Saturday, November 21, 2009

ONGOING COVERAGE: RIVER PARK SQUARE DEVELOPMENT

Mayor hopes law ends garage debate

Verner wants firmer backing for ventures

Jonathan Brunt
Staff writer
July 4, 2008

Mayor Mary Verner said a proposed ordinance aimed at preventing financial ordeals similar to the River Park Square deal should put an end to official city discussion of the controversial real estate project.

"With the passage of this ordinance, I would feel that it's effectively closed," Verner said last week.

Verner has directed legal staff to draw up an ordinance that, in part, would require public-private ventures be backed by developer bonds or letters of credit so that taxpayers won't be left to cover shortfalls.

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Since receiving a stack of documents about the city case against River Park Square in January from the city's former counsel on the River Park Square matter, Verner had declined to say if she thought the records revealed new information that could put the issue back into court. But last week, Verner said she doesn't support further legal action involving the partnership between the city and the mall's developer, the Cowles Co., which owns The Spokesman-Review.

"Here we are, and we could reflect backwards for another period of years," Verner said. "I just really don't see a lot of point in that."

City Administrator Ted Danek said Verner's proposed ordinance likely will make it to City Council later this summer.

Verner said many of the headaches of River Park Square could have been avoided if the city had required firmer backing for the money it lent to Cowles development companies in 1998 for mall renovation.

Cowles did not provide a letter of credit for the mall deal. Instead, the loan was to be repaid by several sources of money, including rent from Nordstrom based on the store's sales and a portion of rent the garage would pay. After the mall opened, Nordstrom's sales were below projections and garage revenue was so low that it didn't have the money to pay rent.

The city and Cowles settled the main River Park Square case in 2004. Other cases involving the deal lingered until early this year. Verner, a former councilwoman, voted in favor of the 2004 settlement and said last week that nothing she's seen since has changed her mind that the settlement was the best decision.

"I've received no additional information from anyone that would make me think that we didn't come to the best conclusion that we could come to and just go ahead and settle," Verner said.

Seattle attorney O. Yale Lewis, the city's first outside counsel after the mall deal began to fall apart, mailed Verner several documents in response to a Web site maintained by Laurel Siddoway, the attorney who led the case after Lewis. The documents also were provided to City Council members Bob Apple and Steve Corker.

Verner and then-City Attorney Jim Craven flew to Seattle to meet with Lewis in May. City Administrator Ted Danek said the city will pay Lewis $2,250 for the five-hour session. Danek said Verner has no plans to consult with Lewis again.

The city released a portion of the documents to The Spokesman-Review last month but declined to release about 50 letters, saying they are legally exempt from release because of attorney-client privilege.

The Spokesman-Review is pursuing further disclosure of the records and is reviewing its legal options, said Bill Holt, a Tacoma attorney hired by the newspaper to examine the city's response to its records request.

Verner said she does not believe the records will ever be released.

But in a letter to Apple and Corker, Craven wrote that the city could release some of the documents if it desired to do so.

"The decision is to be made by either the mayor or the city council, or perhaps both in concert, but not by any one individual," Craven wrote. "Because of the content of some of the documents in question, we have concerns that the precipitous, 'ad hoc' release of certain documents would run the risk of creating liability on the part of the city and any person who might choose that course of action."

Craven's memo was e-mailed to some members of the media this week by Ron Wright, a Spokane resident and critic of the River Park Square deal. Corker and Apple said Wednesday that they were not the source of the leak. In an interview, Wright declined to name his source, calling the person "a reliable citizen informant." He added that he is sending a copy of it to the U.S. attorney's office.

Former City Councilwoman Cherie Rodgers and Tim Connor, of the Web magazine Camas, submitted documents to the U.S. attorney's office last summer hoping for a federal grand jury probe into whether the project violated federal corruption laws.

In his memo, Craven described the records from Lewis as a debate between Lewis and Siddoway.

"Much of the correspondence contained in the package of documents constitutes an ongoing debate among the mayor and two outside lawyers for the city as to what each believed at the time (the year 2001) to be the best strategy to pursue in pending litigation," Craven wrote. "The question being debated is one which could be debated without end by any number of lawyers who would never unanimously agree."

Verner said that while the ordeal may almost be complete, the financial implications of River Park Square remain.

As part of the 2004 settlement, Cowles agreed to guarantee payment of a federally backed loan loan on the project and was given ownership of the mall's garage. The city will end up paying $43.4 million for outstanding debt from buying garage bonds in 2004.

"The pay-down of the River Park Square facilities is far from over," Verner said.