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Originally published March 25, 2013 at 9:06 PM | Page modified March 25, 2013 at 9:06 PM

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City Council doesn’t fear fees will freeze development boom

In the face of intense pressure from business interests, the Seattle City Council plans to raise affordable-housing fees, along with building heights, in South Lake Union.

Seattle Times staff reporter

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Barring a reversal, the Seattle City Council aims to raise affordable-housing fees along with building heights in South Lake Union, going against intense pressure from business interests.

Business leaders and property owners, including The Seattle Times, have lobbied the council not to tie fee increases to a proposal allowing much taller buildings. That could “shock” the market, as one letter delivered to the council Monday said, and discourage development.

Business leaders prefer the council increase fees only after careful study that includes more stakeholders in decision-making. That could take up to a year.

However, a majority of council members is betting that South Lake Union’s popularity, driven by Amazon.com, will keep developers from going elsewhere or not building as tall as they could.

Councilmember Nick Licata has argued that raising fees at the same time as heights will give the city leverage.

Increasing building heights by hundreds of feet creates significant value for property owners and may produce up to 30 new high-rises in South Lake Union. Allowing extra height before increasing fees, Licata said, is like serving dessert before vegetables.

Evidence that the city is undercharging is persuasive, according to council members. A council consultant reported that the city could charge much more and developers could still make enough profit to proceed with projects.

“It’s almost embarrassing to go forward without a change,” Licata said. “We are not meeting our progressive image.”

Business leaders agree that fees should be raised, but in a more systematic way citywide so development isn’t discouraged in a particular neighborhood.

“There hasn’t been a transparent process to determine what the right amount is,” said Lori Mason Curran, spokeswoman for Vulcan, the largest property owner in South Lake Union (SLU).

Seattle Times Co. spokeswoman Jill Mackie made a similar argument. “We strongly believe SLU should not see an increase absent a concurrent increase in downtown,” Mackie said.

Others arguing against increased fees include the Downtown Seattle Association, the Seattle Metropolitan Chamber of Commerce and the University of Washington School of Medicine.

Under the city’s current policy, developers pay a prescribed fee for each square foot of additional height they get beyond existing limits.

City officials want to use those fees to create housing in South Lake Union affordable to moderate-income workers. That way, they reason, the area’s population would be diverse and workers wouldn’t have to commute from suburbs, adding traffic and pollution.

The city’s goal is for roughly one-third of new housing in South Lake Union to be affordable to a single person making less than $45,000, or a three-person household with an income under $58,000. As it stands, current fees would leave the city about 4,000 apartments short of its affordability goal in 20 years.

Four of nine council members have floated proposals to address the problem at the same time as heights. Two others, Jean Godden and Tom Rasmussen, have said they agree.

President Sally Clark’s is the most conservative proposal by a small degree. She would increase fees in the next few years by the inflation amount since 2001.

Tim Burgess and Mike O’Brien proposed similar increases. But their plans would impose increases sooner than Clark’s would.

All three of those council members would increase fees for new residential towers from Mayor Mike McGinn’s proposal of $15.15 per square foot to $21.68 per square foot. Each would end up with the equivalent of about 5 percent of a new tower’s unit set aside for affordable housing.

“My proposal is just a small step,” O’Brien said. It would produce an additional 250 affordable apartments over 20 years — leaving the city 2,850 affordable apartments short of its goal.

Licata’s proposal is more bold and would cut the gap in half. He would charge $96 per square foot over existing height limits in new residential towers. That would be the equivalent of setting aside about 10 percent of a building for affordable rents.

Burgess said the city should be cautious about “taking the Licata leap because that is a huge change.”

The council’s South Lake Union Committee is scheduled to vote on April 22.

Bob Young: 206-464-2174 or byoung@seattletimes.com

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