City may buy back land it sold to Vulcan

The city of Seattle wants to buy back some South Lake Union property it sold six years ago to Paul Allen.

And now taxpayers will likely pay a higher price for the land than Allen's development company did.

But despite the conspiracy theories and charges of bumbling government likely to surface — especially since billionaire Allen is involved — aides to Mayor Greg Nickels say the city couldn't have known in 2001 that it would later want to buy some of the property it sold.

"There's no way anyone negotiating that contract could have anticipated this," said Michael Mann, the mayor's top transportation adviser.

The City Council's Transportation Committee will vote today whether to start negotiating with property owners to buy some or all of 63 parcels so it can reconfigure Mercer and Valley streets between Fairview Avenue North and Dexter Avenue North.

Of those parcels, 30 are owned by Allen's company, six of which were bought from the city.

When the City Council voted in June 2001 to sell a total of eight properties to Allen for $20.2 million, council members said the city no longer needed the land, which had been acquired decades earlier to make room for a freeway that was never built.

Just a year later, shortly after Nickels took office, Vulcan was pushing a plan in City Hall to widen Mercer Street from three lanes to six and make it a two-way, tree-lined boulevard. The plan called for narrowing adjacent Valley Street from five lanes to two, making it easier for residents and workers to get to Lake Union.

The project would make the area near South Lake Union Park more attractive and safer for pedestrians — and it would benefit Vulcan's properties.

Critics say the latest twist in the Mercer project is an example of the city getting outmaneuvered by Vulcan.

"We are buying property from Vulcan to build a project that will benefit Vulcan," said City Council President Nick Licata. "We wouldn't need to buy it if we didn't adopt Vulcan's overarching plan for South Lake Union. I would characterize it as a very good deal for Vulcan."

But Lyn Tangen of Vulcan scoffed at the idea that Vulcan had plotted for years to get a sweet deal out of the city.

"If only we had those kinds of powers and foresight," said Tangen, Vulcan's director of community and government relations.

At the time the city sold the property, it planned to make minimal changes to Mercer Street, she noted, and Vulcan hadn't yet come up with its two-way Mercer idea.

"I'm sure there are better ways to make money than to spend the amount we did, sit around and wait for the city to condemn it," Tangen said. "It's absurd to think we bought that property with the idea we'd turn around and sell a portion of that back to the city. That's not a wise use of resources and it's a very risky thing to do."

Tangen also notes the property cost Vulcan more than the $20.2 million it paid the city. As part of the deal, the company also agreed to contribute $5 million to renovating South Lake Union Park and provide 50 units of affordable housing, which it is now building at the corner of Dexter Avenue North and Denny Way.

Still, John Fox, coordinator of the Seattle Displacement Coalition, calls the city's latest plan "outrageous, but typical."

Vulcan has amassed 60 acres in South Lake Union and is remaking the neighborhood as an office and biotech hub with thousands of new condos and apartments. Vulcan has demolished affordable apartments, Fox notes, and successfully lobbied the city to build a new streetcar line and change zoning to allow taller buildings in the area.

The city might also build a new electricity substation — expected to cost well over $100 million — to meet the needs of Vulcan's new tenants.

"It's a nice trick," Fox said. "They buy at low value, then they use their influence at City Hall to receive millions in subsidies. Then they turn around and make a killing by selling property back to [the] city."

Vulcan bought the city property for an average of $114 per square foot, Mann said. Vulcan bought property in the same area for $187 a square foot in 2003. Last year the company paid $170 a square foot for property farther from the lake.

Nickels' spokesman Marty McOmber said it's likely the city will pay more than $114 per square foot if it buys back property from Vulcan.

But McOmber said it's important to carry out the Mercer plan, which Nickels contends will reduce traffic and improve travel times in the area. The City Council voted 8-1 to support the plan in 2004, with only Licata dissenting.

Mann stressed the council's vote today would only be giving Nickels authority to start the process of appraising properties and negotiating with property owners. It's not clear yet what the city will buy and what it will pay.

As it stands, funding for the Mercer plan depends on this fall's vote on a massive three-county roads plan.

The Mercer project would cost $119 million, Mann said. The city already has spent $11.6 million on the project and voters approved a levy last year that would steer an additional $30 million to it.

The remaining $77 million would come from the regional package, Mann said. If that fails, the city will pursue other regional solutions, he said, because Mercer is a street of regional, not just city significance.

Licata argues the city should be focused on more pressing needs such as replacing the aging Magnolia Bridge. "We'll end up basically depriving other transportation projects around the city to fund this."

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