City May Try Bond Buyback

The city of Spokane may try to solve its River Park Square garage disaster by buying back the $31 million in garage bonds.

The plan, broached by city bond attorney Roy Koegen at Monday’s finance committee meeting, would require the City Council to float another set of bonds to raise the money for the buyback.

In Koegen’s plan, if the city could buy the bonds at a deep enough discount, it would then have eliminated one of the major headaches surrounding the garage: its crushing debt payments.

There’s no guarantee the buyback will work, Koegen said, but “we won’t know until we try.”

The bonds were initially sold by the Spokane Downtown Foundation, which used the proceeds to buy the garage from the developer of River Park Square. The developer is an affiliate of Cowles Publishing, which owns The Spokesman-Review.

Under the terms of the original River Park Square deal, the foundation leases the garage to the Public Development Authority, the city agency created to run the garage.

Because not enough parkers are using the garage, there isn’t enough revenue to cover its debt and additional expenses. As a result, the PDA has asked the city for a loan. The city has refused, triggering the flurry of lawsuits.

If the city bought the garage at a discount, it would theoretically lower the bond debt, the most cumbersome expense for the PDA.

There are obstacles to the plan, however. Not the least of which would be tracking down 120 different bondholders.

Even if the city found the bondholders, they may have no interest in selling at a discount.

The city needs the bonds to have been significantly devalued for the plan to make sense. Koegen said he believed the city could buy them back at 82 percent of their original value. At a price that low, the garage’s revenues might be enough to cover the cost of repaying the city’s debt, plus the operations and maintenance expenses, Koegen said.