An economic development effort that has pumped tens of millions of dollars into the Tri-City economy for more than 30 years is changing how it does business due to a past legal dispute with a prospective recipient of one of its loans.

The boards of the Hanford Area Economic Investment Fund (HAEIF) and Tri-City Development Council (TRIDEC) are hammering out an agreement that would transfer HAEIF’s remaining $1.7 million to TRIDEC to award as grants for building or improving public infrastructure.

Leaders from both organizations say the arrangement will allow the community to continue to benefit from the dollars HAEIF receives from the state while limiting liability from future funding decisions.

Skip Novakovich

“I do think it’s a better way to do things,” Skip Novakovich, president of HAEIF’s advisory board, told the Tri-Cities Area Journal of Business.

Stimulating the economy

HAEIF was established in 1991 by the state Legislature, with the primary goal of stimulating economic diversification and job growth in the region. Money in the fund comes from the fees paid by those depositing low-level nuclear waste at the Hanford site. The fund has been used since its inception to provide loans to businesses and municipalities as well as grants, as approved by the HAEIF advisory board.

HAEIF’s 11-member board is appointed by the state Department of Commerce. It includes representatives from the counties and cities, as well as members of the Port of Benton and the labor community.

TRIDEC assist

TRIDEC is no stranger to seeding economic development. Twenty years ago, the 501(c)(6) nonprofit based in Kennewick began providing grants via an incentive fund sustained by the sales of surplus property from the U.S. Department of Energy.

Karl Dye TRIDEC

DOE last provided money for the fund in 2019. TRIDEC has awarded about $4 million since the fund was established largely to improve public infrastructure that would lead to job creation.

“A lot of these economic development efforts are to combat that we’re more than a nuclear waste site,” said Karl Dye, TRIDEC’s president and CEO. “I think some of the intent was to balance our community and it’s been successful.”

Under the proposal between HAEIF and TRIDEC, HAEIF would inject the cash it has on hand into that incentive fund so TRIDEC could revive the program.

Going forward, HAEIF would continue to deposit the fees it collects – currently about $120,000 per year – into the fund. TRIDEC would stick to providing grants. Loans would no longer be provided.

Lawsuit

HAEIF began looking at an alternative way to disburse its funds after it and administrative and management contractors, Clifton Larson Allen and Jolarr Management Consulting, were sued by a potential borrower.

In 2020, HAEIF began working with Klein Griffith Properties Group on providing a $1.1 million loan to transform a downtown Kennewick building into a luxury office-and-apartment project called The Nineteen. The loan would have provided more than two-thirds of the project’s funding. However, HAEIF revised the loan amount to $345,000 following a closed-door board meeting in October 2021.

Novakovich said at the time that the revised loan amount was because the scope of the project had changed, specifically that it no longer included creating commercial space on the ground floor. But the developers said nothing had changed; the company applied for a permit that would have let it build the shell of commercial space on the first floor of The Nineteen but not an improved tenant-ready space.

“Despite our testimony over multiple meetings and vast documentation proving otherwise, the committee baselessly doubled-down on this false narrative that there was a ‘change of scope’ on the first floor,” said co-developer Brian Griffith at the time.

Klein Griffith filed a lawsuit in the U.S. District Court for the Western District of Washington. It and the defendants agreed to a stipulated dismissal of the case in July 2024.

Novakovich said that dismissal coincided with a roughly $1.5 million settlement with Klein Griffith, with HAEIF providing $80,000 and the remainder covered by the state, insurance and other defendants.

Preventing future litigation

Novakovich told the Journal that the situation with Klein Griffith made clear to the advisory board that “we needed to protect our contractors. We had to find ways to shore up any loopholes to prevent this litigation from happening again.”

The HAEIF and TRIDEC boards are working out the details and hope to have it finalized by the end of April.

“We need a way to keep pumping this money into the community,” Novakovich said.

Millions in loans, grants

Since it was established, HAEIF has provided 47 loans worth more than $25 million, which has helped pay for Pasco’s wastewater treatment facility and the Port of Benton’s Wine Village, among other projects.

Its most recent private business loans helped Tim Bush Motor Co. expand its BMW dealership, paid for the land and construction of The Lodge at Columbia Point and assisted manufacturers Lieb Foods, Carbitex and wheelchair manufacturer Ti-Sports – now Permobil – in acquiring equipment.

The fund currently has outstanding loans with the city of Pasco and Port of Pasco; co-working space Fuse; the Kennewick Crumbl Cookie location operated by Cookies R Rusk LLC; M & D Holding Iconic Brewing; ANM LLC which operates the Crumbl Cookie store in Pasco; and Pepper Preppers.

The fund also has provided $1.5 million in grants, most recently in 2024, to support public infrastructure projects. The five grants provided in 2024 paid for water system improvements in Benton City, parking infrastructure and walking trail upgrades in Kennewick, emergency energy storage planning by Franklin PUD and infrastructure projects in Richland.