Round and roundabout on I-25

LOVELAND – Proposals that seemed to developer McWhinney to be in the best interest of the community have resulted instead in a firestorm of concerns throughout the region.

McWhinney went before Loveland City Council on April 7, seeking an amendment to the Centerra Master Financing and Intergovernmental Agreement. That 2004 document sets forth stipulations for the use of funds collected by the Centerra Metro District – namely the completion of five regional road improvement projects.

The master financing agreement, or MFA, requires the district to fund and contract one regional road improvement project once it spends $70 million in local improvements, which include roads within the Centerra development. The second regional improvement project would need to be completed after $110 million in local improvements were made.

“We’ve hit that first threshold,´ said Jay Hardy, general manager of Centerra.

The developer requested an amendment to the MFA that would allow the already constructed Centerra Parkway/Crossroads Boulevard extension project to meet the first obligation once a roundabout improvement to the Crossroads-Interstate 25 interchange was funded and contracted.

The amendment would free up $12 million held in a restricted account specifically for interim safety improvements at I-25 and U.S. Highway 34. The $12 million could then be put to work for other uses approved by the MFA, including the repayment of debt. To date, the district has accrued $32.3 million in debt to McWhinney, about half of which has already been repaid through bond issuance.

After hours of discussion, city council pushed back the decision. During the next few weeks the council heard a flurry of public comment, mostly urging against the amendment, and received a number of letters – from Greeley City Council, Larimer County’s Commissioners, other developers and the Colorado Department of Transportation – expressing concerns about the request. McWhinney decided to pull the amendment from consideration at the April 21 council meeting.

Complex agreement

According to Loveland City Manager Don Williams, the problem is that the master financing agreement is complicated. What started as a complex agreement between the city and the developer was made more intricate by amendments.

“Most of the objections I heard were based on pieces of information that simply were not true,” he said, including the concerns raised by the Greeley City Council. “They didn’t have hardly any of the facts.”

It was a November 2006 change to the agreement that would have been somewhat undone by the most recently requested amendment. The 2006 amendment added the Centerra Parkway extension as a regional project, an amendment that Hardy said was made at the behest of Larimer County. It also stipulated that the I-25/U.S. 34 project be funded in order for the parkway extension to meet the obligation.

One of the objectives in the 2006 council resolution read: “retain the intent of the Master Financing Agreement. Specifically, the Interim I-25 and US 34 Interchange Improvements will not be delayed because Centerra Parkway is designated a Regional Improvement.”

For some, that was the sticking point.

“Personally, I had very strong concerns about delaying that interchange,´ said Larimer County Commissioner Steve Johnson. His worry was that, given the current economic climate, the project could be delayed longer than the estimated three to five years. At the same time, Johnson said the commissioners were cognizant that they were not a party to the agreement and didn’t want to presume to tell the city how it should act.

The Larimer County Board of Commissioners initially took a position to oppose the amendment, although Johnson said they didn’t know much about the request. After expressing concern, the commissioners received a letter from McWhinney detailing the reasons and mechanisms behind the request.

“At that point, we realized there was a lot more to the story,” Johnson said.

In the end, the commissioners did send a letter to Loveland City Council but did so without taking a stance either way. In the letter, the commissioners expressed concern about delaying the project based on correspondence with CDOT that indicated a delay would require more time and money be spent on planning to meet new requirements.

The commissioners also took the opportunity to point out that Larimer County did not request the addition of the Centerra Parkway extension; rather the commissioners asked that it be restored. They claimed that the project was originally part of the original Centerra agreement, which the county supported, but was removed before final draft was approved.

Concerns beyond transportation

Not all of the concerns aired were related only to transportation. For Greeley City Manager Roy Otto, it was the discussion of opening the door for funding partnerships for the interchange improvements that caught his attention, specifically the mention of Greeley. At the same time, Greeley was working on retaining a large employer that was also considering other sites for expansion in Northern Colorado – including the Centerra development. McWhinney officials used the example of attracting a Fortune 500 company – revealed in official correspondence as Agrium Inc., owner of Greeley-based Crop Production Services – a reason for the amendment request.

“That Fortune 500 company was a Greeley company,” Otto said. “We were all involved in the retention of that company.”

Greeley City Council met in executive session to discuss the issue and fired off a letter detailing its concerns, including the safety issues around not moving forward with improvements; the “spirit and intent” of the master financing agreement; and offering incentives for businesses to move from one Northern Colorado community to another.

“I don’t think that’s good public policy,” Otto said, explaining that the situation is different than attracting an employer from outside the region.

Greeley’s worries were similar to those they had during attempts in 2007 to form a Regional Transportation Authority. Otto said the main concern is what is fair and equitable use of funds.

McWhinney responded with a letter of its own to Greeley officials to “clarify a few points.” Among the clarifications were that the amendment would not relieve the commitment of the Centerra Metro District to helping fund the improvements; that the agreement does not remove the district from bearing the full burden of the regional improvement projects; and that transportation studies show that a bulk of the I-25/U.S. 34 travelers “originate outside Centerra.”

Hardy admitted that Centerra was involved in a site selection process for a company with a presence in Greeley. However, he said the amendment request had no bearing on McWhinney’s ability to land the project.

“If it did, we wouldn’t have withdrawn it,” he said, adding that it would have meant new jobs, not just a regional move for existing ones.

The McWhinney letter went on to invite Greeley City Council to financially support improvements at the I-25/U.S. 34 interchange. Hardy pointed out that the MFA, as amended in 2006, states: “The parties agree to work proactively and cooperatively to obtain funding support for all of the regional improvements from other public and private parties who will benefit from such regional improvements…”

The $6.4 million Crossroads roundabout project will bring together funding from the Centerra Metro District, the city of Loveland, the Colorado Department of Transportation, the Federal Surface Transportation Program and federal stimulus dollars. Hardy said that discussions on funding partnerships for I-25/34 were in the very preliminary stages.

No need for additional funding

Both projects will proceed, even without the amendment, so there is no need to seek additional funding at this time. Hardy points out, though, that McWhinney has already fulfilled its financial obligations, and then some. At this point under the original agreement, the district would be responsible for completing one regional improvement project.

In 2004 the interim improvements at I-25 were estimated to cost $10 million. With the amendment request pulled, the total amount spent on regional improvements will be around $31.7 million. The difference – $21.7 million – could have been used to attract employers, which Hardy said was the original intent of the amendment request.

“We looked at the city’s number one concern, which was jobs,” he said.

The firm was hoping to free up the $12 million, which could have been used to pay back part of the debt it is owed. The funds would be put to use on what Hardy called the “job creation model.” While specific plans for the money were not laid out, Hardy explained that pulling that capital back to repay debt would allow McWhinney to stay ahead of the demand for office and industrial space by prospective employers.

Given the current credit conditions, developers have to put more forward in order to finance construction projects. Hardy explained that a building that would have required $1 million in cash equity in 2006 requires closer to $4 million today. Having space ready or quickly available is a major factor in attracting new employers, he said.

“Companies always look for existing space,” he said. Constant Contact, which opened its permanent facility earlier this month, was down to four or five locations in its site selection process. Hardy said it was Centerra’s availability of temporary Class A space that won the company.

Centerra will be almost out of Class A office space after another major announcement around the end of May, he added.

Surprising reaction?

Hardy explained that the MFA sets out three goals:

n Increasing sales tax revenue;

n Increasing jobs;

n Setting up creative funding mechanisms for regional improvement.

“We set out to accomplish all three goals,” Hardy said. He was a little surprised by the reaction to the amendment request – not the public discourse, but the misinterpretations of what McWhinney was hoping to accomplish.

He may have been the only one not entirely expecting it, though.

“I wasn’t a bit surprised,” Williams said. He had warned McWhinney the first time he met with the company on the matter, pointing to the 2006 amendment process and the flurry of activity it stirred up. Williams wasn’t the only one with a warning.

“I told them on Tuesday (April 21) that this will look bad to the public,” Johnson said. He feels that the step to pull the amendment was a wise one, given that the topic had the potential to divide the region and lead to misunderstandings. Now, the Crossroads project will go out for bid on May 15, with the U.S. 34 improvements about a month later.

“We’d never be able to do either of these without Centerra,” Johnson said. He cited the interchange of I-25 and Colorado Highway 392 as an example of a long-overdue project that has no public-private partnership to move it forward.

Hardy said the region will have a nice interchange, perhaps at the cost of some jobs, but the firm is focused on moving forward.

“We’ll have terrific infrastructure, so when we come out of this recession we will have excellent access to our region’s communities,” he said. “At the end of the day, we made the right decision for the region. McWhinney never has been or will be a company that puts private needs before public good.”