Aspen City Council rejected an idea in a meeting this week to change the zoning rules surrounding North Mill Street properties out of fear that it will spur free-market residential redevelopment and drive out existing businesses.
City community development officials brought the question to council out of concern that the current rules in areas known as Service Commercial Industrial (SCI) zone districts were too random and restrictive.
The zone district was created in the 1970s to give industrial and maintenance shops that serve locals a place to do business.
Over the years different city councils allowed new businesses in the zone. Since, rules about what can open in the area have become slipshod. For example, medical offices and dog washers are allowed, but not dental offices and hair salons, said Chris Bendon, community development director.
There are only five parcels that have the SCI zone district designation. Those include the North Mill Street Center at 465 N. Mill St., the Riverside Mill Street properties that currently house a lighting studio, the nearby post office parcel, the lumber yard off of Highway 82 and Obermeyer Place, which has a combination of SCI zoning and the less restrictive Neighborhood Commercial (NC) zone district.
City officials reached out to different business owners at each property and it became clear that people in the North Mill Street Center are most concerned about removing the SCI zone designation, Bendon said. Four business owners attended the Tuesday work session and explained the reasons for their concerns.
If the SCI zone is changed, restrictions on what businesses can be located in the area will be removed and that will in turn drive up the demand for the spaces and rents will increase, argued Chris McLaughlin, owner of Aspen Repair Service.
The building owners of the North Mill Street Center already have increased rent on the tenants by 35 percent since they bought it in 2007, McLaughlin said.
RG Mill Street LLC, tied to attorney Ron Garfield of the local law firm Garfield and Hecht, purchased the North Mill Street property for a total of $14.6 million. Another neighboring North Mill Street property was purchased for $3.8 million earlier in 2007 by a group of investors including Garfield, Andy Hecht and Nikos Hecht.
Scott Kendrick, owner of Millennium Pack and Ship (MPS), suspects that the land owners already have plans to redevelop the building, because they will not renew the tenants’ two-year leases, he said. All of the tenants have about 16 to 18 months left on their leases, he said.
“They are definitely moving towards some sort of redevelopment,” Kendrick said. “And none of us knows where that’s going to leave us.”
MPS already has tried to find another office space in the area, but has had no luck, noted Shane Allen, MPS employee.
Regardless of whether the building is redeveloped, if rent goes any higher none of the businesses will be able to afford to stay open, said Matt Mulligan, owner of Aspen Laundry and Cleaners.
“These businesses will not survive,” Mulligan said. “In fact, they barely survive as it is.”
Mayor Mick Ireland agreed that the SCI zone designation shouldn’t be removed because it would likely make way for second floor free-market residential units and vacant first-floor commercial spaces. Currently, some residential development is allowed under SCI rules, but it is very limited, while Neighborhood Commercial allows more residential.
The issue that the tenants are facing is the same problem that has come up a number of times in other Aspen neighborhoods, Ireland said, with high-priced residential units driving the real estate market. Spaces for small businesses would not exist without the local government intervening, he said.
The businesses will likely not be saved unless the city gets involved in the property’s redevelopment, Ireland said.
“I suggest to you that no amount of tinkering [with the land use code] is going to preserve this as affordable commercial,” he said.
Councilman Adam Frisch said he thinks the city should focus on what businesses it wants to see in the SCI zone district and not worry about what building owners plan to do. If the zoning restrictions are removed, the reality is that some rents will be higher, but there also will be more opportunities for a variety of local businesses to move in, Frisch said.
“I would rather see the place fill up with locals and see some higher rents,” Frisch said. “... I think we need to focus on what we want to see in town, and think about what trade-offs we’d be willing to make.”
Councilman Torre said the zoning of the North Mill Street property should not be changed until the city understands what Garfield and Hecht plan to do with the building. Torre was opposed to allowing more free-market residential units in the area, he said.
“I don’t have the answers either,” Torre said. “But it is not to leave market forces up to itself. It’s not working, it’s not getting any better.”
Councilman Derek Johnson said staff should look closer at the economics of the situation and see if there’s a way to make the rents affordable and sustainable for local businesses. He didn’t offer suggestions on how that would be done.
Councilman Steve Skadron left in the middle of the discussion and did not comment on the issue.
Bendon said he would reach out to Garfield and Hecht and see what plans they have for the North Mill Street property, and if the company would be interested in partnering with the city to redevelop it.
In the meantime, the city is going to make moves to convert the entire Obermeyer Place into a Neighborhood Commercial zone district.
Changing the zoning at Obermeyer Place won’t drive up rents or put the property at risk of redevelopment because the project was completed about five years ago and is relatively new, Bendon said.