Kendall Yards tax deal ‘critical’

A tax incentive program for the Kendall Yards project development is so important to the $1 billion project that without it the developer might not go forward.

Kendall Yards project manager Tom Reese said the formation of a “tax increment financing district” is essential to Kendall Yards because it would help pay for preliminary work needed to get the construction of buildings under way in 2008.

“It’s critical to get the upfront costs paid,” Reese said on Friday.

City officials have indicated their willingness to create such a district. Spokane County commissioners also must sign on and have shown support.

Action to create the district could come early this spring.

Spokane officials now are proposing that the district be expanded beyond the 78-acre Kendall Yards site to increase the amount of money available for public improvements. They’re seeking to include commercial and retail areas along the Maple-Ash corridor in the West Central neighborhood; industrial areas to the east and west of Maple-Ash; and land south of Boone Avenue, west of the Spokane Veterans Arena and north and east of the Spokane River.

Developers can use tax-increment financing districts to help pay for streets, intersections, sidewalks, streetlights, public utilities, park facilities and other public improvements.

Within a designated district, up to 75 percent of the property taxes derived from the increased value of the property as a result of development can go to pay for the improvements.

General obligation bonds would be sold to pay for them.

Estimates show that the tax incentive would pay for only a portion of the total public improvements needed at Kendall Yards, a long-vacant former rail yard on the north bank of the Spokane River west of Monroe Street. The latest estimate shows the cost of public improvements at Kendall Yards alone could reach $65 million.

Between $11 million and $20 million could be financed through the property tax incentive, said Jeffrey Nave, an attorney working on the project.

All of those figures are considered preliminary, officials said.

Acting Deputy Mayor John Pilcher told City Council members on Thursday that city officials want to expand the district so they can undertake improvements in the adjacent neighborhood, in order to maximize the economic impact of the Kendall Yards development.

Some of the money could be used as matching funds for street improvements in the vicinity, Pilcher said. “It’s a very defensible boundary,” he said.

Pilcher said he is going to organize public meetings on the boundaries and projects within the district, and that money would be distributed equitably throughout the area.

Kendall Yards is expected to bring $1 billion in new investment with construction of 1 million square feet of commercial space and 2,600 residences over the next 20 years.

Earthmoving and grading are expected to begin in March. Construction of the first buildings would begin a year later, said Reese.

“We’re ready for this project to go forward,” Reese told City Council members this week.

The first phase between Monroe and Maple streets would include 747,000 square feet of commercial space and 785 residential units.

Reese said the developer of Kendall Yards – Black Rock Development — has agreed to sign a letter of credit guaranteeing payment on the public improvement bonds.

County commissioners are expected to issue the bonds.

Councilman Al French said that would avoid any potential challenge to the spending based on a City Charter provision requiring a vote of the people for some types of capital projects requiring new indebtedness.

Councilman Bob Apple said he is concerned that the tax district might not be successful and he believes it was intended more for job-producing industrial projects.

Reese later said that Kendall Yards is the exact type of development that the tax incentive was designed to promote. “It’s an incredible tool for a municipality,” he said.