SIX HOMES, ONE FOOTBALL stadium, a 400-foot yacht, and a 10-seat submarine on order. What's left to get for the man who has everything? A whole Seattle lakefront neighborhood, maybe?
Keep thinking. Paul Allen's been there, getting that, too.
Known officially as the South Lake Union Seaport Park redevelopment—and unofficially as Son of the Commons—the city of Seattle is turning the former Naval Reserve base and armory on the lakefront into a 12-acre, $35 million park. In concert, Allen will expand his already considerable investment in the area in hopes of spawning an interconnected marine mecca of boating, dining, tourism, offices, and residences. Allen, through his powerhouse Seattle corporation, Vulcan Northwest, owns more than a million square feet of property in the Lake Union neighborhood. If he strikes a pending deal for 10 more city-owned parcels, he'll add another 223,000 square feet of buildable land. A hotel may also be in the works. Property experts estimate his initial development costs at $400 million.
The project will complete what has become a wide ribbon of Allen developments meandering through the heart of Seattle, from the International District to Pioneer Square to the Regrade to Seattle Center and now to the shores of the busy in-city lake and its uplands. It's another indicator of Allen's remarkable local influence. Unlike his pal and Microsoft cofounder Bill Gates, who has remained focused on the high-tech industry, Allen not only has become a global communications, entertainment, and sports mogul but also is now Seattle's preeminent new developer and landowner.
Through partnerships with the taxpayer and through his own vast resources, he's reshaping the city's southern portals with trendy office buildings, historic renovations, condominiums, and the football stadium complex. At Seattle Center, Experience Music Project competes with the nearby Space Needle as one of the region's most recognized landmarks. With his big bucks, he rescued the venerable Cinerama, the 845-seat Regrade theater, and is embarking, partly with taxpayer funds, on a 68-acre office park and retail development, Quendall Landing, on the southeastern shore of Lake Washington in Renton.
With Allen's deep pockets—$28 billion—it might be an unnatural act for public officials not to love him. He seems to get zoning and construction permits in record time and carries a big stick politically. In Renton, city officials have pressured a private landowner to sell his Quendall Landing property to Allen and have joined the billionaire in asking the state Legislature to construct a freeway interchange for the massive project.
Renton's leaders, like many local and state officials, are eager to share costs with private partners and get their civic designs off the boards. And Allen often gets laudatory results—the Union Station renovation, for example, earned a top national award for historical preservation and "revitalizing Seattle's transportation system." Likewise, he didn't simply save the Cinerama, he turned it into one of America's cutting-edge high-tech movie houses.
He also gets a good return on investment, sometimes aided substantially by taxpayers. Since 1997, Allen's enterprises have directly and indirectly inked deals that will bring Allen at least $1.04 billion in public funds, plus millions more in property enhancements and other benefits. From his lease at Seattle Center to the billion-dollar Seattle football stadium taxpayers are building with him, the corporate Allen holds a half-dozen partnerships with the public. In return, he has constructed at least $600 million in related private projects with millions more to come, slowly reshaping the regional topography into what figures to be a kind of Allentown. Many of the public and private developments greatly benefit taxpayers, and all richly benefit him and his company (see Paul & the Public, Parts 1 & 2).
But what's the ultimate effect of Allentown? "We're getting lots of goodies, cherries with the fruit cake," says University of Washington urban design expert Folke Nyberg. But "the whole city process at this point has been bent over backwards to get these projects through," he observes. "We're getting something of a hodgepodge. These projects don't seem well coordinated with the city overall.
"There's nothing evil about this. It's progress. But there's a question of who really owns what. What is private, and what is public?"
THAT QUESTION RISES anew along the slumbering southern shores of Lake Union, where Allen and the taxpayers are embarking on their latest venture. It may become another sizable partnership or, in the words of Seattle City Council member Richard Conlin, merely "matching and complimentary projects." But taxpayers have a stake.
The Lake Union Seaport Park is still in the planning stage, and the city only recently took title of the property from the Navy—paying a below-market $3.4 million. Mayor Paul Schell has accepted a $1 million grant from the Kreielsheimer Foundation to help construct a historic ship moorage on the site. Community groups are hoping to raise millions to renovate the armory. The park project also includes a maritime museum, Native American canoe center, and the Center for Wooden Boats.
Besides the development costs, public money may be used for an assortment of joint projects, including a skybridge from the park to an Allen-owned mixed-use building and parking garage across Valley Street, and several planned pedestrian underpasses—one below Aurora Avenue that would connect, among other things, Allen's lake project with EMP.
Allen is also negotiating to buy 10 other city-owned properties around the neighborhood. Nathan Torgelson of the city's Office of Economic Development says a deal with Allen may be reached in a few months.
The world's third richest man is at work on several commercial projects in the area, one called Terry Technology Court, featuring Class A office space. "It would be accurate to say," notes Vulcan Northwest Communications Director Susan Pierson Brown, "we are looking at a couple of housing projects that are still in preliminary planning as well as a couple of mixed-use projects also in the planning stage."
Once Allen's six-story waterfront clusters begin rising along Valley Street, Mercer Street, and Terry Avenue, the area is destined to begin sprouting more new developments—many on the other properties Allen owns in the neighborhood.
Inevitably, the Westlake corridor is expected to fill in with new projects and connect with downtown on the other side of Denny Way, creating a new 80-acre commercial-residential-recreation district. In effect, it will be a redrawn version of the 42-acre Seattle Commons, the Westlake/Lake Union park and mixed-use project the political establishment once backed but voters twice rejected.
The smaller park project has long been promoted by Mayor Schell and supported by City Council members. The impetus now is Allen's unique private plan to build around and connect to the park. While past private-public alliances have drawn sharp criticisms—such as the Nordstrom/Pacific Place parking garage debacle—public officials and a new public private partnership review board supposedly will be intensely scrutinizing costs and terms of the alliance.
Critics say, however, the city is already allowing Allen to call the shots and is negotiating from a weak position. A 1999 City Council resolution that led to the negotiations with Allen sets out several city desires for cultural and housing amenities, for example. But, says the city's Torgelson, "They're guidelines, not requirements."
City Council member Conlin sees only an upside to the Lake Union projects. "I don't see us investing significant amounts in [Allen's] developments there," he says. "Our goal is to get maximum value from our land sale and impose some fairly innovative proposals to really enhance the pedestrian environment down there."
From his perspective, "the city's key effort is to implement the neighborhood plan that's been long in the works and get a reasonable return on our investment. So far, I haven't seen anything that causes me to question that effort."
One of the topics of the ongoing negotiations between Allen and the city involves the billionaire's plans to construct taller buildings next to the lake on property he currently owns as well as the city properties he hopes to acquire. The pending Lake Union height variance, permitting a lakeside ridge of 65-foot-tall buildings in an arena now zoned for a low-scale 45 feet, is coasting toward full City Council approval. For example, the council is choosing not to sign Allen to a special contract rezoning that can be used to impose stronger city controls.
Community activist Irene Wall, who led the successful effort to limit the view-blocking bulk of the Marriott Hotel on the downtown waterfront, argues "a key principal of urban design" is that view corridors should step down toward shorelines. In a recent missive to the council, she said it appears members have "focused on economic gain from the sale of [city] parcels more than on an equally important goal of upholding land use policies."
So far, the only official City Hall dissenter has been architect and City Council member Peter Steinbrueck.
The rezoning, he says, "is premature and precedent setting, without knowing more about the development potential. It doesn't look good to form. We're really bowing to the wishes of one developer before we have all the information on the table."
What will the Lake Union portion of Allentown look like?
"No one knows," Steinbrueck says, "because we haven't seen any plans. The potential is there to do good, but the concern is overdevelopment and out-of-scale development." Steinbrueck adds, "As a developer, Allen has perhaps different expectations and investment strategies, and can do far more than other developers as far as largesse and philanthropic efforts. At the same time, his corporation has so much property and money that they can just steamroll ahead, and they do. And they have."
Some community groups are learning to stay out of Allen's corporate path, says Steinbrueck.
"I often hear comments from local groups that they don't stand a chance against Vulcan," Steinbrueck says, "and that Vulcan won't talk to them. Local nonprofit housing operators, who are interested in some of the South Lake Union properties, say they can't even get Vulcan to call them back."
Allen's spokesperson Pierson Brown says, "Mr. Allen is committed to this community and is pleased to partner with the community on projects that enhance the environment for all," including housing projects that may eventually develop in the area.
WHATEVER NEW DEALS might spring up at Lake Union, Allen and taxpayers are already in partnership for the long haul. The taxpayers' $1.04 billion contributions toward the billionaire's local projects (based on true costs plus interest) are payable over at least two decades.
Most of the public's largesse to Allen came in the form of a new football stadium under construction in Seattle, a 72,000-seat, as-yet-unnamed open-air facility approved by a narrow 51 percent in a 1997 public vote financed and promoted by Allen.
The stadium deal is a cautionary tale of public-private partnerships. Allen and elected officials insisted before the stadium vote and insist today "the public's financial obligation is capped at $300 million." That was the salesman's pitch— now, for the contract: With interest over 20 years, the public's minimum true cost for the new stadium is, as of this month, $591,918,958.39, state treasurer Michael Murphy says. As he points out, it costs almost as much to finance the stadium as it does to build it (Murphy, by the way, voted against the stadium; "I thought we should be spending the money on schools," he says).
With other public contributions and Allen's $130 million portion added in (see Paul & the Public, Part 1), the stadium price tag was actually $1 billion when it was being peddled to voters as a $430 million facility.
"People are always forgetting the cost of money," says a King County Council staffer, "the cost of borrowing."
Stadium opponents tried to remind us. "We did our best to inform people of the long-term interest costs," says Chris Van Dyk, one of the stadium opposition leaders. "But it kept getting tossed back to us with, 'Well, nobody buys a car or a house that way, either.'"
That's right, it's like buying a home, says Marty Brown, of Governor Gary Locke's Office of Financial Management. "You don't count the interest, usually. It's that way with other state projects. We don't count the financing costs."
Suanne Pelley of the Public Stadium Authority points out that "the 1997 Voters Pamphlet discussed a figure of $600 million as an estimate of the project cost if the cost to repay the bonds were included."
Several county officials who have studied the deal think Allen will quickly retire his costs to avoid long-term interest. The public, meanwhile, will be paying off its portion into the next generation.
Allen gets to design, build, name, and operate the stadium. For this, he will pay what officials claim is a market-rate $830,000 annual rent for 20 years (about the life of the Kingdome). Effectively, he owns the stadium, and his bean counters are predicting he'll pocket a $7 million profit in just the first year, 2002.
Allen's people point out that the stadium is catalyst for other Allen investments, reviving, for example, a neglected Union Station. Pioneer Square development is taking off, as will Lake Union's, they say. Such projects also spark even more private construction, create jobs, and broaden tax revenues.
And, of course, an Allen spokesperson says, a new stadium saved the Seahawks, who threatened to leave town.
That's a familiar refrain in public-private deals. The Mariners threatened to leave if taxpayers didn't build a new $500 million stadium with them (public portion supposedly capped at $336 million; with interest, true cost to taxpayers is $609 million). When biotech giant Immunex (market value $21 billion) announced its new campus on Seattle's waterfront, it demanded taxpayers construct a $19 million vehicle overpass to its site or the firm would go elsewhere. Recently, Martin Smith Real Estate got the City Council's blessings (except for Steinbrueck's) to build up to 125 feet on a Pioneer Square block zoned for 85-foot height limits by claiming its prospective high-tech tenants would relocate to the suburbs.
Ironically, among those opposed to the Martin Smith proposal were the Mariners. The massive office project, it turns out, will block waterfront views from Safeco Field.
Says Peter Steinbrueck, "It shouldn't matter who the builder is—Paul Allen or whoever—they have to play by the rules. Regulators shouldn't just cave to them, especially when we have an investment."
"It's all a little like wrestling, isn't it?" adds the UW's Folke Nyberg. "The person who comes out strongest and puts on the best show wins."
Paul & the Public, Part 1
Son of the Commons
Project: South Lake Union Seaport park and commercial development, Seattle.
Cost: Estimated $35 million for park; estimated $400 million for initial Allen developments.
Public's obligation: Buy Navy land; pay park redevelopment costs that include new steel and concrete pier, pedestrian skybridge, and underpass; many costs yet unknown.
Allen's obligation: Develop some of 30-plus acres he owns, plus 10 more properties he is bidding to buy from city; may pay some public costs.
Public's benefits: New 12-acre park; long-awaited use of scenic lakefront; new property and revenue taxes from private development, jobs, economic expansion; affordable housing may be included.
Allen's benefits: Revenue from development that may include boutique hotel; benefits from city-funded park enhancements; best seat in the house as landlord of Daniel's Broiler, Cucina! Cucina!, Duke's, and Hooters.
The money pit
Project: Football-Soccer Stadium, Garage, and Exhibition Center, Seattle.
Cost: As claimed, $430 million; in reality, $1 billion.
Public's obligation: Contribute $300 million (plus $291 million interest) to be repaid from lottery sales and assorted taxes until 2020; give Allen $37 million sales tax deferment, payable over 15 years; give state $36,930,100 piece of Kingdome land and cede control of stadium and revenues; pay off $205 million Kingdome debt (includes interest); build planned $168 million stadium freeway-access improvements.
Allen's obligation: $130 million; cost overruns; buy Seahawks for $200 million contingent on stadium approval.
Public's benefits: New stadium and related projects; expanded tax revenues; no further repairs to Kingdome; jobs; spin-off developments.
Allen's benefits: At least $50 million in seat license sales; $30 million in naming rights (proceeds dedicated for stadium maintenance); collect all revenues from stadium and parking (80 percent from exhibition center); sell luxury suites, TV rights, and stadium advertising; enhancement of his surrounding office, retail, and condo properties; option to buy portion of former Kingdome north parking lot for private development; posh high-tech suite to view another Seahawks defeat.
The acid trip museum
Project: Experience Music Project, Seattle Center, Seattle.
Cost: $100 million building; $140 million development costs; financed by Allen and investors.
Public's obligation: Give Allen 40-year lease; pay $500,000 for site preparation and utilities relocation.
Allen's obligation: Annual lease payments, $302,000; clean up hazardous former bus barn site; expand parking across street for net gain of 500 spaces.
Public's benefits: Unique entertainment and tourist attraction, at $20 a pop or $35 to $5,000 for a membership; additional parking; jobs; hazardous site cleaned up.
Allen's benefits: Revenues from admissions, memberships, concessions, all enhanced by location in well-attended public park served by Monorail; Sky Church great place to play air guitar.
Paul & the Public, Part 2
The runaway train station
Project: Union Station renovation and business park, Seattle.
Cost: Allen paid $11.2 million for property from Union Pacific; overall redevelopment cost, $250 million.
Public's obligation: Pay Allen $17 million to renovate building for Sound Transit; buy station from Allen for $1 (property now valued on paper at $29 million; taxpayers gain $12 million difference, says Allen); Sound Transit also leasing space from Allen in new building on site.
Allen's obligation: Restore historic train station; and, on his own, develop 1,100-stall garage and 1.1 million square feet of private office space.
Public's benefits: Restoration of neglected landmark; additional parking; jobs; expanded tax revenues; grand headquarters for Sound Transit.
Allen's benefits: Prime location for Vulcan Northwest headquarters in new 11-story building; income from sale or development of three other building sites; parking revenues; enhancement of assets radiating from taxpayer-backed station restoration; free train rides?
Allen's Renton landing
Project: 68-acre Quendall Landing business and residential development, Renton.
Cost: $500 million? (Take a guess.)
Public obligation: Some or most of $30 million to clean up site; up to $60 million for new freeway interchange.
Allen's obligation: Build complex with other investors; project includes offices, housing, hotels, and retail and entertainment space.
Public's benefits: Jobs; tax revenues; economic expansion; Renton gets new shoreline park.
Allen's benefits: Revenues; sales. (Yadda yadda; Allentown on a roll.)
Sky cries Pauly
Project: International District walkway and stadium skybridge, Seattle.
Cost $3 million; built by King County.
Public's obligation: Pay for it.
Allen's obligations: None.
Public's benefits: Another pathway connecting stadium with International District, including elevator and covered pedestrian bridge.
Allen's benefits: Publicly funded walkway connecting to and enhancing his developments, including headquarters and condo developments; another pathway to success.