RPS owners boot city as garage landlord

The owners of River Park Square maneuvered to take control of the mall’s parking garage and its revenue Monday, telling the city of Spokane it is replacing a city agency as the garage’s landlord because of some $9 million in unpaid bills.

City officials and the mall’s developer, who have been locked in legal battles for more than four years, both said the move will not affect the general public that uses the garage.

“This move appears to have no practical effect on the operations or ownership of the garage,” city officials said late Monday in a statement issued by public affairs officer Marlene Feist. “The developer’s position has no impact on the city’s ongoing strategy – either legally or financially – to work toward resolution of this matter.”

While the city suggested this was a result of last week’s ruling by the state Supreme Court in one of the main legal battles over the garage, an attorney for the developer said that isn’t the case.

Ladd Leavens, an attorney for the developer, said the developer could have done this any time in the past four years, but didn’t want to damage investors who had purchased some $31.5 million in bonds to buy the garage. Now the city is planning to sell its own bonds to buy out those investors and own the garage, and the original investors won’t be affected.

“We hope this encourages the city to talk to us and try to settle the case,” Leavens said.

Shortly after the expanded garage opened in August 1999, it became unable to cover all of its expenses, which include payments on those bonds, rent for the ground on which the facility sits, and operations and maintenance costs.

Some months, the garage doesn’t even make enough money to cover bond payments, its first obligation.

The garage is owned by a foundation that sold the bonds and paid the developer some $26 million for it; the management is overseen by a city-created agency, the Spokane Parking Public Development Authority. The developer, however, handles the day-to-day operations of the garage.

Right now, when a customer pays for parking in the garage, the developer sends that money to the parking agency, which puts it in a fund to pay off the foundation’s bonds. There’s never any money left to pay the other expenses.

The city refused to comply with a 1997 ordinance that promised to loan money from its parking meter fund to cover rent and operations costs. Last week, the state Supreme Court rejected an appeal of a 2003 ruling that the city must honor that ordinance and make the loan.

“The developer has waited four years, through three mayors and two trips to the Supreme Court,” said Les Weatherhead, an attorney for the developer.

The mall development companies are affiliates of Cowles Publishing Co., which also owns The Spokesman-Review.

The parking agency owes the developer more than $3.5 million in ground rent, plus more than $800,000 in late fees and interest, and more than $3.2 million for operations and maintenance costs, the company said in its notice to the city. It also owes more than $1 million in unpaid real estate taxes, late fees and interest.

As part of an effort to settle a federal lawsuit filed by investors against the city, the developer and others connected with the garage, the city is planning to sell its own bonds and buy out the bondholders. The city’s bonds would be backed by the city’s general revenue funds; under the city’s strategy, revenue from the garage would then flow into a special parking fund that would be modified to handle garage finances.

Monday’s move could complicate that. Leavens said that the operator, which will still be an affiliate of the developer, will be paid each month for operations and maintenance. Any leftover money would be used to pay off the outstanding debt, then to pay current ground rent.

Council President Dennis Hession said the move by the developer will not affect the city’s current legal strategy to settle the garage dispute. He said the developer currently is in possession of the garage through its operation contractor.

“You assume they (the mall owners) are trying to better their position in some way,” Hession said.

Councilwoman Cherie Rodgers said the developers are apparently attempting to stop the city from taking full control of the garage.

She said the city has obtained a new appraisal of the market value of the garage. A Bellevue consultant has set the price of the structure alone at less than $6 million, she said.