Council clears way to buy garage bonds

The Spokane City Council on Monday approved an emergency ordinance clearing the way for the repurchase of bonds sold in 1998 to finance the city’s participation in River Park Square’s troubled parking garage.

Council members voted 5-2 in favor of a budget amendment to allow the city to borrow $32.7 million in short-term financing from Bank of America.

The council in April initially approved the repurchase of parking garage bonds as a way to settle its liability in a federal lawsuit brought by private bondholders against the city, River Park Square and other parties involved in the 1998 transaction. The council at the time approved up to $39 million for the buyout.

As they did in April, council members Cherie Rodgers and Bob Apple voted against the ordinance.

“We may be taking on the liability of the bondholders,” Apple said.

Chief Financial Officer Gavin Cooley said the city would borrow the money from the bank temporarily to buy back the bonds. Early next year, the city would sell general obligation municipal bonds for a longer term financing of garage debt. The interest rate on the short-term bond anticipation note is currently 1.2 percent, he said.

Cooley said the city would continue to seek settlements with other defendants in the federal lawsuit prior to a trial now set for Jan. 3. They include the mall owner and developer, the original bond underwriter, the city’s former bond counsel, a foundation formed to buy and lease the garage, a public agency created to operate the garage and others.

The foundation sold $31.5 million in bonds in 1998, and purchased the garage for $26 million from the mall developer. It subsequently leased the garage to a city parking authority, but parking revenue has been insufficient to meet costs of bond debt, operations, a ground lease to the developer and taxes.

By buying out garage bondholders, the city has sought to take over bondholders’ standing to pursue legal claims against other defendants. A parking consultant and one law firm reached settlements with the city in April.

River Park Square is owned by companies affiliated with Cowles Publishing Co., which owns The Spokesman-Review.

In a related matter, the council was told Monday that the state Supreme Court has issued a mandate requiring the city to loan money from its parking meter revenue fund to pay for shortfalls in garage operating costs. The garage has about $9 million in unpaid bills.

The dispute over the loan has been one of the central controversies over the River Park Square garage. As part of the original agreement, the city in a 1997 ordinance said it would loan money to cover operating shortfalls for the garage. But opponents of the loan said it would amount to a gift of public funds.

City Attorney Mike Connelly said the city administration is preparing documents for a loan to the Spokane Parking Public Development Authority, which runs the garage.

A council vote on the ordinance for the loan likely would come in July.

The Supreme Court three weeks ago refused to hear an appeal of a 2003 appeals court decision requiring the loan. The Supreme Court gave no guidance on terms of a loan to an agency that has not had enough income to pay its bills, much less to repay a loan, officials said.

“They provided us no direction,” Connelly said of the court’s mandate.

Two weeks ago, the mall owner notified the city it is taking possession of the garage under terms of a 1998 lease.

The city has more than $7 million held in escrow that has been accumulating from net revenue off city parking meters that could be used for the loan.

• In other business, the City Council approved a $225,560 contract with Robert Goebel General Contractor of Spokane for cleanup and salvage work at a damaged digester at the Spokane Wastewater Treatment Plant.

The contract amount was set at $225,560 and was reached under emergency authorization approved by the council earlier this month.

Goebel will remove sludge and debris inside the tank where a plant worker died and two others were injured in an accident on May 10.