Seattle: The New Biotech Hub

Remaking South Lake Union: Seattle is on fast track to build biotech hub

Los Angeles is the center of the entertainment industry.

New York City is the nation’s financial hub.

And San Jose, better known as Silicon Valley, is the country’s computer capital.

Is Seattle destined to become the nation’s hub for biotechnology, the place where cures for cancer, AIDS, arthritis and Alzheimer’s could be discovered?

By KATHY MULADY
SEATTLE POST-INTELLIGENCER REPORTER

http://seattlepi.nwsource.com/local/196012_slakeunion20.html?searchpagefrom=1&searchdiff=6

Microsoft Corp. billionaire Paul Allen and his company Vulcan Inc. say it is, and that South Lake Union, a long-overlooked commercial and industrial area north of downtown, will be where it happens.

Vulcan has convinced Mayor Greg Nickels that full-speed ahead development of the neighborhood will bring thousands of new jobs, bring in much-needed revenue to the city and garner Seattle international recognition.

Click here to view a detailed map showing Vulcan Inc.’s current real estate holdings and the future costs of redeveloping the neighborhood (PDF, 150K). http://seattlepi.nwsource.com/dayart/20041020/SouthLakeUnion.pdf

Critics say it’s too much of a gamble and the stakes are too high.

City officials should carefully weigh the risks before pouring hundreds of millions of tax dollars and resources into the risky biotechnology sector, especially, they say, when other cities are far ahead of Seattle in trying to woo such developers.

They warn against focusing too much time and attention on one neighborhood when others have more pressing needs and feel neglected by Nickels.

And they worry about leaping into a partnership with Allen, who has an uneven record when it comes to his wide-ranging ventures that include professional sports teams, a rock ‘n’ roll museum and a spaceship.

The decision ultimately rests with the City Council.

Over the next year, council members are expected to consider a half-dozen proposals related to South Lake Union — including a streetcar line, an electrical substation, funding for a regional park, redesigning the Mercer Corridor and changing zoning to make it easier to develop the neighborhood into an urban center.

The council as a whole has repeatedly said it supports developing South Lake Union for biotechnology.

"We are fortunate to have philanthropic corporate citizens like Paul Allen and Bill Gates with their great vision," said Councilwoman Jan Drago, who is a "huge believer" in the future of biotech and a proponent of South Lake Union development.

"It follows in the trend of Seattle producing entrepreneurial leaders," she said. "We seem to be on the cutting edge of this. When I look into the crystal ball, that’s what I see."

But individual council members are divided on how much public money should be spent on the venture.

"We want South Lake Union to be dynamic and a biotech center, but let’s not have overly optimistic expectations and a questionable use of public funds," Councilman Nick Licata said.

They say Nickels is overselling the potential benefits.

"All politicians like to have a project. This is easy to package. It is a bright shiny new industry.

"I think they know they are on flimsy ground. Is it Quixotic? Is it reality? Are we giving up opportunities in other parts of the city?" Licata asks.

Allen owns 58 acres in South Lake Union.

Vulcan plans to build more than 10 million square feet of residential, office and commercial space there.

So far nine projects, totaling 1.8 million square feet, are under way or finished — including apartment buildings, office and research space, a grocery store and a hotel.

"We are moving as fast as we possibly can," said Ada Healy, vice president of real estate for Vulcan.

"Holding onto land is not desirable when we can turn it into income- producing property as quickly as the market will let us do it. It means more jobs and tax revenue for the city," she said.

Some neighborhood residents worry that things are moving too fast.

"People are concerned about the pace," said Candi Wilvang, president of the Cascade Neighborhood Council. "They are worried that the little people, the poorer people, are being overlooked."

Cascade is the residential section of South Lake Union.

"We want to preserve the historic character of the Cascade neighborhood, which includes the low-income housing," Wilvang said.

Perhaps a new nickname

If Allen is right, and biotechnology is the wave of the future, he stands to become even richer and Seattle, known at various times as the Jet City, the Emerald City and an epicenter of the dot-com boom-and-bust, could find itself with a new nickname.

And Nickels’ legacy would be as the Seattle mayor who lifted the city out of its post-dot com doldrums.

"When the mayor came into office, there was a sense that jobs and the budget were going to be the issue," said Deputy Mayor Tim Ceis, Nickels’ chief adviser. "Biotech development in South Lake Union was something the city could influence."

A study commissioned by the Seattle mayor’s office says up to 30,000 total new jobs and $16 million in annual revenue could be added to the city within 20 years as biotech develops in the neighborhood.

But others say the numbers aren’t actual jobs that will materialize, rather, they show the capacity — simply how many jobs could fit into the neighborhood.

"The numbers that the mayor is using are at best optimistic, and may have no factual foundation," Licata said. "I think they might be low-balling the costs, too."

According to estimates from the mayor’s office, it will cost about $500 million in public money to make improvements to meet the needs of transforming the neighborhood.

An estimated $30 million of that bill would come from the city’s general fund, which for years has been running in the red. Because of another tight budget this year, Nickels has proposed more cuts to health and human services, reducing park maintenance and ending bookmobile services.

Skeptics say the South Lake Union improvements Nickels has in mind will cost much more then he is advertising, up to $1 billion in public money, with ongoing city expenses for operations and maintenance, police, fire and other services.

"It is fine for us to support it (biotechnology development), but I am afraid it has gone too far, and there are too many false promises," Councilman Peter Steinbrueck said. "We need to sober up."

On many levels, building South Lake Union as a hub for biotechnology makes sense. With its glittering lake and room for a spacious park, the community curves like a lucky horseshoe between Queen Anne, the downtown business district and Capitol Hill.

But it is also walled-off from the city by Interstate 5 to the east and Aurora Avenue on the west.

"This is an opportunity to knit this community back into the fabric of Seattle," Ceis said.

Many of the old buildings that once housed industrial laundries and car showrooms have given way to research centers.

The Fred Hutchinson Cancer Research Center campus spreads over several blocks. Children’s Hospital, Rosetta Inpharmatics/Merck and Zymogenetics are there as well. The University of Washington is finishing its new building.

Discussion and debate about what to do with South Lake Union started long before Nickels came into office.

The controversial Seattle Commons project was proposed in 1992 as a world-class community centered around a major park. But it divided city residents, who voted against levies to pay for it in 1995 and again in 1996.

Opponents said the plan didn’t provide enough jobs, was too expensive and only benefited downtown developers.

Since 1999, city leaders have taken a series of steps encouraging development of South Lake Union as a biotechnology hub.

Three years ago, the city sold eight properties in South Lake Union to Allen for $20.8 million.

Under the agreement, City Investors, a real estate arm of Vulcan, agreed to build as many as 500 apartments or condominium units in the area. Fifty of those would be affordable housing, built within five years.

Since then, the council hastaken a series of actions, including approving money for park development, changing land-use codes to allow buildings designed for biotech and offering tax breaks for affordable housing.

There are still dozens of decisions to be made, with hundreds of millions of dollars in public money involved.

Others feel left out

Skeptics say the mayor’s office is covering up costs that will surface later. Some neighborhood groups say the mayor’s staff is focusing an inordinate amount of time and money on South Lake Union and neglecting other communities with greater needs.

Early in his administration, Nickels proposed legislation to spark development in Northgate and investment in the University District. In his budget speech this year, Nickels said with millions of dollars connected to light rail construction coming to southeast Seattle, it’s now time to focus attention on Rainier Valley.

"The wait is over, doing more for the people of southeast Seattle starts now."

But Rainier Valley residents say they have been waiting decades for the city to fix the streets and install sidewalks and storm drains.

"Our basic needs should be met before the fancy businesses and neighborhoods get extras," said John Robert Jones, with ACORN, the Association of Community Organizations for Reform Now.

"We pay our taxes. No city street should look like we live in a rural area. Our kids walk in the mud to school," Jones said. "We are paying for the rest of the city to live good."

On Capitol Hill, neighbors say crime and drug problems are being ignored.

"I am concerned about what is being taken away from other areas in terms of attention and resources," said Jim Diers, former director of the Department of Neighborhoods for the city. Diers was fired by Nickels when he was elected mayor in 2001. Under growth management, the city is required to add infrastructure, things such as roads and electricity, as an area grows.

But cities are also allowed to collect impact fees from developers of big new developments to pay for added traffic, or drains on the electrical, sewer and water systems caused by their projects.

Diers said it doesn’t make sense that the city is offering developers at South Lake Union incentives.

"A lot of cities would be requiring impact fees for a development of that size," Diers said. "This isn’t like Omaha, Nebraska; we don’t have to provide incentives to get people to come here."

One of the strongest arguments South Lake Union supporters make for the big public investments is that revenue generated there could be put into the general fund and spent improving other neighborhoods or restoring services that have been cut.

Now, critics fear at least some revenue generated in South Lake Union will stay there instead of benefiting the rest of the city.

"It would set an extremely dangerous precedent," said John Fox, an outspoken critic of the South Lake Union plan.

"Instead of contributing revenue to the general fund, the money generated in South Lake Union could be funneled back to that neighborhood, and none of it would go to benefit the poorer neighborhoods," Fox said.

City officials and Vulcan representatives have been meeting with members of the Coalition for Healthy Communities to discuss developing a package of benefits for South Lake Union. The meetings are private and those involved have agreed not to discuss details with the media.

However, the benefits being talked about in general include affordable housing, transportation, jobs and environmental issues.

Community benefits packages have been negotiated with major developers in other cities, particularly with big-box superstores.

"I am aware of the critics and their concerns. The coalition has the same concerns; that’s why there was interest in organizing this group," said Alice Woldt, a spokeswoman for the coalition. "When you have a large property owner who has the ability to develop a very high-end neighborhood, there is a responsibility on the part of the neighborhood and the city to make sure what happens there is balanced and that people aren’t forced to leave the neighborhood en masse."

The coalition started meeting about a year ago. Siobhan Ring, director of the Tenants Union, said her group dropped out of the talks.

"We didn’t see Vulcan coming to the table with any credible plan to create or preserve affordable housing in the neighborhood," Ring said.

Already too late?

Especially troubling to some are reports suggesting that it is too late for Seattle to become the nation’s leading biotechnology center.

Reports and studies place Seattle in fifth or sixth place nationally behind San Francisco, Boston, San Diego and Raleigh-Durham, N.C.

"Seattle is No. 5 on the list, but it is a distant 5, and it is starting to slip," Leroy Hood said during a forum at Seattle City Hall earlier this month.

Hood co-founded nearly a dozen biotechnology companies, including Amgen, Rosetta, and now heads the Institute for Systems Biology in Seattle.

He said Seattle is in a strong position to become a global leader in biotechnology, but, together with the state, needs to embrace the vision and act quickly.

"This window is not forever," he said.

Some City Council members and Nickels are attending a leadership conference in Vancouver, B.C., this week sponsored by the Greater Seattle Chamber of Commerce. The topic is biotechnology. Specifically, participants will discuss ways of staying ahead of the competition.

Last night a crowd of 500 people gathered at the Naval Reserve Center, including most of the City Council, representatives from the mayor’s office and Vulcan and biotechnology companies. Ed Geiger, president of a neighborhood group in South Lake Union, said South Lake Union is designed for serendipity.

"We can compete with anyplace in the world for biotechnology if we design a funky, artistic, sustainable community that lets scientists bump into each other at coffee shops, grocery stores or while dropping off the kids at day care and exchanging ideas," Geiger said.

Dozens of other cities throughout the country are rushing to lure biotech companies, even though the industry is yet to prove itself as a money-maker for most cities.

Joseph Cortright, a Portland economist and authority on biotech centers, has warned cities against gambling on biotechnology.

The rewards are small, he says.

When biotech companies are successful they pay relatively high wages to highly skilled workers, but that can take years, he said.

According to a report by the City of Seattle Office of Economic Development last year, it costs $800 million and takes 10-15 years to develop one new drug.

And still other skeptics question the city’s interest in rushing into partnership with Allen.

Some of his other projects include the Experience Music Project and Science Fiction Museum in Seattle, Seattle Seahawks football team, the Allen Institute for Brain Science, the Portland Trail Blazers and dozens of other projects.

Earlier this month, Allen’s rocket ship made a recent successful launch into space. But last spring, his Oregon Arena, Corp., owner of the Portland Rose Garden Stadium where the Trail Blazers basketball team plays, filed for bankruptcy protection.

To some, Allen’s plans in South Lake Unionsound similar to the stalled entertainment district known as the Rose Quarter.Since the bankruptcy filing, the Portland Development Commission has put redevelopment of the Rose Quarter on hold.
COUNCIL MOVES

The Seattle City Council has taken a series of steps in the past four years to encourage development of South Lake Union, especially biotechnology. It has:

# Passed a resolution encouraging development of South Lake Union as a hub for biotechnology.

# Passed an ordinance changing building codes to be more favorable to research laboratory construction.

# Approved a multifamily tax exemption for South Lake Union, and some other neighborhoods to encourage construction of less expensive apartments.

# Released some public transportation money to study a proposed streetcar for South Lake Union and ways of collecting local improvement district taxes to pay for it.

There are still many issues to be considered in the coming year. These items are listed so far on the City Council’s South Lake Union legislative calendar, beginning this month and continuing through the first quarter of 2005. The council will consider:

# Approving funding for an environmental impact statement for proposed improvements to the Mercer Street corridor.

# Legislation allowing study and design of a new South Lake Union electricity substation.

# Changing the land use designation in South Lake Union from Urban Village to Urban Center. The new designation could mean denser development and more transportation funding for the neighborhood from the state.

# Enlarging the amount of mixed-use zoning in South Lake Union to allow more housing.

# Consider any items in the city budget proposals for South Lake Union.

# Possible legislation to approve streetcar development in South Lake Union and possibly plans to expand the route to other neighborhoods including the University District.

# Developing legislation for operation and maintenance of the streetcar.

# Consider possible proposals to form a local improvement district to help pay for the streetcar.

# Buy or approve land for construction of a new electrical substation.

P-I reporter Kathy Mulady can be reached at 206-448-8029 or [email protected]

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