Spokane Municipal Code

Title 17D City-wide Standards

Chapter 17D.100 Historic Preservation

Section 17D.100.240 Economic Hardship Determination

1. The City recognizes that there are circumstances under which enforcement of this chapter may cause an undue hardship to a property owner. The City therefore finds that it is necessary to provide property owners the opportunity to demonstrate that an economic hardship exists in specific cases, under which the demolition prohibitions of SMC 17D.100.220 and 17D.100.230 shall not apply.

2. The requirements of SMC 17D.100.220 and 17D.100.230 shall not apply and the owner may obtain a demolition permit without the requirement of constructing a replacement structure if the owner can demonstrate to the satisfaction of the ad hoc committee established by this section that maintaining the historic structure would impose an economic hardship on the property owner that was created beyond the owner’s control.

   1. The ad hoc committee on economic hardship shall be appointed by the commission, and will consist of at least seven members as follows:

      1. one member of the real estate development community or association such as CCIM Institute, Institute of Real Estate Management, the Society of Office and Industrial Realtors, and Building Owners and Managers Association;

      2. one member from a banking or financial institution;

      3. one licensed architect registered in Washington State;

      4. one member from the property management industry;

      5. one member representative of property developers;

      6. one member of the landmarks commission; and

      7. one member representing the neighborhood council where the historic structure is located.

   2. The ad hoc committee’s decision shall be made by majority vote and within thirty (30) days of the submission of the material demonstrating an economic hardship by the property owners.

      1. The property owner has the burden of demonstrating the economic hardship.

      2. Evidence of economic hardship is limited to instances when preservation will deprive the owner of reasonable economic use of the property.

      3. An owner's financial status is not evidence of economic hardship.

      4. The decision of the ad hoc committee may be appealed to the hearing examiner within thirty days of the committee’s decision.

   3. The ad hoc committee will be a standing committee with one revolving member representing the specified neighborhood in which the property resides.

      1. There is a preference for developer and architects who participate on the ad hoc committee to have both new building construction and historic renovation experience.

      2. There is a preference for the neighborhood representative who participates on the ad hoc committee to have experience in development, appraising, construction, and/or related skills.

      3. Members of the ad hoc committee shall serve for two-year terms and may be reappointed for additional two-year terms. 

3. For purposes of this section, a reasonable economic use would be one that provides a greater return on the underlying land value (land with improvements) than the land alone could generate. The following four steps will be taken to determine reasonable economic use:

   1. The market value of the land, as vacant, is to be estimated.

      1. The sales comparison approach to value is an approved method.

      2. The land residual technique is an approved method, but only allowable when accompanied by and reconciled with the sales comparison approach method.

   2. The first year market rate of return on leased land is to be estimated. Market data supporting this rate of return must be provided.

   3. Based on applying the rate of return to the land value estimate, an annual market return on the underlying land results. This is the base figure or threshold for the analysis.

   4. Provide an estimate of the annual market net operating income for the property as is, and under any reasonable modifications thereof. Note that any required capital investment in the property would increase the basis from which the return is estimated.

      1. The sales comparison approach, income approach, cost approach, and development approach to value are all approved techniques.

      2. Under valuation scenarios where an additional capital investment is required, the expected market return on the capital investment will be subtracted from the annual return, with the residual income being the return on the land.

4. In order that a property may be marketed for sale or refinance with knowledge of the property’s status, an owner may request an advance determination that a specific property qualifies under the economic hardship exemption established by this section Upon receipt of a written request from a property owner, the owner shall be entitled to an economic hardship hearing at the owner’s expense, to provide a showing that the factors stated in SMC 17D.100.230(B) are present. If the commission agrees, it shall issue a written determination to the owner that the property qualifies for economic hardship status pursuant to this section, and the is therefore entitled represent the such written determination as binding upon the property owner and City to third parties including without limitation prospective purchasers and lenders.

5. This section does not apply to orders of the building official or fire marshal that a structure be demolished due to public health, safety, or welfare concerns.

Date Passed: Monday, February 12, 2018

Effective Date: Saturday, March 31, 2018

ORD C35580 Section 2