After a year of wrangling, the City of Spokane, Spokane County and the new City of Spokane Valley appear to finally have a deal. Of course, nothing's final until elected officials sign off on it, but that is expected to be decided in the coming weeks.
After voters approved the expenditure of $96 million on regional projects last May, it was left to the elected officials and the Public Facilities District to figure out how to raise the funds. It has been a lot more complicated than anyone expected.
"This is one of the most complex municipal transactions ever done in the state," says Erik Skaggs, who was recently appointed to the PFD board.
Now, with nearly all the pieces in place, the plan will be presented to the Spokane City Council, the Spokane Valley City Council and the Spokane County Board of Commissioners for their approval. Previously, Spokane County was going to issue all $96 million of the bonds. That has changed in recent weeks, and now each entity will issue bonds to pay for their own projects: the PFD will raise $70 million to pay for the convention center expansion and upgrades; Spokane Valley will issue $7 million in bonds to expand Mirabeau Point; and Spokane County will only be left with $12 million on its debt ledger for its Fair & amp; Expo Center improvements. If you're paying attention, you'll notice that doesn't add up to $96 million. Here's where it gets a bit complicated.
The PFD is limited by state regulation in how much debt it can take on, and $70 million is its limit. But it will issue an additional $7 million later in the process, and that chunk will have to be guaranteed by Spokane County. Spokane County is agreeing to do that, as long as somebody (either the PFD or the city) guarantees that if payments on that amount are not made, that somebody will reimburse the county.
"Most of the issues are resolved now," says County Commissioner Kate McCaslin, "but we still need something other than the city's naked promise."
McCaslin says a promise of repayment isn't enough, and she says the city must pledge an asset to keep that promise enforced over the life of the project. Currently, the idea is to have the city pledge its parking lots, like the one outside the Arena. But those lots may be turned over to the PFD, complicating the question of who will be on the hook if the possibility of default comes to pass.
"The city is bringing a lot of baggage to the table with its financial situation, and the county sees a minimal direct return to their budget," says Skaggs of the pledge. "It's a reasonable request. The city gets a tremendous upside."
So as the City Council considers whether to endorse the plan, it must consider pledging assets, or turning them over to the PFD as part of its contribution to the project. At this time, that pledge of an asset appears to be the final piece of the puzzle.
As for paying back the debt, the projects will tap existing dedicated revenue streams as well as one-tenth of one percent of the local sales tax and a 2 percent hotel/motel tax (both starting in 2018, when the Arena is paid off).
Additionally, it appears the city will retain partial ownership of the Spokane Center for at least 10 years, and it will continue to pay its annual subsidy to the facility, as it has over the years. That amount will be no larger than $250,000 per year; if the center has a good year, it will be reduced accordingly. The city will also own the land the center now sits on until the bonds are paid off in 2032.
Skaggs, a onetime critic of the expansion plans who still has questions about the project, says the financing package must be rolled out to the public with care to avoid the perception that this is another River Park Square parking garage deal.
"So far the deal has been on the up and up," says Skaggs, "but this is going to require a lot of focus and time to answer a lot of questions. It should not be done in a single night; that's not appropriate."
The Spokane City Council is expected to take up the issue of the financing plan at its Monday, June 9, meeting, with a vote coming the following week.