Hud Loan On Target, Despite Talk Mayor Casts Doubt, But Agency Says Technicality Surmountable

Mayor John Talbott said several times this week that a federal loan for a downtown Spokane redevelopment project is in jeopardy, but federal officials denied that Friday.

The Department of Housing and Urban Development did say that the city committed the loan funds prematurely.

“The loan has not been approved,” Talbott said Wednesday on his call-in radio show. “The option here that HUD might have if that ruling stands would be that the loan could be denied.”

HUD officials confirmed Friday that they had found a technical violation, but said it’s unlikely it will derail the loan.

Indeed, HUD’s Office of General Counsel said the agency can waive the regulation and still approve the loan. And the HUD official who is expected to sign the waiver said the River Park Square project received a clean bill of health from the HUD inspector general.

When Talbott was told that the loan was still likely to be approved, he said that’s no longer the issue. He said the city staff knew about the latest ruling almost two weeks ago, but didn’t tell him.

“I could care less about the loan. I am concerned that we have senior staff lying to council, or falling back on semantics for not answering questions,” he said.

City officials said they haven’t heard anything new from HUD, except that the application is being reviewed and that there are some internal discussions going on at the agency.

Councilwoman Roberta Greene said she believes the City Council has been kept informed on the status of the loan application.

“As I understand it, it ended up being an internal problem for HUD that they had to work out themselves,” she said.

“Someone in the HUD office put together a waiver. It’s not a waiver we requested, it was requested by HUD.”

The $22.65 million loan would be part of the money used to build the new River Park Square, a $100 million retail center, theater complex and parking garage.

The loan was given preliminary HUD approval in July 1997. It is guaranteed by the city’s community-development block grant money.

Alex Sachs, a spokesman for HUD in Washington, D.C., said a technical violation of HUD regulations occurred in August when the city committed the HUD Section 108 funds to the project prior to HUD’s approval of a request for a release of funds.

In October, HUD’s Inspector General’s Office detailed several problems it had with the Spokane loan process.

One of the issues was that the city may have violated federal regulations by allowing the old River Park Square building to be demolished before the city completed the federal environmental study process.

“We did look at that,” said Sachs. “The general counsel concluded that there was not a violation with respect to the demolition of the building at private expense.”

Duane Swinton, attorney for developers Citizens Realty and Lincoln Investment, also insisted there were no serious problems with the processing of the HUD loan and called Talbott’s comments “pretty astounding.”

The mayor is a longtime critic of any government assistance to the River Park Square project.

“He must be ill-informed of the process,” Swinton said. “That (statement) is not based on fact.”

The waiver is “a procedural issue,” he said.

The development companies are affiliates of Cowles Publishing Co., which owns The Spokesman-Review.

Swinton said he believes the federal agency would finish processing the waiver in a matter of days, and the city could soon have the final loan documents available to sign.

“HUD … is proceeding with probably a little more caution and making sure everything is done correctly,” Swinton said. “There’s no danger of the project being shut down.”

The federal loan is only part of the money needed to finish the redevelopment project, Swinton said. The developers also have private funds and a loan from U.S. Bank. Those funds have been used to cover construction costs thus far.

An article in the Wall Street Journal earlier this week raised questions about the $1.2 billion HUD loan program that has approved low-interest loans for projects such as River Park Square in Spokane and a similar project already open in downtown Seattle.

Opponents of the projects call the program “corporate welfare” since it provides profitable companies cheap financing at taxpayer expense.

In a revised version of the article that later appeared on the Journal’s Internet site, Cardell Cooper, assistant secretary for community planning and development, defended the Spokane and Seattle projects and the Section 108 loan-guarantee program.

He said the loan program has created tens of thousands of jobs in recent years.

Staff writer Jim Camden contributed to this report.