A deal between the city of Seattle and Vulcan, Paul Allen's real-estate firm, is key to Mayor Mike McGinn's proposal to allow significantly taller buildings in the bustling South Lake Union neighborhood.

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A deal between the city of Seattle and Vulcan, Paul Allen’s real-estate firm, is key to Mayor Mike McGinn’s proposal to allow significantly taller buildings in the bustling South Lake Union neighborhood.

In a proposed deal now before the City Council, Vulcan would give almost an acre of property near the lake to the city for affordable housing and other “extraordinary public benefits.”

In exchange Vulcan, the area’s largest landowner, would get to build three towers about 24 stories tall near the edge of the lake.

“It’s a once-in-a-lifetime opportunity to create affordable housing and social services,” said Vulcan spokeswoman Lori Mason Curran.

But at a public hearing Wednesday evening, opinions about McGinn’s plan were split.

“To have this drop on the day of the hearing with its complexity and the secrecy it’s been held under is really troubling to me,” said Peter Steinbrueck, a former City Council member and current lobbyist for a neighborhood coalition.

The idea behind the deal, according to Mason Curran, is this: Nonprofits in Seattle struggle to find space they can afford. Vulcan would transfer to the city 37,600 square feet of undeveloped land on a block bounded by Broad and Republican streets and Dexter and Aurora avenues North.

The city could add that chunk to a piece it owns to create a full block available for public benefit, such as affordable housing and job training.

“This is an opportunity to get land upfront to make innovative, creative things happen,” city Planning Director Marshall Foster told the council Wednesday.

Led by Vulcan and aided by about $300 million in public money, South Lake Union has been transformed from a warehouse district into a high-tech beehive with thousands of new Amazon.com workers. The tallest buildings there are 160 feet.

Also under McGinn’s long-awaited proposal, towers could rise to 400 feet, roughly 40 stories, on blocks just north of Denny Way. That strip includes undeveloped blocks owned by Vulcan and The Seattle Times Co.

Council members peppered Foster with questions about the Vulcan deal, which he said could add 400 affordable apartments to the area called Block 59. The council might act on the deal next month; council President Sally Clark said she hadn’t made up her mind about it.

Underlying such a deal is the city’s policy to allow buildings to rise to certain heights if developers contribute a prescribed amount of money to public benefits such as affordable housing.

In this case, the land transferred to the city — with an estimated value of $10 million to $12 million — would count as a credit toward fees Vulcan would pay to erect condo or apartment towers up to 240 feet tall on three lakefront blocks it owns between Valley and Mercer streets.

The value would be determined by appraisals, but the credit would be capped at $12 million.

Foster likened the credit to a “Starbucks card” that Vulcan could tap as it moved forward with projects. The company could use the credit on other parcels it owns, in addition to the lakefront ones.

If Vulcan builds the three lakefront towers to 240 feet, it would owe the city an estimated $12 million in so-called incentive zoning fees that would be paid for with the land swap, according to Mason Curran.

One advantage of the deal, Foster said, is the city could get the value of the zoning fees soon rather than years from now when Vulcan might build the towers — and when the costs of land for affordable housing have increased.

Vulcan also would pay the city $3.25 million as part of the deal. The city could use that to purchase two parcels on Block 59 not owned by the city or Vulcan, Foster said; or the city could use the money to otherwise prepare Block 59 for development.

The city expects to seek a private partner to help it develop Block 59, Foster said. One potential concept is a 160-foot tower with market-rate condos or apartments.

That, in turn, could help finance several seven-story buildings for affordable housing, he said.

Wednesday’s hearing packed the City Council chambers.

Supporters of the proposed zoning change included environmental, labor, transit and bicycle advocates. With its proximity to downtown, South Lake Union is an ideal place for more density, several said.

“It’s a fairly new place in flux,” noted Ben Schiendelman, a transit advocate.

Opponents of the rezone voiced concerns about blocked views, increased traffic and shadows cast by the towers looming over Lake Union Park.

Neighborhood resident John Pehrson questioned the need for dramatically taller buildings, particularly near the lakefront, saying that exciting growth has occurred under the existing zoning.

About 2,600 new housing units are being built or designed under the current zoning, said Pehrson, a retired engineer.

He also predicted McGinn’s plan would alter the character of the neighborhood, where about 30 percent of the housing is considered affordable, and make the mix of residents more affluent and less diverse.

“We don’t believe there’s a plan for keeping that diversity when building 240-foot towers,” he said.

Steinbrueck, who has not ruled out running for mayor next year, summarized the feelings of some opponents. “Let’s get this right. This is not about growth and density, but the look, feel, and fit of future development.”

Bob Young: 206-464-2174 or byoung@seattletimes.com