City officials Wednesday put on hold plans to sell Pacific Place Garage, saying Seattle could lose about $21 million because of prepayment penalties on the outstanding bonds.
Members of the City Council Finance Committee directed city administrators to explore other options to the proposed $55 million sale of the garage to the owners of the downtown shopping mall.
The city is losing about $1.5 million a year on garage operations and already has loaned it about $4 million to cover expenses since 2011.
If it held onto the property until 2018, committee members were told, the city would be able to pay off the outstanding debt without prepayment penalties, but would continue to lose between $1.5 and $2.5 million per year.
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“We’re losing money now, but we’ll lose a lot more if we sell because of the penalty,” said Councilmember Tim Burgess, chairman of the Finance Committee, after the hearing.
Burgess said the city could ask the mall’s owners, Pine Street Group, to take over management of the garage in the interim. The owners have complained the city hasn’t done a good job of maintenance and upkeep.
Matt Griffin, managing partner of the Pine Street Group, said it would consider alternate proposals from the city, but that the city might not be able to legally turn over management of a publicly funded garage.
That’s because the city is constrained by the tax-exempt bonds it issued to build the parking facility, he said. Those can only be used for the public good, and Pacific Place, he noted, is a for-profit retail business.
“We’ll sit down with the city’s bond attorney and see whether we can fit in that box,” Griffin said.
When the garage sale was proposed in February, the city said it wanted to get out of the business — and the financial drain — of running a parking garage. And Griffin complained the city had been a poor landlord, slow to respond to complaints about aging ticket and payment machines, and deterioration.
Griffin renewed those complaints Wednesday, recalling that the purpose of building the garage was to compete with Bellevue Square, Southcenter and Alderwood malls by offering convenient parking in an upscale setting.
“It needs to be a Nordstrom experience,” he said, referring to the Seattle-based retailer’s reputation for outstanding customer service. “The way it’s been managed the last five to 10 years, it hasn’t been that.”
Wednesday, Katherine Schubert-Knapp, a spokeswoman for the city’s Finance and Administrative Services Department, reiterated that managing a parking garage is not a core city function. She said the department will continue to explore “how best to manage the garage and who is in the best position to manage it.”
The garage cost about $50 million to build in 1998 and was appraised for about that last year. But the city paid $73 million to the mall developers to build the indoor shopping mall and help revitalize a three-block area downtown. That included moving the Nordstrom flagship store into the building formerly occupied by Frederick and Nelson.
The city still owes $59 million on the garage construction bonds. The debt payments have increased over the past few years at the same time revenues plummeted with the recession and the drop in retail sales.
The city tried raising parking prices several times to offset the lost income, only to lose more customers.
It lowered prices in summer 2011, but the number of visitors didn’t rebound.
Information from The Seattle Times archives was included in this report.
Lynn Thompson: email@example.com or 206-464-8305. On Twitter @lthompsontimes