Woodinville Wine Village: Judge Rules Against City of Woodinville

The city of Woodinville will appeal after a judge ruled against the city last month in its request to be priority one in payment of a more than $1 million debt related to the Woodinville Wine Village project.

The Woodinville City Council has given the go-ahead for city attorney Greg Rubestello to file the appeal. The recent King County Superior Court ruling specifically gives priority to a new investor in the Woodinville Village Project over a $1 million debt owed to the City. An appeal was filed to the Court of Appeals on July 3, 2013.

"It's certainly worth having the matter reviewed by court of appeals," Rubstello told Patch.

In 2005, the City of Woodinville entered into a Development Agreement with Woodinville Village Associates (WVA), the developer of the proposed 20-acre mixed-use Woodinville Village Project.  Part of that agreement required WVA to enter into a funding agreement with the City for the construction of the Roundabouts Project, a series of three traffic roundabouts surrounding WVA’s property on SR 202 through Woodinville’s Tourist District.  In 2006 WVA agreed to reimburse the City for the cost of the street frontage improvements surrounding WVA’s property when the City built its Roundabouts Project. 

The City completed the Roundabouts Project in 2010, including the street improvements surrounding the WVA property.  When WVA failed to reimburse the City for its portion of costs, the City obtained a Court Judgment ordering WVA to pay.  The City believes the obligation to pay these costs is secured by the WVA Property and has priority over other liens since this obligation arose out of the Development Agreement which was recorded before any others, including the original bank loan to finance the project. 

The Woodinville Village Project has been in trouble and stalled for years. WVA failed to make payments to Frontier Bank which originally loaned WVA more than $19 million to develop the project site infrastructure. That defaulted loan became a problem asset of Union Bank, N.A. when it acquired the failed Frontier Bank. 

In 2012, Union Bank, N.A. sold the  bank’s security interest in the WVA Property to Woodinville Partners, LLC (“Partners”) owned by Tom Ellison of Kirkland, for approximately $14 million. The Superior Court concluded in part that the bank’s security interest purchased by Partners had higher priority than the City’s security interest. If the Superior Court decision becomes a final decision, the foreclosure of the bank security interest would discharge the City’s lien security in the WVA Property.

The City disputes that Partners should be allowed to acquire ownership of the WVA Property through foreclosure of the bank security and then to develop it without paying the City the money owed for the street frontage improvements.  The City believes this violates the Development Agreement and the public/private partnership commitment for the Roundabouts Project made by Associates on behalf of itself and successors in interest to the Woodinville Village Property.

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