Gig Harbor settles suit over Harbor Hills retail project, opening way for new grocery

The City of Gig Harbor and a developer have settled a lawsuit over a planned North Gig Harbor retail development, clearing the way for a much-anticipated grocery store — although not the one originally planned.

The suit, by the Olympic Property Group, alleged that the city improperly raised traffic impact fees on a development called the Village at Harbor Hills, making the project financially infeasible.

In the settlement, signed Aug. 4, the city agrees to adjust the way it calculates the impact fees, saving the developer about $1.1 million. In return, OPG agrees to pay for street lights and other traffic improvements.

“We’re satisfied,” city administrator Bob Larson said on Friday. “We felt we got a good outcome for the city and the community. It was a long time coming.”

Mayor Kit Kyhn called the settlement “satisfactory to both parties.”

Officials of the Olympic Property Group were not immediately available for comment.

The $44 million, 18.5-acre business park project at Borgen Boulevard and Harbor Hill Drive was expected to have a Town & Country Market grocery store, banking, restaurants, shops and medical services.

A grocery store is still in the mix for the center, according to the settlement, but it probably won’t be Town & Country, which is now pursuing a downtown site.

Traffic impact fees are payments made by a developer to mitigate the expected effects of a project on streets, roads and sidewalks. They are calculated by complex formulas based on expected trips during rush hour on a single projected day years in the future.

Action by council

Raising the city’s traffic impact fee was one of the first actions taken by the new, slow-growth council during its first year in office. At a Dec. 10, 2018, meeting, the council raised that fee from $2,100 to $5,071 per vehicle trip.

“We had not updated our fee structure for over 10 years,” Kuhn wrote in his blog that month. “Meanwhile we are not getting the necessary funding for our roads and traffic.”

Olympic Property Group sued Jan. 8 in Pierce County Superior Court, alleging that the fee hike was arbitrary and violated the state’s Growth Management Act, State Environmental Policy Act and the city’s own municipal code.

Jon Rose, the company president, said the new fee would have added $2 million to the business park project, making it infeasible. He said the city, in calculating the new fee, included old road projects not connected with Harbor Hills.

“We think they put projects in their wish list that shouldn’t be in there, and that drove the price up beyond what it should be,” Rose told the News Tribune in 2019.

Grocery delayed

An unintended consequence of all this was the delay of the Harbor Hills grocery store, which had been highly anticipated by nearby residents, including some in Heron’s Key, a senior-living community close by.

Larson emphasized that the agreement of OPG did not lower the city’s statutory traffic impact fee, which remains at $5,071 per vehicle trip. But the city agreed to change the way it calculated the fee for the Village at Harbor Hills. Instead of totaling calculated trips for all eight or nine retail stores in the project, the city agreed instead to use a standard generic formula for shopping centers.

The definition, developed by the Institute of Traffic Engineers, is “nationally recognized, sort of like a national building code,” Larson said.

The change will save the developers about $1.1 million, Larson said.

In return, OPG will make a one-time cash payment of $460,000 to the city, which the city will use to make traffic or disability access improvements near the project. It will also make a separate payment of $60,000 to pay for streetlights.

Town & Country

Facing the delays with development, Town & Country Markets, originally planned for the Harbor Hill site, has now set its sights on a downtown Gig Harbor location, a move that was first anticipated late last year.

The former Thriftway/QFC store location in the Peninsula Shopping Center on Judson Street downtown is now where the grocer says it is considering opening.

Town & Country CEO Bill Weymer told The News Tribune in a brief phone interview Friday that “we think it is the right thing to do. There’s a lot of congestion already in the Harbor Hill area — and doing something from the ground up is very challenging.”

“We worked hard on that (project) and it just got complicated and then with the questions about traffic mitigation, it was time for us to go our separate ways,” he said.

Weymer said the grocer is now working with The Rush Companies on a potential agreement to locate at the downtown site, with site redevelopment.

He said that while the grocer is still excited about coming to Gig Harbor, the current plans are not yet a done deal, “these things take time,” he added.

His message to those waiting for Town & Country’s arrival: “We’re still working on it. Don’t give up.”

Alexis Krell of the News Tribune contributed background to this story

This story was originally published August 28, 2020 at 12:57 PM.