December 7, 2007

Pros and cons of the Industrial Jobs Initiative

Pro: Legislation will save family wage jobs



City of Seattle

Seattle’s industrial businesses, and their family wage jobs, need a home. That may sound strange when you see our busy industrial waterfront and our many diverse industrial businesses. Or when you learn that last year Seattle industries had $31 billion in revenues, a 5 percent vacancy rate, average wages of $55,500, and provided nearly one-quarter of Seattle’s jobs. It’s a great success story, one that resonates especially in thousands of homes that depend on these family wage jobs.

Seattle’s industrial areas provide good-paying jobs for long-shore workers, truckers, machinists, welders and electronic equipment assemblers. Great Seattle industrial businesses such as McKinstry, Nucor Steel, MacMillan-Piper, Seidelhuber Iron and Bronze Works, and Ballard Oil thrive in these areas. The Port of Seattle’s seaport depends daily on the warehousing, trucking, processing, forwarding, and fueling businesses that reside in our industrial centers.

The Industrial Jobs Initiative
Mayor Greg Nickel’s Industrial Jobs Initiative contains land-use recommendations that limit office and retail use on industrially zoned property. The initiative seeks to:

• Reduce office and retail uses in industrial general (IG) zones from maximums of 100,000 square feet of office and 75,000 square feet of retail to 10,000 square feet per site for these uses.

• Reduce density of office and retail uses in IG zones from a 2.5 floor area ratio (FAR) to 0.5 FAR.

• Clarify the definition of research-and-development in the land-use code to ensure the continued growth of R&D laboratories in industrial areas.

• Consider changes in zoning designation for industrially zoned sites along the edges of the industrial centers (Duwamish and Ballard/Interbay MIC), and industrially zoned sites not in the manufacturing and industrial centers (MIC).

• Allow Starbucks to expand its headquarters in the Duwamish MIC with the potential for increased FAR.

But our industrial base, the home for these jobs and businesses, is threatened by commercial development and land speculation, by businesses that can thrive in our commercial districts, where industry cannot go. Current regulations allow up to 100,000 square feet of office and retail development on industrially zoned land. That is simply too much. It means industrial businesses can be squeezed out of industrial areas by retail and big office buildings.

In Sodo, for example, industrial businesses are in danger of being squeezed out by increasing land costs and lease rates that the commercial market can afford, but that the industrial market cannot. Currently, the city has applications for 745,000 square feet of new office and retail development in our core industrial areas — a threefold increase from 2006. It will continue — unless things change.

My Industrial Jobs Initiative responds to this threat. The initiative, which is before the City Council, will lower the amount of retail and office uses to 10,000 square feet in our most intensive industrial zones. These limits will help us regain the balance needed to protect family wage jobs and a dynamic economic engine. Many of the long-time commercial businesses that serve industrial users are less than 10,000 square feet and will not be impacted. The current commercial uses over 10,000 square feet will be allowed to remain.

The council should act now on the issue. This is no rush to judgment — we have been studying it for several years. In the past two years alone, the Seattle Planning Commission and the Department of Planning and Development have reached out to the public, businesses and property owners, unions and other cities to figure out the best way to protect these good-paying jobs.

Here’s what we learned: Portland protected industrial jobs by limiting office and retail to 3,000 square feet; Vancouver allows office and retail uses only when affiliated with primary industrial uses; and Chicago has set similar limits in its manufacturing areas. These cities say it is working and good-paying industrial jobs are growing with no loss in real estate values. These industrial businesses have a secure home.

My initiative will continue to allow dry and wet research-and-development labs outright in Seattle’s industrial zones without size limits.

My initiative allows an unlimited amount of affiliated office and retail space for industrial uses, even if it is not located on the same lot.

I read with amusement the characterization in the Seattle Post-Intelligencer that industrial jobs are so last century. Annual revenues of $31 billion? One quarter of Seattle’s jobs? Walk into a machine shop in Seattle today and you will see the latest technology at work — innovation with an industrial flavor.

I want the city to be a partner, not a problem, for all businesses in Seattle. Streamlining permits, increasing utility service and adding office and retail space in downtown and the Denny Triangle are helping commercial businesses thrive. We’re helping neighborhood business districts through zoning changes that invite and support commercial uses in our neighborhoods. The results are nothing short of spectacular. The commercial sector is thriving where it was intended to grow, and where the current infrastructure supports commercial uses.

But industry can’t go downtown or to our neighborhood business districts — it needs a home that allows noise, and tolerates plenty of trucks and rail activity. It needs a different kind of infrastructure. And it needs the security of knowing that industry is competing with industry, not with commercial uses that can do well elsewhere in Seattle.

We have one chance to get this right. I fully believe Seattle can compete in this global economy in all sectors, including the industrial sector. Retail, biotech, software, aerospace, online services — you name it — Seattle is winning its place at the table. Our industrial businesses are also competing successfully. The City Council must now do its part to secure industry’s home and keep these good-paying jobs and this important part of our economy alive and growing.

Greg Nickels is mayor of Seattle.

Con: Legislation is an economic roadblock



Special to the Journal

This is serious business. The Industrial Jobs Initiative, as proposed by Seattle Mayor Greg Nickels, is an attempt to severely limit the uses of approximately 5,100 acres of industrially zoned land in Seattle. The value of this land approaches close to $20 billion.

Radically restricting the uses of this land ensures a huge drop in both the demand for this land and the attendant economic activity that comes from this land. Why sabotage a finely tuned economic engine? Is this legislation proposal based on faulty intelligence? Is it the indulgence of the union vote? Or likely a combination of these two items? I don’t know the answer to this question but I do know that once the facts are presented accurately, it will be unlikely that the City Council will give the green light to this economic roadblock.

Industrial users of this land do make a significant contribution to the Seattle economy. I come from a union family and fully appreciate the importance of protecting workers’ rights and jobs. Those of us who oppose the mayor’s initiative to restrict the use of this land by municipal fiat recognize that some of this acreage should be set aside for certain traditional industrial and maritime uses that are still viable economic entities. The notion that old Joe Hill, Dave Beck and their packed union halls are still as relevant to Seattle’s 21st century economy as they ever were is ludicrous. As far as economic horsepower, those veritable names have been emphatically replaced by the likes of Microsoft, Real Networks, Google and many other high-tech firms in the greater Seattle area. The wheel turns.

The city of Seattle, in attempting to reinforce support for the mayor’s initiative on limiting industrial land’s usage, uses numbers that appear to be based on conjecture. An example of this, purposeful or not, is that industrial jobs provide average yearly incomes of $55,000. That number assumes, with a 40-hour workweek, an hourly rate of $26.44 with two weeks of paid vacation. A partial survey shows something much different: manufacturing employees in the Sodo district, are starting out in the $9-$10 per hour range (approximately $20,000 per year) and climbing to $11 an hour after a few years.

Another example of this presumptive thinking is the following by Deputy Mayor Tim Ceis in a letter to the City Council:

“By clarifying that industrial land is for industrial uses, we will encourage re-investment by existing businesses and encourage a broader diversity of industrial users to set up shop.”

That’s hokum. A major reason why so many industrial users have left Seattle is because they simply cannot assemble enough contiguous acreage to ensure an efficient functioning of their day-to-day businesses. A very recent search of the Commercial Brokers Association industrial land inventory for Seattle shows virtually no 1- to 10-acre parcels available for sale, let alone the desirable larger parcels needed by bigger industrial users.

My question for Mr. Ceis is: What are these phantom industrial users going to invest in if there isn’t any land to invest in? With $20 billion of land at stake and a vast amount of potential economic growth that can flow from the efficient use of this property, it is unsound the mayor would permit such unverified data, resulting in flawed reasoning, to be used in defense of this industrial land’s initiative?

The planning commission that supplied the mayor with inaccurate facts and figures has failed this basic research task. I would challenge the mayor to use an independent and competent researcher such as the University of Washington to gather the necessary data before attempting to bring about serious change to Seattle’s zoning rules and regulations. Just as one cannot imagine 52-foot tractor/trailer rigs lined up in the middle of New York City or foundries pouring bronze molds in downtown San Francisco, one shouldn’t expect these activities to be taking place in close proximity (read: Sodo) to the middle of downtown Seattle in 2007 and beyond.

These types of companies can, and do, conduct business in the heavily industrialized areas of South Park, Kent, Auburn, Sumner, etc., where land is much more affordable and in far greater supply.

Remember South Lake Union prior to the positive, and simply mind boggling, transformation we are witnessing today? The invisible hand of the marketplace proved that there was a much higher and better use of that property than industrial usage. The wheel keeps turning.

I was involved in a transaction in Sodo a few years ago. There was a particularly rundown and vacant eyesore of a building on First Avenue South that a local investor asked me to see about helping him buy. It has taken several years but the building has been totally renovated and tenanted with a national franchise that sells and installs windows for homes and businesses. This piece of property now provides five times the amount of real estate taxes as it previously did. Not only does the building enhance the neighborhood aesthetically, it now employs 47 people in this once useless and vacant building.

Vince DeLuca is an investor in a number of properties in Sodo. He has been in the commercial real estate business, specializing in industrial properties, for 27 years.

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