Urban Politics #31: Should Key Tower Be Sold?


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By City Councilmember Nick Licata.

Urban Politics (UP) blends my insights and information on current public policy developments and personal experiences with the intent of helping citizens shape Seattle’s future.

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CONTENTS:

  • Should Key Tower Be Sold?
  • Background To Key Tower Purchase
  • Mayor’s Proposal To Sell Key Tower
  • Reasons To Keep Key Tower
  • Locating City Hall

Should Key Tower Be Sold?

I’m using this UP edition to look at the proposed sale of the Key Tower and share my thoughts about it with you. The City Council meeting of March 16th held off a decision to test the market to find out how much the building could sell for. Council Members Tina Podlodowski, Jan Drago, Sue Donaldson and Margaret Pageler voted to halt any further exploration of the sale.

I talked to a number of Council Members before the meeting and suggested that a vote be delayed until the April 6th date so more information could be collected and time provided for considering the Mayor’s proposal.

The proposal before the Council on the 6th will not be to sell Key Tower butto explore selling it, by formally going out to the market. This involves sometime and money. It would probably will take at least a month to prepare the bid and the City’s cost will run anywhere from $70,000 to $100,000.

Background To Purchase

Two years ago the City purchased Key Tower for $120 million. It was great deal. It was purchased at a time when no one wanted to get stuck with a half- empty, one million sq. ft. building as surplus office space was flooding the downtown market. The City bought the tower recognizing that it had to find approximately a million sq. ft. of space for its employees due various departments moving from their old quarters.

The City Light building was sold last year. The Public Safety and Municipal buildings are planned for demolition in 2001, and the Alaska and Arctic Buildings, both currently occupied by city employees are planned for sale in 2004. In addition there is a new planned Court House on Fifth Avenue across from the current Municipal Building, to which Municipal Court and a portion of the Police Depart will move.

Some have argued that new offices are not needed. But that debate ended with the purchase of Key Tower to provide our employees new and safe working conditions. The current Public Safety building, according to those who work there, is in very bad shape and creates an unsafe working environment. Meanwhile, the Municipal building, requires significant new wiring, increasing maintenance costs, & seismic improvements.

All of this sets the ground for the current debate: To sell or keep the Key Tower given that we have to provide a significant amount of new office for city employees.

Mayor’s Proposal To Sell It

Last summer, in the heat of summer campaigning, a number of candidates, including myself argued that the Key Tower could be sold. The tower presented two major problems. First it projected a “corporate image” of city government since city hall would then be occupying a premier downtown corporate office building. Secondly that image would be highlighted by the pedestrian unfriendly and confusing entrance to the building.

In fact, the Seattle Office for Civil Rights (SOCR) issued a memorandum on 3/19/98 stating that “SOCR has become aware of significant access problems for the public and City employees at Key Tower.” Although not providing any cost estimates, the memo did conclude that renovations and modifications could overcome the 5 problems identified.

Mayor Paul Schell, soon after taking office, again proposed selling the tower. He received an initial favorable response from Steinbrueck, Richard Conlin and myself, because of the above reasons and perhaps most importantly, because of the huge windfall that the City could collect if it sold Key Tower under the current market conditions. Downtown office space is now selling at a premium.Seattle Times Editorial Page Editor, Mindy Cameron, in this Sunday’s Editionechoes this last point clearly when she asks, “If Seattle home sellers are making a killing in this market, why shouldn’t the taxpayers?”

The Mayor’s proposal would sell the Key Tower on the premise that the City could net anywhere from $50 million to $90 million over the purchase price. You could buy a lot of parks and community projects with that dough.

Which is one of the Mayor’s objectives, aside from building a new Civic Center to house himself, the City Council and some other service oriented city departments. The other departments, including City Light, would go into officebuildings on the periphery of the Central Business District where office space should cost less.

Reasons To Keep Key Tower

The Mayor’s proposal struck me, and a number community leaders, as sensible. And then Sue Donaldson and Jan Drago, who in the past had supported the controversial and often criticized Pine St. development , argued that it was now time for the city to turn its attention to neighborhood projects and not more downtown projects like a new civic center, no matter how much money the tower’s sale could bring.

Both had voted to buy Key Tower, so one might assume that they have some vested interest in not selling it. But the Mayor had graciously recognized their past decision to buy the tower as a good one. He simply argued that now was even a better time to sell.

Donaldson pointed out that if the library bond passes, the city could be facing a very large job of managing construction. The total library construction bill could easily top $140 million. The decision on who will manage this effort is still to be determined, but since the public’s money makes up over two-thirds of it, City Hall will have to exercise some responsible oversight.

And there is the rub, particularly for Council Members Tina Podlodowski and Margaret Pageler who point to the $2.3 million overrun on the new West Precinct Police Station as an example of how the City needs to improve its construction management before taking on a new municipal civic center.

In brief they argued that no matter how much money the Key Tower brought in, the City would find itself stretching its staff resources managing the construction of new facilities to house their employees as well as the libraries and perhaps other neighborhood projects to be identified in the upcoming Neighborhood Plans.

But still, the lure of a large cash infusion is tempting. Particularly if it could be used to finance neighborhood projects rather than a civic center. To the Mayor’s credit, he had his departments prepare some very realistic “what if’ scenarios showing the financial impact of the Key Tower sale. Surprisingly, on a net present value basis, there aren’t any savings over the long run of say 20 years or so. Even if one assumes a net of $80 million overthe purchase price, the cost of constructing new buildings or finding and buying others, eats up the “profit”.

The Mayor, of course, can argue that the estimated tower sale prices are purposefully conservative, but then again one can argue that so are the costs for locating new office space. The bottom line is that there is no guaranteed pot of money for neighborhood projects. And depending on the size of a new civic center, the cost of rehabilitating older buildings, and buying others, it is very possible that the City could lose money, particularly in light of the cost overrun on the West Precinct Police Station.

There may be some advantage in the Key Tower sale, in that perhaps some $20 million or more in councilmanic debt capacity could be freed up. But I suspectthe public has soured on this type of debt. At a recent community library bondmeeting that I attended, a number of residents expressed some hesitation regarding even the small $ 6 million councilmanic bond for the proposed central library’s parking garage. I don’t see selling the Key Tower to allow for more councilmanic bonds winning over many people.

Locating City Hall

If the Key Tower is not sold, the Mayor’s Office and City Council could still be located somewhere else. Council Member Richard McIver has suggested looking at building out to the maximum size on the new Court House site to allow for City Hall to move in.

It might make economic sense, but having three distinct and very different functions, (city hall, police, and municipal courts), in one building could prove to be as confusing for citizens entering the building ashaving City Hall in the Key Tower.

Clint Pehrson, president of the Allied Arts organization, has proposed a smaller City Hall building to be built on the Public Safety Building site. The Mayor, City Council and perhaps other service oriented departments could be located in a building that is much smaller, and hence less costly, than the present Muni Bldg. The present site of the Muni Bldg. could be sold to privatedevelopers for a significant amount since its zoning makes it very marketable.

Under this plan, City Light and many other departments would reside in the Key Tower. Those floors not occupied by city departments could be leased out and provide a revenue flow to the city.

Finally, City Hall could move into Key Tower as planned. Some new design work on the entrances could make them more pedestrian friendly. It’s not a great solution and it’s one that I don’t particularly support.

I’m inclined to look most favorably on the Allied Arts plan. It addresses the issue of citizen access by providing a recognizable City Hall on a major transit corridor, with the bus tunnel station right in the building. If the design and scale were modest, the cost might be covered by the sale of the present Muni Bldg. site.

The Mayor’s plan might work too. If I were a developer by profession and had been an entrepreneur, I think I’d be more inclined to ride the market. Perhaps my spirit of adventure has been curbed by sixteen years of working in the stodgy insurance business, but I keep asking myself what option has the lowest risk? And selling the Key Tower just doesn’t seem to be the one.

Keep in touch…

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