An unexpected conversation with Spokane’s Chief Financial Officer.
As I mentioned in the news story I posted Tuesday, Monday night’s city council meeting was long and contentious, as in longer and more contentious than usual. As a practice, I only cover meetings if the Center has an issue or a client’s issue at stake. But the thing is, you just never know when your item is going to come up. There is an agenda, but my experience is that an issue that’s, say, number 3 on the agenda can come up at 6:15, or it can come at 9:45. It can feel a bit like a hostage situation if you’ve gotten your hopes up for an early escape, so I just try to get comfortable with the experience, to learn what I can in the process, and otherwise pretend that I’m on a very long flight home, en route from Chicago, or Copenhagen.
That’s more or less what I was doing around 9 p.m. Monday when, during the intermission, Gavin Cooley, the city’s Chief Financial Officer, made the long walk down the aisle where I was sitting, alone, and plopped down next to me. I’ve known Gavin for years. He’s very personable, witty, and surprisingly candid at times. Years ago, before he became CFO, he approached me as I was walking up the hill to City Hall from Peaceful Valley, where I’d parked my car. He told me that, in his circles, the view was that the only two people involved in “this” who sleep well at night were “you and Larry.” “This” was the River Park Square fiasco and Larry, of course, is Larry Shook, my reporting partner at the time on the RPS investigation. I’ve written a book about RPS, “Secret Deal,” and Larry and I co-authored a second book “Under the Influence, Spokane, the Cowles Family, and River Park Square.” Both books contain reporting that won national journalism awards and while Larry and I occasionally endure general, ad hominem comments questioning our sanity, no one has seriously contested the facts in either book.
I bring that up because Gavin immediately started in on “your books” and how I should be adding epilogues to them explaining that things really didn’t work out so bad for the city. I frankly didn’t know what to say 
about this, at first, and this was good because I think it’s bad form to start yelling, immediately, at people who are offering what may be constructive criticism. Unless I misunderstood him, Gavin wasn’t just arguing that the RPS transactions had worked out well for downtown, but that they’d worked out well for City Hall.
Now, that I don’t get. And, apparently, neither does Gavin’s boss. It was only a few months ago that the Mayor acknowledged the City’s remaining $40 million-plus indebtedness in the RPS fiasco (which, as advertised, wasn’t supposed to cost the city a penny) and said, according to the Spokesman-Review’s Jonathan Brunt: “The pay-down of the River Park Square facilities is far from over.”
So, you can imagine my surprise that the city’s CFO was now beseeching me to set the record straight.
As I told him, when I got my chance to speak, there are two things that I feel strongly about.
The first is that it’s difficult for any journalist to accept criticism from public officials who don’t return their phone calls. When I last reported on RPS, I sought Gavin’s help in answering a technical question about how the city was going to refinance its RPS debt. I left repeated messages for him, none of which he replied to. As I mentioned to him last Monday, I think there was an explanation for the unanswered phone calls. When I asked to tape record an interview with him in City Hall, in 2004, he refused to be taped. This is what he said: “Things are just too damn sensitive right now. That’s why people are so reluctant to talk to you.”
Gavin did say, Monday, that this was news to him, that he was simply unaware of the phone messages that I’d left for him.
The second point is that there really are any number of ways one can evaluate whether or not River Park Square was a net benefit or loss to the City. While I think Mayor Verner put her finger on the cost to the City last summer, the RPS economic impact numbers have never been my foremost concern, and not just because they’re difficult to sort out.
Here I borrowed a phrase from a recent article in The Economist that the British publication used in an editorial to warn about the unpunished bad behavior that began on Wall Street and still ripples through the nose-diving world economy.
“Moral hazard.”
If the argument is that the ends justified the means at River Park Square, I told Gavin, then I disagree. Moreover, it’s not a journalist’s job to refrain from reporting wrongdoing, or avoid making much of a fuss about it if things seem to be working out peachy for all involved.
I’ve heard this argument before. I was giving a presentation on RPS to social club in west Spokane years ago and one of the members had come from Cleveland where, she said, everyone knew that rules had been broken to do the revitalization of downtown Cleveland. But that it had all worked out so well for that city. So, she argued, what’s the fuss over RPS?
Well, here’s the fuss: Journalists are a big part of a free society’s immune system. If you want reporters to waste precious time doing a cost-benefit analysis about whether unethical or illegal activity really pencils out so badly in the economy, then you are asking reporters to behave unethically as well. This will make it difficult to blame the press for not doing its job. Having said that, RPS could be condensed to one poignant phrase in the U.S. Internal Revenue Service’s final report on the RPS garage transaction: “the casino was rigged.”
That finding was built on facts that Larry Shook and I, and our former broadcast partner, Tom Grant, carefully excavated and which IRS investigators corroborated. Even though the Justice Department later chose not to bring criminal fraud and money-laundering charges in the RPS garage case, they did not dispute the IRS findings. Indeed, when former city council member Cherie Rodgers and I met with Justice Department lawyers at the Spokane FBI offices last March, they had nothing but high praise for the IRS investigation.
So, for my part, and as long as anyone cares to ask, that’s the story. If one wants to excuse it with an argument that the RPS chicanery was ultimately necessary to save downtown then so be it. As I told Gavin, he’s the one that approached me. It’s not as though I’m walking up and down Main Avenue ranting at strangers or trying to re-direct shoppers to Northtown or Costco. My continuing concern, just as a citizen, is that even as the city taxpayers continue to pay dearly to put RPS behind us, so to speak, that the city won’t do its job and enact the reforms needed to prevent a future public/private fiasco.
And I shared this with Gavin too. On my own time (I want to make clear that I’m not speaking here, for the Center for Justice) I proposed to the mayor and the council last May three basic reforms that a) cost the city nothing and, b) ought to be adopted without much fuss.
1) The city should require market value appraisals on projects involving city funds. The federal government enacted this reform to its own lending rules following the Savings & Loan scandals of the 1980s. There’s no reason that the city shouldn’t adopt the same rules so that city taxpayers are protected from the same appraisal scams that federal taxpayers are now supposed to be protected against. (Although, here, I would note that the Justice Department now agrees with me that the federal rules were violated in the RPS loan transaction.)
2) The city should prohibit private agreements (that were insisted upon by Cowles negotiators in the RPS transaction) to withhold public records that are otherwise not exempt from disclosure under state law. This should be easy because the courts have already found that the agreements, themselves, are unlawful.
3) The city should require unqualified letters of credit from developers who, like Cowles real estate companies, want to take advantage of the city’s access to low interest pass-through loans. In the case of RPS, the city was badly hurt because it repeatedly ignored the advice of city staff members and federal officials overseeing the transaction. These officials knew how under-collateralized the $22.65 million loan to the Cowleses was but Cowles negotiators simply refused either to post a letter of credit or give the city a first lien on additional RPS revenue streams (other than Nordstroms). The 1998 City Council voted to make the loan anyway.
I presented these three proposed reforms to Mayor Verner last May. She thanked me and indicated that she supported each of the proposals. But it hasn’t gone anywhere since then. I don’t know why. Gavin told me Monday, during our little discussion, that he opposed item #3, the letter of credit requirement. He said that if the city insisted on letters of credit from private developers, it would essentially remove the incentive for public-private partnerships with the city.
I disagree. Developers would still have access to lower loan interest rates through the city (that’s the advantage of HUD 108 loans, like the one made to RPS) than they could get from a private lender. But, in exchange, they should fully protect the city. If that’s not a good lesson learned from RPS, then I don’t know that we’ve learned anything from the misery of the whole civic ordeal we’ve been through over the past decade.
But that’s just my opinion. Again, Gavin is the City’s Chief Financial Officer and he’s very persuasive. Usually.
–Tim Connor
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