Tax money at center of feud

The question of who has control of property tax money collected in the River District development in northwest Liberty Lake is causing conflict between the city of Liberty Lake, Spokane County and Greenstone Corp., which is developing the property.

The land, located north of Interstate 90 on both sides of Harvard Road, is owned by Centennial Properties, a subsidiary of Cowles Co., which also owns The Spokesman-Review.

The area is in a Tax-Increment Financing district formed in 2005. Property taxes paid in the district are collected and used to reimburse the developer for infrastructure projects like sewer, water and roads. It is expected to collect $15 million over 15 years.

When the TIF district was formed, the River District was located outside the city limits, so Spokane County was given authority to oversee the TIF money and sell bonds that would be repaid by property tax money. In 2006, Liberty Lake annexed most of the River District into its city limits.

Now Liberty Lake council members are upset that they have no say in how the TIF money is spent. “The city of Liberty Lake is not really formally part of the discussion anymore,” Councilman Patrick Jenkins said at Tuesday’s council meeting.

Since last year the city has been in discussions with Spokane County to modify the agreement to allow the city some say in how the money is spent. That request has been denied, Jenkins said, even though county commissioners initially seemed to agree that the agreement should be modified.

“The city is not at the table,” he said. “We didn’t have written agreements. We went on a handshake. The city is relegated basically to the role of the Spokane resident.”

In March the council noted that Spokane County had approved a $94,000 payment to Greenstone for attorney fees. Some council members were concerned that the county was just approving what the developer submitted without consideration of a resolution the city passed in May 2008 that specified how the city wanted the initial money spent. The resolution authorized $500,000 for an I-90 interchange study, $1 million for arterial roads that supported commercial development south of Mission Avenue, $2.9 million for sewer and water infrastructure and $400,000 for a large park.

Councilman Neal Olander said he feels like he let the taxpayers down. “We let it slip through our fingers,” he said. “We don’t have any oversight anymore.”

He singled out Greenstone and the property owner for taking advantage of the city’s lack of oversight. “We were very naïve,” he said. “We really trusted them.”

Olander also said he thinks the developer and the landowner lobbied county officials so they would deny the city’s request to modify the agreement. He also tied the commissioners’ apparent change of heart to campaign contributions given by Greenstone. “I’ve had extensive conversations with (Commissioner) Mark Richard,” he said. “The answer is no.”

Greenstone owner Jim Frank was in attendance at the meeting and left as soon as the council finished discussing the TIF program. As he stood outside City Hall he insisted that he is following the resolution passed by the city last year. “We agreed to that resolution,” he said. “We’ll follow that list. We want to do what they want to do.”

Frank said it appears that the city wants the power to reject proposed reimbursements. He doesn’t want to do a project and then find out after the money is spent that he won’t be reimbursed, he said. “They’re asking for a veto,” he said. “We’ve already spent the money.”

If the city wants to pass a new resolution with a new priority list, he will abide by it, Frank said. “If there’s something the city doesn’t want done, they can take it off their list.”

Frank said he plans to ask for reimbursement from TIF funds soon for the installation of sewer and water lines under Bitterroot Road. Bitterroot is a two-block street north of Mission Avenue that currently serves only the new Bitterrroot apartment complex. “It was installed for commercial frontage across the street,” Frank said of the road. “We’re not going to seek reimbursement for the road. It’s not our intent to in any way subsidize residential development.”

Frank said that neither he nor the property owner lobbied county commissioners to reject the city’s request, though he acknowledged getting an e-mail from the county asking for his opinion while he was vacationing in New Zealand. “So I sent them an e-mail,” he said. “No one else in our office said one word to the county commissioners.”

He did not deny giving campaign contributions to county commissioners, but said that is something he frequently does to support candidates. “Over time we’ve given campaign contributions to lots of people,” he said. “It’s got nothing to do with it. It’s disgusting.”

A check of Washington State Public Disclosure Commission records show that Greenstone Corp. gave donations of $700 and $50 to Commissioner Bonnie Mager in 2006. In 2008 Commissioner Mark Richard received $4,000 in donations from four companies giving an address of 1421 N. Meadowwood Lane, Suite 200, which is the address for Greenstone. In addition, Richard received $800 from Frank directly. Frank said he is a partial owner of three of the companies that gave donations, but does not have a controlling interest.

“I’m offended, I guess is my first response,” Richard said. He pointed out that he helped facilitate the TIF district and the annexation of the River District into Liberty Lake even though it would take away tax money from Spokane County. “I’ve demonstrated a strong commitment to Liberty Lake. I don’t care if he gave me $100,000. I’m not beholden to anybody.”

In a later e-mail Richard defended himself further. “This false claim is an unfortunate red herring tactic on Mr. Olander’s part in attempt to compel Spokane County to acquiesce our position and authority. If anything, I am more convinced by his display that the ultimate and most objective oversight must come from Spokane County.”

Richard said the county has sought the input of Liberty Lake, sending information to community development director Doug Smith before any payments were made. The county never heard any objections from the city, Richard said. “We were not making any decisions without getting their input,” he said. “Not only do we desire but we need their input to make the best decisions.”

While Liberty Lake is free to object to any reimbursement request, the final decision is still up to the county commissioners.

Richard said he told Liberty Lake representatives last year that modifying the TIF agreement seemed agreeable but that he would have to research the issue. “That is not a commitment,” he said. “I didn’t change my position.”

The requests received from Liberty Lake seem to indicate the city wants complete control over reimbursement requests, Richard said. Other taxing districts are involved in the agreement, such as the school district and fire department, and 400 acres of the River District are still in Spokane County boundaries. The county is also responsible for selling the bonds to be repaid with property tax revenue.

“Still remaining unresolved would be the legal exposure of giving up decision making while Spokane County retained responsibility for compliance under the law, giving up our oversight while retaining responsibility for repayment of any bond debt the county incurred in the future,” he said.

All those items helped convince Richard that redoing the TIF agreement would not be a good idea.

“I don’t think this is as controversial as they have been trying to make it,” he said. “We have and will continue to seek their input on all decisions.”