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City votes to amend Kendall Yards deal

Greenstone will get tax revenue even if construction contracts not publicly bid

Tax subsidies will flow to Kendall Yards even if the developer of the 78-acre project does not seek public bids on construction of streets, sewers and other public infrastructure, as originally agreed.

The Spokane City Council on Monday voted 6-1 to amend the tax-increment financing agreement it has with Kendall Yards.The city approved its original tax deal for Kendall Yards in 2007. The developer would be reimbursed for building public infrastructure, such as roads, with tax revenues generated by the property if several conditions were met, including that infrastructure projects be publicly bid.

But Greenstone Corp., which took over Kendall Yards in 2009 from financially troubled developer Marshall Chesrown, opted not to publicly bid infrastructure it built in the first phase of the project. Even so, it asked the council in April to be reimbursed for $1.3 million of work. The council rejected the request. Most council members said they were uncomfortable changing the deal to allow reimbursement of infrastructure that was built without following rules. Even so, most expressed willingness to change the deal for future construction.

Councilman Jon Snyder said state rules that he supports, which prevent tax money for schools from being diverted to development through tax subsidies, make Washington’s tax-increment financing program less effective.

Allowing Greenstone to forgo public bidding is “a creative way to solve that challenge,” Snyder said. “We’re talking about a piece of dirt that has resisted development for 40 years.”

Wayne Frost, of Greenstone, said 39 housing units in Kendall Yards have been sold so far. He noted that prevailing wages will be paid on infrastructure construction and that work must comply with city standards.

“It allows us to move much more quickly,” he said.

Frost estimated that Kendall Yards could eventually receive about $25 million through tax-increment financing.

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. Opponents say the concept diverts tax money to developers for projects that they may have built even without the subsidies.

City Councilman Richard Rush cast the lone vote against the change. He called Kendall Yards “a tremendous project that greatly benefits our city,” but said he is concerned that the deal would restrict the infrastructure that could be paid for from the set-aside tax revenue. He said, for instance, that if an electric trolley line is built between Kendall Yards and Sacred Heart Medical Center, as has been proposed, that Kendall Yards tax-increment money could help finance the project.

He also questioned the need to make the subsidy more attractive.

“Would they build without this incentive? That’s an open question.”