The Billionaire Club

Three of Seattle's richest people—Howard Schultz, Paul Allen, and Bill Gates—can now call Seattle Center home.

"Seattle has always been a beacon of generosity," said William H. Gates Sr., co-chair of his son's charitable organization, after the Bill and Melinda Gates Foundation announced last month that it would locate its new world headquarters at Seattle Center. Gates Sr. wasn't necessarily referring to City Hall's generosity, but considering the foundation was getting a $50 million piece of public property for essentially $22 million, the philanthropy seemed to come from taxpayers. Established by the world's wealthiest man, the world's richest philanthropic foundation reported assets of $33.6 billion in 2003. It rightfully earns global praise for donating millions to urgent health and educational causes—a stunning $750 million just last week for vaccines for children in developing countries. But negotiations over the Seattle Center deal, unveiled by a beaming Mayor Greg Nickels, were strictly business, with Gates forming a new corporation, Iris Holdings LLC, as land owner.

The sale marks a turning point for the city-owned Center, the grounds of which will soon be dramatically altered by a planned new Seattle monorail, as well. The city, it turns out, is also selling two other Seattle Center properties, which, along with the Gates deal, will limit opportunities for expansion while turning over more public land to private interests.

According to city officials, the Gates Foundation purchase, for a purported $50.4 million, was arranged for taxpayers by Seattle Center's redevelopment director, Shelly Yapp. Her deal gives back $28 million of that to the Gates Foundation in the form of site preparation and a parking garage the city will pay Gates to build. Yapp is a friend of Bill Gates Sr., and the two have served together as University of Washington regents the past five years. Yapp did not respond to requests for comment.

Gates Foundation President Patty Stonesifer says the foundation is "very committed to a public process" as the project develops. The foundation has not released details of its headquarters campus plan, but Stonesifer says the initial goal is a single, signature building, multileveled, with 300,000 square feet of floor space. That, presumably, leaves the foundation lots of developable space at the property, which is bounded by Broad Street, Fifth Avenue North, and Mercer Street. The planned building is about the size of nearby Fisher Plaza at Fifth and Denny Way, home of KOMO-TV.

The income tax–exempt foundation grew its assets by more than $6 billion from 2002 to 2004, thanks to Bill Gates Jr.'s continued generous donations and the foundation's return from investments. Most assets are stashed in U.S. government agency and treasury securities, mortgage-backed securities, and other bonds and notes, as outlined in a 2003 review by an outside auditor, KPMG. The foundation has 198 employees and operates from leased offices near Lake Union on Eastlake Avenue East. It plans to grow its workforce, whose top five employees, mostly doctors involved in health care projects, are annually paid $300,000 to $400,000, including benefits, according to the foundation's latest Internal Revenue Service filing, for 2003. Headquarters construction could begin in 2007, with move-in set for 2008–09, Stonesifer says, noting that the negotiations were "difficult" but the outcome, "if not the perfect marriage, [is] the perfect partnership." The foundation's land purchase, she adds, "is not about the employees there or even the founders of it. It is about the goals of opportunity and equality around the world."

The building site, 12.3 acres now mostly used for parking, is east of Fifth Avenue, across from Paul Allen's Experience Music Project (EMP), making neighbors of the two legendary Microsoft founders. The site—just a short hike from KeyArena, home of Howard Schultz's pro basketball teams—is already occupied by Schultz, who leases space there for a Sonics/Storm team practice facility. The three Seattle moguls will all directly and indirectly benefit from the property deal, which, besides the parking garage, includes the retirement of Seattle Center debt and money for Seattle Center infrastructure repair and maintenance. Nickels says the land-sale revenue is badly needed at the Center, which he calls "our city's living room." He says significant capital improvement and maintenance, to address such problems as hazardous sidewalks, exterior damage, landscaping, and roof and fountain repairs, has been long deferred. The deterioration has apparently occurred in spite of Seattle Center's $35 million annual budget and more than $300 million in new development there the past 15 years.

To further firm up the Center's saggy finances, the city is jettisoning other nearby parcels of city property. According to city documents, the little-noticed pending sale of two parking lots near the Pacific Science Center should bring in about $6.4 million.

About $10 million of the $22 million in proceeds from the Gates Foundation purchase will be used by the city to pay off debt from the renovation of KeyArena, which Schultz leases for his pro basketball franchises. The Sonics' inability to sell VIP seating—tied to the lease payments—helped put Seattle Center deep in the red. Schultz, the Starbucks Coffee CEO, has indicated he can't make money at the Key even if it was filled every game. He is seeking up to $200 million from taxpayers (not including millions more in interest) to expand arena concession space and top-dollar seating, and to pay off at least $40 million the Sonics already owe taxpayers. (See "What the Big Boys Want," Jan. 12.) Schultz might get further help from taxpayers if and when the $1.6 billion Seattle Monorail Project builds the Green Line through the heart of the Center, planting bulky columns and heavy guideways around the popular music fountain and through the amusement-ride area. Plans call for two Center monorail stations, one outside KeyArena, the other across from Allen's EMP, a half-block from the Gates campus.

Besides the $8 million to cover repair and maintenance, the remaining $4 million of the Gates proceeds will go toward debt incurred from construction of Seattle Center's $127.8 million (interest excluded) Marian Oliver McCaw Hall, home of Seattle Opera and Pacific Northwest Ballet. It was named for the matriarch of the pioneering McCaw communications family after her sons, Bruce, Craig, John, and Keith, donated $20 million to the cause. City Hall and the private arts organizations miscalculated the performance hall's financing, however, coming up at least $10 million short. (The city gave $38.8 million, private donors pledged $72 million, and state and county taxpayers kicked in $5.5 million.) The opera and ballet groups had promised, in writing, to pay the shortfall, then refused. The city also picked up half of a $1.3 million initial financing charge the arts groups were supposed to pay. Nickels says the $4 million will be used as seed money for private matching donations to pay off McCaw Hall's total debt.

Meanwhile, the city will take the remaining $28 million it "receives" from the Gates purchase and plow it back into the Gates project. About $13 million will go to prepare the contaminated parking lot, a former city bus barn site, for construction. The other $15 million will be spent to build a parking garage on the corner near Broad Street, on Gates Foundation property and directly across from Allen's EMP. Gates will get priority to lease at least 300 of the 1,000 parking spots planned for the city-operated garage. The rest will be available to the public.

City parking garages linked to wealthy folks is a touchy subject in Seattle. City Hall paid $73 million for a downtown parking garage built six years ago for the benefit of Nordstrom and Pacific Place, creating a public furor. (Part of the funding came from federal money designated for blighted, low-income areas.) The city also quietly gave away its longtime Freeway Park Garage to the Washington State Convention and Trade Center, a nonprofit corporation, sacking city taxpayers for a $23 million loss. Though details are sketchy, the city has suggested the Seattle Center garage on Gates property will supply new income. But since the structure will, in effect, be replacing a 1,000-stall parking lot, it won't necessarily be additional income—unless, of course, the city jacks up garage rates for parkers, who currently pay a nominal $5 per day at the surface lot.

While the Gates deal is called a $50.4 million sale, the property, with improvements, is valued at $53 million by the county assessor. The site includes a new skateboard park and the Nate McMillan Basketball Court—both to be relocated at a cost of $900,000 Schultz leases the far northeast corner of the mostly rectangular parcel. On the Schultz site are Sonics and Storm team offices and a practice facility, built for $2.6 million in 1994 and remodeled for $500,000 in 2000. His lease is good at least through 2010. By that time, planners hope, tax funds will have been tapped to expand KeyArena and perhaps add a practice facility there.

At the Jan. 13 press conference announcing the deal, Nickels called Seattle Center "the place we invite people we really like, to come and enjoy our city." The Gates Foundation headquarters will "put Seattle on the map," he vowed—though the foundation has been located in Seattle for 11 years. Seattle Center Director Virginia Anderson sketched the sale for a receptive City Council parks committee last week, touting the project's "synergy" while committee Chair Jean Godden gushed over the "amazing coup." At the earlier mayor's press conference, Anderson hailed her boss for bringing the deal to fruition. Nickels, she said, "is a mayor who has made it very clear that he has as one of his priorities to create opportunities for all. And what a fitting tribute, I think it is, to have his support of this project, which involves a foundation that is committed to equity and opportunity for all throughout the world." Seattle included, of course.

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