Bidding issue complicates Kendall Yards agreement

Developers of the highly anticipated Kendall Yards project violated an agreement with the city that allows the project to receive tax subsidies to build streets, sewers and other infrastructure.

Greenstone Corp., which began building homes in Kendall Yards last year, constructed about $1.3 million in infrastructure projects without seeking public bids. The bid requirement was part of the 2007 deal with the City Council allowing Kendall Yards to recoup an estimated $12 million or more in property taxes collected on the land over 25 years to pay for public infrastructure.

Greenstone is asking the city to amend the rules so that they can be reimbursed for projects built or under construction.

Jason Wheaton, Greenstone’s president, said the public bidding process would have delayed the project by months, perhaps a year. By moving when Greenstone did – soon after acquiring the project from developer Marshall Chesrown – 40 residential units already will be occupied by the end of June, he said.

“It was important to us to get the project moving,” Wheaton said. “We took that risk understanding how important momentum of the project is.”

Until Greenstone took over the project, momentum had been lagging – to say the least. Developers have proposed projects for the former railroad land for decades, but no homes or structures were completed until Greenstone took over.

Most City Council members say they’re open to the request, although some say they should have been consulted before work began without public bidding.

“The normal course of business would be that they would come to us and request permission in advance,” Spokane’s Chief Financial Officer Gavin Cooley said in response to questioning from council member Amber Waldref. “It is a somewhat awkward position for the city to be when this comes forward in this fashion.”

Councilman Jon Snyder said Kendall Yards is important to the city to improve the tax base and slow urban sprawl.

“The city is quite rightfully trying to look really hard at how we can make infill housing projects like Kendall Yards as successful as possible,” Snyder said.

Supporters of tax-increment financing for the project argued it is helping generate growth, cleaning up a polluted site and generating taxes in the long term even if some of the taxes are diverted to pay for infrastructure that will be publicly owned anyway. Opponents say the concept diverts tax money to developers for projects that they may have built even without the subsidies.

If the council rejects the proposal, Cooley said, the city likely still would get ownership of the infrastructure without reimbursing the projects that didn’t go through a public bidding process.

Under the 2007 deal approved for Kendall Yards’ tax-increment financing district, 75 percent of increased city and county taxes generated by the site will be siphoned to pay for infrastructure like sewers, streets and water mains needed to serve homes and businesses on the land. School taxes aren’t affected. If taxes collected from the district are lower than predicted, the developer covers costs.

Kendall Yards officials say they have complied with prevailing wage requirements under the 2007 agreement.

Greenstone owner Jim Frank told a City Council committee earlier this month that in exchange for allowing Greenstone to skip public bidding, he is willing to give the council more authority over whether certain projects will be reimbursed. Frank said Greenstone wanted to skip public bidding to “streamline the design and construction process.”

“That part of it is really important to us because it allows us to act more quickly to meet the needs of the market,” Frank told the council. “If every project that we had to do had to go through a public design process and a public bid process we’d never get anything done, to be honest with you.”