It has been more than six years since city taxpayers lost at least $10 million on the city's fire sale of the old City Light headquarters on Third Avenue, but the deal is still racking up losses: Metro Transit is losing its lease and has been forced to shell out $13 million to move a trolley power substation from the basement of the now privately owned building, the delayed effect of having been cut out of the 1996 deal by the city. The public's losses from the sale now arguably exceed $20 million, although the long-running boondoggle that began in the Mayor Norm Rice era is getting some new scrutinyan ethics complaint filed last month by two retired city workers determined to prevent similar wheeling-dealing.
"Understandably, when these things are done in the back rooms, we tend to find out about them too late," says former City Light engineer and sometimes-political candidate Bob Hegamin, who has been investigating the deal for several years with former city Administrative Services property manager Nigel Keiffer. Hegamin says they're hoping to at least point out loopholes in the city's ethics codes and problems with earlier investigations. The 1997 reviews of the deal by the ethics office and the city auditorwhich found no wrongdoingwere limited in scope and failed to address the integrity of the deal or Metro's loss, they say. Hegamin and Keiffer say they met with an ethics investigator two weeks ago, and in their declaration charge that the city "violated its fiduciary duty to the people of Seattle, costing them and all of the residents of King County at least $25 million."
After details of the sale emerged in 1997, Hegamin and Keiffer say it stuck in their craws. Plumbing public records, they've since discovered the city launched a disinformation campaign in 1994 to undermine the viability and value of the building and prompt City Light's move to Key Tower. They also claim the city provided prospective bidders with proprietary details and was predisposed to the ultimate winner, a group associated with developer Martin Smith Real Estate. The hastily formed group, called 1015 Third Avenue LLC, first outbid two other potential buyers, offering $3 million, documents indicate. But 1015 was allowed to rebid at a lower $2.6 million figure, while another bidder increased its offer to $2.9 million, yet was ignored.
A spokesperson denied 1015 took advantage of any City Hall connections, calling the group "high-integrity folks who played by the rules." The city was anxious to unload the building, arguing it was vastly overvalued (assessed at $19 million, the city devalued it to $2.6 million for the sale). Then-Mayor Rice said it was the best deal possible for taxpayers, although 1015 got an exceptionally better one: Within 10 months the investors resold the property for $5.5 million. The buyer, international freight forwarder Expeditors International, turned the 10-story structure into its handsome global headquarters for just $14 million (the city had claimed renovation would cost $42 million).
Metro Transit general manager Rick Walsh, noting he wasn't involved in the 1990s talks, last week confirmed that the county system got stung on the sale. Though the city had been reassuring Metro in writing that "Any future plans for the building will address Metro's needs relating to the substation" lease, documents show the city agreed to a sales clause that left Metro without a continuing long-term lease. "I think it's reasonable to say we would have preferred to have stayed in the original location and avoided the costs of relocation," Walsh says. "We did inquire about extending the lease with the new owners, but they were not interested." Metro now has a month-to-month extension until the station is up and running this summer at a new spot under I-5. Metro had once considered buying the building but opted out, assuming it could re-lease with the new owner. In hindsight, had Metro bought the building for what private investors paid, it could have saved at least $10 million and then resold the property with its lease guaranteed.