Federal Way is moving forward, contingent on receiving a $5 million grant from the state, in purchasing the old Toys “R” Us site for the future location of a performing arts and cultural center.

On Tuesday, the city council made public that it is pursuing the property, located at 31510 20th Ave. S. Several residents attended the council’s regularly scheduled meeting. Both they and the council were split on whether a performance, cultural and conference center (PACC) is in the city’s best interest — and whether the facility should be pursued at this time, at this location and using the state grant.

Multiple contingencies

The 3.95-acre property under consideration is owned by Federal Way developer Brian Park’s Pal-do Company Inc. The property and vacated building that remains on the land is assessed at $4.833 million. The city plans to buy the site for $5.375 million. Park said he will not make a profit off the sale because he has paid the difference in property taxes and maintenance fees for the site. The property will be sold as-is. It is scheduled to close no later than Dec. 30.

But first, several contingencies must be met before Dec. 17 to allow the city council to approve a final purchase and sale agreement by Dec. 21.

• The city must end a convenance held between Pal-do Company; Hillside Plaza Associates LLC, owners of the Hillside Plaza shopping center at 2000 S. 314th St.; and Park Target Investments LLC, owners of the vacant Target store at 2141 S. 314th St. The convenance is a parking agreement that was in place when Park bought the former Toys “R” Us location more than 20 years ago, he said. It permits shared parking and maintenance of the three closely located retail areas, but restricts new construction taller than one story on the properties.

• The site must be surveyed to determine property lines.

• Per Park’s request, the city must take the first step in making the property eligible for condemnation. The city would do this by sending Park a letter detailing its interest in taking control of the acreage so that it may be used for a “public purpose,” city attorney Pat Richardson said. The letter would give Park leeway to take advantage of the IRS’s 1033 Exchange once the city has purchased the land. The Exchange would allow him to delay IRS taxation on the income he made this year by selling the Toys “R” Us property and use that money, within two years, to buy a replacement property similar to the Toys “R” Us site.

The city would only threaten to condemn the property, and does not plan to take further steps to actually follow through on the condemnation, Richardson said. She made clear that Park requested the process.

“This is one contingency that the seller says is a deal breaker if the council doesn’t approve,” she said.

The inclusion of a 1033 Exchange divided the council. Councilman Jim Ferrell said if the city were to send the letter, it would be engaging in a “legal fiction” for Park’s gain. Councilman Jack Dovey said he is not comfortable sending a letter containing a false message.

“I cannot with my heart of hearts vote for something that has a 1033 in it,” Dovey said.

• Per the state, the city must identify infrastructure improvements to take place on the property before the state awards its grant.

• Lastly, the City of Federal Way must secure the $5 million grant.

“The purchase is expressly contingent upon the state granting the $5 million,” Richardson said.

Funding

The grant will cover the majority of the acquisition costs. Federal Way was awarded the money in 2008, and had until the end of this month to buy property or sign a purchase and sale agreement for the PACC, which the city is now referring to as a Civic Center/PACC. The city has until the end of the year to use the money. Money from the city’s redevelopment fund ($375,000) will round out the purchasing funds. The money came to the city in the form of real estate excise tax revenues, which, per law, may only be applied toward capital projects.

Differing opinions

Some council members see potential for a performance and civic center to bring much needed revitalization to downtown. It could spur growth in the area and help attract increased tax revenues to the City of Federal Way. The city council has long had the vision to revitalize downtown, but the process has been painstakingly slow. Deputy Mayor Dini Duclos said she ran for her council seat with the promise of prodding the vision forward.

“We have an opportunity now, in a down economy, in a down environment, to do something,” she said.

Nine residents spoke, or had read into record, comments in favor of a PACC. It will benefit the city and its performance groups, Joann Piquette said.

“As I see it, you have the opportunity to take advantage of some grant money by the state,” Ed Plumlee said.

Four residents spoke against a PACC. The economy is too difficult to pursue the facility now, they said.

“I’d love to see a performing arts center, but not now — not now,” Sheryl Nevers said.

The construction of the Civic Center/PACC is not expected in the near future, Mayor Linda Kochmar said. The city does not have the money for capital construction costs at this time.

Next steps

• Dec. 7: By this date, the city will identify infrastructure improvements in connection with the PACC.

• Dec. 17: Contingencies for the purchase and sale of the property must be met.

• Dec. 21: The council is expected to approve a purchase and sale agreement for the property.

• Dec. 22-29: The council expects to be awarded the state grant following the signing of a purchase and sale agreement for a PACC.

• Dec. 30: The city must finish closing on the property by this time.

• Onward: The city will begin a public process seeking input on what designs and features residents wish to see in a PACC.

Learn more

View the full purchase and sale agreement at this link.