Council OKs settlement with firm over RPS

Spokane City Council members on Monday approved a $4.25 million settlement with a law firm, one of the last settlements in a massive legal case involving financing of a parking garage at River Park Square.

Council members voted 6-1 in favor of the settlement payment from the Seattle-based law firm Perkins Coie, which had acted as the city’s bond counsel on River Park Square financing as well as on other city projects. Councilwoman Cherie Rodgers, a critic of RPS garage financing, voted no.

As part of the deal, the city is paying Perkins Coie $183,000 as compensation for unpaid legal bills charged to the city before the city brought Perkins Coie into the River Park Square case. Perkins Coie initially sought more than $300,000 in unpaid bills.

The council initially had approved the RPS settlement in April, but the deal was held up pending a resolution of legal bills.

The city last month sold $25.7 million in bonds to finance a buyout of the garage, which involved repurchase of the original $31.5 million in revenue bonds used to finance the garage renovation and expansion in 1998.

The city reduced the cost of buying out the garage by collecting about $11 million in settlements from other parties involved in the deal, including Perkins Coie.

The city has one additional settlement pending with the Spokane Downtown Foundation, a nonprofit board that was created to purchase the garage with bond proceeds and then lease it to a city-sponsored parking agency.

From the time the garage opened in 1999, it was unable to take in enough parking revenue to pay the costs of the project. The garage was losing about $2.3 million a year. Bond holders sued in 2001 after the value of their bonds dropped on the bond market. The suit alleged securities fraud and was settled through the city’s buyout of the bond holders as well as a series of agreements and court action in 2004 and 2005.

The city had named Perkins Coie and its attorney, Roy Koegen, as a defendant in their response to the bond holder lawsuit in 2001.

Last year, the city repurchased the bonds and negotiated settlements with other defendants, including the owners of River Park Square, which took back possession of the garage in exchange for other financial concessions.

The mall is owned by real estate affiliates of Cowles Publishing Co., which publishes The Spokesman-Review.

City Chief Financial Officer Gavin Cooley said Monday that a special fund held for cost overruns at the garage may be used in part to increase the size of the city’s general fund reserve. Standard & Poor’s gave the city a negative outlook when it rated bonds at AA- prior to the bond sale last month for the RPS settlement. The negative outlook was posted because the city’s general fund reserve had declined to $1.7 million last year.

Cooley said the city expects to gain an $800,000 settlement from the Spokane Downtown Foundation.

Another settlement with RWR Management Inc., the former manager of the mall, has not been paid.

An appeal of a $1.8 million property tax bill on the garage is pending in Lincoln County. The city accepted responsibility for paying the tax bill when it settled its case with the mall owner and is now trying to have that bill reduced.