River Park Square Pays Bill From City Payment Called ‘Good-Faith Effort To Get The City To The Table’

The owners of River Park Square paid some $163,000 “under protest” to the city Thursday, saying they hope it’s the first step in solving a dispute over the federally guaranteed loan that helped build the downtown mall.

Duane Swinton, attorney for River Park Square LLC, called the payment “a good-faith effort to get the city to the table.”

The company sent the money, which it withheld from payments for December and January, in a letter to Mayor John Talbott.

The letter asks that Talbott designate members of the City Council and the city legal staff to a team to help resolve the dispute. It also demands a meeting over the dispute in 10 days.

Assistant City Attorney Milt Rowland said he was delighted to hear that the mall’s owners were making the payment. But any decision on meetings between the city and the mall’s developers is up to the City Council, he said.

“It’s always a good step to take - to try to resolve a dispute,” Rowland said. “With the courts, one side wins and the other side loses.”

The dispute revolves around the final $1.1 million of a $26.65 million loan to help build the mall. The U.S. Department of Housing and Urban Development guaranteed the loan, which the city obtained. The developer uses the money for construction and has a schedule to repay it.

The developer says that because Phase I of the mall is finished, it is entitled to use that money to finish Phase II. The city says the money can’t be released until the entire mall is finished.

Meanwhile, the city is charging the developer interest on that money, and deducting some other expenses, Swinton said.

In response, the developer refused to make two payments, totaling $163,346.69, into a debt reserve account. The city countered by sending a letter saying the developer was in danger of defaulting on the HUD loan.

“The loan is not in default. The project is not insolvent,” said Betsy Cowles, president of River Park Square LLC.

The developer is an affiliate of Cowles Publishing Co., which also owns The Spokesman-Review.

Swinton said the debt reserve account has some $520,000, more today than what the developer said would be available in written projections attached to the loan document.

One factor that contributes to the dispute is that the loan document does not use the term Phase II. Swinton said that a series of written agreements known as pro formas and verbal assurances give the developer the right to the money at this stage of construction.

But Rowland said releasing the money requires an agreement by a majority of the City Council because it’s “an interpretation that would potentially vary from the precise language” of the loan document.

That means any change would require four council votes at a time when the majority of the council is critical of different aspects of the River Park Square project.

“It’s unfortunate that River Park Square is caught up in the political debate,” Cowles said.

Although the parking garage is struggling to meet revenue projections because of a shortage of customers, the mall and theaters are a success, she said.

The city will receive an estimated $4.2 million this year from building permits, sales taxes on construction materials and increased sales taxes from retail sales, Cowles said.