On Monday, September 27, the Council unanimously adopted an ordinance approving an agreement with the Museum of History and Industry (MOHAI).  MOHAI and the City have been working together to plan a relocation of this important cultural resource for many years, and that cooperation has resulted in a plan to relocate MOHAI to the South Lake Union Armory.

No City of Seattle General Fund dollars will be used for the move of the museum, the rehabilitation of the Armory, the transformation of the Armory into a museum, or the ongoing operations of the museum.   Instead, the City will save general dollars by having MOHAI take on the responsibility of fully restoring and maintaining the historic SLU Armory, a building that the City owns and cannot afford to renovate. Once the museum opens, an annual maintenance contribution will be made, but MOHAI’s overall responsibility for maintenance will be significantly greater than that contribution.

MOHAI’s financial plan for the SLU move and the transformation of the Armory involves combining private funds with funds from the sale of its former expansion space near the Convention Center and mitigation funds received from the State, which is taking the current MOHAI building and land for the SR 520 project.   No new city capital funds will be used for this project.

At the city’s request, MOHAI was able to successfully negotiate with the State to secure $40 million in compensation for the existing museum building (originally built with private funds), almost half of their $85 million budget for the relocation.  This is midway between the estimated value of the shell building ($15 million – what the City would have received) and MOHAI’s valuation of the functioning museum ($57 million).

The City also assigned to MOHAI the projected revenues from the State’s use of the land under the building, which the City owns, anticipating that MOHAI could also negotiate more compensation based on the museum use than the City could.  MOHAI and the City agreed that this was likely to return about $7 million to MOHAI.

Late last year, the State indicated that they wanted to purchase, rather than use via a construction easement, the land.  MOHAI and the City negotiated a new agreement, assigning 50% of the proceeds to the City.  At the request of the Mayor, MOHAI again renegotiated the agreement this spring, increasing the City’s share to 60% and capping the MOHAI share at the planned $7 million.  The City’s general fund will benefit as a result.  MOHAI is also negotiating on behalf of the city (and at MOHAI’s expense) compensation for  the City’s loss of parkland use, which is expected to result in several million dollars in revenues for the City’s general fund.

MOHAI will take on a City liability in the South Lake Union Armory, saving taxpayers the $18 to $20 million the City estimates it would need to spend to make the Armory usable, and transform it into an asset.  MOHAI will receive no general fund money, and in fact the already renegotiated agreement will benefit Seattle’s general fund.  All funds that MOHAI receives will be State gas tax or SR 520 toll revenues that can only be used for State transportation purposes.

Recognizing the challenges that the recession places on Seattle’s budget, MOHAI has agreed with the Council to loan the City $8.5 million in 2011 and 2012.  These funds can be used for general fund purposes and will help us support essential public safety and human services programs.  Under our agreement, the City will pay MOHAI back in future years when the construction money is needed and the economy and the City’s budget will hopefully have recovered.

Council approval of these agreements with MOHAI is a win-win for all of us.  Beyond that, it keeps faith with the series of agreements that the City and MOHAI have negotiated over the years, the final version of which was signed by the Mayor’s staff in June.