Council OKs loan for mall parking garage

The Spokane City Council voted 4-3 on Monday to loan money from its parking meter collections to bolster the ailing finances of the River Park Square parking garage.

The vote came in the face of a court order requiring the city to loan the money under terms of a 1997 ordinance that established financing for the garage. Council members Cherie Rodgers, Bob Apple and Mary Verner voted no.

Four years ago, a similarly divided council voted 4-3 against making the loan because of the likelihood the money would not be repaid, thus making it a gift, not a loan. That set the stage for lawsuits and appeals of a writ to compel the city to make the loan under the ordinance.

The state Supreme Court refused in June to hear an appeal of a ruling by the state Court of Appeals last September ordering the loan.

“We don’t have a choice, unfortunately,” said Councilman Brad Stark. “It pains me greatly to have to do this.”

Under terms of the loan, the city will provide $3.4 million to the Spokane Parking Public Development Authority, the lessee of the garage, at nominal interest payments through 2019 when the principal will be due. The $3.4 million is the amount of the loan as ordered by the trial court.

City officials said it’s unlikely the loan will be repaid because the PDA does not take in enough parking revenue to cover its costs. The PDA is $11 million in debt, Rodgers said.

She decried the use of parking meter money, saying it should be used for city services at a time when the city budget is facing a $6 million cash shortfall.

“That’s parking meter money that’s supposed to be in the general fund,” Rodgers said.

More than $7 million in parking meter receipts have been set aside pending the outcome of the dispute over the parking garage.

In approving the loan Monday, the council sought to apply leverage against the owners of the River Park Square shopping center after the mall owners took possession of the parking garage earlier this year. The loan contains a condition that the money will not be made available to the PDA until the city obtains legal title and possession of the garage. The loan terms also require the PDA to assign any claims stemming from the garage dispute to the city as security for the loan.

In April, the council approved a repurchase of $31.5 million in tax-exempt bonds sold to finance the garage. The repurchase is the cornerstone of a city initiative to settle the parking garage dispute, which involves the mall owner, the PDA, a private foundation, bond underwriters, attorneys and others.

City Attorney Mike Connelly said Monday the city is close to reaching a settlement with the Spokane Downtown Foundation, which issued the bonds for the parking garage and has leased the facility to the PDA..

The 1997 ordinance made parking meter revenue a backup source of cash if parking receipts did not meet all of the garage’s costs. The ordinance also calls for the city to take ownership of the garage once the bonds are refunded.

The city should have possession now, said Laurel Siddoway, the city’s special counsel for River Park Square

Les Weatherhead, attorney for River Park Square, said the mall developer took possession under the terms of two leases it holds for the garage. Payments on those leases are in arrears. He said the council cannot vote to take away the mall owner’s right to enforce its leases.

River Park Square is owned by companies that are affiliates of Cowles Publishing Co., which owns The Spokesman-Review.

The garage has been operating since 1999 without payments to the developer.

Money from the parking meter loan could be used to satisfy outstanding amounts on leases. A portion of the proceeds from one of the leases was earmarked to make partial payment on a federal Housing and Urban Development loan that was obtained by the developer for mall construction and is being backed by the city’s annual community development block grants from HUD. A shortfall in the repayment account for the HUD loan is being recouped from city block grant funds.

During Monday’s debate, former city Councilman Steve Eugster tried to convince the council not to make the loan because the tax-exempt status of the parking garage finances was rejected in a recent ruling by the Internal Revenue Service. Eugster recently filed a lawsuit seeking to prevent the loan, and he was an original litigant in the case that led to the court order to make the loan.