No back taxes owed on RPS garage

The River Park Square parking garage did not have to pay property taxes during the years it was part of a contentious public-private partnership with the city of Spokane, a judge ruled Wednesday.

The summary judgment by Whitman County Superior Court Judge David Frazier, who handled the case as a visiting judge, frees up some $1.8 million that the city had set aside to pay in taxes if it lost the legal battle over the garage’s former tax status.

The property tax bill over the garage had been in dispute since shortly after the renovated mall and garage opened in 1999. When the $110 million project was proposed as a joint venture between the city and the mall’s owner, budgets always assumed the garage was exempt from property tax because it would eventually become property of the city.

The city wouldn’t take possession of the garage for 20 years, after some $26 million in bonds that were sold by a private foundation were repaid. In the meantime, parking revenue was supposed to pay off the bonds, and any money that was left over was to cover operations and maintenance costs and “ground rent” to the mall developer who still owned the land under the structure. A portion of any money left after that was slated for the developer.

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

After the garage opened, revenues failed to meet projections and the facility struggled to repay the bonds, never collecting enough to cover its other costs. It slid into debt, igniting a series of lawsuits.

County attorneys said the city didn’t receive enough of the benefits of the garage for the structure to be tax-exempt. The city, the mall developer and the foundation that sold the bonds disagreed. While the two sides argued, property taxes of about $220,000 per year weren’t paid, and penalties and interest were assessed.

Garage critics sometimes said that meant the garage could be auctioned by the county for back taxes, but county officials never threatened that.

When the city transferred ownership of the garage to the mall developer earlier this year as part of a settlement of lawsuits in federal and state court over the financially strapped garage, the property tax dispute remained. As part of the bonds the city sold to help pay for the settlement, it set aside nearly $1.8 million for the property tax bill.

City Chief Financial Officer Gavin Cooley said Wednesday he would recommend to the council that money be placed in the general fund’s reserve account, along with some other expected payments from the River Park Square settlement.

Deputy County Prosecutor Ron Arkills, who handled the case before Frazier, said county commissioners, the county treasurer and county assessor would have to decide whether the county will appeal.