This speech was read at the Regular Council Meeting on September 25, 2018 by Council Member Joel Wachtel.
There is no question that this issue is highly emotional and will significantly impact the tenants and sub-tenants of the SeaTac Center. What has not been said and is often misunderstood is that this situation is part of a plan that began in 2006 and was moved forward by many different councils and that plan has been moved forward, at expense to the city, in the form of planning, purchase and roadwork over the years. This situation did not “just” happen!
In December of 2006, the South 154th St. Station Area Action Plan was published. This document sets forth SeaTac’s commitment to developing the Tukwila light rail station area as the best use function of the property. The city is obligated to act on this plan.
The City purchased the property under ordinance number 09 – 1043 on December 29, 2009. The property cost the city approximately $12 million. That ordinance indicates the purpose of the purchase is to redevelop the property.
Sometime after the sale property owner, sued the city for an illegal taking. As you may know, that litigation lasted until 2017.
In 2017, the city settled with K & S for a total of $12 million, of which the city paid $4 million, and the insurance companies made up the difference. Conservatively speaking, the city has the original $12 million in the purchase price and $4 million paid in settlement invested in this property for a total of $16 million. The city also received approximately $600,000 positive cash flow per year from property rental.
The SeaTac Center is an old building, built in 1954 and now more than 60 years old. The city has been forced to make repairs to the structures which have escalated over the past couple of years. Prior councils authorized lessee’s to utilize the property under the belief that obtaining some rental income was better than no rental income. In 2013, while Mia Gregersen was mayor of the city. Paragraph 9, was added to the lease indicating that the city would be seeking to sell the property for redevelopment and that the tenants would be provided a minimum of nine months’ notice to leave the building.
One of the major issues is the fact that the city has only 11 actual tenants and the rest of the small businesses which are owned by members of the Somali community are subtenants, which have no contract or business relationship with the city. Part of the reason this matter has become volatile is it is alleged that the tenants who rent from the city never advised the subtenants that the city would be selling the property in the future for redevelopment (even though paragraph 9 states this fact).
The city has tried to find a path to work with the subtenants. However, they have decided to handle this in a politically charged manner claiming that “they are being targeted and ignored”. Nothing could be farther than the truth. A City moves very slowly, especially on project like this. As you can see, by both the 2006 Station Area Plan and the December 29, 2009 ordinance, the property was purchased with the concept to redevelop the building and the area. Also, the lease the signed with the 11 true tenants indicates that the city intended to sell and redevelop the property. The subtenants continue to assert that they have earned the right to stay in the building even though they have no lease with the city!
The subtenants have submitted a proposal offering $1 million and $3 million in yet unidentified financing, for a part of the entire property. This plan would not work because it would undermine the market value of the property, potentially costing the taxpayers millions of dollars in unrecovered costs. Also, the subtenants demand that upon the selling of the building, they must not be forced to leave the property and that a developer must be required to building phases so that they can be moved from one phase to another and remain in business during the construction. Such a plan would not be acceptable to any developer because the increased cost of the project in that manner could make the project unprofitable. Also, under the subtenants offer, they indicate that they would like to set the price for their part of the building in the area of $4 million, but (1) have no promise of credit and (2) haven’t set forth a fixed price. Their submission of the RFP is unprofessional, incomplete and did not conform to the conditions of the RFP. They believe that their value alone to the SeaTac community makes up for the enormous discount, and considerations, they are seeking, but offer no proof.
As a Councilman, I take very seriously the fact that I represent all the 29,000 residents of the city. I consider that, due to the extreme lack of developable land in the city that this is unquestionably one of the most important available tracts of land in SeaTac and it will play an important part in changing the cities development. The RFP submission from Inland proposes a mixed-use residential project of 600 units (40% market and 60% workforce). Consider that if the average annual income for each apartment were estimated to be $45,000 the total annual income of the buildings would be $27 million. This additional local income would benefit the businesses in SeaTac and all surrounding cities. Finally, this project would put that property back on the tax rolls which is a huge win for the residents.
This is a very difficult decision to be involved in because I do understand that members of our community face displacement and my heart goes out to them. However, they are making impossible demands and asking for consideration that in my opinion, the City legally is not able to offer.
However, authorizing the City Manager to enter negotiation does not effectively close the door on the desposition of the property. Rather, it is a first step that must eventually be taken. In my opinion,because a plan has been in operation for 9 years and we need to consider the prior investment in the plan and its goals.
Therefore, my assessment of this matter is simple;
- The SeaTac Center Coalition has submitted a non-conforming RFP; they did not set a firm price: Only want a piece of the property and do not have commitments for financing. This is not reasonable.
- Only one other RFP was received, from Inland, a construction company with a successful history of building mixed-use housing, and with the finances and credit to purchase and build this project, and with an organization to properly manage and deliver the proposed construction.
- The city is in great need of housing near the light rail station to infuse new residents into the community to balance our median income and to drive further local business development within the city. The city also has an obligation under the 2006 Station Area Action Plan to develop this property.
- The city has a responsibility to recover as much of the purchase cost, attorney’s fees and settlement costs as it can from the sale of this By doing so, those recovered resources become available for the betterment of the lives of all the 29,000 city residents.
In closing, I can see no other path but then vote my conscience. I see no reason not to initiate negotions with Inland for development of this property. The size of the numbers demands that the council have the strength and fortitude to make the right choice. The recovery of $15 million spent on a project that started nine years ago. The creation of 600 apartments to bring new residents into the city. The redevelopment of a building that is 64 years old and is prime for redevelopment. And the honoring of the commitment to develop the 154th St. Station area. This project will create a whole new neighborhood within the city. It will be a start of the future of mixed-use development to enhance the lives of our residents. It is the future, and the City needs to embrace it.