The Bill & Melinda Gates Foundation's search for land near downtown Seattle to build a large headquarters campus has led it to an unlikely location: 12 acres of city-owned...

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The Bill & Melinda Gates Foundation’s search for land near downtown Seattle to build a large headquarters campus has led it to an unlikely location: 12 acres of city-owned property next to Seattle Center.

A deal has not been finalized, but the world’s largest private foundation approached the city earlier this year about buying the roughly triangle-shaped site at Mercer Street and Fifth Avenue.

The property — a former Metro bus yard that once hosted a tent city for the homeless — had been considered expansion space for Seattle Center but is now used mostly for parking. It includes the Seattle Sonics’ practice gym and a popular skateboard park.

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In recent days, Seattle Center Director Virginia Anderson and a representative from Mayor Greg Nickels’ office have met with individual City Council members to talk about the proposal.

Although details remain to be worked out, sources said the foundation would pay between $40 million and $50 million — providing what could be a much-needed financial windfall for Seattle Center and the city.

The city would also build an estimated $20 million public parking garage on the property as part of the deal.

While Seattle Center is the foundation’s top choice, it is eyeing at least three other sites near downtown for the proposed campus, which would be built out over years and could reach 600,000 square feet.

“Each of the four parcels are at various stages of negotiations and Seattle Center is furthest along,” said Greg Shaw, the foundation’s spokesman. “It is a leading site, and we’ve had good cooperation from the city.”

The other properties include a large block along Dexter Avenue owned mostly by Casey Family Programs, a foundation started by United Parcel Service founder Jim Casey that aims to improve the nation’s foster-care system.

Casey has been buying property in the area since the early 1990s with its own development plans in mind. But the charity has recently considered selling the land instead.

The Gates Foundation is also talking with Paul Allen’s company, Vulcan, about a location in the South Lake Union neighborhood, possibly on land the company recently purchased from The Seattle Times.

The only property under consideration south of downtown is the so-called WOSCA site, on First Avenue South across from Qwest Field. Owner Greg Smith declined to comment. But he has been trying to develop the 8-acre former industrial site for years.

Vulcan also would not comment for this story. Casey did not return a phone call yesterday.

Expansion plans

The foundation caused a stir in February when word leaked that it was looking to expand and had started contacting major landowners around the region, including Smith and Vulcan. But Seattle Center and the Casey properties were not on the list.

A high-profile campus near downtown would mark a sharp departure for the foundation, which is using a $27 billion endowment from Gates to improve world health, education and libraries and help disadvantaged families.

The proposed campus would eventually be five times the size of its current headquarters on Eastlake Avenue, a leased three-story office building renovated in 1998. According to a written statement released last night, the campus would include environmentally sensitive buildings and a design that reflects its culture and mission.

The Seattle Center site is one of the largest undeveloped properties near downtown. The flat surface and lack of roads cutting across it make the site an ideal location for a campus-style development.

But striking public-private development deals is notoriously difficult in Seattle, especially if they involve city property. The foundation has tried to line up the political support it will need in City Hall before making its plans public.

Exactly when the City Council would take up the potential land deal is unclear. But the foundation hopes to make a decision on a site by early next year.

A spokeswoman for Nickels declined to discuss the proposed deal yesterday.

But sources familiar with the proposed deal say the city would build a parking garage on a portion of the site — estimated to cost $20 million — which would be used for Seattle Center events. The foundation would pay for a portion of the garage that would be used for the campus.

The Sonics’ training facility would also be sold, but the team has a lease on the building that runs through 2010, and would likely remain there until then.

The foundation also would like to raise the building-height limit on the property to at least 85 feet from today’s cap of 65 feet.

Another potential issue is the fate of a popular skateboard park on the property, which would have to be moved or closed.

“Regardless which site we pick, we would want to make sure the impact would be minimal and anyone affected, those issues would be resolved openly, quickly and completely,” Shaw said.

Center losing money

It’s unclear how the city would use proceeds from a sale. But the deal could throw a financial life ring to Seattle Center.

The Center has consistently lost money in recent years and its mounting deficit was projected to reach $9.4 million by the end of 2004, according to a report by Anderson, the Center’s director.

The losses, which began in 2001, have been mainly blamed on KeyArena’s sagging performance, owing to lackluster seasons by the Sonics and competition for luxury suites from Seattle’s new professional baseball and football facilities.

Anderson said earlier this year the 86-acre Center hoped to sell “peripheral” properties to staunch the short-term financial losses. In the first proposed deal, the Center hoped to recoup $5 million by selling a parcel, now used for parking, west of the Pacific Science Center on Second Avenue.

But a recent financial analysis by City Council staff said the Center’s forecast “remains grim” and “more drastic actions will be needed.”

In public budget meetings this fall, Anderson didn’t mention the potential property sale to the Gates Foundation. In the last week, however, she briefed individual council members in secretive meetings that council aides were not allowed to attend.

In the long term, Anderson has said, the Center must come up with a new business plan because of changes in Seattle’s professional-sports marketplace.

The Center has cut 51 jobs and trimmed its spending in recent years, but Anderson told the City Council earlier this year that the Center could not solve its problems by cutting costs.

“It’s got to be solved on the revenue side of the equation,” Anderson said.

J. Martin McOmber: 206-464-2022 or