As Larry Stone stonewalls, Spokane City Council grudgingly invests in shelter he owns

Members of the Spokane City Council say it has become increasingly clear that developer Larry Stone, of the Stone Group of Companies, has no intention of selling the Trent Avenue property that has become Spokane’s largest homeless shelter.

Now, nearly nine months after the shelter opened its doors, the City Council has approved costly construction at the facility, though several said they did so “grudgingly.”

On May 8, council members voted unanimously to approve spending $1 million dollars from a real estate excise tax fund to help pay for $1.4 million in improvements to the shelter, including bathrooms, showers and laundry facilities. Several expressed frustration before the vote, in part because the city does not own the property, and in part because of broader concerns about the shelter’s long-term financial sustainability.

Councilman Michael Cathcart had called for the investment decision to be paused until after the council could get a better sense of how the city intends to fund the shelter, which costs roughly $13 million per year to operate.

“I think that we need to identify exactly how we will be paying for this beyond 2023, before we decide to put a million-plus into a building we do not own, we cannot afford to buy and the owner has zero intention to sell,” he said.

The motion to defer failed. Ultimately, Cathcart and other concerned members of the council agreed to move forward with the investment, in part because of the potential cost savings.

The cost to maintain current temporary shower and bathroom facilities, as well as to do off-site laundry, is so high that the $1.4 million investment is expected to pay for itself within 18 months after construction of permanent facilities is finished, according to City Council Budget Director Matt Boston.

In addition, Council members said they believe permanent facilities would provide more human services to the hundreds staying at the shelter, who reportedly experienced numerous issues during the winter with the temporary showers and bathrooms.

“Trying to use a large warehouse without bathrooms was a very ill-fated plan, and was mostly in my opinion an attempt to win a legal argument, not to really help people or the city,” Beggs said before voting in favor of the expenditure. “But if we’re going to have people there, we need bathrooms and showers.”

Beggs expressed further frustration with the shelter site selection process that resulted in the Trent Avenue property being chosen.

“We were only given one option, and it was either that option or people freezing to death, so we took (the former) option grudgingly,” he said.

The nearly 33,000-squarefoot former warehouse was identified by Mayor Nadine Woodward’s administration last year as the shelter’s ideal site after exhausting upwards of 100 other options, the administration has stated.

The five-year lease negotiated by the administration and approved by the City Council is expected to cost the city $26,100 base monthly rent, plus a 2.5% lease management fee, for a total cost of $1.6 million during the lease term.

Woodward has consistently opposed spending millions to purchase the shelter, which Stone bought last March for $3.5 million, while the majority of council members have opposed investing millions into a property the city doesn’t own.

The administration included an option-to-buy clause in the lease agreement, which Beggs last year insisted the council would act on.

At the time, City Administrator Johnnie Perkins, who led negotiations for the lease, had expressed optimism that, if the clause was exercised, negotiations with Stone would be fruitful.

“In speaking with the owner about this exhibit and the potential for the city to purchase, they are willing to work with us on that and do so in a manner that would not be overly intrusive in terms of what price we would pay,” Perkins said.

Now, many on the council believe that the option-to-buy was little more than smoke and mirrors.

Then in January, the council voted 5-2 to exercise the purchase option, which required both Stone and the city agree to a third-party appraisal, which would act as a starting point for negotiations.

In early May, Beggs reported that an appraiser chosen by Stone had valued the property at around $4.1 million. Stone wanted north of $8 million, Beggs added.

Several council members have expressed they believe that Stone’s offer was not serious and appeared to be Stone signaling he was not interested in selling to the city.

“We certainly don’t have $8 million, nor would we likely be legally allowed to purchase it at twice the appraised value,” Beggs said in an interview. “I think he’s hoping that in a few years the commercial real estate market will go up, so he wants to sell it later for a bigger profit.”

Stone did not respond to requests for comment by phone, email and in-person.

Beggs floated the idea that the city could take Stone to court and attempt to force a purchase of the property at the appraiser’s valuation through eminent domain, though he expressed little appetite for that option, especially with the mayor running for re-election this year against former state Commerce Director Lisa Brown.

“It would be easier with administrative buy-in, but they don’t want to buy it,” he said. “By the time anything substantive happened in court, we could have a new mayor, and I don’t think Brown is excited about Trent either.”

In a brief interview, Brown expressed wariness of the city purchasing the shelter, but did not outright say she would oppose it. However, she did express dire concerns with the financial sustainability of the shelter’s $13 million annual price tag.

“It feels like the whole decision was fiscally irresponsible, if not reckless,” she said. “I think this is rather horrifying, that it costs that much.”

If a path were to ever become available to purchase the shelter, Beggs doubts it will come this year.

“It’s frustrating, because we just approved spending over a million in putting in bathrooms and showers,” he said. “It’s hard to spend that knowing it benefits someone else.”

Construction of permanent bathroom, shower, laundry and other facilities at the Trent shelter is expected to take around six months, Boston said in a Friday interview.