Special Reports

Grays Harbor PDA at odds with other such agencies

The public agency that oversees development of the new business park in Satsop says it was created to get things done - without all the bureaucratic red tape of regular government agencies.

That's news to the other public development authorities in Washington state. The groups, which have tackled everything from the new football stadium in Seattle to the Mission Ridge Ski Resort in Wenatchee, agree they must follow the same rules as the governments that create them.

They hold open meetings, solicit public bids and adhere to strict conflict of interest rules.

"Because we are small, we are able to make decisions and act quicker than the city. But we have to follow the same rules," said Susan Taoka, executive director of the Seattle Chinatown development authority.

A six-month investigation by The News Tribune, published in March, found a pattern of mismanagement and deception by the Grays Harbor Public Development Authority as it rushed to accommodate a fast-growing Internet start-up called SafeHarbor. A more limited review by the state auditor found that the agency violated state law.

PDA attorney Art Blauvelt justified the agency's actions in a letter to state Auditor Brian Sonntag, saying the PDA was created to serve public purpose by relieving blight and revitalizing the Satsop property. The agency's charter detailed lending money, credit and property among its rights to aid in that goal. The agency has stuck by its contention that it was allowed to loan money, although officials say they don't plan to do it again.

'Governed by common sense'

Despite the corporation label, development agencies are just like the agencies that started them, according to state and municipal law experts.

There are 25 known PDAs in Washington state, including the Grays Harbor PDA. Of the 21 PDAs reached in a News Tribune survey, all said they follow the leadership and law of local governments, and that PDAs don't have the authority to do the kinds of things the Grays Harbor agency did.

"We are governed by common sense," said Don Meyer, executive director of the Foss Waterway Development Authority. The agency was created by the Tacoma City Council in the mid-1990s to redevelop the waterfront properties off Commencement Bay. It follows the same rules as the city.

Meyer must open his books and his meetings to public scrutiny. He can't spend more than $10,000 for supplies or services without getting the approval of his board of directors. He must consult a list of approved vendors when he wants to buy things and he can't take anyone out to dinner.

Meyer also follows the City of Tacoma's rules when negotiating real estate deals.

Daniel Lieberman, executive director of the Pike Place Market Preservation & Development Authority, said the City of Seattle acts as a silent partner in his operation. City Council members approve board members and make sure he is fulfilling the mission of the agency.

"We are essentially running a business," he said. But there's a big difference - he doesn't have the same profit motive as a traditional business. Instead, he works to ensure the market has a diversity of tenants, including small businesses that pay a lower rent. He, too, must provide the public with access to his meetings and records.

The Vancouver Area Development Authority, which manages city properties inside a historic district, uses the city's processes when making purchases and big decisions, said Steve Burdick, who oversees the development authority. To ensure that, Burdick is employed by the city and runs much of the operations out of city offices.

All of these rules separate development authorities from private businesses and align them more closely with their municipal parents.

Municipal law experts agree.

"(PDAs) are not independent," said Hugh Spitzer, a municipal and public finance lawyer with Foster Pepper & Shefelman in Seattle. "They are instruments of the entities that created them. They can only do those things which the parent has the authority to do."

Spitzer represents many development authorities in the state and teaches classes about them at the University of Washington. He said the allure of PDAs is their ability to let a public organization focus on a single project or mission.

A more powerful agency?

Much of the controversy with the Grays Harbor PDA surrounds the agency's decision to loan money to a private company - something cities and counties are not allowed to do.

The PDA received $15 million from the Bonneville Power Administration in 1999 to develop the site of a never-completed nuclear plant. The agency used much of the money to build offices and provide equipment for SafeHarbor, which provides online "help desk" services to companies and government agencies. The Washington state government is one of its customers.

To keep SafeHarbor as a tenant, the Grays Harbor development agency loaned $2.3 million to SafeHarbor for furniture and equipment. It also guaranteed a $3.8 million construction loan for a private company to build a second office building for the Internet start-up.

In their defense, PDA officials define the organization as quasi-public. They say the agency is like a business and must move more quickly than a government agency to accomplish its goal of adding jobs and tax base to economically depressed Grays Harbor County.

The PDA has greater authority than the county commission that created it, PDA Chief Executive Tami Garrow said. The agency can lend its credit and guarantee loans.

"People use the term quasi-public because it's difficult to define," she said.

Blauvelt, an attorney for Grays Harbor PDA, told the state auditor in a letter that PDAs are allowed under the state constitution to loan money to private companies, giving them more power than other public agencies.

"A careful review (of state statutes) reveals that the state Legislature expressly authorized the loaning of funds to public or private parties and determined such loaning to be a 'lawful public purpose' of public corporations," Blauvelt said in the letter.

Lawful public purpose, he added, includes loans to public or private parties. The money the PDA received was considered federal funds - money that legally can be loaned - because it came from the Bonneville Power Administration, he said.

The auditor and the Attorney General's Office disagreed, saying use of the money became more restricted once it entered the PDA's bank account. Public agencies are allowed to loan federal grant money to private companies. But this was not federal grant money. Instead, it was a payoff in a real estate transaction, the Attorney General's Office said.

A final audit of the PDA for 1999 and 2000 is scheduled to be released this week. A draft released in March found several instances in which the Grays Harbor PDA exceeded its authority.

An audit for 2001 already has begun and Garrow said the agency is working to update its charter to reflect some of the concerns from the auditor.

Sonntag, the state auditor, also has said his office is investigating issues raised by The News Tribune.

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Marcelene Edwards: 253-597-8638 marcelene.edwards@mail.tribnet.com.

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SIDEBAR: Public development agencies in Washington

Public development agencies and their authority:

* Capital Hill Housing Improvement Program, Seattle.

* Seattle Indian Services Commission. Operates two buildings that house the Seattle Indian Health Board and a health clinic.

* Pike Place Market Preservation and Development Authority, Seattle.

* Seattle Chinatown International District. Real estate development and property management.

* Historic Seattle Preservation and Development Authority.

* Downtown Redevelopment Authority, Vancouver.

* Vancouver Area Development Authority. Oversees residential and business properties.

* Washington State Public Stadium Authority, King County.

* Washington State Major League Baseball Stadium, King County.

* Poulsbo Public Development Authority, Port Orchard. Operates the Marine Science Center.

* Museum Development Authority of Seattle.

* Spokane Public Facilities District. Operates an events center.

* Pierce County Community Development Corp. Low-income residential and business loans.

* Bellevue Convention Center Authority. Owns and operates convention center.

* Burke-Gilman Place Public Development Authority, Seattle. Property management, including the Ronald McDonald House and the Burke-Gilman Apartments.

* Southwest Washington Public Development Authority. Developing a theme park in Winlock.

* Pacific Hospital Preservation and Development Authority, Seattle.

* Tacoma Community Redevelopment Authority. Low-income residential and business loans.

* Kent Public Development Authority. Owns the building that houses the Kent public market.

* Everett Public Facilities District. Development of a special events center in Everett.

* South Snohomish County Public Facilities District. Development of a special events center in Everett.

* Edmonds Public Facility District. Development of a special events center in Everett.

* Mission Ridge Public Development Authority. Development at the ski resort.

* Grays Harbor Public Development Authority. Developing abandoned nuclear facility into a business park.

* Hurricane Ridge Public Development Authority. Design programs for Olympic National Park.

© The News Tribune