Seattle Negotiating with Downtown Property Owners Over $200M Tax for Waterfront Project

This piece was originally published by the Seattle Times on Oct. 26 2018

Seattle is negotiating with some downtown-property owners over a $200 million tax for the new park and promenade the city wants to build along the waterfront, along with a pedestrian connection to Pike Place Market.

The talks could result in the city reducing the size of the assessment by tens of millions of dollars and making commitments related to maintaining the public space that’s planned to be built after the Alaskan Way Viaduct is demolished.

Land-use attorney and political power player Jack McCullough has been representing certain property owners in the meetings, and some condo owners were recently told the city had tentatively agreed to lower the assessment to $160 million.

The bargaining is happening now because Mayor Jenny Durkan’s administration wants to pass an ordinance by the end of the year that would create a local improvement district (LID) and because property owners have been putting pressure on the city by filing protest letters.

Authorized by state law, LIDs allow cities to raise money for infrastructure projects by assessing nearby property owners who stand to benefit through property-value increases. The property owners included in a LID pay a percentage of their anticipated “special benefits.”

Those closer to the project would pay more, based on their larger anticipated benefits. Under Seattle’s waterfront LID plan, as now proposed, the typical condominium owner would pay $2,400 and the typical commercial property owner would pay $7,400. The median charge per rental apartment would be $1,300, with landlords choosing how much to pass on to tenants.

The City Council passed a resolution in May stating the city’s intent to create the LID. But if Seattle were to receive protest letters from property owners representing at least 60 percent of the money the LID is supposed to raise, the city would be blocked from moving ahead with the plan.

The owners of more than 1,000 properties, representing about 48 percent of the money, already have filed protests, said Marshall Foster, Seattle Office of the Waterfront director. If the council were to adopt the LID ordinance, protests would be accepted for an additional 30 days.

About 6,100 total properties would be in the LID, including about 1,500 commercial properties accounting for 87.5 percent of the money and about 4,600 condos accounting for 12 percent.

The LID would stretch from Safeco Field to Denny Way and from Elliott Bay to Interstate 5.

Having the LID blocked would be a huge blow for the project’s boosters, who for years have assumed that downtown-property owners would cover $200 million of the nearly $700 million price tag to overhaul the waterfront, including the construction of a new Alaskan Way and landing where the Seattle Aquarium intends to build a new pavilion with a shark exhibit.

Reducing the LID’s dollar amount would be an unwelcome but better outcome, in comparison. The city would need to raise more money elsewhere.

Besides the LID, Seattle is counting on $193 million from state taxpayers, $195 million from city taxpayers and at least $100 million in private donations.

The Durkan administration began negotiating with select property owners weeks ago, even before the protest-letter percentage reached double digits, Foster said. The hope is to have the owners sign a “no-protest agreement” in exchange for certain conditions, he said.

The administration would send the no-protest agreement to the City Council along with the LID ordinance, Foster said. The plan is to do that in late November, assuming an agreement is reached.

“These protests are very much their leverage and they know that and we respect that very much,” Foster said. “They’ve been very clear they’re filing their protests to make sure we negotiate a resolution.”

“It’s never been the city’s desire to force this LID down anyone’s throat,” he added. “Our goal is to reach a solution the property-owner community can support.”

Foster declined to name the property owners taking part in the negotiations, calling the talks confidential. He said the Downtown Seattle Association (DSA) and Building Owners and Managers Association and NAIOP Washington have been involved.

McCullough acknowledged representing some property owners in the talks but declined to name his clients. Like Foster, he said the property owners are concerned with the size of the LID assessment and how the city will maintain it.

“I’ve been working with some property owners downtown on trying to reach an agreement that will ensure … it truly becomes a world-class park,” McCullough said.

DSA president Jon Scholes said property owners want to make sure the new public space is “safe, welcoming, clean and attractive.” They want Seattle to commit to an adequate operations budget and to allow property owners some oversight role, he said.

The DSA has partnered with the city in recent years to maintain and program Westlake Park and Occidental Square. The Friends of the Waterfront is a nonprofit that could help manage the new park.

“We don’t have a great history of managing urban-public spaces to high standards in this city,” Scholes said. “We don’t want the waterfront park to turn into what Westlake Park looked like five years ago, with illegal activity welcome and not much else.”

Steve Danishek, who lives in the Waterfront Landings complex on Alaskan Way, said condo owners like him would be hardest hit by the LID assessment.

“The business property owners can build those costs in. The condo owners can’t,” he said, arguing the condo owners should be exempted.

In an Oct. 15 email to Danishek and other condo owners, a Waterfront Landings board member reported that McCullough in a draft agreement had negotiated the size of the LID assessment down to $160 million.

The email said the not-yet-final agreement would prohibit Seattle from taking additional money at a later date to cover cost overruns on the waterfront project, commit the city to minimum budget allocations for maintenance and create an oversight committee with property owners.

Property owners are worried about overruns because Seattle’s construction budget for the project was drawn up years ago, said Bob Stevens, another Waterfront Landings condo owner.

The potential agreement also would designate the entire stretch a park, which would “allow stronger (and enforceable) no camping laws,” according to the Waterfront Landings email.

“The city has agreed in principle to the terms, and a formal contract has been drafted and is currently being negotiated,” the email said.

“The threat to the city is that if these terms are not met, the property owners will file protests to reach the 60 percent threshold to kill the LID,” the email added. “Jack has said he feels confident he can get the remaining amount needed if an agreement is not reached.”