The city of Spokane is refinancing bonds paying for the settlement of a federal lawsuit related to the River Park Square parking garage.
The move is expected to save about $1.9 million over 10 years, according to city officials.
The $190,000 in annual savings will be used to seed an economic incentive investment fund, which was unveiled last summer and is intended to build transparency and fairness into the city’s ability to provide funding, waive fees and contribute other incentives for private projects within the city.
Gavin Cooley, the city’s finance director, said the savings come from a better interest rate on the loan, which is down from 5 percent to 3.24 percent. The new loan was issued through U.S. Bank, the city’s primary banker, instead of through the typical bonding process used by cities, which has a more arduous process including hiring bond counsel and releasing official statements.
“Banks have gotten a lot more competitive,” Cooley said. “We sent out bids and got seven responses. It was better than what we thought we could do on the marketplace.”
The move was approved this week by the City Council in a unanimous vote.
There were no fees on the loan, but administrative costs came to about $34,000.
In 2005, $25.2 million in bonds were taken out to pay for a settlement in a federal lawsuit related to the troubled downtown parking garage. River Park Square and its garage are owned by Centennial Properties, an affiliate of the Cowles Co., which also publishes The Spokesman-Review.
In the mid-1990s, the city and River Park Square entered into a complicated partnership aimed at expanding the downtown mall.
The project involved the city borrowing money to loan to the mall, and the Cowles Co. setting up a foundation to raise additional money for the project through revenue bonds.
If everything had worked as supporters said it would, the loan and the bonds would have been repaid through money generated by the mall and the garage. But when receipts fell short, the deal fell apart, leading to a series of lawsuits. When a federal suit was settled in 2005, the city agreed to pay off the bonds, costing between $1.4 million and $2.3 million a year through 2027.
Rules placed on the 2005 bonds when they were issued did not allow them to be refinanced until Dec. 1, 2015.
Though the refinancing will save upward of $2 million, the city will have paid more than $15 million in interest over the life of the loan ending in 2026.
Regardless, Mayor David Condon said the new savings are better used on local incentives than toward interest payments.
In short, the savings will fund a program that separates larger projects from smaller ones. The city will evaluate and score a proposed project on five criteria: sales and utility tax revenue generated by the project, job creation, public benefit, type of industry the project is part of, and the part of the city in which the project will be built.
Design standards, historic preservation, brownfield redevelopment and environmentally sustainable structures also score well. The program will give points to manufacturing, aerospace or aviation, biotechnology, medical technology or tourism-related projects.
A project’s score will determine the amount of public funding and incentives committed to the project by the city. Tax revenue, job creation and public benefit will be more heavily weighted.
City leaders said although the program has been in development for years, it was in 2015 that its need became imperative.
In March, with his new downtown Spokane hotel nearly complete, Walt Worthy asked for $318,000 in public funds for soil pollution cleanup, money promised to him by Condon years before. Worthy asked for the money based on an informal handshake with Condon, who told Worthy that $3.3 million in city funds was available to his hotel project near the convention center.
When City Council members received the request from Worthy, they said it was unexpected and inappropriate, leading to a rejection of the funding by the council.
With the new program, city leaders say Worthy likely would have received the money with little trouble.
“This makes better use of public money by investing it in economic development in Spokane instead of larger interest payments,” Condon said in a statement. “Our vision is for Spokane to be the fastest growing job market in the Inland Northwest and this helps us get there.”
Cooley echoed Condon.
“When you can turn around and refinance debt and come up with $2 million in savings to use for economic development, that sure is a benefit to the community,” Cooley said.
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