Proposal would expand Spokane city limits; shopping center developer threatens lawsuit

Spokane may grow a bit this year, but not before neighbors and business owners get a say in the matter.

On Monday, the Spokane City Council will hold the first of two hearings about expanding city limits for the first time since 2012 when it considers adding 42 acres to the city on the southeast corner of town.

If approved, the city will absorb 360 units of affordable housing built on the land in the past five years. Eight acres deemed for commercial development also would become part of the city, but the property owner has threatened to sue the city if land-use and zoning rules are changed in a way that would hamper his plans for a new shopping complex.

The petition to annex was made primarily by Spokane Housing Ventures, which built the affordable housing, when Mayor Mary Verner was in office. But the plan was denied and delayed by Mayor David Condon.

A decision on the annexation is expected March 14, when the City Council will hold the second hearing and vote on the issue. The city last annexed land in 2012, when it gained 10 square miles – or 6,400 acres – in the West Plains.

The city’s Plan Commission voted 4-2 to support the annexation, but recommended limiting it to the area west of Freya Street.

Council President Ben Stuckart supports the annexation and pushed the request through City Hall after Condon’s denial early in his tenure after a city examination of annexation policy.

Part of the reason for Condon’s denial dealt with utility revenue. If the city provides utilities outside of the city, like with the affordable housing in question, its utility rates increase. Specifically, wastewater rates are doubled, and water rates increase by 50 percent. If the homes are swallowed by the city, the rates drop to in-city costs.

“We’re losing utility revenue, but in the bigger picture we’re saving affordable housing,” Stuckart said. “There’s a need for that type of housing stock.”

While the city loses utility revenue when it annexes areas to which it provides water or sewer service, it gains property and sales taxes.

Fred Peck, executive director of Spokane Housing Ventures, said the units were originally built in 2012 based on a promise made by officials in the Verner administration that the city would annex the land.

“We were led to believe the city would annex at the time we broke ground,” Peck said, adding the city had his organization sign a document saying it agreed to be annexed. “We had the contractor trench in water and sewer lines. Then Mayor Condon won the election. When that change in leadership took place, there was a rethinking of annexation as a whole.”

But by being served by city sewer and water, the affordable housing organization faced utility bills much higher than expected. It anticipated paying $5,000 a month in utilities. Instead, Peck said, they’ve been paying $12,000. The variance made it difficult for the group to secure loans, which led to even higher costs.

“We’re eager to see this annexation considered,” Peck said.

Peck called it a “conscious decision to spread affordable housing around the city, and not have it concentrated.”

Another landowner subject to the annexation, however, has made it clear he would prefer to stay outside of city limits.

Cyrus Vaughn, who owns Cyrus O’Leary’s Pies, owns 8 acres of land on South Regal Street between 53rd and 55th avenues. The South Regal Lumber Yard sat on part of the land for decades. After Vaughn purchased the property in 2013, the yard was closed and the buildings razed. Now Vaughn plans to build a shopping center.

According to his attorneys, Vaughn is concerned that new zoning and land-use regulations will impinge on his plans.

In a letter to the city, Vaughn’s attorneys, Alexandria John and Bob Dunn, mention more than once Vaughn’s desire to have drive-through facilities built on the property, which would not be allowed under some land-use designations the city is considering.

According to the letter, Vaughn has spent $6 million on the property, and the city’s land-use rules would “diminish the value” of his property by half. If the city annexes the land and classifies it in the city’s strict “centers and corridors” designation, Vaughn will seek $3.5 million from the city.

If the city maintains a similar zoning as it currently has, Vaughn will not seek damages.

“The issue is our client is unable to make any commitments until this issue is resolved,” John said.

Even without commitments, Vaughn has told nearby residents of the proposed complex that an unnamed “natural grocer” that sells organic food would be its anchor tenant.

Ted Teske, chairman of the Southgate Neighborhood Council, said the suggestion of such a tenant was done to win over distrustful neighbors.

“They’re dangling the promise of some tenant out there with no real plans,” Teske said. “They suggest it’s a Whole Foods, or who knows what.”

Regardless of the tenant, Teske said, the neighborhood prefers a stricter definition because it falls in line with the city’s Comprehensive Plan.

“How is it going to be zoned and affect the viability and walkability of our neighborhood?” Teske asked, noting the land is zoned mixed-use, which he said was the “most pedestrian-friendly” zoning under county rules.

“The analogous would be centers and corridors in the city,” Teske said, adding that Vaughn wants it to be zoned community business. “If you look at the intent of the zoning, word for word, it’s supposed to be pedestrian-oriented. Centers and corridors aligns better than you think.”

Teske said zoning the land “community business” would increase traffic, harming the character of the neighborhood. Community business zones accommodate cars, but their uses are limited compared to general commercial zones, according to the Spokane Municipal Code.

“We’re trying to create a walkable, liveable environment,” Teske said. “They’re basically trying to create strip malls and a more auto-oriented design. The best way to alleviate congestion on Regal Street is to get people out of their cars.”