City bypasses warning signs
In 1997 deal, council pledges loan if garage revenues fall short

Jim Camden
Staff writer

Jed Conklin - The Spokesman-Review Customers pay parking fees recently as they leave the River Park Square garage. Consultants questioned the garage's revenue projections.

Before the Spokane City Council promised to use its parking meter money in the proposed River Park Square garage deal, it hired outside accountants to see if the finances penciled out.

The consultants, Coopers & Lybrand, raised a series of warnings.

The proposed parking fees seemed high, they told the council on Jan. 27, 1997. The average time a shopper will park might be shorter than projected. And the estimates didn't include a parking validation system.

Using the validation system in place in 1997, the garage wouldn't make as much money as the city expected, they added.

The same night the accountants delivered their report, a hearing room full of civic boosters wearing "I (heart) Downtown" buttons said the mall was needed to save the city's retail core. A parking validation system would be worked out, and the parking meter fund was unlikely to be tapped, they said.

The City Council voted with the boosters that night. With little debate and no dissent, it agreed to loan money from the city's parking meter fund to cover certain expenses if garage revenues fell short.

Problem was, the consultants were right. And on the validation system, the boosters were wrong.

Raising warnings

City leaders paid scant attention that January night to one of the many warnings about the River Park Square garage from people they were paying for advice.

Investors who later bought some $31.5 million worth of bonds to finance the garage are suing the city, the mall developer, other groups connected with the garage ownership and management, as well as consultants and advisers to the parties. The investors say they were misled about the risks of the project, which has struggled to repay its bonds and hasn't covered other expenses since it opened.

Part of the investors' claims involve the fact that they weren't given details of warnings from Coopers & Lybrand or some of the other city consultants who questioned the garage's revenue projections.

Some of the first warnings came from two local appraisers hired by the city to estimate the value of the garage for negotiations with the mall development companies.

Those companies are affiliated with Cowles Publishing Co., which owns The Spokesman-Review.

One set of appraisers, John Evans and David Auble, had doubts about the amount of time the out-of-town experts said customers would leave their vehicles in the new garage. In a report prepared for the city, Walker Parking Consultants had projected that the average stay would be three hours -- because of improvements to the mall -- compared with the nearly two hours they said customers were staying in the current structure.

But Evans and Auble said in their appraisal report they thought the average stay at the time was really just over one hour.

Daniel Barrett said in a separate appraisal he thought the Walker report overestimated the money that would come from theater customers and made unreasonable assumptions about parking validation.

Merchants didn't cover the full cost of parking discounts under the existing validation system. But Barrett pointed out the Walker report assumed the new garage would operate with a "revenue neutral" validation system, so that any money a parking customer saved would be covered by participating merchants.

The city never relayed those criticisms to Walker, John Dorsett, the senior consultant for Walker, said last year in a deposition for an upcoming trial in a lawsuit filed by bondholders against the city, the developer and other parties involved in the project.

Concerns omitted

When Walker revised the report in 1998 before the bonds were sold, it made only minor adjustments.

The Walker report was updated for the bond "offering statement," an official document that described the garage project for potential buyers. It was prepared by the bonds' underwriters, the foundation selling the bonds and a host of legal advisers.

All 75 pages of the Walker report -- complete with spreadsheets and charts that show how garage revenues would conceivably cover bond debt, operations, maintenance, rent and other expenses -- are included as an appendix to the bond offering statement.

Coopers & Lybrand's 28-page report is reduced to an 11-sentence synopsis. It ends by noting that Walker is "a recognized expert in the area of parking garage operations and construction" and that the revenue projections are based on formulas developed by a national institute.

Also missing from the prospectus is any mention of the concerns Barrett and Auble had raised about Walker's projections.

The vote the City Council took on Jan. 27, 1997, cleared one of the last big hurdles for the project. At the urging of the mall's developer and bond advisers, the city promised to lend money from the parking meter fund if revenues didn't cover some garage expenses.

The council made that promise as an emergency ordinance, which meant it took effect immediately and couldn't be overturned through referendum by the project's critics.

It was challenged in court, but judges consistently held that the city had the right to make that promise in exchange for receiving the garage when the bonds were paid off.

Saving downtown

Phyllis Holmes, a member of the council that voted 6-0 for that ordinance, said she and her colleagues were aware there were some concerns about project details, which she later described as "in constant flux."

"We expected concerns to be addressed by professionals," Holmes told attorneys preparing for the securities fraud trial.

But Holmes and other members of the council that voted to approve the parking meter ordinance defended their decision as necessary to save a dying downtown.

"The city needed revitalization," Holmes said in her deposition. "By not moving forward, the demise of downtown was certainly assured."

Although council members had experts telling them the parking meter funds were unlikely to be needed, Holmes said she realized it was always possible.

"There was no certainty to not tapping the fund," she said.

Jeff Colliton, a council member who voted for the parking meter ordinance in 1997, was ousted by one of the project's chief critics in 1999. But Colliton still believes the council made the right decision the night it received the report from Coopers & Lybrand.

"We wouldn't have the development occurring on the east end of downtown, we wouldn't have the Davenport (restoration) . . . if we had not had someone step forward and bring this project forward," Colliton said.

•Thursday: A dispute with AMC Theatres threatens to scuttle the garage sale.