Sound familiar? The Seattle City Council effectively gives a city parking garage to a downtown developer without fully informing taxpayers of the costs.
In an eerie mirroring of the Nordstrom garage giveaway, that's what happened to the 23-year-old Freeway Park Garage back in early 1997, when the city leased it to the Washington State Convention & Trade Center for $1 per year. Though city officials claimed their plan was to contribute the garage's revenues toward financing the convention center at a cost of a few million dollars, a review of the deal now shows the garage was jettisoned just as it was set to turn a hefty profit, and the cost to taxpayers will be more than $15 million. And that doesn't include a separate $7.5 million cash gift the council and then-Mayor Norm Rice gave the convention center, a nonprofit corporation.
Financed by a 2 percent hotel tax, the $150 million center expansion is about to begin along Pike Street, creating a sprawling, five-block complex with three skybridges. Final construction hearings are under way at City Hall. Though completion is two years off, the quasi-governmental center has been leasing the garage—built in 1975 for a relatively cheap $4 million—and collecting revenues since January 1997. To some, it's more than a mere lease: At a recent meeting of council and center officials, someone observed that the city has "in effect deeded over" the eight-story, 640-car garage through the $1-a-year, 30-year lease. No one disagreed.
Constantly struggling to make money under city management, the garage will reap millions for the center once its $1 million debt is paid off. The mortgage-burning milestone seems to have been left out of public discussion of the lease. In the first years under center control, the garage will net an average $60,000 from parking revenues after taking debt payments off the top. When the debt is retired in five years, garage profits will soar: The center will net $389,000 in 2002; by 2018, it will be making $630,000 per year from the garage.
Altogether, the center will net (and the city lose) about $10 million in parking income over 20 years—more than three times what officials claimed. Additionally, the city based its cost/loss projections on a 20-year basis for a 30-year lease (which carries a second 30-year option). Using the city's cost projections for 30 years, the center's garage profits will hit $15 million.
Whether or not the city should be contributing to the center expansion is a separate and still controversial issue; more pressing is the question of whether the public even knows what it gave up. As then-council member Jeannette Williams cautioned back in 1986, in opposition to a proposal to privatize the garage, "That place is going to turn into a gold mine." Sure enough—with a debt-free garage and potential 60-year lease in hand, the center may have found a mother lode.
City officials contend the deal will pay off for taxpayers. They base their views on creative cost projecting that determines "net present value" of future dollars. The method, says analyst Matt Lampe of the mayor's office, "discounts future revenues back to a current value, so a dollar earned in five years is worth less than a dollar earned today." Under that method, the city figures its revenue loss is only $4.3 million—in current dollars—for 20 years. Lampe says the projections "provide a reasonable basis for decisionmaking," but allows that "anyone who would say they are 'accurate' is kidding themselves in any long-range decision." The 20-year figure was picked, he adds, because that's when debt will be retired on the separate, $7.5 million cash donation the city borrowed to give away. Once that loan is paid off, Lampe predicts, general revenue gains from the new center will offset city losses.
Still, adding in the $7.5 million, City Hall's total contribution to the expansion will be at least $22 million in current and future dollars. That wasn't the message conveyed when the contribution was discussed in recent years: The total was pegged at $10 million, with about $2.5 million coming from lost parking revenues.
That's pretty much the council's story today and they're sticking to it. The overall contribution is "around $11 million" says Dan McGrady, assistant to City Council member Jan Drago. He adds that leasing out a city property for 60 years isn't giving it away: "That's not correct, and I'd be careful in reporting it if someone says otherwise," McGrady says.
The leasing deal was orchestrated by Mayor Rice and legislatively sponsored by thencouncil president Drago, who forbade public bidding on the garage's operation (she has also asked the public not to pester council members with calls or e-mails about center construction while they're debating the issue in her committee this month). Rice and Drago played similar roles in the enigmatic Nordstrom deal, approved by the council in 1995, which quietly gave Nordstrom and Pacific Place developers an estimated $30 million in cash and use of a new $40 million-plus city-built parking garage. Rice and Drago defended that giveaway as a needed boost to downtown commerce. Drago characterizes the freeway garage deal likewise, saying an expanded center will result in "increased tourism, job creation, and retail sales." Analyst Lampe predicts the city will earn $16 million in direct new revenues from the convention center (earned with or without leasing the garage), which ultimately will have three parking garages for 3,000 cars. Besides, the freeway garage was a white elephant, Lampe says. "The city was never a very effective manager of the garage," he notes, "primarily because it was not cost effective to provide appropriate on-site management, and the city was not in the garage-management business."
Now they tell us.
Apparently there's no going back. Like the Nordy garage, the freeway garage is a moot issue around City Hall and is not expected to come up during current hearings. "The garage is a separate thing altogether," says spokesperson McGrady, "already approved."