Herndon City Council details changes to town center redevelopment

Herndon City Council met Tuesday evening in a business session to discuss the redevelopment of the town centre.

The board discussed a proposed change to the existing global agreement with Comstock Herndon Venture, LC, from 2017.

The redevelopment was first proposed in the 1980s and a handful of proposals over the years have been heard for the project, but none have come to fruition.

At the November 10 business session, City Manager Bill Ashton and City Attorney Lesa Yeatts outlined the issues who delayed the redevelopment plan and proposed changes detailed in the comprehensive agreement the city has with Comstock.

When complete, Comstock will develop the area into a mixed-use neighborhood. It will include 273 apartments, a 787-space parking garage, an 18,000 square foot arts center and 17,000 square feet of retail space.

Ashton pointed to a variety of issues that caused delays due to economic pressures. Among these, he pointed to rising raw material and labor prices due to a booming construction market in the DC metro area since 2017. He also cited economic pressures from the COVID-19, including raw material issues when factories were closed.

He also acknowledged renewed interest from the community and its “palpable frustration” shared by council over delays in redevelopment.

“They were certainly well-founded, but that was because we couldn’t rush development when we had these economic pressures there,” Ashton said.

Yeatts presented board members with a variety of amendments to the overall agreement with Comstock to address issues and other concerns.

The existing agreement calls for the city to contribute land worth an estimated $10 million and $3.6 million in cash split into two categories, according to Ashton. The first category for cash value is $2.2 million to be used for the project.

The remaining $1.4 million is to be used in a series of allocations that will allow the city to meet its obligations before releasing the property. These obligations include environmental remediation, transitional downtown parking, relocation of transitional art space, and culvert repair for stormwater management function.

According to a presentation by Yeatts and Ashton, changes to the existing agreement include:

  • Establish the closing date of the property no later than December 15, 2020.
  • Allow the satisfaction of certain conditions precedent subsequent to the sale.
  • Requires city ownership before closing.
  • Adjusted the external satisfaction date by which Comstock must have the project under construction to December 31, 2021.
  • Extending certain rights of Comstock to suspend the start of construction (up to 24 months) due to market conditions and other factors, including delays caused by the COVID-19 pandemic.
  • Increase the parental guarantee from an additional 5 to 10 million to cover the arts center and parking.
  • Priority registration of a parking easement on the site for a minimum of 162 spaces.

“These financial economic constraints led us, both parties, to believe that negotiating an amendment to the existing agreement between us would really improve our situation,” Yeatts said.

She pointed to the priority listing of a parking easement as an important “concession from our partner in this agreement.” This amendment will ensure that Herndon will receive 162 parking spaces regardless of the loan on the property.

Ashton detailed potential economic development incentives to “at least help close the gap on some of the item costs that have increased on our components.” These incentives represent a total fee reduction of $2.35 million for water, sewer and building permits.

He also entered a 10-year tax refund to the arts district worth an estimated $1.9 million over that period, in which the estimated tax return on top of the refund would be $1,165,000. $. Currently, the city does not receive tax benefits on the site and will not as long as it owns the property, Ashton explained.

Ashton also broke down the city’s return on its investment in the project. He totaled Herndon’s investment at $15,950,000 while considering a return of $16,637,000. The public parking lot to be returned will be valued at $9,537,000, the arts center at $2.25 million and the public improvements at $3.5 million. Comstock will also take on the city’s responsibility for the temporary parking lot, temporary arts center and environmental cleanup which combine for an estimated $1.35 million.

To stay on schedule, Ashton told the board he would seek passage of this amendment in November to allow funds to be allocated in December.

“I think this amendment, if any, made the deal better,” Ashton said.

The city council will vote on this amendment in a public session on November 17 at 7 p.m. Mayor Lisa Merkel asked the council and Yeatts that public comments on this draft be the first item discussed at the meeting.

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