What was not apparent from looking at the sparkling shopping mall was the shambles the debate over it had made of the city’s “social capital” – the feeling of trust, the feeling of inclusion, the feeling of pride, people might have taken from it, had they been included in the decisions to construct it.
By William Stimson
In the closing years of the twentieth century, Spokane fell into a feud over the $110 million mall called River Park Square. Both sides in the feud explained the situation in terms of villains: The Cowles family, the developers of River Park Square, used its special influence to raid the city treasury. Or, Steve Eugster and his backers attacked the wonderful project irresponsibly and spoiled the city’s image and credit out of inscrutable personal motives, perhaps just ego.
The argument went nowhere because neither explanation made sense of the situation. Whatever its temporary problems, the Cowles development had reinvigorated a dying downtown and would almost certainly produce more money for the city than it ever cost. On the other side, after five years of his supposedly irresponsible behavior, Eugster was placed on the city council by 52 percent of the electorate.
The controversy could not be understood in narrow terms of personal motives. It was the product of two broader trends. Spokane was one of many American cities which sought “creative” – and often controversial – solutions to fight urban malaise. Spokane also had its own political trends, as outlined in the previous sections of this report. The turmoil over River Park Square resulted when an inherently controversial deal was dropped upon a political system that had few mechanisms for handling controversy.
The special influence of a powerful family was not required to produce a River Park Square. In the 1980s and 1990s, every city in the country was hoping to be offered such a “public-private partnership.” With the sudden withdrawal of the federal government from the field of urban renewal in the late 1970s, cities had few options for rescuing a faltering city center. The formula of River Park Square – a publicly financed parking facility and enticements to a key department store (often, in fact, a Nordstrom) – was the most popular approach to urban renewal.
In this “post-federal” era, city governments saw the public-private partnership as a win-win situation. Retailers who had abandoned city centers were willing to reconsider in the 1990s. But they would only join a thriving center; no store would be the first to return to the city.
It was up to local government to prime the pump. A city could not invest directly in private development, of course, but it could leverage certain assets and powers. The federal government offered tax breaks on the preservation of older buildings. Though the federal government had withdrawn from urban renewal specifically, it still offered grants to stimulate the economy. Cities could sell bonds to provide the quasi-public portions of renewal projects, often in the form of a public parking garage that would serve the new retailers. These public assets, when cobbled together by a clever developer, could begin the process of inner-city redevelopment.
Through the 1980s and 1990s, dozens of cities – Detroit, Cleveland, Kansas City, Norfolk, 
Memphis, Seattle, to name a few – used the public-private partnership formula with success. The case of Seattle is especially pertinent to Spokane. It played out over the same years, the mid-1990s, and produced a similar controversy.
The Pacific Place project, at the corner of Sixth and Pine, was proposed to Seattle’s city government by developer Jeff Rhodes, a newcomer to that city. Rhodes proposed to purchase the historic Frederick and Nelson store, preserve and refurbish it, and lease it to Nordstrom. Then he would remodel the old Nordstrom store, creating new retail space, and add a huge new parking facility, altogether a $400 million development at a corner known up to that time as a favorite of panhandlers.
The Seattle city council accepted the idea in 1995 with a 9-0 vote. For its contribution, the city agreed to pay Rhodes $73 million to build a parking garage, not because the garage would cost that much, but because that was the developer’s price if he were to participate.
A citizens’ organization called the Civic Foundation protested the deal as “corporate welfare.” The Seattle Times, in a long investigative article, documented that the $73 million garage actually cost only about $50 million to build. “Parking experts say the only explanation for the large spread between the cost and the price of the garage is that the city is subsidizing the developer,” the Times reported.
The developer did not bother to deny that the garage was overpriced or to explain where the additional money went. “Our obligations with the city,” the developer told the Times, “are basically to provide all the items of value that the city has required. It is not to tell the city how we spent the money.”
Mayor Norm Rice defended the deal on the grounds that $73 million was not the price of a parking garage, but the price of a parking garage guaranteed to come attached to a $400 million refurbished corner at the heart of Seattle. Besides, the garage would pay for itself through parking fees.
The Civic Foundation asked state auditor Brian Sonntag to investigate. Sonntag did so and proclaimed the deal “creative” but not, in his opinion, illegal. His main criticism was that the Seattle city government limited public discussion of the project. Seattle’s own Ethics and Elections Commission conducted another investigation and came to similar conclusions.
In an editorial entitled “Garage Flap: It’s Over,” the Seattle Times admitted that, given the results of the two investigations, the paper had been “too harsh” in its judgment of Pacific Place. The Times accepted the state auditor’s conclusion that the extra $23 million on the cost of the garage produced “tangible and intangible benefits.” The editors remained miffed by the secrecy that surrounded a deal involving public funds, but nevertheless decided that to prolong the argument “seems both futile and churlish.” It was useful to keep in mind, Times editors wrote, “what the Sixth and Pine intersection was like just a few years ago.” The Seattle Post-Intelligencer concurred in an editorial entitled “City’s Garage Deal Will Pay Dividends.”
In the next election, three new council members were elected. Two voted against paying for the garage. A third said she disagreed with the deal, but felt the city had to live up to its promise anyway.
The Pacific Place controversy rose and fell over a period of just six months. No one felt entirely comfortable about the winks-and-shrugs manner in which it was achieved. But ultimately it worked out for the city. It looked good and it paid for itself. So the controversy ended.
Spokane produced an altogether different drama.
In the early 1990s, Spokane’s downtown streets were strangely quiet. J.C. Penney and Frederick and Nelson department stores had closed. Many other store windows displayed only real estate signs. The future looked worse. Nordstrom was planning to pull out in 1999, and most observers assumed that the Bon Marche would follow.
In 1992, Betsy Cowles returned to Spokane and began discussions with her father, William Cowles III, about taking a position in the family business, the Cowles Publishing Company, and its various affiliates. “The way we were brought up, that was not a birthright,” Cowles said in a recent interview. “You work elsewhere, get a graduate degree, come back with some skills that are useful.”
Then 29 and working as a lawyer in a Seattle firm, she and her father agreed she would go to work in the real estate end of the Cowles Publishing Company. The weekend she was supposed to return to Seattle to tender her resignation in the law firm, her father died of a heart attack while jogging.
At the time, the family had made no decisions about the future of the family’s property on the three corners of Post and Main. “I know there’s a rumor floating around that this was [my father's] dream, and I was carrying it out. That’s absolute hogwash.” In fact, Cowles said, all the family knew for sure in 1992 was that it faced a major decision. Nordstrom’s lease was to expire in 1999, and the store planned to leave unless downtown Spokane perked up. That vacancy would seriously damage the value of Cowles property downtown.
“We came to the conclusion that we had an asset sitting over there,” Cowles said, “which was that some retail still existed, and we had an opportunity to keep it alive.”
The Cowleses may have been the only ones in a position to do so. Ron Wells, developer of Steam Plant Square, Carnegie Square, and half a dozen other notable urban reclamation projects, commented that in his experience really ambitious projects don’t look profitable enough on paper to sell to investors. Usually, someone with resources must make a “leap of faith” and, in effect, gamble to show it will work. “I don’t think the Cowleses have gotten enough credit for taking Spokane past that threshold,” Wells said.
“This myth that we control the world [is] laughable,” said Betsy Cowles. “We have as much control as anybody else down the block . . . . Just because we’re big property owners doesn’t mean the city council is going to do what I say they should do.”
Nearly everyone admits it was a formidable challenge. The idea was to build a mall that would make Spokane a destination shopping center for people from parts of four states and British Columbia. Other towns-Kalispel, Wenatchee, Calgary, Lewiston-had the typical stores, J.C. Penney, Bon Marche, et cetera. What would make Spokane different was its group of elite stores and shops only to be found in major cities.
That strategy meant that Betsy Cowles had to persuade a list of elite retailers to invest in the faltering business center of a poor town. “There were ten million reasons why this should never get done,” Cowles said, “but we worked around each hurdle.”
The greatest hurdle was persuading Nordstom, one of the nation’s two or three most prestigious chains, to remain in Spokane. Thoroughly aware of its value as a magnet to other retailers, Nordstrom never went into even a large market without a price, usually parking and cash incentives.
The Cowleses wanted the value of the new garage to be calculated based upon a very optimistic future revenue projection (the so-called “Walker Report”), coupled with an advantageous long-term interest rate made possible by the city’s involvement in the financing. The city council agreed to order two appraisals of the garage based upon this “investment value.” This appraisal set the garage’s value at close to $30 million, or roughly $10 to $15 million above what a conventional market appraisal would likely have shown.
The legitimacy of such an approach was later questioned by investigative reporters Tim Connor of Camas Magazine and Tom Grant of KXLY television. They reported that top city officials, including Dennis Beringer, the city’s real estate projects manager, had objected strenuously to the unusual appraisal method. The reporters found that veteran Spokane appraisers, briefed by the city on the requirement to take into account the “investment value,” were amazed. Such an approach was “practically unheard of,” one of them said. One appraiser, a veteran of 25 years in the business and a past president of the region’s Appraisal Institute chapter, said he had never seen an appraisal based upon “investment value” rather than market value.
In all probability, the purpose of the appraisal was to set an artificially high price on the parking garage so that the excess profits could be invested in the mall itself – the same as happened in Seattle’s Pacific Place and in many other mall developments. An article in Governing magazine, a journal directed at city management professionals, described the trend. It reported that, “public tolerance for government subsidies” for urban renewal projects had reached an all-time low in the 1990s. “But in most cases, there has to be a subsidy somewhere, or the project will never happen.” City officials needed a way to extend a subsidy without appearing to do so, and, the article said, “cities and developers are finding a convenient place to hide it – in the garage.” Author William Fulton explained: “Instead of financing itself, the garage becomes an instrument whose future revenues provide a mechanism to slip public money into private hands.” This money can then be used to move along the rest of the project.
“In many parts of the country,” Fulton wrote, “garage subsidies (and other downtown development costs as well) are paid off through tax-increment funding – that is, dedicating future increases in property-tax revenue to cover the up-front expense. Almost all urban redevelopment deals in California have been done with a tax-increment arrangement. But it is a common technique in the Midwest as well.”
Betsy Cowles and her chief developer, Bob Robideaux, flatly deny that the price of the garage in Spokane was set at a high figure in order to provide a hidden city subsidy to the development.
The 1996 city council decided not to buy the parking facility at its “investment value” price. It did, however, agree to allow the Spokane Downtown Foundation, an entity set up for the specific purpose of buying the garage at the higher price, to purchase it “on behalf of the city.” The idea was that this new foundation would take in parking fees and use them to pay off bonds. Creating this new agency limited the city’s financial responsibility in case the garage went bankrupt.
In January 1997 the city council unanimously agreed to an additional fateful provision. If the parking garage did not earn enough to pay off its bonds, the council pledged it would contribute proceeds from downtown parking meters. This in effect was a pledge of a $1.5 million annual subsidy to the garage. Both Betsy Cowles and members of the city council assured the public that this was only an emergency back-up, highly unlikely ever to be required.
But the prediction that the garage’s income would cover its borrowings was based upon a wildly inaccurate forecast of how many people would use the garage. No one could explain how the Walker Parking Consultants, a national expert in mall parking, could miss the projections by so much. The “emergency only” funds were required the first month.
These surprises were enough to justify legitimate questions. By trying to make a teapot out of a tempest, the developers ensured that the questioning would go on.
Add to this the public fascination with the name Cowles. Any private family with a very strong influence in a community naturally attracts attention. Especially a family that happens to own the city’s major source of information, in this case the Spokesman-Review.
“This myth that we control the world [is] laughable,” said Cowles. Waving a hand toward the window of her sixth-floor office in the Review Building, she added, “We have as much control as anybody else down the block . . . . Just because we’re big property owners doesn’t mean the city council is going to do what I say they should do.”
But surely the family’s evident influence requires some bow to appearances. Betsy Cowles’ great-grandfather thought so. During the Pan-Tan controversy he declared in an editorial: “The publisher of the Spokesman-Review has no connection whatever anywhere in the Inland Empire with any public service corporation, or with any bank, or with any concern which has anything to sell to the city, county or state. He has made it a point to have no interests which can in any way interfere with the unbiased publication of the news and a disinterested attitude on all public questions.” Betsy Cowles’ father, William Cowles III, was given to responding to requests he join civic ventures by saying something along the lines of: “We’ll support you, but don’t get us out front on this thing.” He knew, from generations of experience, that a wealthy family that had no interest in living in the limelight was bound to tease the human tendency to suspect a plot.
Spokanites were hardly paranoid in believing they were being kept in the dark. The Wall Street Journal had to find and report to Spokanites the fact that they were obligated, in a secret agreement, to assume some of the risk if River Park Square faltered. Spokane’s elected officials made no apologies when they went all the way to the state Supreme Court to prevent Spokanites from voting on River Park Square. The Supreme Court agreed the city of Spokane was within its rights to declare the parking ordinance an “emergency” – in effect stopping a vote on it – but that did not mean they were endorsing it. Four of the nine members of the court wrote separately (one in dissent and three concurring) that they found the ruse of an “emergency” objectionable. Justice Richard B. Sanders said precedent compelled his concurrence, but he disliked having to endorse “the preposterous notion that a new parking garage for Nordstrom’s is ‘necessary for the immediate preservation of the public peace, health or safety.’ ” By accepting such obvious dodges, Justice Sanders wrote, “this court virtually repealed the citizens’ constitutional right to referendum.”
Another outsider, Brian Sonntag, the state’s chief auditor, found that the Spokane deal, like the Pacific Place deal in Seattle, was unconventional but not, in his opinion, illegal. Then Sonntag added his opinion that the River Park Square project might have gained from a full public discussion: “The debate should have been welcomed, particularly for such a large-scale project. The feeling that citizens were left out of the debate only heightened suspicions over the creative course the city took to assist in the project.”
Outsiders like Sonntag and Sanders perceived what Spokane’s insiders apparently could not: that just because a maneuver is legal does not mean it is wise politically. A wide open debate is the best way to slake suspicion.
That is also a major function of journalism, but here too Spokane was handicapped. The Spokesman-Review was bound to be perceived as prejudiced no matter how good a job it did. As a matter of fact, Review line reporters did an honest job of covering unfolding events surrounding River Park Square. But the paper’s curiosity about this hot local issue was noticeably restrained. A professor of journalism, Steve Blewett of Eastern Washington University, did a statistical analysis of the Review’s coverage of River Park Square. In his report, Blewett criticized the paper for sticking closely to “routine reporting of the actions of official bodies” and avoiding “in-depth reporting on the complexities of the issue itself. . . . There were no articles on the results of other such public-private partnerships and no articles using independent sources (such as city planners, financial analysts or merchants in other communities) with no stake in the outcome.” Columnists and cartoonists not generally known for their reserve found nothing amusing about River Park Square, except its opponents. Spokesman-Review editorial writers continued to treat all dissenters as crackpots.
The withering editorials no doubt appealed to the large number of Spokanites who already supported River Park Square, but they tended to reinforce the view of opponents that they were up against a vast conspiracy. A portion of the electorate turned to talk radio, which built substantial audiences in Spokane through the 1990s. As one political scientist who studied the phenomenon pointed out: “Talk radio provides information, but it is information with an attitude.” The River Park Square controversy, with its acrimonious charges, its secrets, and its soap opera-class villain in the rich Cowles family, made for good radio drama. Betsy Cowles herself thought talk radio was her most formidable obstacle.
The 1997 election was a good plebiscite on the city’s involvement in River Park Square.
The secrets, the deficits, the rumors, all paved the way for a revolution in Spokane’s government. In the 1997 elections, one of the most persistent critics of the city’s involvement in River Park Square, John Talbott, opposed the mayor who had championed the project, Jack Geraghty.
Talbott conducted his campaign with $30,000 donated by David Sabey, owner of NorthTown, a shopping center that competed with River Park Square. Nevertheless, finances of the two candidates were roughly the same, and the election was probably as good a plebiscite on the city’s involvement in the project as was possible. Geraghty, as the one who led the council coalition for the mall, would get votes of those who favored it. Talbott had no other issue and no other reputation with voters except as a critic of River Park Square. Talbott stunned Spokane’s establishment by winning (by 433 votes out of 57,000 cast).
As the chief elected representative of the people of Spokane, Talbott merited some status among Spokane leaders, whether others agreed with him or not. But Spokane’s insider system of government had always regarded new public officials as mere recruits to the already decided effort. Spokane politics had no concept of public officials as message-bearers from the voters.
Having been elected on the single issue of opposition to River Park Square, Talbott, once in office, could hardly do anything else but question it. That was clearly his mandate from over half of the voters. For doing so, though, he was treated as a traitor to the city. Chris Peck, editor of the Spokesman-Review, wrote that when Talbott raised questions about federal loans to River Park Square he was acting as a “civic terrorist.” Chamber of Commerce leaders failed to invite Talbott to official functions and often snubbed and insulted him when he did attend them. This turned out to be a major miscalculation later, when the establishment needed Talbott’s cooperation.
In the fall of 1999, the voters put Talbott in the majority. Steve Eugster, who had hounded River Park Square for five years with lawsuits, defeated Jeff Colliton, the establishment’s chosen leader of the council after the departure of Geraghty. Steve Corker, who had defeated the Science Center four years earlier, won an open seat on the council. With Cherie Rodgers, a 1997 appointee to the council who became a critic of River Park Square, Talbott, Eugster and Corker formed a majority of the council. For the first time since 1910, Spokane’s establishment was an outsider to city government.
Two other ballot measures completed the revolution. Voters changed the form of government from the council-manager form to the strong-mayor form and set up a council with members elected by districts. This was a return to the government form that had been discarded in 1910 (See: Part 3, The Election that Changed Spokane’s Politics.)
The first phase of River Park Square opened in the summer of 1999. Overnight, vibrancy was restored to the city’s center.
But the parking garage that was supposed to support itself began losing money immediately. The developers called upon the city council to provide the emergency back-up from the parking meter funds. The new city council refused to allocate the money on the grounds that this “loan” could never be paid back to the city. Both sides filed lawsuits, and as of the summer of 2000 the project’s financing and perhaps future are up in the air.
The new council majority came under intense pressure to give up its opposition to the 1997 River Park Square contract when the city’s credit rating dropped because of it. As one letter writer to the Spokesman-Review wrote: “As a community, we wanted to save downtown by building the new shopping center. In order to do that creativity was required. Commitments were made. What about honor? Pay the bill.” The problem was, the citizenry had not made the decision “as a community.” If it had, Talbott, Corker and Eugster, whose only claim to election was opposition to the development, would not have been elected.
At the same time, those who put together River Park Square were making no apologies. Mayor Geraghty pointed out that in cost and impact, River Park Square was an addition to Spokane comparable to Expo. He pointed to the sudden surge in downtown building – the Steam Plant Square and announcements that the Davenport Hotel and the Fox Theater would be renovated and reopened. “That’s what we said would happen.” Though the city’s contribution of parking meter funds was unexpected, he believed the use of downtown parking fees was an appropriate contribution to a more interesting downtown.
Orville Barnes, the city council’s leader in negotiating the River Park Square deal, always believed there was a chance the parking meter fees would be necessary, and said so at the time. He said the money the city will lose will be more than made up by the new taxes generated in River Park Square.
In the short run, though, it was not quite that simple. The loss of $1.5 million per year in revenue would not break the city, but it would be a very difficult and painful problem. This was at least the fear of Terry Novak, one who, as Spokane’s city manager from 1978 to 1991, had some experience to judge.
Novak became involved in the controversy more or less by accident. He was asked to serve on the Spokane Parking Public Development Authority (PDA), the management end of the new parking garage. As a former city manager, Novak could look at the city budget and foresee that the loss of parking meter revenue, plus legal bills run up by the council trying to fight it, plus some other unusual city costs, were leading to a serious city budget crunch in 2001. City government, he estimated, might have to cut its expenditures that year by around 10 percent. A shortfall of that magnitude made Novak, a bonafide insider, an outspoken advocate for some sort of renegotiation with the Cowleses that would lessen the impact on the city budget.
What about the claim of Orville Barnes that, because of the new income from sales and property taxes, city government would do better even with the garage subsidy?
“I agree with Orville,” Novak said. “In the long run, Spokane is better off with River Park Square than it would be without River Park Square.”
What was not apparent from looking at the sparkling shopping mall was the shambles the debate over it had made of the city’s “social capital” – the feeling of trust, the feeling of inclusion, the feeling of pride, people might have taken from it, had they been included in the decisions to construct it.
THE END
Copyright 2000 by camasmagazine.com
Reprinted with permission.
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