It was late 1996, and Seattle's politicians, reporters, and activists were occupied with the prospect of then-Mayor Norm Rice's becoming US Secretary of Housing and

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King Street, easy street

Developer John Finke cleans up again with another 'public-private partnership.'

It was late 1996, and Seattle's politicians, reporters, and activists were occupied with the prospect of then-Mayor Norm Rice's becoming US Secretary of Housing and Urban Development. Rice's role in securing a low-interest HUD loan on behalf of Nordstrom and shopping-mall developer Jeff Rhodes came under intense federal scrutiny. The Municipal Building buzzed with rumors and allegations. Meanwhile, a block away at the King County Courthouse, another "public-private partnership was being cobbled together. It wasn't nearly as spendy or flashy as the $400 million Nordstrom­Pacific Place complex, but this project—a new county office building—had one element in common with Pacific Place: It was another sweet deal for consultant-cum-developer John Finke.

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Finke, his partner Rhodes, and the public-subsidy experts at the law firm Preston Gates & Ellis had just worked federal, state, and local bureaucrats for $144.2 million in taxpayer-backed assistance for the Pine Street project. County officials needed a new office building at Second and Jackson to consolidate two departments, and Finke and the Preston attorneys were there with the solution.

At first, the county leaned toward financing its eight-story, $60.3 million King Street Center the old-fashioned way—by issuing general obligation bonds. This is straightforward process; administrative and legal costs can be kept to a minimum. But Preston attorney David Thompson took a page from the Pine Street work of his partners Gerry Johnson and Jay Reich. Thompson told County Executive Ron Sims' staff about a relatively new—and slightly more costly—financing mechanism called "63-20 revenue bonds" (after a section of the IRS code). These bonds aren't issued by government agencies; instead, a nonprofit organization becomes the borrower. Enter Finke.

Under the advice of Thompson and financial consultant Jim Hattori, Sims' staff strongly urged City Council members to go with 63-20 rather than general-obligation bonds. "It was portrayed to the council that this was the best deal we could possibly get," one council staffer recalls. "When the bond counsel tells you what to do, how can you go against that?" says a Sims aide, who likewise spoke on condition of anonymity.

The council assented in January 1997, with members Brian Derdowski, Maggi Fimia, and Rob McKenna casting dissenting votes. "It sounded like another case of giving subsidies to the private sector... big time," says Fimia, a self-described "fiscally conservative Democrat" who opposed public-financing deals for the new Mariners and Seahawks stadiums. "These public-private partnerships are recipes for favoritism," says Derdowski. "It's another name for special favors. When someone says 'public-private,' I reach for my pocket."

Thus was born"Community Development Properties, King County III" (or simply "CDP III"), the latest ad hoc nonprofit corporation created by Finke under the umbrella of the New York City­based National Development Council. A few months earlier, Finke's CDP II had secured a $47 million low-interest loan through the Washington State Housing Finance Commission to help him and Jeff Rhodes build the ostensibly nonprofit Pacific Place parking garage beneath Rhodes' Pacific Place mall and across the street from the new Nordstrom store. CDP III's job would be similar to CDP II's: channeling the proceeds of tax-free bonds into a privately developed though technically nonprofit project.

Finke's work for the county—little more than co-authoring a few contracts and filing corporate documents with the secretary of state's office—earned his new company a "nonprofit fee" of $487,500, according to county records. The responsibility of building King Street Center on budget and on time lies not with him but with developer Wright Runstad & Co. and contractor Lease Crutcher Lewis. And even though Finke's CDP III will own King Street Center when it's completed next summer, the financial burden of maintaining the new building will fall on King County taxpayers. Under the 28-year lease it signed with Finke last year, the county will pay all utility and nearly all operating and maintenance costs, as well as Finke's property taxes, license fees, and other levies. The base annual rent of about $18 per square foot mounts to more than $26 when maintenance, operating costs, and taxes are counted in. (The county must pay for utilities separately.) This is at or slightly above the average annual rent for "Class A" office space downtown.Finke's company will also earn an "asset management fee" of 1 percent of the rent payments, or about $1.5 million over the 28-year term.

Privately, county staffers wonder whether Finke is being overpaid. Attempts to reach Finke for comment were unsuccessful. But it is highly unlikely that his King Street project, now under way north of the Kingdome at Second Avenue and Jackson Street, will spark as much controversy as the Nordstrom­Pine Street scandal, which so far has spawned at least 13 government investigations and citizen lawsuits. The latest complaint, filed April 24 by community activist Jordan Brower, asks the IRS to investigate whether Finke's nonprofit CPD II and its parent National Development Council have reaped excessive benefits from their roles in the Pine Street project.

Some activists are also monitoring a proposal by Finke, who chairs the Pike Place Market Preservation and Development Authority, to build a parking garage at the Market's "PC-1 North" site, a city-owned parcel adjacent to Steinbrueck Park. At an April 28 public hearing—which Finke unsuccessfully attempted to gavel open before its advertised time—all six speakers expressed fears that the proposed 200-space garage would spoil views of Elliott Bay and harm the Market's ambiance while doing little to relieve congestion. A decision on that garage is not expected for several months.

Related Links and information:

King County page

http://www.metrokc.gov/

Preston Gates' homepage

http://www.prestongates.com/

 
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