"Mistake by the lake" owners receive permit for hotel, while Olympia council declines $200,000 grant for isthmus park

The public and private sectors want to redevelop the blighted isthmus between Capitol Lake and West Bay in downtown Olympia – but not everyone is on the same page.

The private owners of the Capitol Center Building - nicknamed by critics as the “mistake by the lake” - will move forward with plans to create a hotel on the isthmus. Meanwhile, the public is trying to nail down funding and a vision for a park next door to a building that some say the city should raze.

Views on Fifth Ltd. received a city permit May 27 to remodel the tower. The owners are still working with engineers and architects, and no timeline has been set for the hotel’s construction, said property manager Neil Falkenburg.

Located at 410 Fifth Avenue Southwest, the nine-story Capitol Center Building has been vacant since 2006. At one time, the building had been marketed as an office center, but that plan was sidelined by the recession, according to the owners.

“A development such as that in downtown Olympia would have a very positive impact,” Falkenburg told The Olympian, saying the hotel would attract more visitors who will spend money downtown. “Private developers are taking a risk and spending their money to try and make something happen.”

The public sector is also trying to make something happen on the isthmus. In 2013, the city purchased two vacant isthmus properties at 505 and 529 Fourth Avenue West for about $3.3 million. The Olympia Capitol Park Foundation is a citizen-led organization that’s lobbying the city to build a park on those parcels – and demolish the nearby Capitol Center Building.

“It sits right in the middle of the iconic view of the Capitol setting and Olympic Mountains,” foundation president Jerry Reilly told The Olympian. “It ought to come down.”

Reilly said the idea for a hotel at the site has been in the works for so long, he questions whether it will ever attract enough investors or finish navigating through all the red tape.

“I have no fault with them. They’re trying to cover their investment,” Reilly said of the building’s owners. “If this were easy, it would have been done a long time ago.”

Funding for a park on the isthmus also has its challenges. The Olympia City Council voted unanimously Tuesday to decline a $200,000 state grant from the Recreation and Conservation Office (RCO).

That money would have gone toward the city’s 2013 purchase of two parcels on the isthmus. However, the RCO grant comes with development restrictions – namely, that the money must go toward an outdoor park.

The city had initially sought a grant for $1 million, according to parks director Paul Simmons, who recommended that the council turn down the $200,000 until a more concrete plan is in place.

“If we were to accept the money, it would really limit our flexibility to do anything but build a park,” Simmons told the council Tuesday. “When they fund a park project, they want to make sure it stays a park project.”

In addition to declining the grant, the council also approved a request for a more in-depth look at the financial impact of developing the downtown area, including the isthmus.

Keith Stahley, director of planning and community development, updated the council Tuesday about isthmus scenarios. These scenarios – which explore possible park, housing and retail combinations for the isthmus - surfaced from two recent workshops with the Citizens Advisory Committee.

Stahley told the council that in order to move forward, several issues need to be resolved, such as height limits, park designs and more. During his presentation, Stahley also noted that a majority of attendees at the workshops were in favor of the city acquiring and demolishing the Capitol Center Building.

“Are we trying to create a neighborhood there, or are we trying to create a destination? That’s still somewhat up in the air as to what we’re trying to do,” Stahley told the council.

As a result of the workshops, the city is requesting a more in-depth financial analysis from consultant ECONorthwest. The Portland-based consultant is already working with the city to establish a Community Renewal Area (CRA), an economic development tool intended to address blighted properties downtown and expand the city’s power to initiate public-private deals. With the council’s approval, the city will pay a $7,500 for this extended study.

While the council members generally agreed Tuesday that declining the $200,000 grant was the right move, some expressed frustration at the process behind the isthmus proposals.

“It is sad that we spent so much staff time trying to get that money… but I understand we don’t want to be locked in,” Councilwoman Cheryl Selby said, noting more council members need an opportunity to provide input. “I don’t feel like it’s been a public process at all.”

Councilwoman Jeannine Roe said she understood why the $200,000 grant should be turned down, but suggested the isthmus conversation is veering off course.

“What if we had gotten the full million? Then where would be now? I imagine we wouldn’t be turning it back,” Roe said Tuesday. “We would be restricted to having it as a park, which was the original vision.”