The gateway to Coeur d’Alene for the masses flowing in on Northwest Boulevard from Interstate 90 gives little hint that a gorgeous lake and thriving downtown are 60 seconds away.
On the right is a blend of purported modernity: multi-storied condominiums resting on retail shops hulking in the background, framing a cold concrete parking garage, top level barren. There’s the windowless massive rear end of Regal Cinemas and retail space spreading north, buildings as blunt and bland from the back as they are warm and welcoming from the front. The theater’s sprawling roof, where air conditioning units crouch like abandoned cars on a forgotten tarmac, caps the visual splash until the Inland Northwest’s largest metal feather beckons from an approaching median.
This might not be the welcome to the City by the Lake envisioned by chamber of commerce types, but it is the entryway to Exhibit 1 in the community’s controversial public-private urban renewal partnership, a live/work/play neighborhood evolved from an old mill site and 100 foot deep gravel pit. Over the past decade, it has stalled, flourished, staggered, and is showing signs of life again.
This is the road to Riverstone.
John Stone has agreed, somewhat reluctantly, to be interviewed by North Idaho Business Journal at 11 a.m. on 11/11/11. He shows up at Starbucks, right on time, a Riverstone promotional packet in hand and a countenance on his serious face as gray as the November skies. It is the look of a man who devoted much of his time and more of his treasure to create and then shape this project over a dozen years, yet as he walks through the front door of the coffee shop he looks anything but triumphant.
As reported in The Press in late October, Stone has just deeded back to a Seattle-based lender three buildings that form part of the village’s heart: the movie theaters and two adjacent, multi-tenant retail buildings. He got kicked in the financial teeth when Barnes & Noble went into what was called “capital preservation mode” and “pulled out at the 11th hour,” Stone said, leaving the developer embarrassed, angry and in full possession of the empty B&N building that he had sunk an additional $1 million into just for that specific client.
All told, Stone has suffered much more than that.
“We probably lost $15 million,” Stone said of his Riverstone investment. “It hasn’t been fun. That’s the risk you take in the development business.”
Stone admitted reluctance to being interviewed, saying he was concerned a “witch hunt” might be lurking in a hidden agenda somewhere. And later on that Veterans Day, as Stone drove a reporter and photographer toward what someday could become a sports complex on the northwest edge of Riverstone II, he imparted a little payback for criticism that has come his way from editorial writers and urban renewal critics.
“If I hear ‘wealthy developers are lining their pockets’ ever again, it’ll be too soon,” he said.
For this developer, the support he has gotten from Coeur d’Alene’s urban renewal agency, Lake City Development Corp., was critical to proceed but has done little to mitigate that $15 million loss. According to Tony Berns, LCDC’s director and lone employee, Stone has been reimbursed just under $1.5 million over the past decade. He is due $30,677 more before reimbursement from LCDC for the orginal Riverstone development concludes.
And reimbursement is the key word, Berns said.
“We don’t just hand out cash up front,” he said. “John Stone paid for that [traffic lights and other infrastructure on Northwest Boulevard for access to Riverstone] out of his own pocket.”
Stone pointed out that even full urban renewal reimbursement on the original Riverstone doesn’t fall into his profit column because it paid for improvements along Northwest Boulevard that he doesn’t own.
“There is not one penny of urban renewal money that’s in our pocket,” he said. “It’s all owned by the public in infrastructure.”
“It’s his risk; the burden’s on him,” Berns said of Stone’s venture with LCDC. “If it works, he gets paid back from the parcels within that improvement. If it doesn’t. . . .”
Stone said that when he walked the 76 acres of the original site more than a dozen years ago, it was the graveyard of a sawmill littered with industry mementos that included buried sawblades and other “unsuitable materials.” In a wistful moment, Stone wields the fact as a counter to some of his critics.
“They have no memory of what this was,” he says.
But Stone sure does. In 1998 he had a video made and distributed to 30 or 40 people in the community, including Coeur d’Alene Mayor Steve Judy and Avista’s Paul Anderson. Stone showed them what the site was — and told them what it could be, including a lake for the public and many other pluses.
“When we did our first conceptual renderings. . . I’ve been amazed at how close we came to that,” he said. “It’s really happened. I’m pleased that we’ve done everything we said we’d do.”
He paused and then added, “It hasn’t been successful economically but that’s part of life.”
Stone labored for two years to finalize the development’s plans and forge the necessary agreements. And just as momentum was beginning to build — bringing with it a burst of bricks and mortar for Riverstone — terrorists brought down twin New York financial landmarks and with them, the nation’s economy.
“Nine-eleven hit us and that stalled everything for another year,” Stone said. “You can’t control that.”
Riverstone began to rise with its first tenant, First American Title. Nationally and locally, the economy picked up speed, reaching unprecedented pinnacles. In 2004, Stone’s company acquired the old quarry on 77 acres just west of the original Riverstone and, over the next three years, moved 2.5 million cubic yards of material to prepare the quarry site for a lake, a park and more. In April of that year, construction began on the 14-screen Regal Cinemas theater. Four years later, the 25-acre Village at Riverstone was complete, but the good times that had taken so long to build ended in a hurry.
“This economic earthquake hit us in 2008 and you can’t control that, either,” Stone said.
Also beyond his control was Barnes & Noble’s last-minute decision not to provide the retail anchor that formed much of the development’s foundation for financial growth. When B&N exercised a clause in its contract and backed out, Stone said, the ripple effect was devastating. Seven other national franchises retreated from their earlier commitments, Stone said, and existing Riverstone retailers that had been contractually assured the giant was coming to the village were given steep discounts in their leases — again, triggered by the bookseller’s bailout.
That created a quarry Stone hasn’t been able to fill.
“If the economy would do a magical turnaround, then we’d be back in the game again,” he said. “But that’s highly unlikely to happen.”
Coeur d’Alene City Council member Deanna Goodlander believes Riverstone is a boon to the community, and that it most definitely would not have happened without John Stone’s hard work and the encouragement from urban renewal.
“John has said that if it weren’t for urban renewal, he’d never take that risk,” she said.
As a council appointee to the LCDC board of directors, Goodlander sees first-hand how urban renewal can impact a community.
“When you take a brownfield like John did and turn it into something positive — the same holds true for Mill River, too — everybody benefits,” she said.
Berns, who took LCDC’s helm in December 2001, said that after the initial agreement with Stone on the original Riverstone, the urban renewal agency executed a promissory note with Stone for Riverstone West Phase I on June 21, 2007. That phase includes property west of the Red Robin restaurant. The agreement called for Stone to spend $6,682,237 of his own money on infrastructure, with half of it dedicated to the park and pond that have become the development’s public centerpiece. Stone then deeded that property to the city.
Almost four and a half years later, Stone’s risk still has not paid off. According to LCDC financial records, the principal on the promissory note remains $6,682,237. Only interest on the note has been paid.
While Stone hasn’t begun to be paid back, his investment has reaped dividends for the city, Berns said.
“The first thing that jumped out at us was the park and pond,” he said.
Hundreds of jobs were generated as well, and the city’s residential options grew. Berns recalled that there were even plans for condominium towers at Riverstone.
“People were dreaming big,” he said, “but what really encouraged us was creation of the public space.”
Like Stone, Berns compares what was to what is.
“I think people forget what it looked like,” Berns said. “That was a brownfield for the community, which he reclaimed.”
Berns also emphasized that urban renewal support leads to reimbursing developers like Stone only if the property being developed becomes viable. The mechanism of tax increment financing works like this: If the original Riverstone property generated $100,000 in annual property taxes before Stone developed it and $500,000 in annual property taxes after he developed it, that $400,000 difference — the tax increment — would be divided as follows:
• 72 percent would be applied to Stone’s reimbursement agreement with LCDC
• 3 percent would be transferred to the city’s Art Commission to spend on public art in the Lake District
• The remaining 25 percent would be used by LCDC on other projects within the district.
And if the property never generates property taxes beyond that initial $100,000 annually, Stone would never get repaid for the public improvements he installed.
“The taxpayers are not on the hook,” Berns reiterated. He explained that when an urban renewal district closes, as the district encompassing Riverstone West will in 2027, whatever balance remains to reimburse Stone would go unpaid. Instead, all the tax increment will go back to the other taxing entities within the district from that time on.
Berns is convinced that Riverstone is a model of a good public-private partnership, providing public space and valuable amenities.
“A successful Riverstone means more jobs, more places to live,” he said. “At one time Riverstone was going to be only high-end apartments.” Now, Berns notes, construction for low-income apartments on the far west end of Riverstone is almost complete, and most of the original condos sold for modest prices.
He also pointed out that because the original Riverstone is generating positive dollars, the additional funding can be deployed elsewhere in that specific urban renewal district. That’s how Midtown improvements were made, he said, and more downtown improvements are coming.
Goodlander is keeping her eye on the bigger picture. She shares the story of interconnectivity that came from her cardiac physician, who works for the network of heart specialists now being brought into the Kootenai Health family. According to Goodlander, her doctor from Heart Clinics Northwest asked if the Riverstone condos were joined by pedestrian and bike trail with the education corridor just south of the development and on into downtown. And the answer was “yes.”
“She said she’d be interested in one of the Riverstone condos because she’d love to ride her bicycle on that trail,” Goodlander said.
Goodlander said Stone’s role is basically transparent as far as taxpayers are concerned.
“It doesn’t matter who owns it,” she said. “It’s there, and whoever owns it will be paying taxes.”
Asked if she believes Riverstone has been a rousing success, she answered thoughtfully, “I don’t think it’s there yet but I think it will.”
And she remains firmly in Stone’s corner.
“Are we lucky we got a John Stone? You bet,” she said, “because he made that development happen.”
John Stone is on a new mission these days and it has nothing to do with rebuilding a fortune.
“I’m working to pay down debt,” he said.
That effort is emphasized by jackhammers and clamboring construction workers busily working on several of the five projects launched in Riverstone this year, projects that Stone estimates have generated 300 construction jobs while paving the way for numerous other permanent jobs in those buildings.
Right next to Bardenay, the restaurant on the lake, construction on a dermatology business is in advanced stages. Across the road heading northwest, a new center for the FBI is going up. Stone’s own offices and expanded space for an existing high-tech tenant, Pacinian, are also taking shape, and there’s more of that in store. Several parcels have been purchased this year and contracts are pending with a couple others, Stone said.
Meantime, his eye is fixed on that one prize.
“It takes awhile for the tax increment from these new businesses to pay off that debt,” he said. “We have to pay off the loan regardless. We took the risk that this had to be paid off in a certain amount of time.
“There are close to 500 units here now that weren’t here 10 years ago. Taxes are always there. They’re down now because real estate across the board has dropped 40 percent, but we still pay our taxes and the increments continue to build. It’s a funny game.”
Not that Stone is laughing.
“It’s been a rough ride but we’re real pleased with what we’ve been able to accomplish,” he said. “This will be the place to shop in the North Idaho Panhandle. This village will be healthy at some point when the economy picks up.”
This story was originally published in November 2011 in North Idaho Business Journal and on cdapress.com.