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Synergy or Subsidy?

March 14th, 2006 by dk

Perhaps you’re familiar with this definition of middle age: When you stoop down to tie your shoe, you find yourself asking, “Is there anything else I can do while I’m down here?” Eugene’s planners have officially hit middle age.

Whole Foods wants to build a grocery store on the east end of downtown, located on a busy corner where IHOP’s blue roof currently dominates. City planners can’t be blamed for entering into other discussions about what will be needed for that end of downtown. A parking garage has been on the wish list for almost a decade, long before the new federal courthouse began replacing Agripac.

That parking garage, with retail on the first floor, would make more sense if it was adjacent to the 52,000-square foot anchor for the area’s retail resurgence. But the lot nearest the development belongs to Jim and Ginevra Ralph, who bought it when they purchased the First Baptist Church to be reborn as The Shedd. Luckily for the city, the Ralphs are happy to swap plots with them to have the quarter-block lot immediately north of their concert hall and arts complex.

This land swap helps the project overcome another hurdle. The Oregonians Credit Union, which is currently beside IHOP would rather not move. Again, good fortune shines on the city, because their board of directors is willing to consider moving into a new building on the same site. Presumably, that building will have levels of parking above it.

Rotating all the pieces of the puzzle until they fit together is no small feat. The grocer and the credit union will become neighbors, parking is addressed in the compact urban design envisioned long ago, and the Ralphs may now have room as their vision and investment in downtown grows.

So far, so good.

The hitch may have come when discussions turned to choosing a contractor to build the retail and parking complex that will sit beside Whole Foods. (Keep in mind that Whole Foods has designed their store to include two levels of parking already—without any requests for city subsidies.) The parking garage with retail below ensures that Whole Foods sparks more development nearby. One building may make a destination, but two buildings becomes the start of a neighborhood, a shopping district, a new hub. Building both at the same time makes perfect sense, and designing them as if they go together also makes good sense.

The lesson was learned on the other end of downtown. Broadway Place was built, together with a garage. Two different contractors were used and the headaches were innumerable.

So the proposal was floated for Gerding Edlen, the Portland-based developer with the contract for the Whole Foods building, to also build the parking and retail complex immediately north of Whole Foods. To expedite the process and to underscore the city’s enthusiasm for the project, the joint-venture proposal included a provision that the general building contract for the parking and retail complex would not be put out for competitive bids.

Many people who watch these matters, including at least one Eugene city councilor, see this as prudent use of city resources, a shrewd synergy that benefits every party involved. Other government watchdogs, also with a couple city councilors, are asking whether this is a sweetheart deal for the developer and a hidden city subsidy.

“Sweetheart deal.” “City subsidy.” “Level playing field.” “Your tax dollars.” Them’s fightin’ words.

The “no-bid” portion of the development is limited to the general contracting. Each subcontracted service, and any actual work done by Gerding Edlen themselves, will be put out to bid as usual. If anything, those bids are likely to be lower if they can be bundled together with the Whole Foods construction. General contractors generally hope to earn 5 percent as “overhead” on a project. That comes to roughly $400,000 on an $8 million job. Assume the worst and figure Gerding Edlen’s price in this no-bid contract is inflated by 25 percent. If they can leverage each subcontractor to shave one percent from each bid because they get both jobs at once, it’s a wash. More likely, it will represent a net savings in tax dollars.

Is this a public subsidy? Or is it sound management of the public’s resources? Stoop down to street level, and it looks like both.

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