Opposition to financing plan for Kendall Yards is misguided

Skip Chilberg will not challenge the use of tax increment financing for construction of Kendall Yards streets, sidewalks, water and sewer lines or other improvements.

Although he threatened litigation earlier this month, he says he has since realized he does not have the authority to take on the project in court. But, as Spokane County treasurer, he does occupy a bully pulpit, one he grasps with determination.

And with a populist message. Misplaced, in the case of Kendall Yards.

Public money, Chilberg says, should be used for public purposes. Kendall Yards, despite the $1 billion boost the project will give the Spokane area, is a private development. Financial responsibility for building infrastructure properly belongs with the developer, he says, not with taxpayers.

That’s a deeply held belief in Washington. The lending of public credit for private benefit has been a no-no since the drafting of the state constitution. Although a commonly used tool in many states, efforts to make tax increment financing palatable in Washington have been repeatedly swatted down by the courts. A city of Spokane proposal for a tax increment finance district on Bernard was a casualty in 1995.

Even though a 2001 version passed constitutional muster, tax increment financing remains rare in Washington. The funds can be used for only a limited number of purposes, and the paperwork can be burdensome. They are also frequently misunderstood.

Tax increment financing does not take existing tax revenues away from other county purposes in order to service the new debt. The bonds are repaid with incremental taxes created by increases in property values.

The distinction does not impress Chilberg, who has long opposed TIFs.

A former chairman of the Washington State Housing Finance Commission, Chilberg says affordable housing should not be sacrificed in developing Kendall Yards. As the project boosts property values in the West Central neighborhood, rents in one of the most affordable areas in Spokane will increase.

“The residents who are there now are not going to benefit. The speculators will,” he says.

But housing is not one of the allowed uses for tax increment financing, except for historic preservation. That’s an omission, Chilberg concedes, that will have to be corrected by the Legislature.

In the meantime, West Central residents should see some direct benefit from Kendall Yards. If, as now stands, much of the area will be subject to the tax increment financing, some of its streets and sidewalks deserve some attention.

Kendall Yards Project Manager Tom Reese says additional amenities are still in the mix as negotiations continue with the city and county. Just how big a bond issue will be called for depends somewhat on what improvements, for example, might be made along West Broadway, he says.

“I think that there’s a lot of merit to that,” Reese says.

But whatever the public dollars committed to the project, owner Black Rock Development will have far more invested in infrastructure that is expected to cost around $65 million. It may be years before any new homes or businesses tap into those sewer and water lines, roads and other improvements.

This is a project the city has to get right, and not just because it will be a showcase.

Kyle Usrey, dean of the school of Global Commerce and Management at Whitworth College, says the kind of partnership the county, city, neighborhood and developer put together at Kendall Yards will create a precedent for future redevelopment of Hillyard and the East Central areas.

“There’s always an equity piece that comes in,” he says, but big projects cannot be undertaken with the public and private sectors working separately.

Unfortunately, the public was soured on public-private ventures by the city’s experience with River Park Square, in which this newspaper’s owner, Cowles Co., played a major role. But, as City Council Member Al French has noted, many of those problems could have been avoided had the guarantees been in place that Black Rock is willing to provide.

The public is giving nothing to Kendall Yards, yet will eventually have something any other city would envy.