RPS development

The Spokane City Council will talk about making a loan to cover River Park Square garage expenses this week, but the amount and the terms of the loan – points that have generated court battles over the last four years – are still uncertain. City Attorney Mike Connelly said last week that the council is expected to have a first hearing on a loan proposal today, with a final vote likely scheduled for the following Monday.

The Internal Revenue Service has determined that a $31.5 million sale of tax-exempt bonds used to finance the River Park Square mall renovation did not qualify as a public, tax-free enterprise. In a 27-page report received by the parties in the case this week, the IRS said that under law, tax-exempt bonds must be used for "activities which are essentially public in nature." In this case, the IRS said, "it is clear there was substantial and excessive private benefit derived by private interests."

Bonds sold to purchase the River Park Square garage are not tax-exempt because the groups involved in the deal did not follow federal law, paid an unreasonably high amount for the facility and gave too much money to the mall's private developer, an Internal Revenue Service report says. A final Proposed Adverse Determination report, received this week by the city of Spokane from an IRS supervisor in Denver, is scathingly critical of the deal that involved the city, affiliates of Cowles Publishing Co. that renovated the downtown mall, and a foundation that sold bonds to buy the garage for $26.5 million. It says one part of the project "raises troubling aspects of potential fraud" and refers to some of the complicated financing as "smoke and mirrors."