Tag: Mercer megablock

Unredacted Documents Reveal Initial Megablock Proposal Was for Ground Lease, Not Sale

A newly unredacted version of Alexandria Real Estate’s initial proposal for the Mercer Megablock shows that the winning bidder to buy the three-property parcel initially proposed a ground lease—not a sale—that would have included a $31 million initial payment, followed by annual rent payments that would have started at $2.6 million a year. Renting the land out under a long-term ground lease would have kept the 3-acre parcel in public ownership, but could have been less lucrative for the city, which ultimately sold the land to Alexandria outright for $138 million, plus a $5 million payment for future homelessness programs.

The original request for proposals for the site made it clear that the city “has a strong preference to structure the transaction for the site as an unsubordinated long-term ground lease” but would consider a sale. “The value differential that we saw was really, really large between what was being offered on the lease relative to the cash up front,” city budget director Ben Noble says.

Alexandria’s initial proposal estimated the net present value of a ground lease—that is, the amount those annual payments would be worth in 2019 dollars by the end of the lease term—at $69 million, for a total value along with the initial payment of $100 million. This was a bit more than Alexandria’s initial proposal to buy the land outright for about $98 million. Since Alexandria’s offer to buy increased nearly 40 percent, however, it seems likely that their best and final offer for a ground lease would have increased, too, raising the total value of the bid to a level similar to what the city will get from the sale. It’s unclear whether Alexandria’s best and final offer included a ground lease option; I’ve requested a copy of this offer from the city.

Alexandria’s unredacted proposal, which is being published here for the first time, includes a number of details that have not been previously known about the real-estate firm’s plans for the three megablock properties.

The document Alexandria originally provided to the city included extensive redactions that concealed all of the information about the ground lease proposal. The company also blacked out details about what will go in the planned commercial space (including a business incubator and conference center), the address of a project in San Francisco that the company is currently building (88 Bluxome), the amount of open space that’s included in an Alexandria project in Cambridge (2.2 acres), and the height of each floor in its proposed life sciences buildings (13 feet).

My request for the documents, filed on August 7, led to a considerable amount of back-and-forth with the mayor’s office, which responded to my questions selectively and incompletely. (I still have several unanswered questions, for example, about the way the mayor’s office handled both Alexandria’s “proposed redactions” and my request.) Initially, the city informed me that if I wanted the unredacted documents, the mayor’s office would exercise their discretionary option to inform Alexandria so that the company could seek an injunction to keep them secret, exposing me to the potential for “lengthy litigation.”

The project will include 730 parking spaces—more parking than most of the other proposals, except for one (from Touchstone) which called for a massive underground parking lot for 1,000 cars. Tishman Speyer’s proposal included just 50 parking spots.

The city did not respond to followup questions. Instead, more than two weeks after I made my initial request, the budget office informed me that an email from me that included the phrase, “I am interested in seeing the materials redacted in Alexandria’s proposal,” followed by a list of questions asking what the implications would be if I did make a formal request for the redacted information, constituted a formal request that would trigger the third-party notice to Alexandria. Continue reading “Unredacted Documents Reveal Initial Megablock Proposal Was for Ground Lease, Not Sale”

Here’s a Look at All the Megablock Proposals (Including a Redacted Plan from the Winning Bidder to Keep the Land in Public Hands)

Alexandria Real Estate’s proposed development at 800 Mercer

Here are the six proposals for the Mercer Megablock, including the one that the city chose, by Alexandria Real Estate. Alexandria’s proposal, like several of the proposals that were not chosen, includes an option for a ground lease, which would have allowed the land to remain in public hands. Ground leases are typically for about 99 years, include a rent escalation factor so that rent goes up each year, and can sometimes be renegotiated at different points during the lease term.

Alexandria Real Estate 

Vulcan

Touchstone

BioMed Realty

Tishman Speyer

Kilroy

Bidders that included a ground lease option included Kilroy (which did not provide details); Touchstone (which proposed an initial annual rent of $7.7 million if the project didn’t include affordable housing, and $4.675 million if it did, escalating 10 percent every five years); Tishman Speyer (which proposed a $70 million downpayment and initial rent of $4 million without affordable housing, and an initial payment of $40 million with affordable housing and initial rent of $2.75 million, both escalating annually at 2 percent) and Alexandria.

Here, in stark contrast, are the details Alexandria provided about its ground lease proposal:

The city budget office told me that I had the right to request an unredacted version of the proposal—which, to be clear, was redacted by Alexandria, not the city. However, they cautioned me that they would exercise their right under RCW 42.56.540 to inform Alexandria that I had asked for this information, at which point Alexandria could seek a court injunction to withhold the redacted records from public view.  “If they chose to pursue an injunction, you will likely be named as a necessary party to the lawsuit and lengthy litigation may ensue,” a city public disclosure officer warned.

I believe these records are of interest to the public, as many advocates argued that the land should remain in public, rather than private, hands. I have asked the city for a more detailed explanation of the process for finding out what’s behind all those black bars.

Mercer Megablock Sells to Real Estate Equity Firm for $143 Million

Mayor Jenny Durkan announced today that the city will sell the “Mercer Megablock” property—three parcels in South Lake Union totaling just under three acres—to Alexandria Real Estate for a total of $143 million. (I was first to report that the city had chosen Alexandria as the buyer last month.) The sale of the property, one of the largest undeveloped properties in South Lake Union, will net $78 million for various affordable housing uses (including both low-income and middle-income housing); pay back several loans the city took out against the future sale of the property; and provide $5 million for unspecified homelessness-related programs—including, perhaps, the restructure of the city and county’s homelessness response systems into one regional agency.

The $143 million price tag includes a $38 million “discount” in exchange for Alexandria’s guarantee to provide affordable housing; the price without affordable housing would have been just over $171 million. “It’s a new benchmark number in terms of price for square foot” on the portion of the property Alexandria plans to develop, Steven Shain, from the city budget office, told reporters during a briefing on the plan last week. “I think we did a great job negotiating. … I don’t want to characterize in the press that they’re overpaying [but] they are going way above to make sure that they won this project.”

During last week’s briefing, Mayor Jenny Durkan called the deal “one of the most consequential property deals the city of Seattle has ever done. … I think it will be one of those things that people look back and say, that really was a generational opportunity for the city of Seattle and they were able to seize it and make our city better because of it.”

Here’s a detailed look at what the project will look like and where the money from the sale will go.

What will be included on site:

The project will primarily be a life-sciences campus like the ones Alexandria has already developed in cities like San Francisco, San Diego, and in South Lake Union—”creating … hundreds of new jobs, if not thousands of new jobs, that will lead to our ability to be the city that cures cancer and other things like that,” Durkan said.

In addition to commercial space, the project will include a community center of up to 30,000 square feet, according to Shain, at no rent to the city, and will a single, large building (up to 12 stories tall) combining 175 units of low-income housing—the minimum number the city asked for in its original request for proposals—with about 38 moderate-income units built under the city’s Multifamily Tax Exemption (MFTE) program, which grants developers a property tax break if they keep units affordable to moderate-income households for 12 years. (City officials who briefed reporters on the plan last week said the developer could build as many as 190 units in addition to the affordable ones, but has not committed to a specific number, which will determine the exact number of MFTE units).

The affordable units, according to Shain , would be distributed throughout the same building as the market-rate apartments—”there wouldn’t be two separate doors”—and would be available to people making less than 60 percent of the Seattle area median income, or about $45,600 for a single person. The new units would mostly be studios and one-bedrooms, not the family-sized units that are most lacking in Seattle, particularly in the downtown core.

Alexandria would also be responsible for building two blocks of protected bike lane on Mercer St. and to open a pedestrian path through the campus on the block between Mercer and Roy. The company has agreed to pay for pay for environmental remediation on the site, which has been the site of a dry cleaner and a gas station, among other things; Shain said the cost would probably be a “significant eight-figure number.” Continue reading “Mercer Megablock Sells to Real Estate Equity Firm for $143 Million”

Unanswered Questions from Durkan’s Housing Announcement

On Wednesday, city staffers, supporters of Mayor Jenny Durkan, and members of the media crowded into a  small black-box theater at the 12th Avenue Arts building on Capitol Hill to hear what was billed as a major speech outlining the mayor’s vision for affordable housing in Seattle. (Press, many of whom had expected the event would include an opportunity to ask questions, were relegated to a “reserved” row in the very back.)

Ultimately, the event—which consisted of a State of the City-style address outlining what the city has done on housing recently, followed by an announcement of two initiatives that were already in the works—didn’t make much news. Durkan said that Seattle plans to take advantage of a new state law allowing cities to use a portion of existing state sales tax for housing, by bonding against future revenues to get about $50 million for housing for formerly homeless people up front. And she said the city would extend the multifamily tax exemption program that gives developers a property tax exemption if they agree to set aside 20 percent of new units for low-to-middle-income renters for 12 years. (The city renews the tax break every three to five years).

In fairness, the MFTE announcement did include a bit of real news: Under Durkan’s plan, the city will cap rent increases at MFTE units at 4.5 percent a year. Under federal rules, potential (though not necessarily actual) rent increases for these units track to area median income—when median income goes up, say, 10 percent because a bunch of high-paid tech workers move into the city, rents for low-income people living in tax-exempt buildings can go up 10 percent as well, even though the people living in those units obviously aren’t seeing their incomes rise 10 percent every year. (In practice, huge annual rent increases for existing units would be out of scale with the overall market in many parts of town, although it does happen). Last year, the city used some creative math to freeze rent increases at MFTE properties to prevent apartment owners from raising rents at the rate of median income increases, but the 4.5 percent cap puts a firm limit on how much landlords can charge.

Otherwise, though, Durkan’s “Seattle Housing Now” announcement raised more questions than it answered. Here are some of those questions, along with a few potential answers.

• What’s going on with the pending sale of the Mercer Megablock?

Durkan provided a few sparse details about the pending sale of the Mercer Megablock, a three-acre city-owned site in South Lake Union that could bring in upward of $100 million. The mayor will likely announce a plan and buyer—reportedly Alexandria Real Estate Investment, Inc., a real estate investment trust that focuses on life science campuses—in the next two weeks. The mayor’s office recently briefed council members on the deal, sort of: Staffers reportedly showed council members a PowerPoint that contained few specifics, and took the document with them when they left.

What we do know from the mayor’s speech is that the new development will include some housing on site (the request for proposals for the project called for at least 175 rent-restricted units), and that the city will use some of the revenues from the sale to buy properties in areas with a high risk of displacement, to provide low-interest loans to struggling homeowners who want to build cottages in their backyards, and to fund homeownership opportunities.

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What was unclear from Durkan’s pre-announcement announcement was how she will propose splitting up those revenues among programs that help low-income renters, middle-income workers (the “teachers, nurses and firefighters” that are a frequent Durkan talking point) and higher-income homebuyers and homeowners. Some housing advocates had argued that the city should hang on to the megablock property and build affordable housing on the site, or, failing that, invest heavily in housing for low-income people who are being driven out of the city by rising rents. It remains to be seen how much Durkan took their pleas to heart, but programs for homebuyers and homeowners tend to be aimed at people making as much as 120 percent of median income, or about $130,000 for a family of four. (For a single person, 120 percent of median works out to $91,000). If Durkan’s plan for the megablock money is skewed toward subsidizing people making six-figure salaries, it will likely come under fire from the council; on seeing an early draft of the mayor’s ADU plan, council member Lorena Gonzalez reportedly responded that the high-income subsidy (a loan product aimed at people making up to 120 percent of median) would end up disproportionately benefiting  white homeowners, not people of color facing displacement in areas like the Central District. Her office says they’ve asked the mayor’s office to do a race and social justice analysis of the proposal, and that they’ve said they will.

The mayor will likely announce a plan and buyer—reportedly Alexandria Real Estate Investment, Inc., a real estate investment trust that focuses on life science campuses—in the next two weeks.

• Why didn’t the MFTE plan go further?

One perennial question about the multifamily tax exemption program is whether it results in enough  affordable housing to justify the cost, which amounts to about $26 million in lost taxes every year, according to the most recent program status report. The program ensures that between 20 and 25 percent of new units are available to people making between 65 and 85 percent of median income (a number that varies depending on the size of the unit and where it is in the city). The idea behind the 12-year tax break is that by the time the tax expires, new development elsewhere will have been built to meet demand at the top of the market, and the MFTE units will have depreciated in value to the point that rents will be affordable relative to the rest of the market. Because housing development hasn’t kept up with population growth, this hasn’t happened, raising the question of whether the subsidy is deep enough to justify the tax break for developers.

One perennial question about the multifamily tax exemption program is whether it results in enough  affordable housing to justify the cost, which amounts to about $26 million in lost taxes every year,

Options the mayor and her middle-income advisory council, which advised Durkan on the plan, could have proposed include lowering the income eligibility so that lower-income people could participate in the program, which would lower rents (currently, MFTE landlords can charge someone making 80 percent of median income $1,737 for a one-bedroom apartment, which is basically market rent); placing a more stringent cap on rent increases; or limiting the program to larger “family” units, on the grounds that the market is already producing lots of small units at rents basically equivalent to the units the program subsidizes with tax breaks.

• What’s up with the Uber/Lyft tax?

Durkan has been working since last year on a plan to tax Uber and Lyft rides to pay for a laundry list of transportation and housing programs, but the proposal has been slow to get off the ground. Uber and Lyft generally have opposed the plan, arguing that it won’t reduce congestion downtown, because ride-hailing services only amount to a small percentage of car trips downtown and because of a phenomenon called induced demand, where small reductions in congestion lead people to drive when they ordinarily wouldn’t have. The ride-hailing companies have called for broad congestion pricing on all downtown drivers, which (unlike a tax targeting them specifically) would require voter approval.

Durkan’s latest plan would reportedly fund new investments in housing with the tax. But  it’s unclear when—or whether—the mayor will actually release a final proposal. Another question, if Durkan does end up proposing the tax, is whether the revenues will go to capital investments (building new units) or operations and maintenance (the less flashy but critical work of running them). Permanent supportive housing units for very low-income people (like the ones that would be funded through the new sales tax revenues) are expensive to run because they (unlike regular apartments) require full-time staffing and case management. If the ride-hailing tax passes, that money could be used to build housing around transit stations (providing a nexus, sort of, to justify using a transportation tax to pay for housing) while the money from the sales tax can go toward O&M. Without the Uber/Lyft tax, that equation becomes more challenging.

Durkan’s latest plan would reportedly fund new investments in housing with a new tax on ride-hailing services. But  it’s unclear when—or whether—the mayor will actually release a final proposal.

• When is Durkan going to announce a new Office of Housing director?

Durkan told OH director Steve Walker (whose final day is today) he was out back in March. His deputy director, Miriam Roskin, went on sabbatical shortly after that and is not expected to return. Durkan has had four months to appoint a replacement for Walker, but has not yet done so. It’s unclear when the mayor will announce Walker’s replacement. In June, 30 housing advocacy groups sent a letter to the mayor outlining their values and recommendations for the hiring process—an effort, according to Puget Sound Sage policy and research analyst Giulia Pascuito, to “push back on [the] narrative we’ve seen from the Mayor’s office around ‘middle-income housing’ and to let the city know that advocates are paying attention” to the appointment.

• Why didn’t Durkan acknowledge state Rep. Nicole Macri (D-43), in her speech?

An oversight, perhaps—her official press release mentions Macri by name—but it was somewhat jarring that Durkan didn’t shout out one of the prime sponsors of HB 1406, the legislation that made it possible for the city to use sales tax revenues to fund housing, during her speech, which included praise for Macri’s co-sponsor, June Robinson, as well as house speaker Frank Chopp and state Sen. David Frockt.

Morning Crank: “Not On Track” for “Even Seattle’s Insufficient Climate Action Plan”

1. Mayor Jenny Durkan’s legal counsel, Ian Warner, has left the mayor’s office for a job as public policy director  at Zillow, the  mayor’s office confirms. His replacement, who started Monday, is Michelle Chen, most recently a deputy city attorney who worked on land use. With Warner out, the mayor’s office retains just two high-level staffers from the Ed Murray era—legislative affairs director Anthony Auriemma and deputy mayor Mike Fong.

2. Speaking of departures: Moxie Media, the political consulting firm that ran Cary Moon’s unsuccessful (and costly) campaign for mayor in 2017, just lost four of its key staffers, including two veteran local political consultants who are striking (back) out on their own: John Wyble, whose firm, Winpower Strategies, merged with Moxie almost exactly one year ago, and Heather Weiner, who has been with the firm since 2016. Wyble was a partner at Moxie for most of the 2000s; when he rejoined the firm, which was founded by Lisa MacLean, last year, I wrote that “A look at Winpower’s local electoral record suggests this is not a merger of two equal partners—as does the fact that the firm will retain the Moxie name.” Wyble’s clients have included include two-time city council candidate Jon Grant and former mayor Mike McGinn, and numerous campaigns for Democratic state legislators, who run in even years. Weiner previously did work for Honest Elections Seattle (the pro-public campaign financing campaign) and several union-backed statewide campaigns.

Asked about the mass departure, both Weiner and Wyble gave versions of the same response: Campaigns are cyclical, it was time to make a change, consulting firms sometimes split up and sometimes come back together. “For me personally, I ran my own company, and I liked that better. That’s what I learned this year,” Wyble said. Weiner put it this way: “Political firms are kind of like boy bands, where they break up and get back together. It makes more sense for me to [go into the slow 2019 campaign season] as an independent consultant.”

Other possible reasons for the breakup: Personality conflicts (MacLean: “I’m not going to get into all of that in this conversation”), or financial difficulties, which MacLean denies. In fact, MacLean said Moxie had “an incredible cycle,” financially speaking, in 2018—”probably our biggest ever”—and explained the split as “typical end-of-cycle, shuffling the deck, musical chairs kind of stuff—people moving on.” The departures—which also include account executive Maria Leininger, who is going to work for Congresswoman-elect Kim Schrier, and Delana Jones, another partner at the firm—will leave Moxie at about half the size it was during the 2017 and 2018 campaigns.

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3. The city council will reportedly get its first look at the bids for the Mercer Megablock redevelopment in executive session on Monday morning, with the possibility for some public discussion before the closed-door meeting. The three-acre site is the largest remaining piece of city-owned land in South Lake Union; the city put it on the market earlier this year, in a request for proposals (RFP) that asks potential buyers to include at least 175 rent-restricted apartments in their bid. Affordable housing advocates have suggested that the city hang on to the property and build affordable housing on the site. On the open market, the combined megablock property is likely worth in the range of $90 million; but because the land was purchased, in part, with gas and commercial parking taxes, more than half of the proceeds of any sale or long-term lease will, under state law, have to go to the city’s transportation department.

4. Move All Seattle Sustainably, a new coalition made up of transit, bike, and pedestrian advocates—including the Cascade Bicycle Club, Seattle Neighborhood Greenways, and the Transit Riders Union—is demanding that Mayor Jenny Durkan take concrete actions before the end of 2018 to prioritize transit, biking, and walking during the upcoming “period of maximum constraint,” when construction projects and the closure of the Alaskan Way Viaduct are expected to create gridlock downtown. The coalition’s list of priorities includes completing the stalled Basic Bike Network downtown; implementing transit speed and reliability improvements (like bus bulbs, longer hours for bus-only lanes, and queue jumps) on 20 transit corridors across the city; and keeping sidewalks open for pedestrians during construction.

In recent weeks, advocates have expressed concern that Mayor Jenny Durkan’s office is shutting members of Cascade and Seattle Neighborhood Greenways out of positions on advisory groups like the Seattle Bike Advisory board, whose former chair, Cascade board member Casey Gifford, was abruptly replaced by Durkan last month.  The mayor’s office denies this (in an email to a group of advocates late last month, deputy mayor Shefali Ranganathan said there was “no truth” to the rumor and asked for help in “quashing” it) and notes that Cascade director Richard Smith was on the committee that is helping to select the new Seattle Department of Transportation director. In any case, it’s clear that the transit, bike, and environmental activists on the coalition don’t see eye to eye with the mayor’s office on transportation. On the new MASS website, the group declares the city “off track” and unprepared not only for the upcoming traffic crunch, but “to achieve Vision Zero”—the goal of reducing the number of deaths and serious injuries from traffic violence to zero— “or even Seattle’s insufficient Climate Action Plan.”

Durkan’s Proposed Budget Adds Funding for Cops, Congestion Pricing, and Buses, But Not for Safe Consumption or New Spending on Homelessness

Mayor Jenny Durkan’s $5.9 billion budget proposes hiring 40 net new police officers, funds shelter and rental-assistance programs that had been at risk of being cut while keeping overall homeless funding basically flat, and dramatically increases transportation spending, at least on paper—the $130 million in new funding consists primarily of unspent funds from the Move Seattle levy, which is currently undergoing a “reset” because the city can’t pay for everything it promised when voters passed the levy in 2015. The new transportation funding includes funding 100,000 new Metro service hours, including “microtransit” shuttles to bring riders to the ends of the existing RapidRide lines and to the water taxi in West Seattle. Those additional hours will require Metro to  work overtime to add buses, drivers, and bus parking capacity, but Metro spokesman Jeff Switzer says the 100,000 hours were also included in the King County budget that County Executive Dow Constantine transmitted yesterday, as part of a total increase of 177,000 hours of bus service over the next two years.

City budget director Ben Noble said that if the city wanted to significantly increase spending on homelessness, “that is going to have to happen through reprioritizing [funding] or some as-yet-unidentified source of revenues.” Alison Eisinger, director of the Seattle/King County Coalition on Homelessness, says that, given the ongoing homelessness crisis, “it is unconscionable to put forward a biennial budget … without additional resources for housing.”

The budget would also eliminate about 150 mostly vacant positions, eliminate funding for 217 basic shelter beds provided by the group SHARE after June of next year, fund a new city “ombud” independent from the Human Resources Department, to help employees in city department navigate the process of filing harassment or discrimination claims, and pay police officers $65 million in retroactive pay and benefits from the four years when they were working without a union contract. Officers, Durkan said, have “gone without even a raise but also [without] a [cost of living adjustment]. There hasn’t been pay raise since the beginning of 2014, so that’s four years of pay increases. …  You can get to seemingly large sums really quickly.”

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In contrast, the budget proposes making an “inflationary increase adjustment” to what it pays front-line homeless service providers of just 2 percent—less than the actual inflation rate.. Earlier this year, the Downtown Emergency Center sought more than $6 million for salaries and benefits—enough to raise an entry-level counselor’s wages from $15.45 an hour to $19.53 and to boost case managers’ salaries from a high of about $38,000 to $44,550 a year. (Currently, the lowest-paying job listed on DESC’s job board pays $16.32 an hour.) “Even a non-police officer, just a clerical position in a city department, is earning more money in salary—let alone salary plus benefits—than somebody whom we are asking to go out under bridges and work with people who have had years of being brutalized in this world,” Eisinger says.

I’ll have a lot more to say about specific budget proposals over the coming weeks as the city council digs into the details in a series of budget briefings that start on Wednesday, but for now, here are a few more highlights from the mayor’s proposal:

• Durkan’s proposed budget does not include any additional funding for a supervised consumption site (mobile or permanent); instead, it simply pushes $1.3 million that was supposed to fund a place for users to consume their drug of choice under medical supervision, with access to wound care, treatment, and case management forward into this year’s budget. Durkan said Monday that the city would not move forward with supervised consumption site until Durkan is “sure [that King County is] still willing to step up and fund the treatment portion of” a supervised consumption site. Activists, including at least one mother who had lost her son to a heroin overdose, stood outside the Pioneer Square fire station, where Durkan delivered her budget speech, protesting the fact that Durkan’s budget calls for continued inaction on safe consumption sites. It has been more than two years now since a King County task force unanimously recommended supervised consumption as part of a holistic strategy for tackling addiction to heroin and other drugs, the rest of which is slowly being implemented and funded. 

Marlys McConnell, whose son Andrew died of an accidental heroin overdose in January 2015, was wearing a “Silence=Death” t-shirt and holding up the right side of a large banner that read, “Overdose is killing a generation. Is it time to act yet, Mayor Durkan?” She said a safe consumption site could have helped diminish the shame her son felt about his own addiction, which he tried to hide from his family. “Had there been a space available for him, I would very much hope that he could have gone and taken advantage of it and been treated with love and respect and dignity. That could have been a bridge to treatment and other services early on.” McConnell is aware of the argument that safe consumption sites enable drug users to continue in their active addiction, but says, “You don’t get [recovery] ’til you get it.”

• Durkan said she would not support selling off more public land to pay for city budget priorities, as the city has done in the past. (The sale of land in South Lake Union funded new shelter beds and “tiny house village” encampments, as well as a rental-assistance program—all part of the nearly $20 million in services that this year’s budget proposal makes permanent.) The city has put its largest remaining property in South Lake Union, the so-called “Mercer Megablock,” on the market, but Durkan said the city would strongly prefer leasing the property long-term under a master lease to selling it outright. Affordable housing advocates have suggested that the city hang on to the property and use it to build high-rise affordable housing. Noble told me that nothing technically bars the city from using at least some of the land for affordable housing (either city-owned or built by a nonprofit housing provider); however, he noted that because the Seattle Department of Transportation used restricted gas-tax funds to pay for some of the Mercer Corridor Project, which used part of the megablock for construction staging, the city has to pay back SDOT (a cost that could account for about 40 percent of the proceeds from the property) before it can start building anything or funding other projects on the property. The city also has taken out significant debt on the future proceeds from the sale of the megablock site, which would also have to be repaid. Finally, high-rise housing is generally much more expensive (and therefore less appropriate for affordable housing) than low-rise, because it involves glass and steel, although advances in technology are slowly making high-rise affordable housing more feasible.

• Durkan’s budget is mostly silent on the question of the over-budget Center City Streetcar (currently stalled so city consultants can determine whether the city should finish building the downtown connector or cut its losses), but it does include about $9 million in funds over two years to help operate the existing South Lake Union and First Hill streetcars. Previously, the city had backfilled streetcar revenue shortfalls periodically as revenues consistently fell short of projections. The new budget pays for those anticipated shortfalls up front. “We’re trying to be more upfront and honest about what it’s costing for the streetcar so that we won’t continue to run in the red and having to incur the debts that we’ve seen” in the past, Durkan said.

• The transportation budget is otherwise a mixed bag for transit proponents. It includes $1 million to pay for an expanded study of congestion pricing (as currently conceived, a toll for people who want to drive into the center city during certain hours); funds new investments in adaptive signal technology, which Durkan touted as a solution for slow and delayed buses but which the National Association of City Transportation Officials says “can result in a longer cycle length that degrades multi-modal conditions” and is best for moving cars in suburban areas; and proposes asking the legislature to change state law barring the city from using traffic cameras to enforce rules against blocking bike and bus lanes. “Right now, you have to have an actual officer come over and pull them over,” Durkan said—an expensive proposition. The budget also eliminates funding for the “Play Streets” pilot program, which permanently activated some street right-of-way for active (non-car) use, and cuts funding for any new “Pavement to Parks” projects, “takes underused streets and creates public spaces for community use on a year-round, daily basis,” according to the budget.

• The proposed budget moves almost half a million dollars from parks department spending on the city’s four golf courses into the separate capital budget as a “bridge solution” for an ongoing revenue shortfall. Although the city recently invested in improvements to its golf courses—hoping that better facilities, along with higher fees, would bring in more revenue—that hasn’t panned out, and the city has hired a consultant to evaluate the program. Asked why the golf courses aren’t penciling out the way the city had hoped, Noble said that it may be that “golf just isn’t as popular as it used to be.” Affordable-housing proponents have suggested closing down at least some of the city’s golf courses and using them as sites for affordable housing.

The city council begins hearings on the mayor’s budget this week; a full schedule of budget meetings is available on the city’s website.

Afternoon Crank: Public Land Sale Materials Tout Restrictive Zoning, Barriers to Homeownership; Details on Bike Lane Mediator’s Campaign Contributions

1.The official request for proposals for developers interesting in buying the so-called Mercer Megablock—three sites that total three acres in the heart of South Lake Union—includes some revealing details about how the city is pitching itself (via JLL, its broker) to potential property buyers. Alongside standard marketing language about the city’s booming economy, growing tech base, and wealth of cultural and natural assets, the Megablock marketing materials tout the fact that Seattle has restrictive zoning and “high barriers to entry for homeownership,” along with some of the highest and fastest-rising rents in the nation, as positive assets that make the city a great place to build.

From the RFP:

This area is also one of the most dynamic real estate investment markets in the country, benefiting from a combination of strict land use planning, topographical constraints on supply, and employment growth that consistently ranks above the national average. Favorable “renter” demographics, positive job numbers, strong population projections and a low unemployment rate, together with high barriers for entry in home ownership, also position the region as a strategic market for multifamily investment gains.

 

What, exactly, constitutes “a strategic market for multifamily investment gains”? A pull quote in the RFP puts a finer point on it: “Housing prices have grown at the fastest rate in the country for the past 17-consecutive months. The 12.9% year-over-year growth is more than double the national growth rate. Multifamily rents increased by 3.1% year-over-year and vacancy is just 4.2%. ”

Obviously, when you put artificial constraints on housing supply (such as zoning laws that make multifamily housing illegal in most parts of a city), housing prices increase. Usually, we think of that as a bad thing, because it means that all but the wealthiest renters (and those who can afford to buy $800,000 houses) get priced out of neighborhoods near employment centers, transit, and other amenities. But the city’s marketing materials turn this idea on its head: Restrictive zoning, “high barriers” to homeownership, and spiraling rents make Seattle the perfect place to buy one of the city’s last large parcels of public land—a parcel which, if housing advocates had their way, would be used for affordable housing that might help address some of those very issues.

Support

2. After I reported yesterday on the city’s decision to hire a mediator with the Cedar River Group to facilitate a series of conversations  with groups that support and oppose a long-planned bike lane on 35th Ave. NE, architect/intrepid YIMBY Mike Eliason dug through the city’s elections website and discovered that the mediator, John Howell, has given money to both Mayor Jenny Durkan (who directed SDOT to initiate the mediation) and onetime city council candidate Jordan Royer (who, along with attorney Gabe Galanda, is representing the Save 35th Avenue NE anti-bike-lane group in mediation). Howell, who is a principal and founder of Cedar River Group, contributed $275 to Durkan last year and $250 to Royer in 2009.

Rules adopted after the passage of Initiative 122 in 2015 bar contributions from contractors who made more than $250,000 from city contracts over the last two years; according to the city’s contractor list, Cedar River Group made $399,757 from city contractors between 2016 and 2018. However, the Seattle Ethics and Elections Commission last year dismissed a similar case involving contributions from Paul Allen, who owns a large stake in City Investors (the real estate arm of Allen’s Vulcan Inc.) , concluding that restricting Allen’s ability to donate to local candidates would violate his right to free speech. The “rationale,” according to SEEC director Wayne Barnett, was that “giving a campaign contribution is protected speech under the First Amendment.”  I asked Barnett if that finding might also mean that (under Citizens United, the Supreme Court ruling that unleashed unlimited political spending by corporations) that the contractor contribution restrictions themselves were unconstitutional. Barnett said that was an interesting legal question but that it hasn’t been tested (yet).