Intermountain Health’s request for a zoning upgrade for 754 S State Street, the former site of a 1950s Sears Roebuck department store, will soon be up for a vote in the City Council.

The local health care nonprofit is asking the city to allow downtown elevations on its 9 acres between 700 and 800 South, Main and State, and also to loosen ground-floor activation rules and ban hospitals in the D-1 zone.

Since the City Council last discussed the proposal in a public meeting in July, Intermountain representatives have met with City Council members several times to express concerns that the development’s conceptual plans do not sufficiently revitalize the street.

Compounding the IHC’s difficulties is the fact that the Planning Department has informed the Council that Intermountain’s new street-level activation proposals still do not meet Zone D-1 requirements.

Despite the City’s activation concerns and the fact that the IHC’s concept plans do not meet the requirements of the new zoning category, the City Council may approve the upzoning along with a development agreement that would allow certain exceptions to the zoning regulations.

From a regulatory perspective, the Council will decide whether Intermountain provides sufficient public benefits to justify the upgrade estimated at $39 million.

Let’s take a look at the latest proposal and also at an issue that was not addressed in the city’s discussion: the lost property tax collection on the nonprofit’s 9-acre site.

How much revenue does the city lose if nine acres in the South Downtown area are not taxed?

The Council has scheduled this item for its working session on Tuesday and also plans a possible vote during its official meeting later this evening.

New proposals for street activation

In June, we broke the news about Intermountain’s proposals – building plans and conceptual site plans that didn’t particularly impress city planners or the City Council.

IHC architects/designers, VCBO and Stantec, have since produced updated plans to accommodate City Council’s requests for ground-level activities.

Images courtesy of VCBO and Stantec

Planners claim to utilize 50 to 70 percent of the street frontage on all four sides. Those potential uses include, according to the City Council, “at least one acre of public open space such as healing gardens and outdoor wellness areas on the property, mid-block walkways through the property, a year-round food truck park, a grocery market, a cafe, a cancer care salon, an outpatient pharmacy, and a community space for nonprofit organizations.”

“The hospital-related activation on the ground floor,” the report states, “includes the emergency department/InstaCare/clinic reception, hospital reception and admissions, and an outpatient pharmacy.”

However, City Council staff also report that a review by the Planning Department “found that some uses, such as walkways, lobbies and reception areas, are not considered active ground floor uses in the City ordinance.”

Therefore, Intermounta’s claim of 50-70% activation is incorrect – and the code requires much more.

D-1 requires that 90% of a building’s ground floor use must be “active” or that 80% must be active and an additional 10% must be “visually interesting.”

Some of the parking plans for the “municipal hospital” also violate D-1 zoning regulations. Intermountain is planning a 125-space surface parking lot in front of 700 South — which planners also say is not D-1 compliant. Those 125 surface parking spaces would be in addition to the 1,600 parking spaces planned in a garage in front of the west side of Main at 800 South.

Development agreement?

City Council members will let us know Tuesday whether they’re ready to vote on Intermountain’s proposal – which simply involves upzoning to D-1 and a change to the use table allowing hospitals, additional housing and ambulance services in the zone.

The current proposal to change the zoning does not provide for the approval of the design. However, the enhancement of the area involves a significant increase in the value of the land and the possibility of obtaining public goods concessions in advance could be on the City Council’s agenda.

According to staff, the Council has three options:

• Deny the application and keep the properties zoned D-2.
• Adopt the ordinances on the condition that “Intermountain enters into a development agreement with the city requiring the inclusion of certain features, including at least one acre of publicly accessible open space such as healing gardens and outdoor wellness areas, a year-round food truck park, or others if a hospital is built on the property. The council could also require that the ordinances not be published until the development agreement is approved by the Planning Commission and ratified by the council.”
• Pass the changes without additional conditions. Property owners who wish to develop the property must meet current D-1 standards and have the opportunity to submit a planned development proposal, which allows successful applicants to make minor adjustments to zoning regulations to accommodate development plans and site restrictions.

Impact on the budget: “None”?

As is customary with all administration proposals to change regulations, including zoning changes, the Department of Communities and Neighborhoods, the Planning Department’s parent division, was required to disclose the budgetary impact of the proposal.

“None” was reported.

Admittedly, it is difficult to accurately estimate the additional revenue from property tax and sales tax that would result from an upgrade of the urban area, given the city’s increased expenditure on servicing a larger population and increased use of public spaces.

But in the case of a nonprofit that owns and develops property, the loss in property tax revenue is clear. That’s cash that the city and the county’s other property tax recipients — such as schools, libraries and recreation centers — lose because property owned by nonprofits like Intermountain Health cannot be taxed.

How much will the city lose?

By examining property tax assessments on four adjacent blocks, Building Salt Lake found that on average, property tax collectors on those four blocks would lose $773,919 annually.

About 30% of that amount goes to the city government. Salt Lake City schools receive about 25%, plus a 12% subsidy from state school revenues. City libraries benefit from about 6% of the property taxes collected, and Salt Lake County receives 12%.

These losses?

If annual property tax revenues were distributed among the four other nearby blocks south of downtown, with Grand America at the high end ($1,405,648) and the block south of the Sears block at the low end ($243,948), a new commercial development on the Sears block would likely generate annual property tax revenues of $773,919.

That’s $232,176 per year (including a 30% reduction) that City Hall will have to forego thanks to the nonprofit development of the block.

A previous proposal by another owner called for a multi-phase project that would have added hundreds of residential spaces and likely tens of thousands of retail spaces to the block.

In the negotiations between the City and the IHC regarding the requested zoning changes, payments in lieu of taxes do not appear to be at issue.

A year-round food truck park and an acre of open space may be all the city council is asking for.

Email Luke Garrott

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