Post Falls Landing developer Harry Green's bankruptcy was dismissed on Wednesday, allowing a creditor to proceed with foreclosure on the city center site along Spokane Street and the Spokane River.
The decision was made in U.S. Bankruptcy Court in Coeur d'Alene by Chief Bankruptcy Judge Terry L. Myers.
Green filed Chapter 11 corporate bankruptcy on Dec. 19, the morning an auction sale on the property was scheduled. The bankruptcy canceled the sale.
Wednesday's court decision allows Liberty Bankers Life Insurance Company, a creditor on the 33-acre, multi-use Landing project, to proceed with the foreclosure, a process that could take up to four months. The firm is seeking $8.2 million.
Shelly Enderud, Post Falls interim city administer and finance director, said the city was pleased with the decision because it wants to see the city center developed into a vibrant corridor.
"We believe Liberty should be given the opportunity to collect on what is owed to them and the bankruptcy stalled that," she said.
"We'd like to see Liberty negotiate with someone to take over the property and do something with it or, if Harry is able to obtain a lender, that would be great also. We'd just like to see the property be developed."
Green, who wasn't in court, couldn't be reached for comment on Wednesday.
Jim Lehr of Liberty referred a call seeking comment to its attorney, Lukins and Annis of Coeur d'Alene. Lindsey Simon, an attorney with the law firm, declined to comment.
The Landing has been in the works for 11 years, but only two condo buildings and the marina have been built. Retail shops, a hotel, an amphitheater and more residential units are also part of the plan.
Some condo owners have said they are upset that a garage has not been built as Green indicated would be and their property values have declined due to slow activity in the project.
The Post Falls Urban Renewal Agency reimbursed the project about $1.5 million for infrastructure improvements such as streets, lights and curbing in hopes of sparking development in the city center. The agency paid the lending bank, not Green, for the cost.
Len Crosby, a commercial real estate lender who has followed the Post Falls Landing case and is a member of the Post Falls Chamber of Commerce's Local Issues Committee, said he believes the court's decision was good for the community.
"Anytime you can get property as prominent as this one back into an entity that has the ability to improve the property or liquidate it to someone who will improve it, cut the weeds and pay the taxes is a good sign for the community," Crosby said. "It takes away a liability, creates a favorable environment as the economy improves and that will assist the city."
However, the decision doesn't mean Green is out of the Landing picture. The court earlier decided that there were multiple entities within the project that Green created and controls, so he could file more bankruptcies.
"We could see a windfall of bankruptcies, but I'd think that since the bankruptcy court has gone through this once already that it would be inclined to move along (with the foreclosure)," Crosby said. "The big problem has been swatted, but smaller ones may come up."
Meanwhile, a quarter-acre land swap proposal between Green and the city that has been in the works since 2007 remains unsettled.
The city owns property where tanks to the marina's gas station sit. Green has a similar-sized parcel that has a view of the dam that the city is interested in for a park area.
City officials said they are uncomfortable subsidizing private enterprise and are frustrated that a permit for the tanks on city property was issued because no one from the city signed off on putting tanks in there.
The gas tanks at the marina have been locked all summer.
Terry Werner, the city's public works director, said water to the marina was turned back on about a month ago. It had been shut off due to non-payment, but Green paid the $1,200 owed to have it restored.