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Originally published Monday, April 15, 2013 at 8:49 PM

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City Council split on fees for high-rise developers

Mayoral candidate Bruce Harrell is positioned as the swing vote as the Seattle City Council prepares for next week’s vote on rival proposals about fees for developers in South Lake Union that help pay for affordable housing.

Seattle Times staff reporter

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The Seattle City Council was divided Monday on affordable-housing fees for developers in South Lake Union, with mayoral candidate Bruce Harrell positioning himself as the swing vote in next week’s decision.

In informal voting, council members were split 4-4 between a modest proposal by Tim Burgess and Sally Clark and a slightly more aggressive one by Mike O’Brien. A much bolder proposal by Nick Licata, meant to bring Seattle in line with other major cities, did not garner support.

Harrell came close to endorsing O’Brien’s plan, saying it made the most sense from a policy standpoint and he would have a “hard time arguing against it.”

But Harrell made clear in an interview after the meeting that he wasn’t prepared to support O’Brien’s option on Monday. Harrell explained that he likes to work collaboratively with developers and he wasn’t sure O’Brien’s proposal had been vetted by developers. The Burgess-Clark plan appeared more collaborative, he said.

“I’m going to work hard to find a solution that works,” he said.

Under Seattle’s incentive-zoning policy, city officials will allow heights on properties to extend above existing limits if developers pay a prescribed fee for every square foot of additional space they get.

Some of that fee goes to affordable housing, which has become a battleground in South Lake Union.

Developers say if the fee is too high it will stymie growth.

If it’s not high enough, council members say, the fee will not result in much affordable housing in South Lake Union, which means almost all moderate-income workers will have to commute, adding to congestion and pollution.

Mayor Mike McGinn proposed charging residential developers $15.15 per square foot in South Lake Union. Burgess and Clark would bump that up to $18.34 per square foot in three staggered steps by July 2014. O’Brien would go to $21.68 immediately.

As it stands, the city still would fall at least 2,000 apartments short of its 20-year affordable-housing goals in South Lake Union under any of the proposals.

Sally Bagshaw and Richard Conlin indicated support for the Burgess-Clark model. Jean Godden, Tom Rasmussen and Licata said they preferred O’Brien’s.

Evidence that the mayor’s proposal undercharges 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.

Burgess, also a mayoral candidate, pushed for the consultant’s report.

At the time of its release, Burgess called the mayor’s fees “incredibly low” and said, “We must craft a better deal for the people of Seattle.”

After initially proposing an increase in fees of $21.68, like O’Brien, Burgess retreated to a more conservative stance with Clark, who said their plan was aimed to give developers “fair warning.”

Their pitch would increase the fee to $16 through the end of this year, then to $17 next January, and to a little more than $18 next July. After that the fees would increase annually with inflation.

“To suddenly impose the fees all at once is where we got the most criticism and pushback from the development community,” Burgess said in defending his incremental approach over O’Brien’s.

Burgess said that differences between his and O’Brien’s approach were minor in results and the number of affordable apartments they would produce.

But O’Brien noted his plan would produce about 140 more affordable units over two decades than Burgess and Clark’s. More important, he said, his fee would produce more of those units in the fast-growing South Lake Union neighborhood, where rents are high and climbing.

The city’s zoning program allows developers to gain extra height by paying a fee or providing an equivalent amount of affordable housing within their projects.

The city’s fee has been so low in other parts of the city that almost no affordable apartments have been produced within projects using the extra height. Instead developers have paid into a pool of funds that the city has used to build affordable housing, often for very poor people, around the city.

O’Brien said his fee is high enough that it hits the turning point where developers would create the units within their projects.

He noted that the city hasn’t increased its incentive zoning fees since 2006 for residential projects and 2001 for office towers.

“We can’t go back and recapture” the money, he said. “What we can do is make up for lost time going forward and this simply gets us back to where we started in 2001.”

O’Brien also noted that taxpayers will soon have invested more than $500 million in South Lake Union on transportation, a new electrical substation and other amenities. “We almost never do that scale in a single neighborhood,” he said. “That’s public investment that the public should benefit from.”

Business leaders and South Lake Union property owners, including The Seattle Times Co., generally agree that fees should be raised. But they say fees should be increased in a more systematic, deliberate way citywide so development isn’t discouraged in a particular neighborhood.

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

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