect Matthew Tirman, who has repeatedly asked the council to set the contract aside for the new council to take up next year.

“I wish to respect the efforts of this council and their strong efforts to move this project forward in a responsible manner, however, authorizing the city manager to proceed with the DMA [development management agreement] at this time is to needlessly rush the matter,” Tirman said in a letter send Saturday to the city council.

Tirman, in his letter, said the project budget that was proposed by Olympic needed “a great deal of refinement and clarity.”

“There is no proposed cost schedule and timing of payments, which all of us should be keen to review. I would also expect that before asking the city manager to proceed ahead that the council would hear opinion from the city attorney on the latest agreement as well as a cost reasonableness analysis by city staff on the proposed budget,” Tirman added. “For example, I would like to further understand the overhead cost going into the project at nearly $250,000.”

Tirman also said affordable housing was “being treated as an afterthought by the proposed developer,” and said the contract would put an undue financial burden on the city and taxpayers if nonprofit housing groups could not come up with grant funding to pay for the construction of homes on the Suzuki property.

He also noted that the federal Low Income Housing Tax Credit may be eliminated by Congress, and noted those credits are used to build nine out of 10 affordable homes in the country.

“It would be wise for the council to pause, and rethink our financing and development strategy for Suzuki,” Tirman said.

“I sincerely appreciate the effort that council, the city and OPG have put into this project, but it’s important to recognize that in current form this agreement, the budget, and project scope are not even close to being ready for approval and action by the city manager,” Tirman said.

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