Tax subsidies will flow to Kendall Yards even if the developer of the 78-acre project does not seek public bids on construction of streets, sewers and other public infrastructure.

The Spokane City Council on Monday voted 6-1 to amend the tax-increment financing agreement it has with Kendall Yards to make the change.

Councilman Jon Snyder said state rules that he supports which prevent tax money for schools from being diverted to development make Washington’s tax-increment financing program less effective.

Allowing Greenstone to forgo public bidding is “a creative way to solve that challenge,” Snyder said. “We’re talking about a piece of dirt that has resisted development for 40 years.”

Kendall Yards is a highly-anticipated residential and commercial development on the north bank of the Spokane River in the West Central neighborhood. The land used to be the home to railroad tracks that were torn out as part of urban redevelopment related to Expo ’74.

The city approved its original tax deal for Kendall Yards in 2007. It said the project could be reimbursed with tax revenue generated from the site over 25 years if a number of conditions were met, including that the construction contracts to build streets, sewers and other infrastructure paid for through tax subsidies be publicly bid.

But Greenstone Corp., which took over Kendall Yards in 2009 from financially troubled developer Marshall Chesrown, opted not to publicly bid infrastructure it built in the first phase of the project. Even so, it asked the council in April to be reimbursed for $1.3 million of work. The council rejected the request. Most council members said they were uncomfortable changing the deal to allow reimbursement of infrastructure that was built without following rules. Even so, most expressed willingness to change the deal for future construction.

Wayne Frost, of Greenstone, said 39 housing units in Kendall Yards have been sold so far. He noted that prevailing wages will be paid on infrastructure construction and that work must comply with city standards.

“It allows us to move much more quickly,” he said.

Frost estimated that Kendall Yards could eventually receive about $25 million through tax-increment financing.

Supporters of tax-increment financing for the project argued it is helping generate growth, cleaning up a polluted site and generating taxes in the long term even if some of the taxes are diverted to pay for infrastructure that will be publicly owned anyway. Opponents say the concept diverts tax money to developers for projects that they may have built even without the subsidies.

City Councilman Richard Rush cast the lone vote against the change. He called Kendall Yards “a tremendous project that greatly benefits our city,” but said he is concerned that the deal will restrict what infrastructure could be paid for from the set-aside tax revenue. He said, for instance, that if an electric trolley line is built between Kendall Yard and Sacred Heart Medical Center, as has been proposed, that Kendall Yards tax-increment money could help finance the project.

He also questioned the need to make the subsidy more attractive.

“Would they build without this incentive? That’s an open question.”

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