July 28, 2013 in City

Developer Pete Rayner seeks tax break for project

By The Spokesman-Review
 
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What is TIF?

Tax-increment financing is a public financing method using future gains in taxes to subsidize current improvements, with the idea that those improvements will create the gains, primarily from property taxes.

A housing plan on the east fringe of Spokane that has been dormant since the 1970s may soon get a jumpstart if tax subsidies for the 220-acre development are approved by city and county officials.

The subsidies are part of a tax-increment financing plan to be considered by the Spokane City Council on Monday. The effort would allow construction of streets, sidewalks and water facilities, not just in the planned development of 1,500 residential units but also for the “light industrial” section of town bounded by Freya and Havana streets and Princeton and Broad avenues.

Even if the council approves the plan, the project has to clear many hurdles before development begins. Developer Pete Rayner, however, said he’s ready to start work this fall.

According to the agreement, up to $30 million could be funneled into two separate areas, Rayner’s residential development and the city’s light industrial area directly to its west.

For its part, the city would widen and rebuild Wellesley Avenue between Freya and Havana into three lanes, with sidewalks, street trees, street lighting and storm drainage systems at an estimated cost of $3 million, a plan the Northeast Public Development Authority has been exploring.

Rayner would use the funds to rebuild and straighten Wellesley east of Havana, construct his site’s infrastructure and then launch his ambitious 10-phase plan mixing apartments, townhomes, houses and mansions. While his plan and its TIF status will likely draw comparisons to downtown Spokane’s Kendall Yards, Rayner insists it will be more like the historic neighborhoods on the South Hill.

“There’s no middle class living in northeast Spokane,” Rayner said. “Never been one.”

He said he hopes to complete the development in 15 years.

City Councilman Mike Fagan, who represents the district in which Rayner is developing, said he views the project as “worker residential” due to its proximity to the Northeast Development Targeted Area, which has more than 500 acres of industrial land, a railway, freight route and the planned north-south freeway.

With the infrastructure improvements in place, Fagan said, it will be a draw for employers.

“We’ll be able to say, ‘Check it out. We got the infrastructure, and we’re ready to build,’ ” he said.

A TIF is a public financing method using future gains in taxes to subsidize current improvements, with the idea that those improvements will create the gains, primarily from property taxes. In this case, the assessed value of the land will increase from $2 million to $500 million with help from the tax subsidies, according to Rayner.

The agreement to the tax subsidy would also mark progress in a relationship between Rayner and the city that has foundered for decades.

“Pete had demands on the city. The city had demands on Pete,” Fagan said. “It took a while to find the middle.”

“I think everybody’s on the same page,” Council President Ben Stuckart said. “The city being more on the hook for Wellesley makes everybody feel a lot better about it.”

Still, there’s agreement to be had.

Once the city agrees to the TIF, the county has to follow suit, because it collects the property tax from which the TIF draws.

Even after the agreement to a TIF, when the development begins, Rayner has to convince the county to issue an estimated $7 million in bonds, what Fagan calls “a loan against the infrastructure improvements” made by the city. To convince the county to issue the bonds, he first needs a letter of credit from a bank saying that it would pay debt service on the bonds in case tax revenues cannot cover that debt service.

Rayner said he thinks he can convince both the county and bank. And if there’s one man to convince them, Rayner said, he’s the man.

“I’m a persistent man,” Rayner said. “I’m not a patient man.”

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