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Growth is not a force of nature

Exhibit A is the case of developer Henry Liebman, whose strategy in Seattle's SoDo neighborhood wouldn't be possible without a lot of government help.
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The SoDo neighborhood of Seattle, seen from the Columbia Tower. (Wikipedia)

Exhibit A is the case of developer Henry Liebman, whose strategy in Seattle's SoDo neighborhood wouldn't be possible without a lot of government help.

Growth advocates, politicians, and even local greens argue that growth is unstoppable in the Puget Sound area. After all, who can stop the free market? The argument that flows from that is that we must do everything possible to manage and accommodate massive growth because it is a tsunami, to use onetime area developer and Seahawks owner Ken Behring's term. There's no sense in trying to staunch demand. But if growth is unstoppable, why is so much of our politics devoted to stoking, greasing, and boosting it? Whether it's tax breaks for Boeing, public financing of stadiums, widening freeways, or loosening height restrictions for downtown developers, our policies and legislation consistently focus on generating more growth, then asking the public to pay for it with more taxes, more subsidies, more capital investments. Of course, these can never keep ahead of the tsunami, so the pressure is always on for more. But the boom and development in Seattle is not a natural phenomenon. Like global warming, it's a manmade thing. And a man-manipulated one. We're so used to it, we don't often notice what's right in front of our eyes. However, in the last few weeks the veil has begun to lift in the case of Seattle's SoDo district. The newspapers have begun to write about Henry Liebman, a man who is the 900-pound gorilla of real estate in SoDo and the industrial areas of South Seattle. What the articles reveal is that Liebman, clearly a sharp businessman, is no accident. He's an entrepreneur who is taking advantage of a federal program designed to stimulate development. And he's using this program to be a changemaker. It's clear that he would not be in the game at this scale without government help. In the July 27 issue, Seattle Weekly's Brian Miller took a look at Liebman's proposal, through his company American Life, to turn the historic Alaska Building downtown into a Marriott hotel: Thanks to a 1990 act of Congress, rich foreigners can gain an "EB-5 investor visa," jumping ahead of the huddled masses, by investing in purportedly job-creating businesses. The program buys an affluent immigrant (plus spouse and unmarried children) two years' residency on a green card and, ideally, a glide path toward full citizenship. The country's largest beneficiary of this program to date is a Seattle real-estate fund called American Life Inc., which has purchased numerous properties in SoDo with EB-5 money and is now looking to fund the $85 million conversion of the Alaska Building in concert with the developer, Kauri Investments. Miller reports that "the GAO estimates that through 2004, immigrant entrepreneurs invested about $1 billion through the EB-5 program." Foreign investors can get in by ponying up as little as $500,000. The money is supposed to be used for creating jobs in "depressed" areas with high unemployment, but Liebman says the program is flexible. Where does the foreign investment go?: This wouldn't be the first time that EB-5 money was used to create lodgings for business travelers. The GAO reports: "Hotels and motels make up an estimated 19 percent of all businesses created by immigrant investors granted permanent resident status." Other EB-5 money goes into "manufacturing companies, real estate companies, domestic sales companies, farms, import/export companies, restaurants, and technology companies." But it's left to the EB-5 fund manager, such as American Life, to choose where to invest. Without the program pumping millions into Seattle real estate, Liebman admits he wouldn't be the "Mogul" of SoDo. As he told the Seattle Post-Intelligencer's Dan Richman in an Aug. 1 story: Sodo landlord Henry Liebman, that area's largest single landowner, says he couldn't have amassed as much property and wealth without money from foreigners. Those investors use a little-known government program to gain citizenship in exchange for their money, with which Liebman is buying up industrial real estate. So this massive investment, enabled by a federal program, is giving Liebman leverage to convert Seattle's industrial section into a higher-end zone ripe for commercial development. On Liebman's investment strategies, the P-I reports: Critics think his exclusive local participation in the federal immigration service's EB-5 program gives him an undeserved advantage over other prospective buyers. It's all the more unfair, they say, because it lets immigrants invest less to get a green card based on Sodo's high unemployment rate – a rate they say doesn't exist and never has. Liebman is also raising the traditionally affordable rents of Sodo's industrial tenants, causing some to consider moving away. That leads critics to say he is using the federal program to undermine a local government initiative: preserving industrial land for industrial use. So again, when people point to the changes in Seattle as a force of nature, remember that here is a government program utilized by one individual that is fueling growth and inflating prices with money that would not be flowing here otherwise. And it's transforming an entire section of the city in spite of the city's stated objectives. Liebman is setting up the dominoes and tipping them over as he sees fit. Liebman, of course, doesn't quite see it that way. While he admits he wouldn't be in the game without government help and foreign cash, he plays the old inevitability card in a July 20 story in The Seattle Times: Liebman says a break with the past is inevitable in Sodo because economic forces bigger than his business are causing "traditional metal-benders" to leave. "We don't view it as us driving anyone out ... We view it as replacing someone who is going to go anyway." Plus, Liebman says, he got encouragement from the city back in the mid-1990s: Liebman applied to create a Seattle regional center in 1996 and his proposal was backed by then-Mayor Norm Rice's economic-development director Mary Jean Ryan, now a high-ranking Nickels aide. And this isn't a case of Liebman shaking up one city. He's got bigger plans for repeating his successful formula elsewhere in metro Puget Sound, according to the Times: Liebman's company, American Life, didn't really take off until 2003, when legal issues regarding the program were resolved in federal court. In all, American Life has attracted 303 foreign investors, making it one of the top EB-5 participants in the country. He is applying to create regional centers in Tacoma and Everett. He will face some opposition. The Port of Seattle and the mayor's office are concerned with the transformation of the industrial areas. So are some unions. "Mr. Liebman's scheme is one of the more insidious moves to convert industrial properties in Seattle to commercial use," Dave Freiboth, head of the labor council, told the Times "We're going to marshal our forces to push back." Pushback. What a concept. Those concerned about growth ought to consider it. You may not be able to stop a tsunami, but turning off the tap at the source would be a good start.

  

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Growth is not a force of nature