| Under the Influence | |
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By Tim Connor and Larry Shook |
8/18/2001 |
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Box Canyon
Box Canyon
Since the PDA signed its lease for the River Park Square garage in September 1999, revenue shortfalls at the facility have been leading Spokane taxpayers into a kind of legal, political and financial box canyon.
It begins with the bonds. While they are called revenue bonds (meaning payment of their principle and interest is supposed to come from revenues), the garage bonds were carefully modified to put a considerably larger checkbook behind them.
In a July 18, 1996 memo from John C. Moore of Prudential Securities, the bond underwriter, Moore reported that an "important credit feature" of bonds financing the garage would be the perceived "moral" obligation of the city council to dip into its general funds.
Such a moral obligation was satisfied by the 1997 emergency parking ordinance. If garage revenues lagged, the city was pledged to apply its parking meter income. If that still wasn't enough, the city had to raise parking meter rates. If that drove customers away, so that there still wasn't enough money to cover operations and maintenance, the full brunt of Spokane's moral obligation came to bear. The city was then required to apply "other legally available funds."
This meant the city's general fund could be tapped. Police, fire, library, park worker paychecks, etc. come from the general fund. The people of Spokane, then, were playing an important role in building River Park Square's garage. They were risking their general fund and, as things turned out, their municipal bond rating.
The importance of enhancing the creditworthiness of the bonds became apparent when the plan changed to one where the bonds would be sold "on behalf of the City" by a new nonprofit corporation (SDF) with no credit history and no assets other than the garage itself to draw upon.
This "credit-enhancement" will go down in Spokane history as the short fuse for the opening legal battles in the River Park Square fiasco. And yet its purpose in providing a "moral" if not legal obligation upon the city was plainly demonstrated as recently as the July 30, 2001 city council meeting. PDA president Terry Novak, among others, urged the council to "avoid the cloud over the community's credit" by approving an $800,000 loan from the city's solid waste fund to avoid a default on the bonds. Days after Mayor John Powers vetoed the loan, two bond ratings agencies downgraded the city's credit rating, even though there was no legal obligation on the city's part to make the loan. Estimates of the cost of the credit downgrades run into the hundreds of thousands of dollars per year.
THE END
Copyright 2001 by camasmagazine.com
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