Seattle’s city auditor will investigate a real-estate-development incentive program at the request of City Councilmember Mike O’Brien, who says planners were ready to let a hotel builder contribute less than required toward the city’s low-income housing fund.

Share story

Seattle’s city auditor will investigate a real-estate-development incentive program at the request of City Councilmember Mike O’Brien, after he learned planners had been ready to let a hotel builder contribute millions of dollars less than required toward the city’s low-income housing fund.

The planners have reversed course, saying they made a mistake, while the builder is calling the case a false scandal cooked up by a labor union as part of an ongoing conflict.

O’Brien and Councilmember Kshama Sawant stood Tuesday with members of the Unite Here Local 8 hotel-workers union and the Alliance for a Livable Denny Triangle, a neighborhood group, to question whether the Department of Planning and Development (DPD) is regularly letting developers off the hook.

The DPD administers Seattle’s incentive-zoning program, which allows developers to build extra floor space when they pay fees into the city’s low-income housing fund.

“Did the planners follow the process properly here and is the process designed to give us the outcome we want?” O’Brien said. “My concern is that it may not be.”

R.C. Hedreen Co. — the developer behind Grant Hyatt Seattle, Seattle Hilton Hotel and other downtown hotels — hopes to build a new 45-story hotel between Eighth and Ninth avenues and Stewart and Howell streets.

It would replace a former Greyhound bus terminal, an office building and a 106-year-old apartment building with 48 units and several mom-and-pop stores. That building’s apartment tenants have been evicted. Their last day to move was Tuesday.

Hedreen has applied for a pair of land-use permits, one for each of two development alternatives. The first would involve taking over the alley that runs through the block. It has yet to be approved because the City Council must sign off first. The second received conditional approval from the DPD last October.

That approval was partly based on the developer treating the entire square block as a single lot. Local 8, which has been warring with Hedreen for years, banded with the Alliance to object, arguing that the block consists of two separate lots, with the alley running between.

Though Hedreen plans to build the hotel on just one side of the alley treating the entire block as a single lot would give the developer a larger floor-space allotment to use before needing to pay low-income housing fees. That’s because the allotments are based on a project’s footprint.

The difference between the one-lot and two-lot approaches, according to Local 8, would mean about $9 million versus $12 million in fees.

The DPD backtracked last December, saying it had mistakenly endorsed the one-lot approach and instructing Hedreen to modify the proposal.

Hedreen’s president, David Thyer, called the $12 million figure a guess because the project has yet to be finalized.

“We were aware of both approaches,” Thyer said. “We were pushing the one-lot approach as the result of direction from the city.”

“The union is using some of these numbers to … make it sound like we were defrauding the housing-bonus system,” Thyer said.

The union has been at odds with Thyer over organizing rights at his hotels.

A hearing examiner still needs to decide some issues that Local 8 and the Alliance appealed, so the DPD declined to comment on the case. A spokesman said the agency looks forward to working with the auditor.

Bill Fisher, 58, an airline worker evicted from The Bonair apartments, said his new monthly rent is $1,300, $500 more than before.

“This makes me worry about the city, because we’re going to get another steel and glass box with no character,” he said.