The Big Short
Wednesday, February 27, 2019
THE BIG SHORT: In a quiet meeting last week, groundwork was laid for the biggest swindle and public asset heist in state history.
The Bellingham Planning Commission considered a series of amendments to the Waterfront District Subarea Plan that will realign the street grid and remove building height and setback requirements for a wall of condos. Clandestinely, the changes also switch out planned view corridors in exchange for a rather fanciful view imagined from the roof of a massive (but nonexistent) parking garage that will almost certainly have to be constructed with public subsidy.
The amendments are sought by Harcourt Developments LLC, the under-performing master developer, as tee-up to a land sale that could flip our consolidated public waterfront into the hands of a private developer.
Scarcely 35 citizens attended the meeting and only a handful spoke, as public enthusiasm for the waterfront fades from memory. Fortunately, the Planning Commission asked cogent questions about the plan amendments and understood how substantially they veer from what was approved following years of lengthy public process.
The city’s meeting notice reads, “Amendments include new alignment of roads, parks and view corridors and other text revisions to reflect changes that have occurred since the plan was adopted in 2013.” This is the city admitting deviations from that plan have already occurred, which calls into question the very purpose of the plan and its covenants and assurances.
In 2006, the Port of Bellingham purchased the former pulp mill site from Georgia-Pacific for $10 and agreed to remediate the contaminated property and adjacent waterway at public cost. Georgia-Pacific Corporation essentially skipped free of cleanup costs.
Together, the Port and City of Bellingham have spent well over $60 million to clean the site, cut in roads and parks, and plan the area for future redevelopment.
In 2015, the port executed a master development agreement with Harcourt that included a completion schedule for a series of projects, including the Granary and an additional building—the latter underway by 2019. That schedule imagines that up to a half a million square feet of new construction will be erected a mere ten years hence. Unlikely! The master development agreement also provides terms under which Harcourt may purchase the property.
As the Bellingham Herald reported in 2015, “roughly 19 acres would be sold in parcels as projects proposed by Harcourt, at a price of $20 per square foot, an amount port staff say was fair based on appraisals of the contaminated brownfield site. The value per square foot would go up 3 percent per year.”
The property was appraised at the time of the agreement at $40 per square foot, or $9.7 million. Harcourt could obtain the property for little more than half of that amount. Commercial, non-waterfront property recently sold downtown for upward of $70 per square foot.
The proposed parking structure is not part of the original master development agreement timetable and, as such facilities are not famous sources of cash flow for private business, will likely need to be “encouraged” at public cost. No one has agreed to build it, so the public must. Else suffer the loss of another view corridor in a realigned street plan with crimped setbacks.
It is worth returning again to the fundamental assumptions underlying the master development agreement—that an outside master developer would bring considerable capital and world-class professional development standards to the project. The Irish developer has produced neither the pot of gold nor the rainbow; and even their Belfast projects have stalled.
It does not take a financial wizard to recognize that this shell company could acquire Bellingham waterfront property at well below market value and immediately flip it to another distant buyer for a considerable profit. The public, meanwhile, which has invested millions in a consolidated marine property, will be out more than $60 million and have lost substantial control over the future of the city’s central waterfront.
At least partially aware of their master developer’s imperfections, the Bellingham City Council in 2016 rejected Harcourt’s low bid to construct the new Whatcom Waterway park as non-responsive to the city’s bid procedures and state labor requirements.
Harcourt principal Pat Power put on a good show at City Council this week, outlining the assortment of their speculative proposals—“pretty pictures,” as Council President Michael Lilliquist described them.
Rather than capitulate to a heist (to say nothing of actually sponsoring and endorsing it in an application as lead agency to the planning commission), port commissioners should act to limit their agreement with Harcourt.
Happily, our current elected commissioners—none of whom have any history with this plan—seem aware of both the potential for a heist and its triggers. However, they also appear under considerable pressure to move the property off of the port’s ledger in a land sale to a private developer.
Commissioners have established a series of near-term performance standards to more closely monitor the progress of their master developer—project by project, acre by acre.
We stand at a moment of opportunity. Gone are the cries to put this land productively back on to the tax rolls (no one even talks of this anymore). Gone even are the underlying assumptions of dense, high-end levels of development and trades in service to a marina (it is not going to be built).
Time for a new plan. But until then diligence is required to understand the snares and deadfalls represented in these amendments. They are in service to a master development with no master.