Spokane Journal of Business

Tax-increment financing interests developers here

Granite Investments hopes incentive is used on project; others expected to follow

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Tax-increment financing wont become available in Washington state for another several weeks, but developers here already are looking into whether the city or county would use it in conjunction with their projects, which could be worth tens of millions of dollars.

Washington state Gov. Gary Locke signed a tax-increment financing bill into law on May 7, and that law will take effect July 22. Though the ink on the governors signature barely has dried, one Spokane company, Granite Investments LLC, already has met with county and junior taxing district officials to discuss whether they would use tax-increment financing in connection with Granite Investments planned 152-acre Pacific Northwest Technology Park, on the West Plains.

Roy Koegen, an attorney at the Spokane office of Seattle-based Perkins Coie LLP who serves as bond counsel for Spokane County, says the technology park could be the first project in Spokane, and possibly in Washington state, for which a city or county sets up a tax-increment financing district. Use of that financing mechanism could be a catalyst for $80 million to $100 million in new development at the Granite Investments property, he says.

Also, Koegen says, Perkins Coie has received inquiries from other developers who are eyeing projects. He declines to disclose details on those proposed projects.

Spokane City Councilman Steve Eugster says he hopes to propose city use of tax-increment financing to fund improvements in downtown Spokane. Eugster says he envisions selling about $20 million in bonds for new streetlights, streetscapes, and other improvements. He currently is researching the idea and hopes to bring a proposal before the rest of the council in the next few months.

Spokane businessman David Clack says rumors that hes looking to use tax-increment financing at a proposed business park in East Spokane arent true. Clack says, however, that hes a proponent of the economic-development tool, and adds, I think youll see a lot of interesting things crop up in the next six months or year. Everyone who is looking at development of any magnitude will consider (tax-increment financing) as one of their options.

Generally speaking, in tax-increment financing a city or county sells bonds to pay for construction or improvement of infrastructuresuch as streets and sewer and water linesin an area that it designates as undeveloped or underdeveloped. When developers build or upgrade business facilities in the designated area, property-tax payments from the properties go up. Under Washingtons new law, a large part of the increased taxes from facilities developed in a tax-increment district would be earmarked to retire the bonds sold to pay for infrastructure. When the infrastructure bonds are paid off, the increased property taxes would flow into city or county coffers for general use.

Lowell McKee, a partner in Granite Investments, says the company hopes that the county will hold a public hearing next month on a proposed tax-increment district for the Pacific Northwest Technology Park. He says its too early in the process to tell when, or whether, such a district would be established.

If the county sets up a tax-increment financing district, McKee says Granite Investments believes it would be able to develop the technology park in half the time it originally expected.

He says that if all of the infrastructure were put in at once, rather than in phases, Granite Investments could sell or develop parcels in all parts of the park right away. He says three companies have sought land in undeveloped parts of the park, but, All we could show them is a wheat field.

McKee says Granite Investments still plans to move forward with three initial structures at the technology park, including a $15 million office building, a $10 million Hilton Garden hotel, and a small bank branch. The company has applied for building permits for all three structures and expects to start work as soon as those permits are issued.

Granite Investments is owned by a group of investors, including prominent Spokane developer Dick Vandervert.

Tax-increment financing already is in use in Idaho, Oregon, and Montana. Tax-increment financing proponents in Washington state have said for years that the use of the tool in other states has given those states an unfair advantage in recruiting and retaining businesses.

Washington state enacted a tax-increment financing law in the 1980s, but the Washington state Supreme Court ruled that the legislation was unconstitutional because it diverted funds from basic education.

Dan Kirschner, the Spokane Regional Chamber of Commerces vice president of programs and policy, who has lobbied for tax-increment financing for several years, says the law that passed this year is written so that the state portion of the property tax, which includes funds for education, is excluded from the diversion to pay for infrastructure. He says the new law is believed to be constitutional, though it still might be challenged.

Linn  Parish
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Editor Linn Parish has worked for newspapers and magazines since 1996, with the bulk of that time being at the Journal. A Montana boy who has called Spokane home for some time now, Linn likes Northwest trails, Deep South foods, and lead changes in the ninth inning.

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