It was strangely quiet at City Hall Monday night, prior to the Spokane City Council meeting. In the "good old" River Park Square days, when critics and supporters filled the chambers, the half hour before the meeting was the best time to get the scoop. It was practically a social event, often lasting until well past 11 pm.
Not so on Monday. As the city council approved a multi-million-dollar settlement with the River Park Square parking garage bondholders -- the group that was suing the city, the developer and others for securities fraud -- only one citizen signed up to speak before the council.
Maybe what they say about the month of March applies to the parking garage controversy, too: It came in like a lion, to be sure, and it appears to be going out like a lamb.
"Tonight we haven't even heard where all the money is going," said Tom Grant, a critic of the deal and Mayor Jim West's opponent last November. "You haven't restored the community block grants that should go to the poorest in our community, and there was still a gift of $10 million in public funds to a private company. This is not a settlement -- this just says that we are responsible."
Prior to Grant's lonely testimony, the council had debated two connected issues for about an hour. One was an ordinance seeking to allow the city's financial staff to go out and secure short-term funding for the $39 million bond issuance; the other was the actual settlement with bondholders, a 28-page document that was summarized by the city's special counsel to River Park Square, Laurel Siddoway.
The plan is for the city to pursue settlements, but not to take out any long-term debt until it's known exactly how much money will be needed. The city hopes to ultimately issue much less than the $39 million amount being cited, but that depends on its ability to bring about settlements with other defendants. Whether this action will be viewed with as much skepticism as the council's January 1997 decision to join the project remains to be seen. But for now, the five supporting council members are optimistic that it's the best path out of a problem for which their are no easy exits.
Last week the council voted six to one -- Cherie Rodgers was the only one voting no -- approving the $39 million bond issuance. On Monday, the city's chief financial officer, Gavin Cooley, presented a revised version of that ordinance asking for the council's approval for short-term financing of the $39 million.
"It's a lot like when you are building a home and you go to the bank and say a lot of things are not clear, but it'll be somewhere between $120,000-$150,000 and the bank authorizes that," Cooley explained. "As things become clearer, you then go out and get your long-term financing, your 30-year mortgage." Bank of America has already agreed to provide this short-term financing, which is not to exceed 180 days.
The short-term financing ordinance was closely tied to the settlement proposal that was then presented by Siddoway. She explained that the settlement includes $1.49 million from Walker Parking Consultants, which has been accused of providing inflated parking revenue projections for the River Park Square garage.
"They have given us basically all they've got," said Siddoway, explaining that the $1.49 million comes from Walker's professional liability coverage. "The settlement also includes a clause that Walker will be cooperating with us as we pursue other settlements."
Several city council members had questions about how the total amount needed for settlement grew from the original $31.5 million issued to bondholders, to $39 million needed for settlement.
Siddoway explained that the difference mainly consists of attorneys' fees, interest and pre-trial fees.
The exposure over the tax-exempt issue with the IRS, which found that the original bonds are not exempt from federal taxes, is expected to be covered by the law firm Preston Gates and Ellis, Siddoway testified.
"We have been going around and around on the tax issue, but Preston remains in front of us to get that solved," she explained. "We have agreed to backstop the IRS issue only in the event it goes back to assessment against the bondholders again."
City council member Mary Verner asked if backstop meant indemnify?
"Yes," said Siddoway, "it means indemnify, but we know how much money we're looking at. It's a set amount."
Ultimately the council voted five to two, passing both issues, with council members Bob Apple and Rodgers voting no.
While Rodgers has been opposed to the settlement plan all along, preferring for the city to go to trial as a defendant without incurring additional debt, Apple had changed his mind since last week's vote.
"There was a lot of hope in the past week, trying to be someone who can bail out this big mess, but I don't see this as a viable solution," said Apple. "If this is all we can offer, then we need to go to trial."
Rodgers said that, in her opinion, the city is gifting public money to a private entity by paying off bondholders.
"We still don't own the land underneath the garage. According to these documents, which are public record, the garage and the land is worth only $9 million," she explained. "Why would we want to pay $39 million for something that's only worth $9 million? To me, that's gifting of public money."
Council president Dennis Hession reiterated throughout the meeting that this isn't a global solution of the River Park Square case, but that this one settlement would be a positive step for the city.
Shogan agreed. "There still remains the issue of the HUD loan and the ownership of the garage itself," he said. "But this is a start to settle part of the federal case the bondholders have filed against us."
Newly appointed council member Mary Verner probably summarized the majority opinion best when she said that "Citizens have made comments over the past week and most have said, 'Please don't make this worse.' This current council would probably never have entered into the [River Park Square] agreement in the first place. I don't think anyone on this council has tried to hide any facts or any part of the truth.
"This is ugly," said Verner, who, like Shogan and Hession, is a lawyer. "But we are trying to arm our legal counsel with the tools they need to settle this, and that's why I will continue to support our legal advisors."
Publication date: 04/15/04