At its June 19 meeting the Poulsbo City Council held a workshop to discuss converting some of the zoning in downtown Poulsbo from strictly commercial or C1 zoning to mixed use or flexible zoning.

In 2018 the city council adopted amendments to the Poulsbo Municipal Code for commercial districts. The amendments addressed the land use table, landscaping, design standards and the creation of a downtown shopfront overlay, which dictates projects on Front street specifically.

Mayor Becky Erickson requested that the Economic Development Committee (EDC) review the mixed use and residential components of the amendments for the C1 downtown zoning district outside of Front street. In 2019, the EDC began discussing options for residential uses in the C1 district back in February. In April, the committee asked to bring their discussions to the council for further review and invited members of the private sector to attend and share their thoughts.

City Planner Karla Boughton opened the workshop with a PowerPoint presentation explaining the mayor and EDC’s thinking behind the changes as well as a review of the current zoning district.

The council and EDC did not have as much information in 2018 about the potential for mixed use in the downtown area and chose to revisit the discussion when they had more information after talking to property owners.

“The reason that we are asking the council to reconsider this, is that there is a sense that we may be missing out on an opportunity,” Boughton said.

One of the property owners that the EDC spoke with was Mike Brown of the Sound West Group, who owns multiple properties in the downtown area. Brown and other downtown property owners spoke to the EDC about their experience as property owners and the situation they are currently facing.

For example, delayed maintenance on older buildings is resulting in expensive but necessary upgrades, specifically the installation of sprinkler systems to meet new fire code standards. The biggest issue is that commercial rents in the downtown area at this time do not support the expense of these necessary upgrades.

Brown, specifically has had to halt moving forward on an approved building permit due to his current financial status. Brown had also looked into converting some properties into mixed-use properties but could not get a bank to back the conversion.

Boughton used a formula to break down the situation in downtown for property owners and why a flexible use or mixed use option could help.

Cost of improvements + Market Rent ≠ Reinvestment/ Investment

Cost of improvements + Flexible Uses = Reinvestment/ Investment

In those formulas the cost of improvement could mean anything from new construction, reconstruction or conversion of a property.

Keeping that information in mind the EDC began looking at flexible use options that could help to revive the downtown area and allow for the necessary upgrades and also answer the call for more residential zoning.

The city could allow for a flexible/mixed use option by requiring that the first floor be constructed and parked to higher commercial standards but allow for residential use until market demand supports a change back to commercial use. This would only apply to properties in the C1 zone and outside the shopfront overlay along Front street.

Additionally, within the C1 zoning, but outside the overlay, residential units could be allowed on the first floor; provided that the first floor would be constructed to commercial building and fire code standards. Parking would be at the commercial use standard as well.

“I recommended this because I think we have an excess of commercial property and we have a huge need for residential.” Erickson said.

Brown supports flexible and mixed-use properties, but based on his conservative estimates he said he believes that building on the vacant properties in the downtown area is not worth it.

“Following the market forces, commercial construction, new construction or conversion of these spaces to any large degree or scope wont work. The rents for spaces in downtown Poulsbo don’t justify the cost of new construction nor cover the potential debt service,” Brown said.

Brown estimated that any new construction would cost nearly $3.2 million.

Gary Lindsey with Kitsap Building Association agreed with Brown, and noted that conversions and re-construction of existing buildings would not only be simple but economical.

“Conversion of an existing building is more likely than that of a vacant lot,” Lindsey said.

Council members shared their concerns about going down this path.

“The main concern for me if we decide to do this is how it would impact the traffic and parking in downtown. I think those will be the two biggest issues we need to have answers to before we proceed,” Council member Ken Thomas said.

Council member Connie Lord was concerned with public perception associated with going down such a path.

“My concern is that the public will feel that we are not able to stick to our guns when we make a decision. It’s been a year (since developing the city comprehensive plan). We need to make sure the public understands that this isn’t on a whim that we are reintroducing this idea,” Lord said.

Mayor Erickson directed the Planning and Economic Development Department to begin the public process of considering a conversion option for the C1 zoning district, with the goal of holding a public hearing in late August.