Port Dracula

Using your tax dollars to drain the life from your community

By virtue of its unique status as a Port District under RCW 53, and the owner and operator of a Class I Airport, the Port of Seattle has a set of financial powers unlike any other regional government. And it has learned to wield these strategically to sell a variety of policies to the entire region. Many of these are highly coveted by regional leaders, despite the fact that these programs tend to make the Port stronger while actually weakening those same communities.

We do not impugn any motive to this, either good or bad. It may be that the Port truly believes it has the best interest of all parties in mind. But regardless, the Port sells their programs and community leaders are often even more eager to buy them, despite the predictable negative outcomes. This pattern of cooperation has been so normative it must now be seen as a form of seduction, which we refer to as economic vampirism. In the legend,¹Dracula must be invited in.

This is power

• As the owner of Sea-Tac Airport the Port is eligible for literally hundreds of millions of dollars in Federal grants every year.
• It has the authority to buy various properties using those funds under the authority of FAA noise mitigation programs.
• It is also a taxing authority, with power to raise over ³$120MM a year without going to the voters. ⁴The Port has almost unconstrained use of this Tax Levy. It uses a small percentage of this for community grants like tree plantings and apprenticeship programs. But the majority of this money is always used to repay the Port’s own borrowing costs, thus making their actual cost of money lower than virtually any other local entity, either private or public.
• Which comes in handy, because the Port is also in the real estate business. It can buy and sell land and either invest in development projects at a profit or lease the property or both.
• But at the same time the Port is itself exempt from most taxes.

Any one of these abilities is powerful, but they can also be mixed and matched to exponential advantage.

The Port can buy up properties with FAA money, then use property taxes from remaining homeowners to invest in a property development scheme on the now empty land, then lease the final building for ongoing profit. For the Port, almost all of that is exempt from taxes. So, over the long haul, the home city actually receives far less revenue than before the entire sequence began.

Two sides of the same street

Here are two specific examples from the Des Moines Creek Business Park, literally across the street from one another, along 24th Ave. in Des Moines. Similar square footage, building design, construction and use cases.

East Side: Bartells/Outdoor Research

Here is a building owned by a private developer on the east side of 24th Ave along 216th Street in Des Moines.

And here are the various taxes collected by King County, the top is the distribution, the bottom is the amount the taxpayer actually pays on that parcel.

West Side: Port of Seattle

Now here is a similar piece of property, directly across the street, on the west side of 24th Ave. It is also leased to private tenants. But this property is owned by the Port of Seattle.

And again, here is their property tax distribution and actual payments

 

And then there’s this…

The Port of Seattle is not only the property owner, it is also the landlord, which means lots of ongoing, market rate lease revenue.

 

Every quarter, the Port of Seattle gets $395,000 in lease payments from its tenants at the Des Moines Creek Business Park. $1,580,000 every year.

And that’s just one tenth the developed square footage along that block within the City of Des Moines. If you sum all the lease payments the Port receives in that area and all the property taxes it saves, the Port of Seattle obtains more than $8.5 million in annual advantage over similar buildings on the other side of the street. This is land that your Federal tax dollars paid for, as part of the Sea-Tac Communities Plan.

The Greater Public Benefit argument

The policy argument behind this arrangement has always been that the Port creates jobs and growth. The economic benefits it provides are so large–even for the residents under the flight path, these benefits more than compensate for the various negative impacts. Not quite.

One time money vs. Structural revenue

²This system creates very well-paid, but temporary construction jobs. It also creates a very healthy slug of one-time money for cities in the form of construction permits.

But once the building is done, the jobs at the new buildings tend to be not so great. And these workers are people who do not live in the host city. However as landlord, the ongoing revenue stays with the Port of Seattle.

Draining the life blood

Now, in the case of property buyouts, either from the FAA or WSDOT, this is particularly difficult for both cities and schools because every parcel of land the Port buys means less property taxes for the city and the school districts. Forever.

The Port pays once (for the property buyout, then for the permit) but the ongoing structural revenue that was going to the city and school every year has now been transferred to the Port. Get it? Every property they buy, makes them stronger and the municipality/school district weaker. Forever.

What was supposed to happen

The FAA acknowledged the vicious cycle between airports and communities in 1973. Airport operators never bothered with communities before acting. They would make the cost/benefit analysis that it was better to act and wait for communities to sue. Worst case scenario? Communities were successful and the airport would adjust. If not, the airport paid no cost.

The Sea-Tac Communities Plan of 1976 was meant to break that cycle. The idea was to develop an equitable system whereby mitigation could be negotiated in advance. And as operational revenue increased, communities would share in some form of ongoing compensation.

Ironically, the City of SeaTac achieved, through their Inter-Local Agreement with the Port, what the entire area was meant to have–a system of ongoing, predictable, structural revenue to the entire region.

What did happen

But what happened instead for every other city? Small grant programs, funded with our own property taxes through the Port’s Property Tax Levy. These grants are designed to promote ‘economic growth’, the Port’s stated mission. But those grants are literally the Port redistributing our own taxes; and almost always for projects which ultimately will also benefit the Port.

Case study

The Des Moines Creek Business Park above is instructive. It was too seductive to pass on for the City of Des Moines, which desperately needed the immediate, one-time revenue the project would provide. And having been completed, from the outside it appears to be a thriving development.

But the long term results are significant:

• The project cleared hundreds of trees, replacing dozens of acres with impermeable asphalt.
• The land generates no revenue for Highline schools.
• And the only revenue it generates for the City of Des Moines is a few thousand a year in Utility Taxes and Leasehold Excise Tax. Compare that with the hundreds of thousands in taxes paid by the commercial property owner just across the street.
• Almost none of the employees at any of these buildings live in Des Moines and almost none of these businesses generate knock on revenue for surrounding shops and restaurants.
• But the Port is able to lease those buildings at the same market rates as every other commercial developer.

However…

Governments like Des Moines can also lease property to private tenants–and still generate that same leasehold excise tax benefiting the entire region. If a city could develop such projects, they would not only generate structural revenue, but also far more tax revenue to benefit the entire region.

The project is literally “the rich governments get richer.” It not only damaged Des Moines and benefited the Port, it was nothing the City itself could not have done, given the proper ‘hand up’. If the Port had truly wanted to provide ‘economic development’ for Des Moines, it would have provided that ‘hand up’. But both the City and the Port instead chose a hand out.

Economic Vampires

This is why we find the Port’s real estate development so harmful to the communities. It is built on trickle-down economics–the notion that these projects will somehow benefit the local economy to such an extent as to outweigh the loss of property tax revenue. Completely. False.

In fact, over time it has actually weakened municipalities like the City of Des Moines. We call it ‘municipal vampirism’ because the life blood of any city is property taxes. It is the key to structural revenue and maintaining good public schools. On top of the noise and pollution, if that life blood is drained, few cities or school systems can hope to thrive.

The Port’s system of grant-based compensation system sucks out that essential energy in order to make itself stronger.

The most insidious part of this whole strategy is that the Port is able to tout all its great work for King County on all media outlets. And since almost no politician or union boss can resist the one-time money and “the golden shovel” photo-op; the Port, like The Count, has usually had no need to ‘hard sell’ or compel anyone to do anything.

Dracula is always invited in.

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¹Bram Stoker’s Dracula, chapter 18. Dracula’s powers are seductive, but ultimately, all his victims must ask to be taken.

²In fact, most cities recognize the moral hazard in this incentive structure and set aside one-time money for their own long-term capital projects. Otherwise, the urge to use one-time money to pay for salaries can have devastating consequences.

³To be fair, the Port has almost never gotten close to that maximum. The 2023 Budget, allocates $82MM. Keeping that number below 70% of the maximum in recent years has been touted as the Port showing sensitivity. They also are fond of pointing out what is, in their mind, the minor impact for each homeowner.

⁴Contrast this with cities which must go to voters for almost any tax increase. And even then, generally must ask for small, specific purpose taxes.