Developers can again move projects forward in a large swath of east-central Boulder.
After a 10-month moratorium on demolition and development in Boulder’s federal opportunity zone, in which taxes are deferred on capital gains invested in real estate, city council in a 6-1 vote early morning Wednesday lifted the temporary ban in place since December.
It opens development in the opportunity zone both to those seeking the tax benefit, and those using standard financing for their projects, both of which were stopped under the moratorium.
Council in the same 6-1 vote approved tweaks to land uses for the municipal zoning districts composing the opportunity zone area, which generally runs between 28th and 55th Streets and Diagonal Highway and Arapahoe Avenue.
Councilwoman Cindy Carlise dissented.
The land use changes are meant to prevent developers from bringing forward projects council worries will exacerbate Boulder’s perceived jobs-housing imbalance, such as high-end office space.
Rather, council tasked staff with finding ways to preserve housing in the area, potentially expand retail uses and limit new commercial office space.
But the new regulations were watered down from what city staff brought forward to council last month for consideration, when a proposal to limit office space to 25% of the floor area in the business zones within the opportunity area triggered outcry from business owners and the Boulder Chamber. The new rules will apply in the relevant zones throughout the city, not just in the opportunity area.
That rule, if it were put into place, would have rendered 96% of the 181 buildings with an office use in the five business districts as nonconforming to city code, forcing the associated property owners into a much more stringent city review process if they wanted to add square footage.
Instead, city staff brought back a more narrow threshold that will prevent parcels from using 20,000 square feet or more as office space, and will place only 13% of the 161 properties with an office use in the five zones under the nonconforming label.
Additionally, city staff walked back its previous recommendation of limiting office uses in residential zones to no more than 25% of a building’s square footage, and prohibiting them in the residential mixed density-1 designation. Instead staff suggested no change to the current rules, which only allow office uses in residential areas through a discretionary use review, a process that requires Planning Board approval.
“After the (Boulder) Chamber’s feedback and considering everything in totality, staff feels that maybe limiting these offices would not really achieve the intended effect of mitigating the jobs-housing imbalance and may in fact kind of work against some of the walkable 15-minute neighborhood goals,” Boulder Planner Andrew Collins said.
Officials also further limited how many efficiency living units, small dwellings of 475 square feet or less, could be included in a structure without prompting a use review. While staff originally proposed removal of a use review requirement for projects containing efficiency dwellings as 20% or more of units on site, potentially allowing an entire property of nothing but the small homes, a majority of council supported a use review trigger for projects with efficiency living units on 40% of the property.
Councilwomen Cindy Carlisle and Mirabai Nagle were against the 40% rule out of concerns the units might not be affordable and could increase housing densities since two of the units are counted as one in density calculations.
Council also imposed an overlay zoning district in residential zones, a tool that prohibits demolition of buildings containing three or more dwelling units in the opportunity area, with about 3,400 existing attached dwelling units in the swath, according to officials.
It leaves single-family homes and duplexes open to razing.
But council abandoned efforts to build higher obligations to the city in terms of larger fees or affordable housing fund contributions for developers using the opportunity zone tax incentive.
“If the concern is really that a project’s economics may result in additional economic benefit for the developer, and therefore we want to extract additional (community) benefit, that gives me pause, and I would like to consult with the city attorney further on that,” Boulder Assistant City Manager Chris Meschuk said. “Because, especially if we start to talk in the realm of impact fees, there are very strong legal boundaries there we need to make sure we don’t cross.”
Additional study of the federal program and development economics would have been required to impose such regulations, and Colorado real estate experts familiar with opportunity investors expressed doubt Boulder could have enforced such rules.
Councilman Sam Weaver lamented the city-hired consultant on the community benefit program also was not tasked with reviewing whether it would be feasible for opportunity zone developers more to pay the city. That consultant’s analysis guided council’s decisions on how to trade building height exemptions for community benefit, namely affordable housing. Council on Tuesday approved regulations for the community benefit program but kept only a few small sections of the city as areas where development would be eligible for an exemption.