Spokane County Treasurer Skip Chilberg said Tuesday he might sue to stop a proposal that would shift tax dollars to pay for public improvements in the proposed Kendall Yards project.
Officials representing the 78-acre development near downtown Spokane have presented a proposal to city and county leaders to use tax-increment financing to pay for a portion of infrastructure costs, such as for sewers, roads and public parking.
“I think it’s a wonderful development for the city of Spokane,” Chilberg said. “I just don’t understand why we should be giving public money to rich people.”
Chilberg said tax-increment financing shouldn’t be used unless there’s proof the development couldn’t be built without it. He questions whether that’s the case with Kendall Yards.
But Kendall Yards Project Manager Tom Reese said the development firm, Black Rock, is investing heavily in the project and in no way is getting a free ride.
Building Kendall Yards is “not a certainty and certainly not to the extent that we would be able if we had (tax-increment financing),” Reese said. “It changes the dynamic entirely.”
If a Kendall Yards tax-increment district is created, property values in the area would be frozen for city and county tax purposes and the county would issue bonds to pay for infrastructure improvements, such as streets. Seventy-five percent of new taxes resulting from increasing values that would have gone to the city and county coffers would be earmarked to pay off the bonds.
The idea is to build public infrastructure without having to use funds that otherwise pay for public safety and other local government services. Once the bonds are paid off, supporters say, the city and county would be earning more tax revenue than they would have without the district.
Supporters also say there’s enough evidence for the need of infrastructure tax support at Kendall Yards, considering how long the former railroad property sat vacant despite attempts at development by the land’s previous owner, Metropolitan Mortgage & Securities Co.
“How long has that property been sitting bare?” asked County Commissioner Todd Mielke. “Unless someone can come up with a bright idea to accomplish that, this is the way to do it.”
Mielke said the project is essential for cleaning up contaminated land in the heart of the city and preventing urban sprawl by creating housing options close to downtown.
Reese said preliminary estimates show that $65 million is needed for public infrastructure on the land. Tax-increment financing would raise $9 million to $20 million of that money, he said. The rest would be paid by Black Rock. He and other leaders said that everything built with tax money would be owned by the city or county, and some dollars set aside under the proposal would be spent in the West Central neighborhood outside Kendall Yards.
Chilberg noted that most development firms are required to pay for needed public infrastructure without tax assistance. And City Councilman Bob Apple questioned how the city could refuse future tax-increment financing requests after approving one for Kendall Yards.
Chilberg also said he’s concerned that the county is being asked to float the bonds to avoid the city having to ask for voter permission. The city charter requires a vote for some types of capital projects that require indebtedness.
City Councilman Al French said the county would benefit from the project and has the right to create the district. French expects the City Council to ask voters in November if they want to remove the restriction in the city charter.
Mielke and County Commission Chairman Mark Richard said they’re confident that taxpayers wouldn’t have to fork over money if the deal goes sour because developers would be required to get a letter of credit from a bank that would hold the bank liable should the project fail.
“There’s absolutely zero risk,” Richard said.
Chilberg, referencing the River Park Square garage controversy, is not so sure. River Park Square is owned by the Cowles Company, which also owns The Spokesman-Review.
In the mid-1990s the city entered into a partnership with the downtown shopping center to expand the mall’s garage. The deal unraveled after parking revenue fell short of projections.
“Just because they have a letter of credit doesn’t mean the county isn’t going to be held harmless,” Chilberg said. “If anything goes wrong with the project – and we have an example in this community recently where things did go wrong – it’s the obligation of the taxpayers.”
French, however, said a lack of such a letter in the garage agreement was one of the problems.
“In hindsight, if the city had secured a letter of credit, a lot of the heartache wouldn’t have occurred,” French said.
Reese said the first phase of the project between Monroe and Maple streets would include 340,000 square feet of commercial and retail space and fewer than 400 residential units.
The county has discussed the possibility of using funds gathered from tax-increment financing to help pay for a parking structure near the courthouse.
As a county commissioner in the early 1990s, Chilberg voted to challenge an earlier state law that allowed tax-increment financing.
The county’s lawsuit ultimately was successful, and the state Supreme Court ruled the law unconstitutional.
Mielke, however, said the new state law on tax-increment financing was written carefully to ensure it could withstand a constitutional challenge. He questioned Chilberg’s ability to file a lawsuit without county commissioner support.