A development group wants to build housing, retail stores and restaurants on a site between Harbor Avenue and Terminal 5, but Port of Seattle officials are dubious about having people living that close to an industrial site.

Owned by the Port of Seattle, the 20-acre site is a short distance south of Florida Street and east of Harbor Avenue. It's separated from Terminal 5's container-handling operations by numerous parallel sets of railroad tracks.

The site is zoned for industrial use and is temporarily being used to park 18-wheel tractor trailers.

The Port is interested in other ideas for using the publicly owned land. Three years ago, the Port Commission approved a market search for potential long-term tenants.

Two proposals were submitted. One is to store boats on the property.

The other proposal came from Sound Legacy Partners, a limited liability company that includes Nitze-Stagen and Co., developers of Union Station and Starbucks' headquarters. Another partner is Tau, LLC, a company in the landfill business.

Sound Legacy Partners want to build four structures on the site, each four to five stories tall, with retail businesses at ground level and housing on the upper floors. Some of the living units would be designated as "workforce housing" and leased at rates somewhat lower than market value.

The paved parcel is about 20 feet higher than Terminal 5's dock level, so it affords a partly obstructed view downtown with cranes and ships in the foreground.

The site would be landscaped and trails would connect to the Alki Trail that runs along Harbor Avenue.

Sound Legacy Partners also likes the recently suggested idea to move the Elliott Bay water taxi from its temporary location at Seacrest Park to Pier 2, which is only a few hundred feet from the site.

The location is good for development because it's an "orphan" that's not part of Terminal 5 operations, said Jim Hodge, chief executive officer of Tau, LLC.

Officials at the Port of Seattle have some concerns about allowing housing so close to Terminal 5.

"It hasn't worked out well," said David Schaefer, spokesman for the Port of Seattle.

When people start living next to industrial areas they suddenly become more concerned about noise generated by industry, he said. New residents also complain about the industrial views.

Whatever the land is used for, one of the Port's goals is to find a tenant that is compatible with other nearby uses, he added.

Zoning of Seattle's industrial lands has been a hot topic this year. In April, the Seattle Industrial Lands Survey was published and warned of the "encroachment" of non-industrial uses of industrial land.

Such development forces industrial businesses that rent space to move, the report stated. There's often a loss of "business cluster support." There is also a shortage of affordable warehouse space in industrial areas, the survey stated.

The new developments bring more traffic as well as competition for parking.

Among the most common complaints from Seattle's industrial base is there is limited room for expansion, according to the survey. Marine-related industries find there is not enough waterfront or dock space.

Currently the site is zoned for industrial use, not for housing or retail operations. The city has been protecting what industrial lands remain in Seattle out of fear that the city could lose some industries that are vital to the local economy.

Seattle is defensive about preserving what industrial areas are left for manufacturing and other industrial uses, particularly those on or near the waterfront. However, the Florida Street site has been used for only temporary purposes since Terminal 5 was turned into a container terminal.

The site is in a transition zone, caught between the shipping terminal and Harbor Avenue's residential and retail neighborhood. It's zoned for industry and isn't part of the neighborhood on the upland side of Harbor Avenue.

A West Seattle citizens' group called Greater Harbor 2000 wrote a plan for the Harbor Avenue corridor in the mid-1990s but it only briefly mentioned the 20-acre Port of Seattle site. Most attention then was focused on planning trails, medians and landscaping along Harbor Avenue.

At the end of August, Mayor Greg Nickels recommended a citywide review of properties on the edges of industrial centers as well as isolated industrial properties to see if other zoning designations are more appropriate.

The Seattle City Council would have to approve any change in zoning at the site.

The other concern about the site is that it was once the location of the West Seattle garbage dump, which was closed in 1968. An estimated 400,000 tons of waste was piled there over many decades.

What's left of the West Seattle landfill is approximately 40 percent trash, 30 percent construction waste and 30 percent is oil in soils and dredged sediment from Elliott Bay, Hodge said. Originally the dump contained about 400,000 tons of waste, he said.

When the Port of Seattle cleaned up Terminal 5 a decade ago, the easternmost portion of the dump was scooped and piled atop the western part to allow room for the railroad tracks to be installed, said former Port Commissioner Jack Block. He and his wife Vikki have been hired to help win approval for the mixed-use development.

The old landfill has a "liner cap" of asphalt to keep moisture out. If the project is approved, a new concrete cap could replace it.

The site was equipped with an underground ventilation system to siphon off methane gas emitted by the old garbage dump. Then the site was "capped" under a layer of asphalt.

"I'm not, by nature, a developer," Hodge said. But he said he is interested in cleaning up the designated "brownfield" to turn it into a more profitable in pursuit of a development opportunity.

Port officials estimate it would cost approximately $50 million for the environmental cleanup of the site. Building a combination of housing and retail development would be the only feasible way to recoup the expense of the cleanup, Hodge said.

Sound Legacy Partners doesn't know how many housing units to design because the precise cost of the cleanup hasn't been determined yet.

The mixed-use development would have to be built on pilings driven into the landfill because landfills are unstable to build on, Hodge said.

Meanwhile Port of Seattle officials are getting ready to release their own recommendations for what to do with the CEM property. They will suggest ways to make the site more profitable and more compatible with its surroundings. The report is to be presented to the Port Commission in a few weeks, Shaefer said.

Tim St. Clair can be reached at timstc@robinsonnews.com or (206) 932-0300.