City settles Showbox lawsuit (UPDATED)

This afternoon, the City of Seattle announced that it has reached a settlement in the lawsuit filed by the owner of the Showbox property over the city’s “spot zone” of the Showbox to prevent it from being redeveloped.

Over the summer, a judge ruled in favor of the Showbox, finding that the Council’s ordinance incorporating the property into the Pike Place Market Historical District was a prohibited “spot zone” and invalidated the ordinance. But the Landmarks and Preservation Board granted historic landmark status to the building’s exterior and parts of the interior, the first step in enacting controls on the property. However, the Landmarks and Preservation Board doesn’t have the power to mandate that the building’s owner keep operating the property as the Showbox music venue.

In the settlement agreement announced today, the city agreed to pay the owner of the Showbox $915,000 to cover legal fees. In return, the owner will grant the city an assignable option to purchase the property and the rights to the “Showbox” name for $41.4 million. Because it is assignable, the city can transfer the option to an organization  (most likely Historic Seattle) that can raise the necessary funds to purchase the property and name, preserve the site, and keep the Showbox running.  The option is contingent on the Landmarks Preservation Board opting not to recommend controls on the property and the City Council passing an ordinance not enacting controls — or at least until after the purchase is complete.

Here’s how this plays out, according to the terms of the agreement:

• Within thirty days, the parties will jointly file a motion with the court asking the judge to enter a final judgment in favor of the Showbox owner and voiding the ordinances that incorporated the property into the Pike Place Market Historical District.
• By December 18,  the Landmarks and Preservation Board must recommend that no controls be imposed on the property (the City Council can extend that deadline to February 19).
• No later than 90 days after the LPB recommendation, the City Council must pass an ordinance imposing no controls on the Showbox property.
• By March 1, 2020, the city must inform the Showbox owner of the party to whom it is assigning the option to purchase the property.
• The assignee and the Showbox owner have thirty days after the city names its assignee to negotiate the terms of a potential purchase agreement.
• The assignee then has until August 31, 2020 to actually purchase the property under the terms of the purchase agreement.
• If the property isn’t purchased by August 31, the option expires.

 

Seattle City Attorney Pete Holmes issued a statement this afternoon:

“The focus of this situation is now appropriately with the Landmarks Preservation Board. I weighed the likelihood of success appealing a case that is now largely superfluous against a potential judgment costing the City tens of millions of dollars. When presented with a resolution that costs us only a fraction of that potential judgment and that retains an option for a third-party organization like Historic Seattle to lead an effort to purchase the building in the event no landmark controls are imposed, this wasn’t a difficult decision to make.”

The Showbox owner also issued a statement through his attorney:

“Our settlement with the City of Seattle allows for a return to a consistent and fair application of the city’s regulations governing 1426 First Avenue. We are also pleased that our settlement with the City of Seattle includes a contingent option for a third-party allied with the City to potentially purchase the property for $41.4 million –the owner has always been open to consider any serious purchaser that offers fair market-value.”

This is a pretty humiliating defeat for the city, and they are lucky to be escaping potential damages of up to $40 million. It looks terrible for Holmes’ office, who gave the Council legal advice leading up to the bill’s passage and who got their asses handed to them in court. It also looks very bad for the City Council, with the exception of Council member Pacheco who voted against the ordinance back in June. The other eight members voted for both the original 2018 spot zone ordinance pulling the Showbox property into the Historical District, and the extension passed earlier this year. For her part, Mayor Durkan signed the original ordinance, but returned the extension ordinance unsigned earlier this year after the judge found the original ordinance to be illegal.

But the big loser is Council member Sawant, who directed the full force of her “movement,” red signs and all, toward saving the Showbox and passing the original ordinance. This settlement feeds the narrative that she is a divisive city official, a loose cannon, and a poor legislator, who nearly cost the city tens of millions of damages with a misguided ordinance that she rammed through the Council. Not a good look in the midst of a tight re-election campaign. Don’t be surprised if we hear her election opponent, and the PACs that support him, using this line of argument over the next four weeks.

Runner-up is Council member Herbold, who sponsored the extension ordinance earlier this year and has been a vocal proponent for the Council’s intervention in the fate of the Showbox.

UPDATE 10-9-19: Council member Pacheco said the following in response to the settlement:

“I’m disappointed that we spent over a year in contentious litigation, $2 million dollars of taxpayer money (approximately $1 million in legal fees & $1 million in a settlement), and missed a potential $3-$5 million MHA payment at the behest of Councilmember Sawant. These funds could have been used to address our housing affordability crisis, homelessness, or provide additional social services– for an outcome that could have been achieved collaboratively from the start.”