Hotel Wins Tax Break Over Oil Spill Impact Appraiser Gives Davenport Foothold In Wwp Suit
While other downtown landlords fumed last spring over soaring property tax bills, the Davenport Hotel banked $45,000 courtesy of the Spokane County Assessor’s Office.
A county appraiser determined that an underground oil spill deprived the landmark at Lincoln and Sprague of $2,855,000 in income since 1993 - even though the hotel hasn’t been open for 10 years.
Commercial appraiser Dick Weber slashed the Davenport’s land value accordingly and made it retroactive to January 1993, nine months before the spill was made public.
In addition to saving an estimated $15,000 a year, the Davenport, with the county’s help, may have gained a major weapon in its lawsuit against the spill’s source, Washington Water Power Co.
That’s because the assessor’s office, in justifying the tax break, agreed with the Davenport that the oil spill shut off the hotel’s potential cash flow.
WWP officials are worried: The county’s action is the first validation of the Davenport’s damage claim.
“It’s clear to us that this is a litigation strategy on the part of the owners of the Davenport,” said WWP spokesman Rob Strenge.
“And we feel that they succeeded in enlisting the assessor’s office, knowingly or not, in their litigation effort.”
Davenport and county officials note that tax breaks are available to any property owner who can prove lost income through environmental contamination. No one else applied.
Hotel officials said cutting costs was their only motivation in seeking a tax reduction.
Assessor Charlene Cooney defended Weber’s appraisal, but said she didn’t know the specifics.
“I do not interfere with the appraisal, with the taxpayer or the taxpayer’s representative, or the appraiser,” she said.
Jeffrey Ng, the Davenport’s executive director, said the hotel sought the tax break because, unlike neighboring property owners, the Davenport was rendered financially impotent by the spill.
“I thought it was very nice of (appraiser) Dick Weber to even entertain us,” he said. “The whole project was ready to take off, and the oil spill halted it still.”
Ng’s brother, Hong Kong hotel and mining mogul Ronald Wai Choi Ng, sued WWP in August, claiming the oil spill scared off bank financing to renovate and reopen the hotel, which he bought in 1990 for $5.25 million.
The spill of molasses-like Bunker C oil was first noticed in 1982 at WWP’s aging steam plant between First and Second avenues and Lincoln and Post streets.
An initial investigation found 1,300 gallons escaped from leaky tanks but spread only to the Burlington-Northern railroad abutment.
The utility and the Washington Department of Ecology kept the spill secret for 11 years, until The Spokesman-Review documented it in September 1993.
New WWP studies indicate about 75,000 gallons of oil escaped and oozed at least 400 feet north of the steam plant - across the street from the Davenport.
WWP is proposing a $4.4 million cleanup plan to state regulators. The utility wants to dam the spill at First Avenue, pump out 10 percent of the oil and monitor the area.
Wai Choi Ng said he has sunk $12.5 million into Davenport renovations already. Another $19 million was set to be loaned by a Swiss bank until it learned of the spill, he claims.
The Davenport lawsuit doesn’t specify damages, but Wai Choi Ng has hinted he would ask for millions of dollars.
To limit the Davenport’s expenses, Jeffrey Ng said he invited appraiser Weber over to the hotel in late 1994 to discuss a reduction on the land value.
That was followed by a meeting Nov. 22, 1994, involving Weber, Assessor Cooney and Sheri Barnard, a Davenport consultant and Spokane’s former mayor.
Barnard is a friend and campaign contributor of Cooney’s, but both said that was not relevant.
“I am friends with a great many people in Spokane and in no way would I jeopardize the integrity of this office,” Cooney said.
On Dec. 6, 1994, Barnard followed up the meeting with a letter to Weber, who is currently under fire for high assessments, many of which have been overturned.
“It is our sincere hope that the taxes for 1993, 1994 and 1995 can be reassessed in light of the serious situation we face with the revelation of the oil spill from the WWP steam plant,” Barnard wrote.
Even though the Davenport owner didn’t know of the oil spill until late 1993 and had not secured financing anyway, the law permits three years’ relief, officials said.
“It is essential that Davenport … control and limit costs as much as possible in order for the project to remain viable while we are waiting for resolution,” Barnard wrote.
Weber agreed, although it’s unclear whether he investigated the Davenport’s damage claims independently. After granting a telephone interview last Wednesday, he did not return three other calls and refused to turn over his documentation, saying it was “confidential.”
The Spokesman-Review obtained Weber’s March 20, 1995, position paper justifying the tax break. He calculated the Davenport’s losses at nearly $3 million, due mostly to 360 rooms sitting empty.
“We figured it as though there were no pollution and the thing was an up-and-running organization,” Weber said.
The oil spill stops short of the Davenport but has been found under the tip of a parking lot owned by Wai Choi Ng across First Avenue. He wants to put a parking garage for the Davenport there.
Weber wrote that contamination under the parking lot “impacts the whole site.”
Much of the heaviest oil contamination is under the Rodeway Inn. WWP bought the hotel, formerly the Travelodge, last year to make it easier to drill test wells and hunt for the spill’s perimeter.
WWP made several renovations to the hotel and saw its assessment rise more than $300,000 for 1995.
Other downtown property owners are worried about the spill’s impact on their businesses but didn’t receive tax breaks. Nor did they ask.
“I don’t know why ours went up and theirs (Davenport’s) went down,” said Paul Sandifur Jr., president of Metropolitan Mortgage & Securities Co. “They probably made a real effort to get theirs reduced, and we didn’t.”
The Davenport is considered a linchpin to revitalizing the neighborhood, which is deteriorating from decay and perceptions of crime.
Jeffrey Ng said plans ultimately call for the Davenport to reopen its 360 rooms and to return it to the showcase it once was.
Downtown economic development sources, however, doubt the Ngs could ever secure enough financing. It would cost many millions of dollars just to bring the hotel back up to safety codes.
Instead, some believe the Davenport’s future is as a multipurpose business - hotel rooms augmented by leased apartments, offices and retail shops. The top floors might have to be sacrificed.
Gordon Budke, president of Momentum, said he recently offered to help Wai Choi Ng find local financing, but Ng did not produce a business plan for the renovation project.
WWP has seen no proof the Davenport was denied financing based on the oil spill.
“We think there should have been an effort to independently verify the basis for their (Davenport’s) claims,” Strenge said, “and there’s no evidence … that effort was made” by Weber.
While Weber was decreasing the Davenport assessment, he was doubling others.
More than 1,000 commercial property owners, several with hotels, appealed last year’s assessments, throwing taxing districts into an uproar. Some appeals are pending.
After they’re settled, the county is expected to lose more than $200 million in property valuation, costing taxing districts hundreds of thousands of dollars.
In one case involving the Sheraton-Spokane Hotel, Weber increased the assessment from $16 million to $39 million.
Just minutes before the deadline for paying property taxes, Cooney was forced to lower the values of five commercial properties, including the Sheraton, by more than $41 million.
All were Weber assessments.
As a result, taxing districts received $621,039 less than expected.
The Washington Department of Revenue is nearing the end of an audit begun last summer of the assessor’s office.
, DataTimes ILLUSTRATION: Graphic: Lowering taxes