This past week, Town Staff informed us of two things that cause us to reach out to you at this time. First, we were informed that after two years, the Staff no longer considers the approval of a Development Agreement a “quasi-judicial” process, and that we are thus now permitted to reach out with our concerns and reasons for them. Second, we were informed that instead of the agreed-upon format of presenting the issues to you in a public hearing, Staff plans to send you a draftDevelopment Agreement and cover memo asking you if you want to hear our concerns. We believe that your consideration, no matter how brought to you, must include consideration of our concerns and thus we present the following discussion.

This letter is organized into three parts. The first part addresses three fundamental concerns that the Home Trust has with the draft Development Agreement. The second part addresses the underlying housing policy, how it is interpreted, and how the negotiations with the Staff have been shaped by the policy interpretations. Lastly, the third part only briefly touches on some details of possible interest in your consideration.

Before continuing, we believe it is appropriate to clarify – to accurately state what the Home Trust seeks to accomplish:

The Home Trust desires and proposes to develop the property and build exactly per the Friday Harbor Municipal Code, with only mutually agreed upon and no additional exceptions or augmentations.

1“Augmentations” are requirements additional to any code requirement, such as requiring moderate rate units.

The Home Trust is seeking exactly one code exception – to increase the allowed density, a common affordable housing incentive known as ‘bonus density’. Why?

Prior to our involvement, the Town and the County reached an agreement as to the desired affordability parameters, density, and additional design standards2for the Argyle property. It was expected that the Town would adopt an ordinance allowing the density. When that didn’t happen, the Town Staff asked the Home Trust to seek a development agreement. Since the stated goals of the Town and the County aligned with our mission, the Trust was happy to follow the path Staff preferred, believing there was broad agreement on the project.

Further, a real and proper Development Agreement offered the opportunity to clearly define who is going to do what, when, where, why, and how. Lack of clarity, vagueness, and surprise and untimely requirements, often beyond code and of questionable legality, have led to prior issues between the Staff and the Trust. The Trust hoped, and still does hope, that clearly establishing in advance the rules and regulations will head off issues on this project.

This hoped-for opportunity is not present in the Staff’s draft Development Agreement which is not at all an ‘agreement’. It functionally offers no rights or security to the Home Trust and places undefined and absolute authority solely in the hands of the Staff. That outcome is substantially more than State authorization – land-use regulation related to zoning, environment, safety, design, or mitigation. It seeks to circumvent the existing and adopted development and procedural regulations and deprives the Home Trust of due process. That outcome is also substantially more than the stated and agreed upon goals of the Town and the County.

Part 1 – List of Concerns

The Home Trust has three basic concerns with the draft Development Agreement as it currently stands. The first two concerns are global and thus impact multiple detailed provisions within the draft. Since we have not been able to reach an agreement with the Town Staff, we believe that the Town Council should weigh in and provide direction for the Staff and the Trust.

2 Code augmentations.

3 We acknowledge that Staff does not agree with this statement.

4. In addition, there are several minor matters, mostly wording issues, that do not warrant wasting your time. We believe that with your direction, these can be resolved with Staff.

First – Vested Rights

“Vested Rights” consist of two parts: one is to identify the applicable rules and regulations and the second is for each party to commit to those rules and regulations in advance (in the Development Agreement).

In any agreement, the parties should agree as to who is going to do what, when, where, and how (and usually why). Identifying the applicable rules and regulations answers these questions and is a standard part of any Development Agreement. Contrary to certain assertions, this is not a request by the Home Trust for special treatment from the Town as it is a required aspect of a development agreement. State law, WAC 365-196-845 (17) c reads, “The development agreement must set forth the development standards and other provisions that apply to, govern, and vest the development, use, and mitigation of the development of the real property for the duration of the agreement.”

In a standard Development Agreement, each party is irrevocably committed to the rules and regulations identified and listed in the Development Agreement. This, too, is not a request for special treatment. State law, WAC 365-196-845 (17) d reads, “The agreement grants vesting rights to the proposed development consistent with the development regulations in existence at the time of execution of the agreement.”

To clearly respond to these laws, and thus to clearly specify (set forth) the applicable and vested development standards and approval processes, we believe the agreement should include a simple list of the current development standards and approval processes. We have previously tried to reach a compromise with Staff by proposing alternative language that simply stated, “All development standards and other provisions in existence as of the effective date of this Agreement are fully vested.” Both proposals have been rejected by Staff.

Staff’s currently proposed version of the Development Agreement reads that only the rules and regulations specified in the agreement are vested, and then none are specified. This effectively carries forward an earlier Staff proposal that the rules and regulations would be those in effect when approvals and permits are applied for. The Trust objects to both of these language options because they are not consistent with State law, but more importantly, they fundamentally mean that absolutely no rights are vested.

As regards public improvements, Staff proposes that no standards shall vest. It is correct that some, like stormwater standards, are not considered “land use control ordinances” and don’t vest. However, those standards that do not implement State or Federal mandates can be vested and we believe that clarity on these things like road and utility requirements, should be listed and vested. The Staff’s proposal is that all would be determined in the future based on the rules and regulations in effect when an application is made.

Even more vague than not listing the applicable and vested rules and regulations, in several other places, the draft agreement calls for Staff to determine the rules and regulations, development standards, and submittal requirements at a later date. Notably, as written, such determinations would be at the sole discretion of Staff and non-appealable. Our concern is that even during this process, Staff has sought to impose requirements that are not interpretations but that are in fact purely added new and unprecedented requirements that have no basis in the code or the augmentations the Town Council previously specified.

For example, at one point Staff proposed language that for solar access, all the buildings must be oriented east to west – as opposed to basing this feature on good design, site constraints, actual solar access, the Friday Harbor Municipal Code, meeting the Historic Preservation requirements, HPRB review, or State law. Responding to our strong and reasoned objections, provisions like this were indeed removed … but were then replaced with the current concept of Staff specifying additional requirements at a later date. This approach can only serve to assure future disagreements, and since the call would be “at the sole discretion of Staff and non-appealable”, the Town has an unfair advantage, and the Home Trust is denied due process and the opportunity to call for a reason.

It is precisely this vagueness and post-agreement augmentations that the Home Trust seeks to avoid. Vagueness is not the basis of true agreement. And we believe the currently proposed language does not meet the intent or letter of State law vis-à-vis Development Agreements.

Second – Appeal Rights

As noted, regarding many of the Development Agreement provisions, Staff’s currently proposed version reads that the Town’s Land Use Administrator “shall make the final determination”. So, for example, if the Staff, without any basis in code, augments the applicable rules and regulations and demands that all the buildings must be oriented east to west, it is final, and not subject to appeal because by agreement, Staff’s call is final. Critically, as written, the proposed absolute authority of Staff specifically includes determining compliance with the Development Agreement. Alone, the current deadlock and need for your guidance justifies keeping all local and legal appeal processes and rights intact in the Development Agreement.

Notably, much of the absolute authority sought by the Staff regards discretionary decisions (like aesthetics, permit denials, or SEPA determinations), are vague and non-explicit, and/or are an attempt to block procedural rights or due process, particularly the judicial review of Development Agreements. We believe that all of these are at best problematic under State law.

Third – Home Trust Personnel

Through the Development Agreement, Staff proposes to regulate the personnel of the Home Trust, seeking approval authority over the Home Trust’s employment of in-house and/or contractual staff. Who at the Town will determine the qualifications of the Home Trust hires? What criteria will be used? What is the process for approval? None of these are specified, and again, this authority is proposed to be absolute and unappealable.

Working on the Development Agreement for the Trust is an architect licensed in multiple states and with decades of experience in development, affordable housing, municipal planning (long-range planning and development review), and writing development codes and regulations for municipalities. And yet, here we are, needing your help to accomplish basic planning and development functions – such as following State law. The qualifications of our employees does not seem to affect the outcomes.

Under RCW 36.70B.170–.210, a development agreement may set forth a range of “development standards,” generally limited to uses, densities, phasing, mitigation conditions, public improvements, and review procedures. Does regulating the developer’s employees come from any of these? Such a provision, regulating the personnel of the developer, is unheard of in practice, standard templates, or widely published examples of development agreements and is without doubt interference in the management, private contractual and employment decisions, and lawful business operations of the Home Trust.

Conclusion of Part 1

Since the Home Trust has been unwilling to agree to these demands, getting to the point of ‘agreeing not to agree’ has been unnecessarily drawn out – a process started well before March of 2024. The responses to proposed solutions were delayed, often measured in months, until we objected … over and over again. Since ‘agreeing not to agree’ more than four months ago, processing of the Development Agreement application has been fully stopped by the Staff with no counterproposals, requests for information, or action. The once-agreed-upon process for resolution – putting these matters before the Town Council – has not been scheduled despite repeated requests by the Home Trust to have a public hearing during which each side can present their case. We now understand that instead of scheduling a discussion with the Town Council, Staff has decided to present their version of the Development Agreement via a ‘memo’ seeking your input on (only) the last Home Trust mark-ups, on only the last attempt to compromise.

As Staff proposes to do under their version of the Development Agreement, this ‘surprise’ and post-agreement decision was unilateral on the part of Staff. It deprives the Home Trust of proper input in the decision-making process – this input. It deprives the Council of relevant and necessary information upon which to base your decision. And it deprives the public of their input. It is pretty much the opposite of open government.

In addition, the coercive nature of all these actions is not the basis of any agreement and serves only to try to lord one party over the other. To be frank, withholding Staff action until the Trust agrees to surrender is simply outrageous, blatantly unfair, and ruthless – more so since our deadlines for funding have been well-known to Staff and progress was inexplicably delayed such that the project is ineligible for funding this year. So, it will be yet another year before we (or anyone) can deliver this affordable housing for the community.

The Staff’s version of the Development Agreement offers a lack of clarity, vagueness, highly questionable legality, and the certainty of future disagreement. We believe that the Development Agreement should instead be a true agreement that allows and requires permitting and development, and approvals, exactly per the Friday Harbor Municipal Code with no additional exceptions and no additional augmentations.

Part 2 – Housing Policy Context

As we look back on the discussions that have taken place, we believe that the current disagreement over the Development Agreement is a result of how the Town’s housing policy is being interpreted and implemented. And, like any comprehensive planning consideration, it is not just the housing policy standing alone, but the community development, infrastructure, and other policies that make great Towns.

5 The issue is not necessarily a shortcoming of the current housing policy.

The Staff have clearly stated the housing policy interpretation being implemented in their negotiations, stating that “the Home Trust is just like any other developer” and “for a bonus density, the project needs to exceed standard requirements.” So, let’s look at that.

When a for-profit developer seeks to add affordable units to their project, this condition makes sense in consideration of the benefit they receive from the bonus density. Each party, the Town and the developer, gives and gets something. The benefits for the Town might be a park, a trail, or enhanced design, or other matters of value to the community, including some housing units that are affordable for some period of time. Importantly, the developer can divide the land cost over ‘more doors’ and after some period, often 25 years, the affordability wears off and the developer thereafter retains the incentives provided, including the added units. For a for-profit developer, there is a meaningful profit associated with receiving a density bonus and in consideration of that, compensatory community amenities are required.

A drawback of this policy for the Town is that when the affordability term expires, the Town’s need for affordable housing resurfaces, requiring new development and new incentives just to replace the units that went away. This is a policy that in the long term, is dependent on more and more development, or sprawl, with added infrastructure costs – not just streets and utilities, but public safety, libraries, parks, and so forth, as well as notable associated development such as grocery stores, gas stations, and ferries.

If the augmentations, the added things that exceed standard requirements, are sufficiently valuable to the community and outweigh the drawbacks, this is a rational policy.

So now, let’s compare and contrast that typical development project scenario with what is proposed for the Argyle project.

Like a for-profit developer might do, the Trust proposes that all the units be built in compliance with the Historic Preservation Manual of the Town. While this agreement provision was the result of prior agreements, it aligns with our mission and is entirely agreeable to the Trust. No matter how it came about, or why the Trust supports this, it is still fundamentally a development proposal that exceeds standard requirements.

Unlike a typical development, the Trust proposes that all the units will be permanently affordable – without expiry (for 100 years). These units become a standing part of the community’s affordable housing inventory without need of more development, more land, or more infrastructure in order for the Town to keep up with demand. And, when the 100 years are up, the project can be repeated on the same site since the incentives provided at this time have not reverted to a private landowner. This far exceeds the standard application of ‘bonus density’.

The Argyle proposal includes, by agreement between the Town and the County, that half of the units be ‘moderate rate’ affordable units. Unlike ‘low-income’ units, public funding for moderate units is non-existent. As demonstrated by the private sector, specifically the lack of developers building moderate-rate housing, at this time, there is no profitable model for building moderate-rate units here. This requirement itself, that we build unprofitably, at a significant loss, far exceeds what is required of typical developments. The Trust proposes building units that cannot pay for themselves, with no assistance, relying solely on private fundraising to provide a desired and needed community amenity.

Additional units being allowed (bonus density) does not get the Home Trust more doors over which to spread the costs, but in fact results in the Trust taking on more expenses. The Trust does not regain the asset at some point. And the Trust loses funding opportunities and is obligated to a higher level of private fundraising. What the Trust does ‘get’ is an opportunity to more fully serve our mission – providing high-quality, sustainable, and permanently affordable housing for our island neighbors in need. In so doing, we also serve the general plan goals of the Town and the respective planning directives from the State.

Recall that the proposed increased density and the provision of moderate-rate units were both the stated goals of the Town for this project. In addition, Staff has consistently asked the Home Trust to provide more units to maximize the density. Within reason, we are happy to execute the Town’s goals.

It is our belief that the development proposed for Argyle far exceeds standard requirements through enhanced design, long-term affordability, no reversion of incentives, and the provision of moderate-rate units. Each represents a meaningful enhanced investment by the Trust, adding sufficient value to the community, and accomplishes the community goals and obligations. In consideration of what is proposed, additional or augmented requirements are not warranted.

Respectfully, we ask the Town Council to consider this non-technical, non-legal, purely ‘policy’ question and provide direction accordingly to Staff and the Trust.

Do you agree that by providing the affordability and enhanced design sought by the Town, by providing these permanently, and by meeting all other code requirements that apply to all other developments, granting the requested density bonus is warranted?

Part 3 – Details Briefly

Being respectful of your time and the expertise of the Staff, we propose to not address herein the various details expressed by our mark-up of the Development Agreement draft. At the pleasure of the Council, we are prepared to address any aspect you would like to understand more fully. However, we believe that with Council direction regarding our three listed concerns, more so with direction on policy, Staff and the Trust can work together to sort out all the details per the direction you provide.

Our only noteworthy detailed concern:

Earlier in this letter, you may have noticed the statement that agreements usually include language as to why the agreement has been made between the parties. Purpose, factual, and intent recitals provide context and background information and are included to document motivations, history, and desired outcomes. If the provisions of the agreement are unclear, they can be used (including by judges or arbitrators) to help interpret the intended meaning of those provisions. By clearly stating the purpose and intent of the agreement, recitals can help prevent future misunderstandings and disputes. We believe including this material is important and appropriate. However, Staff has removed all of them as we worked through the various drafts.

We are happy to answer any questions and happy to present our case in an open public forum.

Thank you for your consideration,

Karl Eberhard,

Argyle Project Manager

The San Juan Community Home Trust

Links within this letter:

Agreement: TFH Minutes 9-1-2022 – Minutes of the Town Council of discussion and unanimous approval of San Juan County’s ‘Request for Proposals’ document listing the development requirements and incentives that could be offered by the Town for Argyle.

Bonus Density: Affordable Housing Techniques and Incentives by Municipal Research and Services Center – A good overview of affordable Housing Incentives with good text on bonus density and example ordinances.

Incentives: Increasing Washington State’s Urban Residential Building Capacity by the Washington Center for Real Estate Research (UW) – The appendix gives an easy comparative look at some actions taken by various Washington municipalities to incentivize affordable housing.

Background Information: Development Agreement Manual by the Institute for Local Self Government – While written by the League of California Cities, it serves as a primer in many states and planning institutions and does not conflict with Washington law.