(From For the Record, January 17, 1998): Letters sent separately: A Friday story detailing Spokane Mayor John Talbott’s concerns about a federal Housing and Urban Development Department loan to assist a downtown redevelopment project stated that a letter from Talbott and another letter from a Washington, D.C., lobbying group were sent together to HUD. The letters actually were sent independently, although the letter from the lobbying group refers to Talbott’s upcoming meeting with HUD officials.
Mayor John Talbott is taking his concerns about a proposed $22.65 million federal loan for a downtown redevelopment project all the way to Washington, D.C.
Talbott plans to meet with officials from the U.S. Department of Housing and Urban Development later this month when he attends the U.S. Conference of Mayors annual meeting.
In a Dec. 16 letter to HUD, Talbott asked that officials delay their decision on the pending loan for the River Park Square project until after the meeting.
“I must tell you frankly that as mayor of the entire community of Spokane, I am aware of other areas that I believe offer much greater potential for producing the type of jobs we badly need in this city,” Talbott wrote to HUD.
His letter was accompanied by a cover letter from a Washington, D.C., lobbying group and a 14-page, unsigned memorandum that raises questions about the security of the loan and the adequacy of information given the public about the project.
Talbott criticized the city’s involvement in River Park Square during his mayoral campaign and is a plaintiff in a lawsuit challenging the project.
City officials weren’t aware of Talbott’s letter until this week. At least two council members weren’t pleased by its contents, and one alleged Talbott’s concerns actually are fueled by the owner of a competing shopping mall.
“The letter shocked me,” Councilman Jeff Colliton said. “Letters of this type could jeopardize the project.”
“It’s not a surprise … but I think he was out of line,” Councilwoman Phyllis Holmes said. “He was elected by a special interest group. He has an obligation to them.”
Holmes was referring to NorthTown Mall developer David Sabey, who spent about $30,000 on the effort to defeat Talbott’s opponent, then-Mayor Jack Geraghty. Sabey did not give money to Talbott’s campaign.
Councilwoman Cherie Rodgers defended Talbott, saying he is raising valid questions about the public-private partnership.
“You have to ask questions,” Rodgers said. “It’s not like he has to ask permission from everyone.”
Talbott plans to be in Washington, D.C., next week for the conference. HUD officials have agreed to meet with him Jan. 21, he said.
He said his concerns about the project stem from his desire to protect taxpayers.
“I want full disclosure to the citizens of Spokane of the risks they are going to be exposed to on a worst-case basis,” he said. “That’s what people expect me to produce.”
The proposed partnership calls for HUD to loan the city $22.65 million, which then would be loaned to River Park Square developers. The loan has received preliminary approval from HUD but hasn’t been awarded.
The $100 million River Park Square project includes a new Nordstrom department store, a multiplex cinema, expanded parking and numerous shops and restaurants.
Betsy Cowles, president of both companies that own River Park Square, said last-minute delays could kill the project. She, too, blamed the letter on Sabey and his opposition to the downtown shopping mall’s redevelopment.
“This is his 11th-hour attempt to derail the whole project and torpedo downtown,” Cowles said.
Efforts to reach Talbott about the Sabey connection late Thursday were unsuccessful.
Jim Kneeland, spokesman for Sabey, denied the developer had anything to do with Talbott’s letter. He did confirm that a note accompanying Talbott’s letter was from a lobbying group that occasionally works for Sabey.
“I was not aware that Talbott sent any of that material on to HUD,” Kneeland said. “We have been on an effort over the course of the last five to six months to ask questions of virtually anyone who will seek to find answers … and that includes Mayor Talbott.”
The memorandum that accompanied Talbott’s letter raises several questions about the project, particularly regarding the loan’s proposed repayment plan and security.
Money from the Nordstrom lease, surrounding property owners and land rents has been pledged to pay off the HUD loan, Cowles said. Also, there is a reserve account of $4 million to $6 million set aside for repayment.
Last fall the new Nordstrom building was pledged to the city as additional collateral, Cowles said.
“Professionals from all sides have looked at this project from the very beginning in order to be sure we meet the HUD criteria for lending and that the project will be a success,” Cowles said. “We meet all the HUD financial requirements. We should just get on with it and build the project for the good of Spokane.”
If the project should fail and the city defaults on the loan, Spokane Community Development Block Grant money would be used for repayment.
However, no section 108 HUD loan has ever defaulted.
Talbott, who said he hasn’t read the draft Nordstrom lease, said he worries the lease isn’t adequate security for the loan. He said he’s heard the lease contains a “kick-out clause” that allows Nordstrom to pull out if the department store isn’t generating enough sales.
Cowles wouldn’t disclose terms of the lease. She added the loan has been scrutinized by an outside accounting firm and three Gonzaga University professors on behalf of the city, as well as HUD accountants.
“It’s been looked at every which way,” she said, noting there have been several public hearings on the project.
The memorandum also raises questions about whether the project will meet the HUD requirement that at least 700 jobs are created or retained.
Developers contend the project will create as many as four times that number of jobs. A 1995 economic study they commissioned said the project would create 2,800 jobs, and generate $2.5 million in city taxes and $50 million in wages.
Neither city officials nor Cowles would say when the HUD loan was expected to be approved. If it is, the council must vote on whether to accept the money, as well as loan it to the developers.
River Park Square is owned by Citizens Realty Co. and Lincoln Investment Co., affiliates of Cowles Publishing Co., owner of The Spokesman-Review.
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