A deep dive on the Waterfront LID agreement

On By In legal, parks

Last week Mayor Durkan announced that the city had reached an agreement with a group of property owners in the proposed Waterfront LID area that would allow the LID to move forward and ensure that the Waterfront Park project is fully funded. The Mayor’s Office has made available a copy of that agreement, along with the accompanying legislation and other documents that have been transmitted to the City Council for its review and approval.

Mayor Durkan announcing the agreement to move the Waterfront LID and project forward

The main documents in the packet of materials include:

There are four main parties to this complex arrangement:

  1. The city, generally represented by the Department of Parks and Recreation, SDOT and the Office of the Waterfront;
  2. a group of property owners in the proposed LID area representing a majority of the property valuation, which would allow them to collectively prevent the LID from being formed by exercising their right to protest it;
  3.  The Seattle Waterfront Conservancy, an organization set up to collectively represent the owners for the purposes of this agreement and future Waterfront-related negotiations with the city;
  4. The Friend of the Seattle Waterfront, a nonprofit organization that has already raised $8 million to support the waterfront park project.

Under the new agreement, the total budget for the project is $712 million. $160 million of that will come from the Waterfront LID in a specially assessed tax over 20 years, a reduction of $40 million from the original proposal. The city will cover the reduction; Mayor Durkan said that it would do so by dedicating existing commercial parking tax revenues to the project (she said that a recent close examination of the city’s existing bond issuances that are backed with commercial parking tax revenues showed they had more capacity than previously recognized).  The Friends of the Waterfront will contribute $110 million to the project through philanthropic fundraising; $102 million in addition to the $8 million originally raised.

Other pertinent details of the agreement include:

  • The city agreed to convene a group of commercial property owners from the LID area to advise the Office of the Waterfront on design of components of the project. IT also agreed to ensure that there were other opportunities for all property owners to weigh in on project designs before they are complete and finalized, particularly for the Pike/Pine corridor.
  • The city agreed not to increase the total LID assessment above $160 million. As part of that, it waived its right to a supplemental assessment or a re-assessment in future years.  This addresses a concern that property owners have repeatedly raised at public hearings: that if the project ran over-budget, the city would simply issue a supplemental assessment. That option is now off the table, but it leaves open the question of how the city would cover overruns on the project.
  • The city will designate the new pedestrian/bike paths on both sides of Alaskan Way (the surface street) as a “park boulevard.” Doing so imposes a 15 MPH speed limit and restrictions on their use by motorized vehicles and unless explicitly granted an exception limits their use to standard park hours.
  • The city will contract out operations and maintenance of the Waterfront Park, including event programming, to an outside third party along the lines of its established agreements with the Seattle Aquarium and the Woodland Park Zoo. Initially, there will be a 2-year pilot agreement with the Friends of the Waterfront to act as that “operating partner,” and the city may contract with the Friends or another organization after the initial 2 years under a long-term operations and maintenance agreement.
  •  The city will establish a Central Waterfront Oversight Committee, reporting to the Mayor and City Council, that will conduct reviews of park operations and maintenance, the operating partner, and adherence to park rules. The Oversight Committee will have 19 members: six at-large community members, two tenants and six property owners  (a mix of residential and commercial) from within the LID area, and five association representatives. The at-large members, tenants and property owners will be appointed by the Mayor and the City Council.  The Oversight Committee is expected to replace the existing Waterfront Steering Committee.
  • The property owners acknowledged that they will receive a “special benefit” from the Waterfront Park, i.e. their property values will increase when the project is complete. The special benefit is the basis for the LID calculation: it is a tax on the expected increase in value of the adjacent properties. This acknowledgement prevents a future legal challenge to the LID over the issue.
  • The property owners waived their right to protest the LID formation (if a large enough percentage protest, then the lid is legally blocked). The do, however, reserve their right to challenge the specific assessment for their individual properties, just as any property owner can challenge the city’s annual property valuation for the purposes of assessing property tax.
  • The Conservancy becomes the sole legal representative for the undersigned property owners in all future legal dealings with the city related to the waterfront project and the LID. The property owners waive their right to separate legal challenges.
  • Under the pilot operations and management agreement, the Friends of the Waterfront will manage event scheduling and support for the Waterfront Park properties, including Pier 62. However, the city will manage any “free speech” related events, i.e. protests.
  • The Friends of the Waterfront committed to a specific schedule for delivering its contributions over the next several years, and to delivering a fundraising plan by the end of March 2019.
  •  The Parks Department will provide the Friends $310,000 in 2019 and $315,250 in 2020 to support maintenance services. Beyond the term of the pilot contract, the city’s financial support for operations and maintenance is yet to be negotiated, but the city’s estimate is that in 2023 when the project is complete the baseline funding need will be approximately $4.8 million, with 2.5% increases annually after that.
  •  Standard Seattle park rules will be enforced, including the “MDAR” rules for removing homeless encampments.
  • The agreement between the city, the property owners, and the Conservancy extends for 20 years — the lifetime of the LID.

In last week’s press conference, the city also distributed its updated projections for LID assessments. It suggests that the typical condo owner will pay $1900, or amortized across 20 years (with interest), $8 per month.

Here are the city’s estimates for the range of assessments based upon its current roster of properties within the proposed LID area:

The agreements and accompanying legislation will be heard in Council member Juarez’s committee, with an initial briefing on January 14th, a detailed walk-through on January 16th, and a potential vote out of committee (after amendments) on January 24th.