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Wednesday, June 17, 1998 - Page updated at 12:00 AM

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Seattle Absolved In Parking-Garage Deal -- No Wrongdoing, State Auditor Says Today

Seattle Times Staff Reporter

State Auditor Brian Sonntag this morning cleared the city of Seattle of any wrongdoing for agreeing to buy a $73 million parking garage in downtown Seattle. But he said the city could have done more to involve citizens before the deal was approved.

After a six-month investigation, Sonntag released a report concluding that the city didn't violate the state constitution when it struck a deal with Pine Street Development and was not obligated to obtain public bids.

Part of the problem, he said in a letter to Mayor Paul Schell, is that citizens have not understood "the creative path the city took to assist private developers."

It's apparent that city officials and their legal counsel carefully designed the agreement to withstand any legal challenges, and they succeeded, Sonntag said.

The probe focused on Seattle's agreement to buy a 1,200-space underground garage at Sixth Avenue and Pine Street for as much as $23 million more than it cost to build.

Located beneath the new Pacific Place shopping center, the garage is part of a three-block development that involves Nordstrom moving into the old Frederick & Nelson building. The garage, which opened Memorial Day weekend, is owned by Community Development Properties, King County II, a nonprofit organization.

Today's findings by the state auditor were little surprise since the state attorney general's office had already issued an April 10 opinion saying the city broke no laws and did not need to seek public bids.

Recent decisions by the Washington Supreme Court have given Seattle and other cities wide latitude to pursue public-private partnerships like the one between Seattle and Pine Street Development, Sonntag said, and there are likely to be more of them in the future.

The Seattle Times reported in December that the city overpaid Pine Street Development to help guarantee Nordstrom's move into the old F&N building. The city is expected to buy the garage for $73 million later this year, even though the developer's spreadsheet shows that construction and the cost of land amount to $50 million.

With the closure of the old Frederick & Nelson department store and other businesses in the early 1990s, former Mayor Norm Rice and City Council members have argued that the Pine Street-Nordstrom redevelopment project was critical to economic recovery.

Sonntag criticized the city for not doing more to include citizens in the decision-making.

The city has acknowledged not holding a public hearing in June 1995, when it gave preliminary approval for the project. The city attorney's office said no public hearing was required.

"The city thinks it's done enough. We think they could have done more," he said. "It's going to be their (the citizens') parking garage and the city of Seattle is the taxpayer. They're one in the same."

The state auditor said he's also not convinced the city gave proper notice for a February 1996 meeting in which the City Council gave final approval for the memorandum of agreement with Pine Street Development.

The Seattle Ethics and Elections Commission had concluded in a separate report earlier this year that the city failed to give proper notice and that documents about the garage project were not made available to citizens.

City officials disagree, and the report declines to make any conclusions.

In the letter to Schell, Sonntag was more blunt. Had citizens been given more input, they wouldn't have accused the city of orchestrating an effort to give money to a private developer and major retailer, he said.

The report also concluded that city consultant John Finke did not violate state or local ethics laws by having a dual role in the project. He assisted the city in its application for a $24.2 million HUD loan for purchase of the old F&N building and then worked with Pine Street Development to develop the garage.

Ethics laws did not apply to Finke because he was not a city employee.

Two members of the 1996 City Council, Jan Drago and Martha Choe, said the auditor's findings vindicates the city and provides more proof of what they have contended all along: that the deal was legal.

"I have already seen the positive economic impact the Pacific Place Garage has had on our continuing efforts to revitalize downtown," Choe said in a prepared statement. "I am convinced that our investment in the garage will continue to provide the city with positive returns."

City officials say Seattle will reap $103 million in new tax revenues over the next 17 years. They also point to hundreds of construction and retail jobs and say the transaction ensured that Nordstrom would keep its corporate headquarters downtown.

It's unclear how much profit the city will make from the garage itself. Projections range from a high of about $44 million over 30 years to $16 million and money losses in the first few years of operation.

Parking rates have been set to lure shoppers and night-time visitors. Weekday rates before 5 p.m. range from $2 for the first hour to $6 for four hours, and $2 an hour after that. After 5 o'clock, the rate is $1 for up to four hours and $2 an hour after that. Saturday and Sunday rates are $3 for the first four hours, then $2 an hour.

Copyright (c) 1998 Seattle Times Company, All Rights Reserved.

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