After the prime Front Street location sat vacant for months, the owners of the old Allen’s Furniture store thought they had finally found a great restaurant tenant to fill the space.

Then, the tenants learned of an unexpected $100,000 transportation impact fee that would be required in order to move forward.

The deal fell through.

“It was so large that it took me aback,” City Council President Maureen McCarry said during a recent Land Use Committee meeting discussion of the issue. “The fees are legitimate by our standards.”

The situation with the Allen’s Furniture space is just one example of how the city’s fee structure is having unintended results on businesses and landlords in Issaquah, particularly in Old Town along Front Street, say a group of citizens working to resolve the issue.

One of those citizens is landlord and businessman Keith Watts, although none of the parcels currently sitting vacant are his. He and former City Council member Joe Forkner are trying to help on behalf of the Downtown Issaquah Association.

The example of the $100,000 fee would be a substantial amount even for a new business, but it’s even more considering that most of the spaces being discussed are proposing a different business in an existing space — referred to as a change of use.

“It makes it very difficult,” said Nate Thomas, who owns the building that housed Allen’s Furniture. “Nobody’s going to pay that. Someone is going to have to put in $300,000 to $500,000 in tenant improvements already.”

Thomas said he feels the impact fees puts the pressure on downtown businesses to pay for traffic, most of which is moving through the Front Street corridor, rather than coming there as a destination.

“It’s not based on our activity,” Thomas said. “And, I think the theory is that we’d like people to be walking downtown anyway.”

In 2003, Watts and his wife, Kate, moved to Issaquah, and were looking for real estate investments, not necessarily in Issaquah but in general. When they started becoming familiar with the area and with Front Street in particular, the idea clicked, Watts said.

“It was like a lightbulb went off in my head — ding, ding, ding. This is the investment,” he said. The couple bought their first building in 2005, and four more sites since then. They have tried to fill the spaces with restaurants and retail shops, such as Stan’s Barbecue, Vino Bella and more.

“We’re trying to bring Front Street back to life,” Watts said. “We couldn’t buy enough properties to make it happen on our own.”

So, through work with the Downtown Issaquah Association and trying to help out fellow landlords, Watts and others are trying to help attract businesses that will help revitalize the area.

“We want destination businesses that will bring people to this area,” he said.

In another example of how the change of use fees are affecting potential businesses, the Time Out Sports Bar started demolition in the old martial arts space on Front Street, but as the permit process proceeded, they were asked to pay $14,300 in traffic impact fees and $7,900 in fire impact fees.

“Everything just stopped,” Watts said.

In another example, a tenant of one of his buildings was asked to pay a $10,000 change of use fee for moving her chiropractic business to a nearby location. She lobbied the city and was able to get it reduced by reclassifying the business.

Another space that went through a similar situation was the old 3,600-square-foot True Value Hardware store, Watts said, where the landlord also had serious interest from a potential tenant. The fees at that site would have been $32,000 for transportation and $8,000 for fire, he said. That tenant is on hold, hoping for a solution from this process.

“There is a sense of urgency from our standpoint,” Watts asid. “These four spaces could dictate what Front Street will look like for the next 10 years.”

Watts has been working with former councilman Forkner, Economic Vitality liaison Dan Trimble and others in the Downtown Issaquah Association and Chamber of Commerce to come up with a solution that would work make sense to business owners and city officials alike.

“I’m afraid downtown’s gonna go away,” Forkner said at last week’s committee meeting. “I don’t want to see us lose downtown. … The landlords down there need to know where they stand with this.”

Forkner said in an interview that the trouble will be to come up with a solution that is equitable to land owners throughout the city.

“You can’t just take downtown Issaquah and say ‘We’re going to treat them separately,’” Forkner said. “You need something that’s going to be able to be spread across the city and be fair.”

An agenda bill will come before the City Council in November asking how the council would like to revise the Transportation Impact Fees in light of the removal of the Southeast Bypass project from the Transportation Improvement Program. Planning Director Mark Hinthorne said that he will also include a list of options for council members to consider to address the issue of impact fees affecting businesses in the Old Town area.

One suggestion from the Land Use Committee meeting was that if a business is less than 10,000 square feet, it could be made exempt from the transportation impact fees. Another option could include creating districts within the city, and have different impact fees within those districts, Hinthorne said.

Wendy Giroux can be reached at wgiroux@reporternewspapers.com or 391-0363, ext. 5050.