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Updated Friday, November 30, 2012 at 11:46 PM

Council to McGinn: Not so fast on Vulcan proposal

By Bob Young
Seattle Times staff reporter

In a politically charged sequel to the recent Sodo arena deal, the Seattle City Council is looking to scour and refine Mayor Mike McGinn's proposal to allow much taller buildings in South Lake Union.

The council, led by mayoral candidate Tim Burgess, is hiring at least one consultant to review aspects of the sweeping rezone that would permit buildings up to 400 feet tall in the fast-growing area dominated by Amazon.com. The consultant would focus, in part, on a proposed deal that would let Paul Allen's real-estate firm, Vulcan, build three towers 24 stories tall near the lake.

In exchange Vulcan would transfer almost an acre of nearby property to the city, with the idea the city could turn it into a full block of affordable housing and social services. But that vision could cost the city millions. Council members are concerned about other elements of the deal as well.

"It's very complicated. It has lots of moving parts. And it has long-term commitments, covenants if you will, that restrict what the city can do in the future. I just felt it would be prudent on our part to have some experts help us analyze the proposal," Burgess said.

It's hard to ignore the idea that some scrutiny of McGinn's proposal is colored by next year's mayoral election, as at least two McGinn rivals — Burgess and former Councilmember Peter Steinbrueck — are taking a hard look at the mayor's pitch. Steinbrueck is a lobbyist for a neighborhood coalition opposing the rezone.

"We all know 2013 will be a year of extraordinary grandstanding," said McGinn at a Friday briefing on his zoning proposal.

McGinn's view is that South Lake Union, with its proximity to downtown, is a prime place to funnel more growth. But in granting developers additional height — most of the area's zoning limits buildings to 85 feet — the mayor says the public should receive benefits such as affordable housing.

Under the city's current policy, developers get additional height by paying a prescribed amount of money for public benefits. The mayor would add a new wrinkle with his deal between the city and Vulcan for property known as Block 59.

Instead of payment, Vulcan would transfer to the city 37,600 square feet of land on a block bounded by Broad and Republican streets and Dexter and Aurora avenues. The city could add that chunk to a smaller piece it owns to create a full block available for affordable housing and more.

The Vulcan land, with an estimated value of $10 million to $12 million, would count as a credit toward fees Vulcan would pay to erect condo or apartment towers up to 240 feet on three lakefront blocks it owns, and elsewhere in the neighborhood.

The key to the deal is that nonprofit housing developers would get land they now can't afford. "We can't buy anything because prices have escalated so much," said Sharon Lee, executive director of the Low-Income Housing Institute.

Lee says she'd much rather get land upfront than bonus fees developers would pay, building by building, over years. Without such a deal, she said, the area would be dominated by luxury housing and low-wage workers would have to commute into the neighborhood.

"We think it's important that there's affordable housing in the neighborhood where people are going to be working," she said, calling the plan — which envisions up to 400 affordable apartments, job training and other services — brilliant.

But it raises several issues with council members.

It would lock in all future Vulcan bonus height payments at whatever amount the council specifies in the rezone. That would preclude future councils from increasing fees as values in the area escalate.

No other developer in South Lake Union would have such a privilege, said Steinbrueck, calling the deal "unprecedented in city land-use policy."

Council members also are concerned about the cost of developing Block 59. Construction estimates range from $60 million to $100 million, according to preliminary plans by nonprofits and Vulcan. On top of that, affordable housing for low-income residents would need to be subsidized for years.

City Planning Director Marshall Foster said the hope is to not charge taxpayers for the project. The city would seek a development partner, Foster said. One potential concept is that the city's partner would build a condo tower for affluent residents. That developer would realize savings from not having to buy land and could contribute several million to the project. The city also could tap its voter-approved housing levy to cover some of the cost, he said.

Lee suggested other potential sources such as city bonds, tax credits and new city tax revenues produced by new buildings.

Burgess said uncertainties around the cost is another reason the council wants outside experts to help analyze all of the proposal's implications.

Another matter likely to raise some questions is the fact the city sold the Block 59 property to Vulcan 11 years ago for $3 million and is now effectively being asked to buy it back for $10 million to $12 million.

The city had long ago acquired that parcel and others nearby for a possible new freeway in the area.

A Vulcan spokeswoman was quick to note that land values have dramatically increased in South Lake Union since 2002. Council members counter that the city's $300 million investment in streets, parks and streetcars in the area has contributed to that increased value.

"It's very similar to the arena deal," Burgess said of Block 59. "We received a complicated proposal and were asked to act on it quickly and our role is to do good due diligence and make sure the public and private benefits are properly balanced."

McGinn said he isn't hurrying the council.

"My expectation is that they're going to work to do what's best in the public interest, and I'm sure there will be some politics intervening," the mayor said. "But the public should work to keep us all honest."

Seattle Times business reporter Eric Pryne contributed to this report.

Bob Young: 206-464-2174 or byoung@seattletimes.com

To comment

To weigh in on the South Lake Union proposal, citizens can contact City Council President Sally Clark, sally.clark@seattle.gov, or 206-684-8802; or council land-use chair Richard Conlin, richard.conlin@seattle.gov, or 206-684-8805.

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