July 6, 2010 in City

Spokane business owner in freeway’s path sues state

Lawsuit claims uncertain future prevents him from selling
By The Spokesman-Review
 
Colin Mulvany photo

Bruce Smith, owner of Petroleum Distributing Co., is suing the state because the Department of Transportation has not purchased his property for the north Spokane freeway. The state claims that it needs to buy properties only a couple years out from construction.
(Full-size photo)

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A 67-year-old business owner is suing the state, saying its unwillingness to buy his company – which is in the path of the north Spokane freeway – is forcing him to continue working because he can’t sell a business with such an uncertain future.

Bruce Smith owns Petroleum Distributing Co. with his wife, Andrea Smith, 59. The state eventually will need their company’s property at 508 N. Fiske St., north of Interstate 90 near the Freya exit, in order to build the freeway.

But not yet.

The state says the freeway section between Trent and I-90 will be one of the project’s final pieces of construction. It is also where the Smiths’ business is located.

“We are not buying commercial property north of I-90 with this funding package at this time. We are working from the north to south end, and there is no construction date targeted for that area,” said Al Gilson, a Washington Department of Transportation spokesman.

The Smiths are suing the transportation department, claiming discrimination in light of the other commercial purchases.

“It’s a nasty deal what they’re doing to me,” Smith said. “I’m carrying a burden for a public highway.”

Commercial properties acquired by the state within the past 10 years include the Sage Tavern on South Ray Street, LaFarge North America on East Main Avenue and Ziggy’s Building Materials on North Market Street, according to court documents.

In 2008, the state also purchased Zig’s Electric & Plumbing Supply Co., on North Market, after owner David Moore sued the state. Moore claimed because the state purchased the adjacent Ziggy’s business owned by his relatives, it diminished his ability to sell or lease. The parties settled out of court, and Moore consolidated business with his relatives. Now they lease the space from the state.

The state purchased LaFarge in 2004 because it had the funding, said LaFarge terminal manager Pat Cunningham. LaFarge was in an outdated building and was going to upgrade the facility, which would have “exponentially increased the cost of their property to the state,” Gilson said in an e-mail.

The state purchased the Sage Tavern with available funds because the owners asked to be bought out in light of family health issues, Gilson said.

Smith said his property has unique features that significantly increase its value, but that also make it difficult to move. The property has specialized spill containment equipment and is connected to the BNSF Railway. Because the property has been used for distribution since 1927, the company is exempt from paying certain fees, Smith said. Those user rights pass with the sale of the property.

The only other facility with comparable rights is in Seattle, Smith said. The value of the property is estimated to be around $9 million, according to Purvin & Gertz, an energy consultant brought in by Smith.

“The value of his business is tied specifically to this specific piece of property. The value is in what he can do there and only there,” said Smith’s attorney, Mike Maurer.

Smith said even if the state purchased and relocated his business, the new property wouldn’t have the unique containment system, and it would be nearly impossible to obtain the same operation permits with the new environmental and state regulations.

The state tested soil at properties throughout the corridor as part of its required environmental impact statement, Gilson said.

Maurer said the state approached the Smiths two years ago about possible early acquisition of their property. Tests of the soil revealed no contamination, the attorney said.

“If the soil tested as contaminated, it would have driven down the property value,” Smith said. “When the state found out the property was clean, they broke off all talks.”

A couple investors expressed interest in purchasing Smith’s business, even this year, but as soon as he disclosed the future acquisition of the property by the state, the buyers backed off, Smith said.

“Nobody will make a $9 million capital contribution for a piece of property that will be acquired by the state,” Maurer said.

The portion of the north Spokane freeway from Wandermere to Francis Avenue will open by the end of 2011. Construction on the southern portion between Francis and the Spokane River will begin following the completion of the northern portion, Gilson said.

“The construction schedule always depends on the flow of funding,” he said.

The state typically purchases property within a couple of years of planned construction. Residential property is the priority right now, Gilson said.

The state thus far has purchased 240 residential parcels in East Central Spokane. It will need about 65 properties between the river and I-90.

“We will eventually need property between Trent and I-90. Right now those properties are not prioritized because of funding,” said project engineer Larry Larson.

Purchases will be based on funding and need, but the state is required to legally possess the properties before construction, Larson said.


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