Saturday, November 21, 2009

ONGOING COVERAGE: KENDALL YARDS

Editorials

Our View: A win-win project

Kendall Yards will pay off for developer, city

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May 20, 2007

There was a pinch-yourself quality to Thursday's groundbreaking ritual for the Kendall Yards development.

Those 78 acres along the north bank of the Spokane River have been sitting undisturbed for a long time, a field of unrealized dreams.

Consider the decade between 1994 (when Metropolitan Mortgage Co. obtained city approval for a residential and commercial construction on the site then known as the Summit property) and late 2004 (when developer Marshall Chesrown paid $12.8 million for it in a bankruptcy auction).

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What happened on that promising real estate during those 10 years, except for talk? Zip.

Now, two and a half years after Met Mortgage's financial collapse led to a change of ownership, Spokane and Spokane County have approved a tax increment financing district, and Chesrown is poised to forge ahead.

Projects of this magnitude rarely get off the ground without overcoming challenges and controversy, and Kendall Yards has had its share. But it's difficult to see much of a downside to a substantial private investment that will increase the city's tax rolls, create construction jobs, combat sprawl by utilizing vacant land in the city core, and contribute to the urban vitality that occurs when growing numbers of people live downtown rather than vacate it at the end of the work day.

For those who are jittery over chances that the project will go sour and taxpayers will have to pay for it, the deal could hardly be nailed down more securely. Chesrown will have to put in sewers, streets and sidewalks that will serve the residences and businesses at Kendall Yards. That infrastructure ultimately will belong to the city.

As construction grows the property's value, now pegged at about $8 million, to an estimated $500 million to $1 billion, taxes will go up. And, unlike the 10 fallow years under Metropolitan Mortgage, the value of the developed property will keep growing. For 25 years, the added revenues will go to reimburse the developer; after that, they go to city and county treasuries. If the project should flop and there is no increase in value, Chesrown is on the hook, not taxpayers.

But if Kendall Yards is as successful as Black Rock developer Chesrown's other ventures have been, the city and its economy are beneficiaries. It bothers some that Chesrown stands to make a bundle, too, but without the entrepreneurial combination of risk and profit, community prosperity rarely follows.

Without question, the Kendall Yards project will be scrutinized, as it should be. At the same time, the city and county need to make sure sound policies are in place for the time when future uses of tax increment financing are proposed. Normally, this process involves the issuance of bonds to cover initial infrastructure costs, meaning the taxpayer is potentially more exposed and prudent judgments are even more important than in this case.

John Pilcher, the city's chief operating officer, doesn't think there are many properties left in Spokane with the right combination of qualities to make tax increment financing plausible – maybe three in the next 10 years.

Maybe. But whether there are three or 30, tax increment financing is now in Washington state's economic development repertoire, and the city and county need to have plans in place to ensure that proposals requiring a reasonable incentive are evaluated diligently and fairly and will benefit the city.