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Originally published September 26, 2007 at 12:00 AM | Page modified September 26, 2007 at 2:05 AM

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City told to buy substation land now

Seattle City Light should spend millions to buy three acres in South Lake Union for a new electricity substation that may not be needed...

Seattle Times staff reporter

Seattle City Light should spend millions to buy three acres in South Lake Union for a new electricity substation that may not be needed.

That's the conclusion of a city-funded consultant, who says it's prudent to buy two parcels for a substation "as quickly as possible" before available land becomes more scarce and expensive in South Lake Union.

The properties at issue are a Greyhound bus garage and a parking lot owned by Vulcan, Paul Allen's development firm.

Although Vulcan's sweeping makeover of the area will add thousands of jobs and apartments, that growth alone doesn't warrant a new substation, consultant Arne Olson said in his report last week to the City Council.

But when new development in the Denny Triangle and First Hill is considered, Olson says it is "reasonably likely" that a new substation would be the best way to handle City Light's long-term needs.

His report has the City Council weighing a high-stakes bet. If it guesses right, it could save millions for City Light ratepayers. If it's wrong, ratepayers could get stuck with a hefty bill.

"This is not a great risk and it's something we've carefully considered," said Councilmember Jean Godden. "The worst that could happen is we buy the property, hold onto it for a few years, and if we don't need it after all, chances are pretty good it would be worth more at that point."

Godden's City Light oversight committee may vote today to acquire the land, either by negotiation or eminent domain.

City Light estimates a new substation would cost roughly $150 million, with the bill spread among all ratepayers.

The city-owned utility has budgeted $40 million for new substation property, which includes substation planning and property costs, said Sung Yang, City Light's chief of staff. "It should not be viewed as what we are willing to pay for the land. It includes several things, not just pure acquisition assumptions."

The two properties, on Denny Way between Minor Avenue North and Yale Avenue North, have a total assessed value of $23.5 million, according to King County records.

Buying the properties does not mean City Light will end up building a new substation, Yang said.

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Working on a $300,000 contract with the council, Olson plans a more detailed study of City Light's projected loads and alternatives for increasing capacity. However, the decision to buy land, he said, "does not require a definitive conclusion that a substation will be needed at a given point in time."

Olson said delaying acquisition could leave City Light without a suitable site or a much higher bill.

One nearby property sold for $101 per square foot in February 2006 and resold a year later for $223 a square foot, he noted. In the last six months, Olson added, redevelopment projects have been announced for six of the 12 properties City Light had identified as potential substation sites, taking them out of consideration.

Olson calculated the possible losses and savings, using scenarios in which property values escalated over 10 years. The city would save money if it delayed a purchase and values increased slowly, Olson concluded. It would lose far more, however, if it waited and values escalated rapidly.

Vulcan has long wanted a new substation to feed the electricity needs of biotech firms and other tenants it wants to bring to the 60 acres it owns in South Lake Union.

Mayor Greg Nickels initially supported the idea of a new substation. But he backed off after City Light analysts said a city consultant had appeared to overstate projected electricity loads in the area. In 2005, City Light said new loads would be best met by investing in a new transformer bank for the Broad Street substation, which now serves the area.

But things have changed, Yang said. New zoning rules allow taller buildings. That alone could add 4 million square feet of office space and 4,000 condos and apartments to the downtown area, according to council analysts.

"There is an increasing pinch in the system, if you will," Yang said. City Light now expects the Broad Street substation to run out of capacity by 2024.

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

Copyright © 2007 The Seattle Times Company

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