Defendants unsure about RPS settlement
Some defendants in the federal lawsuit over the River Park Square garage may have objections to the settlement between the city and the mall’s developer.
The settlement is so complicated that attorneys for the city’s former bond counsel and the underwriter of bonds sold in 1998 to buy the garage said they don’t know yet how it affects their case.
That’s a problem because in less than three weeks, they’re scheduled to start a massive federal trial over remaining disputes surrounding the garage.
In a hearing Wednesday, U.S. District Judge Edward Shea told them to be ready for trial on Jan. 4, although they may spend the first week of the new year sorting out some of those concerns. The settlements may be complex, but then, so is the case, he said.
“It’s unlike any case we’ve been involved in,” Shea said.
The case involves charges of fraud and misrepresentation surrounding the underperforming garage at the renovated downtown mall. City officials and the mall development companies owned by Cowles Publishing Co. reached a settlement last week in the federal lawsuit and in several state lawsuits surrounding the garage.
That settlement involves the city receiving $2 million in disputed money from the city’s parking meter fund, which has been held in escrow for several years rather than loaned to cover certain garage expenses that parking revenue can’t meet.
The remaining parking meter money in the escrow account, more than $6 million, would be put into an account to help repay a $22.65 million loan guaranteed by the U.S. Department of Housing and Urban Development. Because the money pledged to repay the loan has not covered all of the loan payments, the city has had to take some $1.5 million from its HUD block grants for low-income neighborhoods.
The settlement also calls for the development firms’ parent company, Cowles Publishing, to provide a bank letter of credit to repay the loan. That company also owns The Spokesman-Review.
The developer will get title to the renovated garage, but no cash.
The city will be responsible for repaying any outstanding debt from buying up garage bonds last spring and taking over the original investors’ claims. The city took out a short-term loan of $32.7 million to buy those bonds, but hopes to whittle down that amount by settlements from other parties to the case, then sell bonds backed by the city’s general fund.
Ralph Cromwell, an attorney for the law firm that gave the city its bond advice on the mall development, said the city and the developer were proposing “a fundamental restructuring” of the original garage deal by taking “a whole bunch of things and trading them around.”
“We have a lot of concern about who got what, and what the value is,” Cromwell said. “The deal we have had through four years of litigation is now gone.”
He may need to find experts to review the settlement and give their opinion. Finding experts, getting them copies of the settlement and getting their opinion might be difficult over the coming holidays, he added.
The bond firm, Perkins Coie, and the bond underwriters, Prudential Securities, could still settle. But Laurel Siddoway, the city’s attorney for River Park Square matters, said that it’s more likely than not that there will be a trial.
Shea said he wasn’t going to put any defendant at a disadvantage. If necessary, he’ll hold a week of hearings before having the jury report for a trial. But anyone who doesn’t settle should show up ready for trial and “we’ll simply adjust as events unfold.”