Eugster v. City of Spokane

76 P.3d 741

118 Wash.App. 383

Stephen K. EUGSTER, and Cheryl L. Rodgers, Appellants, v. CITY OF SPOKANE, Spokane Parking Public Development Authority, Spokane Downtown Foundation, Citizens Realty Co., Lincoln Investment Company, River Park Square L.L.C., R.P.C. II, National Association, Respondents.

No. 21853-8-III.

Court of Appeals of Washington, Division 3, Panel Eight.

September 16, 2003.

Jerry L. Trunkenbolz, Trunkenbolz, Rohr PLLC, Laurel H. Siddoway, Michael L. Wolfe, David Groesbeck, Jillian A. Grabicki, Randall & Danskin, Spokane, WA, Margery Bronster, Bronster, Crabtree & Hoshibata, Honolulu, HI, John F. Bury, Stephen K. Eugster, Eugster Law Offices PSC, Christopher M. Grimes, Ford & Grimes PS, Spokane Valley, WA, for Appellant.

William F. Etter, Raymond F. Clary, Etter, McMahon, Lamberson & Clary PC, Leslie R. Weatherhead, Robert S. Magnuson, Christopher G. Varallo, Witherspoon, Kelley, James B. King, John D. Munding, Spokane, WA, Alain M. Baudry, Masion, Edelman, Borman & Brand, Minneapolis, MN, Michael F. Connelly, Milton G. Rowland, City Attorney's Office, Spokane, WA, for Respondent.

BROWN, C.J.

Today, we consider another dispute involving the public parking garage portion of Spokane's River Park Square shopping mall. The core issue is whether the superior court erred by issuing a writ of mandamus directing the City of Spokane to abide by an ordinance providing a contingent loan of parking meter revenue to cover garage expense shortfalls. We hold the City has a duty under the ordinance to offer the loan. We agree no material fact issues remained requiring a mandamus trial. Further, we reject contentions seeking to nullify the ordinance centered on alleged violations of the Open Public Meetings Act (OPMA) and the Ethics in Government Act. Accordingly, we affirm.

FACTS

A. Parties

The parties in this continuing River Park Square controversy include the City of Spokane (City); Citizens Realty Company, Lincoln Investment Company, and River Park Square L.L.C., the mall owners and developers (Developer); the Spokane Downtown Foundation (Foundation), the non-profit corporation created by the developers specifically to issue bonds to finance purchase of the garage; the Spokane Public Development Authority (PDA), the public corporation charged with operating the garage; bond trustee U.S. Bank (USB); Stephen Eugster, a City Council member and longtime critic of the project; and City Council member Cheryl (Cheri) Rodgers.

B. Early Garage Financing Concepts

In June 1995, the Spokane City Council passed a resolution directing city officials to work on a proposal for acquisition and development of a public parking garage in connection with the private redevelopment of the River Park Square. The proposal involved issuing revenue bonds "to be repaid over twenty-five years exclusively from parking garage revenues." Clerk's Papers (CP) at 2764. The resolution provided the City would lease the land under the parking garage from the land owner/private developer, and the lease would be "paid by revenues derived from the operation of the public parking garage." CP at 2765.

On October 17, 1996, the Spokane City Council considered a detailed proposal involving the City's issuance of bonds to purchase the garage. A representative of the bond underwriter explained that parking garage revenues would "flow down" first, to pay "all the operation and maintenance expenses of the facility." CP at 2765. "After the payment of operation and maintenance expenses, debt service requirements on this issue comes first. After that it's been structured to state that ground lease payments would be made to the developer." CP at 2765.¹ Later, the City abandoned its plan to issue bonds, and elected to issue them through the Foundation.

C. Origins of the Current Garage Financing Structure

On November 25, 1996, the Spokane City Council passed a resolution authorizing the city manager and city staff "to prepare the ordinances, agreements and documents jointly with" the PDA and Foundation "as are necessary to provide for the renovation, expansion and construction" of the garage. CP at 1196. The resolution additionally directed the city staff "to meet with the Foundation and its counsel and to do all things necessary and appropriate in order for it to recommend action to the Council in conjunction with" the redevelopment project, issuance of bonds, and the eventual transfer of the garage to the City. CP at 1196. The resolution also directed the city staff "to do all things necessary and appropriate" to procure a favorable bond rating for the proposed bonds. CP at 1196.

The resolution further directed the city staff "to prepare the resolution and/or ordinance necessary to accomplish" the City's contingent pledge of parking meter revenues to the PDA "for the sole purposes of supporting the Authority's activities including paying operating and maintenance expenses and ground rent payments in connection with the Facility." CP at 1197. During at least one November 1996 City Council meeting, some discussion took place between unidentified speakers regarding separating out the parking meter revenues for the purpose of paying garage operating expenses but not for payments on the bonds.

D. Presentation of Draft Ordinance

The January 13, 1997 City Council meeting addressed resolutions and a draft ordinance concerning the new garage financing plan. Regarding the City's contingent pledge of parking meter revenue, the City's bond counsel, Roy Koegen, stated:

[T]he way the contingent pledge works is the studies that have been done by professional parking consultants have indicated that the revenues from the park [sic] garage itself will be more than sufficient to repay all expenses incident to the garage, debt service, lease payments and operating expenses.

However, the capital markets look with some askance on stand-alone parking garages. So in order to obtain an investment grade rating, the City of Spokane has agreed to loan money, and it's a loan, not a grant, to the public development authority if the parking revenues that the authority would collect aren't sufficient to pay ground lease payments and operating expenses.

The purpose was to give more security to the public development authority in its agreement to pay operating expenses and ground lease payments.

CP at 2647.

In response to a question from the Council, Mr. Koegen clarified:

[Parking meter revenue] will not leave the City of Spokane at any time unless the revenues received by the public development authority from the garage and only at that time are insufficient to pay, again, only lease payments and operational costs.

There's not an obligation on behalf of the city to make any deposits or to accumulate any money, it's only available if and only if the garage revenues are insufficient and, again, only insufficient to make rent or lease payments and operating costs, not debt service.

CP at 2648. City attorney Stanley Schwartz stated, regarding the parking meter fund, "I should note that if this fund is called upon or is utilized, monies will be repaid in more profitable years, and that is called for in the development documents." CP at 2649.

Betsy Cowles, the Developer's president, then explained to the City Council that private investors would buy the bonds issued by the Foundation, and "it is garage revenue that will repay those bonds." CP at 2650. Regarding the use of parking meter revenue, Ms. Cowles stated:

The city is contingently pledging parking meter revenue, not tax money, and they're pledging it to the PDA. That money will only be used if the garage revenue is insufficient to cover land rent, operation and maintenance, and that is highly unlikely to happen, as Mr. Koegen pointed out.

CP at 2650. Later, Ms. Cowles continued:

The projections for this garage, and the city again acting responsibly, has discounted the projected revenues by almost 25 percent. Even under this scenario, even under that significant discount of what the Walker [Parking Consultants] study says this garage is going to bring in, there is going to be revenue to pay back the debt service, to pay the lease payments, to pay operation and maintenance.

CP at 2651.

The City Council then passed Resolution No. 97-2, which partly approved the Foundation's plan to purchase the garage with bond proceeds.

E. Consideration of Ordinance

At the January 27, 1997 City Council legislative meeting, financial consultant Coopers & Lybrand presented a written analysis of the garage project, partly stating:

The operating income from the RPS [River Park Square] Garage will be allocated first to cover debt service on the bonds, then to obligations under the ground lease and then to pay operating expenses. To the extent revenues from the RPS Garage are insufficient to pay bond debt service, ground lease payments and operating expenses, the City has agreed to pledge parking meter revenues to meet ground rent and operating expenses of the RPS Garage. It is our understanding that this pledge will be in the form of a loan, to be repaid from the operations of the RPS Garage in subsequent years, if available. It is also our understanding that revenues from parking meters will not be used to guarantee debt service payments on the bonds. However, this credit enhancement with respect to covering ground lease and operating expenses, results in the ability to obtain an investment grade bond rating, according to the Developer.

CP at 1269.

The analysis later summarized that debt service on the bonds would have priority with respect to garage revenues. "Ground lease payments and operating and maintenance expenses of the RPS Garage are subordinate to the bond payments." CP at 1274. Regarding the loan of parking meter revenues, the analysis emphasized:

It is important to note that the parking meter revenues pledged by the City are intended to cover ground lease payments and operating and maintenance expenses of the garage

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