Wednesday Jolt: The Pacific Place Garage
The day's winners and losers.
Today's loser (again): Seattle taxpayers.
As we've reported, the city plans to sell the money-losing Pacific Place parking garage to the Pine Street Group, which owns the Pacific Place mall in downtown Seattle, for $55 million.
The city bought the garage in 1998 for $73 million—$23 million more than it cost the original developer, also Pine Street Group, to build. The sale was part of a deal to build Pacific Place and move Nordstrom to its current location.
Although the garage made money for the city in early years, it has lost money throughout the Great Recession, forcing the city to approve multiple bridge loans to keep the facility solvent. According to the city, garage usage has declined 25 percent since 2004.
The sale, which the city council discussed this morning, would get the money-losing garage off the city's hands. But it also includes yet another loan to keep the garage going while sale negotiations are underway—up to $5 million, which would be transferred from the city's general fund (the budget that pays for basic city functions like human services and street repairs), into the city's downtown parking garage fund, which currently has a negative fund balance of $3.7 million.
Unless the garage miraculously starts making money (in which case the loan would be repaid out of those profits), the city will be on the hook for that $5 million.
Part of the reason the city is in this mess is that the sale agreement assumed that garage revenues would increase every year, allowing payments to go up three percent a year through the life of the agreement. That may have been a conservative assumption in 1998, but it certainly wasn't in 2008, when the nation was slammed with the worst recession since the Great Depression.
One potential lesson from the Pacific Place debacle might be that the city shouldn't get involved in non-governmental functions, like running a commercial parking garage. But some council members seem to be taking a different lesson. Tim Burgess, who's running for mayor (and frequently takes credit for inking a better arena deal than incumbent Mike McGinn's initial proposal) said the garage deal shows that the city just needs to make "good public-private partnerships," like the arena and, potentially, the pending deal with Vulcan to redevelop South Lake Union's Block 59.
Of course, there's a third lesson: Deals that look good initially don't always pan out—all the more reason for an excess of caution before the city signs on the dotted line.