City Council rejects paying $300,000 for soil cleanup at Grand Hotel

A proposal to use city funds to pay for more than $300,000 in environmental cleanup at the Davenport Grand Hotel was shot down this week by Spokane City Council members, who argued that doing so would be unconstitutional and set a bad precedent for other polluted properties the city has previously owned.

Mayor David Condon, who made an informal commitment for the soil remediation to Walt Worthy, the hotel’s developer and owner, said the city could still be responsible for any polluted soil on the land because the city is in the “chain of custody” for the property. He added that the Worthy hotel mitigation was part of his administration’s larger effort to clean up developable lands across the city.

For his part, Worthy said Tuesday he had “pretty much said all I have to say,” and would not comment any further.

The council’s refusal to directly pay for soil remediation comes about three months after Worthy requested $318,000 in city funds for the soil cleanup, and nearly two years after Condon’s handshake agreement to pay more than $3.3 million in incentives for the $138 million project.

In a 2013 letter outlining “partnership parameters,” Condon told Worthy the city could commit $2 million toward environmental remediation and $1 million for streetscape improvements. The mayor also said the city could waive $362,000 in various fees for the project.

Council members largely balked at Worthy’s request, saying they had not been informed of the incentives before they got the bill.

This week, a majority of council members detailed their opposition to Condon’s deal in a letter authored primarily by Councilwoman Amber Waldref. The letter says that “the Council does not believe a transfer of City funds to Mr. Worthy as requested is the responsible approach.”

When the city transferred four parcels of land to the Spokane Public Facilities District in 2003, Waldref’s letter says, the city secured “specific, straightforward, and strong indemnification and hold harmless agreements” protecting it from any future liabilities relating to the land.

“What will be the impact to the City’s future finances and liabilities if we begin ‘settling’ potential claims?” the letter states.

Condon disagreed, saying the city still is potentially liable for any pollution on the property, and helping pay for the cleanup relieves the city of responsibility.

“It’s very difficult to transfer environmental liability,” Condon said. “This is a release of liability. The legal analysis that’s been provided to me and the council is that this is clearly in the consideration of release of liability.”

The council’s letter also states that the “requested transfer of City funds to Mr. Worthy has the appearance of a gift … we believe the City should honor the spirit of the Washington State Constitution and avoid even the appearance of gifting of public funds.”

In a rare appearance at City Hall, former City Council President Joe Shogan made a similar remark during the council meeting’s open forum Monday, where he lambasted Condon and Worthy for the agreement.

“Quite frankly, this is an illegal gift of city property, city funds and a violation of the Washington state Constitution, Article 8, Section 7,” Shogan said. “This is a gift. Why is it a gift? Because there’s absolutely no city responsibility for the cleanup of that property whatsoever.”

In part, that section of the constitution states that cities cannot “give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation.”

“There’s no way in hell this council can pay for this,” he said. “If Mr. Worthy wants to be paid, let him go to the millionaire mayor and get his 300 grand.”

Councilman Jon Snyder thinks he has found another way to get remediation money to the Worthy project.

“We think there’s definitely public good in supporting this project, we just have to figure out how to do that within the existing laws,” he said.

This week, Snyder proposed creating a brownfield revolving loan fund that would indirectly lend money toward Worthy’s soil remediation.

Under his idea, the city would seed the revolving loan fund with $325,000, surplus money from last year’s budget. The city would then loan the money to the facilities district, which in turn would give the money to the Worthy project. When the facilities district paid the city back, the money would be returned to the revolving loan fund, which could then be used for other cleanup projects in the city.

“It’s a government-to-government loan,” Snyder said. “The council was caught in the middle between the two entities. The PFD has a contractual relationship with the Worthys. We don’t.”

Snyder said his plan solves the short-term Worthy problem, and a long-term problem of finding money to clean polluted land to allow for redevelopment. Receiving cleanup grants take up to a year, Snyder said.

Condon said he would prefer a direct payment over a loan, suggesting it was a simpler plan.

“The city is turning down revolving loan funds at the state level because they just don’t make sense,” he said.

Worthy said he had not heard of a loan for his request. Kevin Twohig, CEO of the facilities district, said he was largely unaware of the loan fund proposal.

“I don’t know what the proposal is,” he said. “It sounds like we’re paying the rest of the money.”

The facilities district has paid $500,000 toward Worthy’s cleanup effort, as part of the sale agreement. Twohig said the district paid $1.2 million toward cleaning the plot of land, when it transformed the land into a parking lot in 2010.

“We had to go down 3 or 4 feet,” Twohig said. “We encountered a lot more stuff further down. We didn’t have to clean it up because it was encapsulated by the asphalt.”

Worthy had to dig further down for the hotel, leading to more cleanup.

Snyder suggested the council was cleaning up after Condon, who he blamed for putting the city in a problematic situation.

“The mayor got out way ahead of himself and bit off more than he can chew in this discussion,” Snyder said.

Condon said he and the deal’s critics on the council were headed to the same outcome, regardless of how they get there.

“I wouldn’t even call it a debate. We’re after the same thing,” he said. “These are tough issues. There are differences of opinion. But I think we’re focusing on the right things.”