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Wednesday, December 3, 2003 - Page updated at 12:00 AM

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South Lake Union's future in the balance

Seattle Times staff reporters

Seattle Mayor Greg Nickels yesterday unveiled his long-awaited study of benefits expected to flow from developing a biotech hub in South Lake Union, and it was met with questions and criticism from economists, City Council members and community activists.

Nickels said the massive building plans driven by Paul Allen's company, Vulcan, could directly create 23,000 jobs and add more than $160 million in tax revenues to the city in 20 years. "What you'll see, I hope in neon, is the word 'jobs,' " the mayor said.

But others saw a report built on risky assumptions, rife with oversights and lacking in estimated costs. Some critics also saw the study as an orchestrated effort to build support for the mayor's agenda, which calls for plowing at least $421 million in public money into street, transit and utility improvements in the area — and possibly much more.

"Ultimately, it could be a good idea, but the way it's being rolled out and rolled over council members is going to leave a bad taste with a lot of citizens," said Councilman Nick Licata.

One thing is for sure: The study, in its attempt to quantify costs and benefits of South Lake Union development, starts the debate, in earnest, about a series of policy decisions that could transform South Lake Union.

Today, a key City Council committee is scheduled to vote on zoning changes that would let biotech buildings in South Lake Union go higher than regulations allow.

In the next year, council members might also vote on a new $45 million streetcar for the area as well as $90 million in improvements to Mercer Street. Voters in the Puget Sound region might also be asked to vote on improvements to Aurora Avenue North and Mercer Street as part of a regional transportation package.

Released yesterday in draft form, the study is expected to bolster arguments for the zoning changes and other public investments in South Lake Union.

The part of the study that deals with economic benefits was prepared by University of Washington economist Paul Sommers, who received a $14,000 consulting fee for producing a 13-page analysis. He was supposed to write the section that focused on costs but city staffers who work for the mayor instead drafted it.

Neither section addressed what many observers consider the key question: How many new jobs would come to South Lake Union if the city does not spend millions on proposed improvements?

UW demographics professor Richard Morrill calls South Lake Union "the most desirable area of the city for new development" because of its proximity to downtown, the UW, the lake and Interstate 5. "In a way, it's a miracle that it hasn't taken off sooner than this. That's why I say it doesn't need extra inducements," he said.

Sommers projects massive growth in the area: 7 million square feet of net new office and lab space, with 35 percent of it dedicated to biotech facilities. He also forecasts 15,000 new residents living in apartments and condos that don't exist now.

If that boom occurs, the city would collect $160 million in new tax revenues by the year 2025, Sommers estimates. He also reported on "indirect benefits" that might occur — at least 9,000 other jobs and $65 million in added tax revenues to the city. Those indirect benefits are considered more controversial. A similar 1994 study by the city, for instance, did not include such projections.

The second part of the study concluded that benefits would far outpace public costs of the streetcar, road improvements, new parks and upgraded utilities, including a new power substation.

But Councilman Licata was concerned about the study's assumption that 90 percent of the redevelopable property in South Lake Union would be built out to the maximum size allowed by regulations. "It's like stacked dominos. If you applied the same logic to any part of the city there would be tremendous benefits," he said.

Adam Forest, a Seattle University economics professor, offered a different critique. Forest, along with economics department Chairwoman Barbara Yates, wanted to know how much development would likely occur without city investments in streets and transit. They also noted that firms that move to South Lake Union rather than another part of the city may not create a net benefit to Seattle.

Forest thought the study could have discussed the risks associated with the biotech industry and the fierce competition among cities to attract biotech firms. He also wondered why it did not include the costs for increased services like police, fire and parks.

The 1994 study estimated that growth at South Lake Union — without any city improvements to the area — would require the city to spend almost $20 million by 2025 for basic services.

And, operating a new streetcar could cost the city millions more. Portland's streetcar, which is the model for the mayor's proposed streetcar from downtown to South Lake Union, costs about $2.5 million a year to run and maintain.

Anticipating the criticisms, Nickels has appointed a four-person panel to review the report's findings. That group is expected to complete its work early next year.

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

Copyright © 2003 The Seattle Times Company

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