The Billion-Dollar Neighborhood

The mayor wants the public to pay for more than just infrastructure improvements in South Lake Union, and a 'public-interest' coalition is giving him cover. By George Howland Jr.

Peter Steinbrueck: Who's watching the taxpayers' pocketbook?

Seattle City Council member Peter Steinbrueck says Mayor Greg Nickels now wants close to $1 billion in public investment to develop the city’s South Lake Union neighborhood into a biotech hub and urban village, and he’s alarmed by the amount and the way Nickels proposes to raise millions of it. The soaring public price tag, previously estimated to be significantly less than 10 figures, apparently comes as a result of a three-way negotiation between the mayor’s office, the Coalition for Healthy Communities, which is a group of public-interest advocates, and Vulcan, the holding company of Microsoft co-founder and billionaire Paul Allen, which owns almost 60 acres in the mostly low-rise commercial area south of the lake and north of downtown. Critics of the negotiations say Vulcan should be bearing the cost of any social programs, such as low-income housing, that the coalition is seeking. Instead, “the mayor is picking up the tab” for such services, says council member Nick Licata. The mayor’s office and the coalition are mum about details of the negotiations with Vulcan but insist the company is being asked to make substantial contributions for neighborhood improvements and programs.

About a year ago, the coalition’s founder, Sarah Jaynes, approached the mayor’s office about brokering talks between the public-interest groups and Vulcan. Jaynes had put together the coalition from a variety of organ­i­zations, including the anti-sprawl 1000 Friends of Washington, public-transit boosters Transportation Choices Coalition, the Housing Development Consortium of Seattle–King County, and the Hotel Employees & Restaurant Employees union, to create what are known as community benefit agreements with major developers. The coalition drew inspiration from a model used by similar groups in California, most notably to extract significant extras from the developer of the Staples Center, a convention and sports complex in Los Angeles. Jaynes says the coalition set its sights on Vulcan and South Lake Union because there were significant leverage points—namely, the major infrastructure improvements that developer Vulcan wants for the area: a streetcar ($45 million), extensive changes to the Mercer Street corridor and Aurora Avenue North ($165 million–$415 million), a new electrical substation ($200 million), and park improvements ($6 million). The coalition’s thinking: If Vulcan wants all those goodies, it should provide low-income housing, good conditions for union organizing, and environmentally friendly development practices.

First, the coalition approached Vulcan directly but got nowhere, says Jaynes. Then the coalition turned to the mayor’s office to broker the talks.

That was the coalition’s first bit of fuzzy thinking. A few months after taking office, Mayor Greg Nickels turned the city’s executive staff and departments into virtually a government arm of Vulcan. In character­istically hardball style, the mayor’s office began aggressively promoting Vulcan’s extensive plan to accumulate property and turn the frumpy, underdeveloped South Lake Union neighborhood into a world headquarters for the biotech industry and a 24-hour urban village, sort of a Belltown on steroids. Nickels thinks this type of development is the key to turning around Seattle’s economic fortunes and filling the city government’s coffers after budget cuts totaling between $80 million and $100 million in the last three years.

It is impossible for Nickels’ office to serve as a disinterested facilitator for talks between the coalition and Vulcan, because Nickels is staking his administration’s political future on Vulcan’s success. But the coalition’s current spokesperson, Alice Woldt, says members are aware of the stakes. “We are not naive when it comes to political agendas,” Woldt says. “We have had our antennae up. The mayor has been helpful in certain respects. It’s in his interest to have a successful conclusion to this, but it’s in the community’s interests as well.”

Council member Steinbrueck wonders who is watching out for the taxpayers’ interests. Steinbrueck says he recently received a briefing from Deputy Mayor Tim Ceis about the latest proposals for public investment at South Lake Union. “The figures ran close to a billion dollars,” says Steinbrueck. “They had developed this humongous package—going well beyond what the city’s responsibilities might be for infrastructure.” Steinbrueck says the most striking new feature was a publicly funded low-income housing component.

The Seattle Displacement Coalition’s John Fox, a fierce opponent of Vulcan’s plans, says people in the negotiations have told him low-income housing would receive up to $88 million over 15 years.

Fox has spent nearly his entire life fighting for low-income housing, and Steinbrueck has received national awards for his work in that arena. Yet both men are unsettled by the latest proposal to fund housing. Instead of Vulcan paying a development-impact fee, or having to create a housing trust fund, the city’s strapped general fund will be asked to absorb millions of dollars in costs. Contends Deputy Mayor Ceis: “Growth is paying its own way,” and Vulcan’s development will generate significant amounts of new tax revenue—property taxes, business and occupation taxes, and sales tax—for the city’s general fund.

Steinbrueck says Ceis is proposing that the City Council use its credit card—an instrument called councilmanic bonds—to pay for a variety of infrastructure and social-program costs in advance, with the projected new tax revenue from Vulcan’s development eventually paying the bonds off. “We expressed some skepticism,” says Steinbrueck. Fox is apoplectic: “The mayor is casting around for anything to let Vulcan off the hook and buy off these groups.”

The coalition’s Woldt says Vulcan is also being asked to make private contributions above and beyond any taxes the company would pay.

The City Council has had to slash a host of things in recent years, including help for the homeless, important basic services like library staffing, parks programs, and police training. Any new resources that are generated by economic development in the city should go to restoring basic services, to say nothing of dealing with the backlog of unfunded human needs and basic infrastructure improvements throughout the city. Any contribution from the city’s general fund for streetcars and fancy boulevards in South Lake Union doesn’t even merit discussion, much less funding. Unless the coalition can push both Vulcan and the mayor to stop socializing the cost of massive, unnecessary enhancements for a private development, it is not representing the public interest at all.

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