The Seattle Times reports today that the city of Bellevue plans to hire an investigator to look in to Bellevue City Council member Kevin Wallace’s business dealings, in his capacity as president of Bellevue development company Wallace Properties, with GNP Railway, a company that wants to run freight and passenger trains along an abandoned BNSF rail corridor through Bellevue.
Wallace Properties signed an agreement committing to raise $30 million in stock to help fund and expand the railroad. Wallace did not disclose the agreement to the city of Bellevue or his fellow council members. The agreement would have also made Wallace responsible for developing and acquiring land along the route, and included a commitment from Wallace to contribute $500,000 to the joint venture. That agreement fell through when GNP filed for bankruptcy in February.
As PubliCola first reported early last year, Wallace owns numerous properties with his family along the rail line, and has pressured Sound Transit to relocate its East Link light rail to the corridor (the so-called B7 alignment). If the line were moved to the BNSF right-of-way, Wallace would be in a position to build lucrative transit-oriented development along the line, as he has near the Northgate Transit Center in Seattle.
Wallace went on to be main council proponent of a $670,000 study of the alignment, known as the B7 route. which Sound Transit opposes because it is longer, more expensive, would take longer to build, would require a new park-and-ride lot, and would pass through the Mercer Slough, a protected wetland. At no time did he disclose the agreement with GNP to the city of Bellevue or his fellow council members, despite the fact that he stood to benefit financially from the agreement. The council will decide in April whether to contribute additional funding to the study.
Wallace now maintains that the bankruptcy rendered the agreement “water under the bridge”—saying, in effect, no harm, no foul, because his failure to disclose the agreement no longer matters now that GNP is bankrupt.
Here’s something the Times didn’t report that makes the Wallace-GNP agreement and subsequent nondisclosure even more troubling: Had the deal with GNP gone through, Sound Transit might have had to pay to use the company’s right-of-way, because freight railway-use rights are considered “superior” to passenger rail’s. For example, Sound Transit paid BNSF $300 million to run two Sounder lines a day between Seattle and Everett.
Additionally, any new uses of the corridor add construction costs—for new tracks, widening the BNSF easement to allow both lines and a new trail to coexist, etc.—which GNP would probably have expected Sound Transit (that is, the taxpayers) to pay. If Wallace was a partner with GNP, he could have stood to directly benefit from payments from Sound Transit for GNP’s easement.
Another question that will likely come up during the investigation is whether Wallace used city of Bellevue staff time to do research that could have financially benefited Wallace’s prospective business partner, GNP.
We have a records request out to the city of Bellevue for information that could shed light on that question, and a call out to Wallace.
