Loveland rescinds Centerra South pacts; developer likely to sue

Editor’s note: This story has been updated.

LOVELAND — Faced with the threat of a breach-of-contract lawsuit but bolstered by Loveland voters’ resounding message in the Nov. 7 municipal election, the Loveland City Council on Tuesday rescinded its approval of plans designed to help finance a $1 billion mixed-use project on farmland on the city’s eastern edge.

The council voted 6-2 to reverse its May 2 resolution that approved the Centerra South Urban Renewal Plan and 5-3 to rescind its May 16 resolution that established a master finance plan and intergovernmental agreement with the developers, McWhinney Real Estate Services Inc.

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The urban-renewal plan and master finance agreement would have used 25 years of tax revenues the development would generate to pay for Centerra South’s infrastructure including streets and utility lines.

Mayor Jacki Marsh introduced the resolutions based on her belief that the May votes were not valid under state law, but also in response to Loveland voters’ 70% approval of citizen-initiated Ballot issue 301, which amended the city charter to require any development projects proposed or changed under Loveland’s Urban Renewal Authority to be submitted to a public vote. Although it took effect immediately, it was not retroactive and thus didn’t cover the Centerra South agreements, prompting Marsh to recommend that they be rescinded.

Marsh’s motions were further boosted by an altered climate on the City Council with the election of three new  members who all opposed the Centerra South agreements: Erin Black, Troy Krenning and Laura Light-Kovacs.

Also supporting the reversals was council member Jon Mallo, who at the beginning of the meeting was unanimously named Loveland’s mayor pro tem to replace Don Overcash, who lost his race for mayor and thus his council seat.

In the public-comment period before the council’s 6-2 and 5-3 votes to pull out of the agreements, Sarah Mercer, an attorney at Denver-based Brownstein Hyatt Farber Schreck LLP who represents McWhinney, said the developer would pursue legal action against the city. Reached Wednesday afternoon, Mercer said legal action had not yet been taken.

She was followed Tuesday night by the developer’s CEO, Troy McWhinney, who revealed that he was close to finishing a deal with a major corporation to locate its headquarters to Centerra South but could seek to have the site annexed by Johnstown instead.

The other public comments were mixed, with some residents in favor of rescinding the pacts either because of the traffic the development would generate or their view of how the previous City Council handled the agreements. Opponents, however, cited McWhinney’s contributions to the community, a bad reputation the city could incur by going back on a deal, or the potential loss of revenue Loveland could suffer without the development, especially since voters also passed Ballot Issue 300, which prohibited the city from taxing food purchased for home use.

Marsh’s handling of the abbreviated time for council members’ comments on her motions sparked protests from a number of the members. The mayor limited discussion of each resolution to nine minutes apiece so that a roll-call vote could be conducted within a 10-minute time limit, but then took more than eight minutes to explain her reasoning for rescinding the urban-renewal agreement.

“I think trust was violated with the way the URA was formed,” Marsh said. “I heard whispers that Centerra was going to be coming back with something. It never in my imagination occurred to me that you would propose taking land that’s currently in a URA and using it to create a new URA.”

She cited House Bill 1107, passed by the Colorado Legislature in 2010, which was “directly dealing with farmland being used in a URA. It was to stop that practice. That is not urban blight.

“An urban renewal plan is a very good tool when used appropriately,” she said. In “a blighted area of a developed area of town, there’s crime; it’s costing the city money for fire and police.” She said agricultural land does not pose any of that cost or risk to the citizens of the city of Loveland, adding that “to use a redevelopment tool for new development is a misuse of that tool.”

An exemption written into the bill “was never intended to create new URAs,” she said. “You would have perpetual URAs if that was the purpose.”

Responding to the threat of a breach-of-contract lawsuit, Marsh said any damages the developer could win in court would pale in comparison with “25 years of diverted property tax for the city of Loveland, the school district, and for our county.”

Time is of the essence, Marsh said, because “if more time is expended and we get ourselves into deeper liability because the developer is expending funds, making commitments, that means our way out of this is less. We need to cut our losses. It’s a small amount now versus a huge amount over 25 years.”

And answering the charges that rescinding the agreements would give Loveland a bad reputation, she cited nearby properties where developers financed their own residential and retail construction without the help of metro districts or “tax giveaways,” and said with the repeals, “you will actually see more developers who feel like, wow, finally Loveland is a level playing field.”

After Black briefly stated her support for Marsh’s resolution, Marsh called for a roll-call vote, which council member Dana Foley repeatedly tried to interrupt with points of order before finally muttering and leaving the meeting. Council member Steve Olson, while voting against the resolution, said “I want to go on record as objecting to the lack of an opportunity to comment on this issue. I think it shows great disrespect for council. It’s inappropriate.”

Marsh left more time for discussion of the subsequent resolution to rescind the master financing plan.

The tax revenue Loveland would lose in the 25-year agreement “is money the city needs to provide the services, our fire, our police, our road maintenance,” she said. “These are dollars to us. When an area is not providing those to the city, we either have to reduce our services or raise our taxes on everybody else.”

Many city services are funded by property and use taxes, Marsh said, and Loveland “cannot afford to give that away to large developments.” She pointed to other nearby developments rising with no incentives.

“We need to stop being a city that is seen as ‘Ask for it and they’ll give it.’ Let’s ask our developers to support our city and pay for their own development,” Marsh said. “I believe that that’s what people in the last election said.” 

Olson countered that it’s not the city’s money. “Except for enterprise funds, the city doesn’t make money. It taxes, takes or, in some people’s minds, steals a portion of what successful business people have made,” he said. “If development doesn’t occur, there’s no tax revenue for the city.”

He said reversing the council’s approval of the financing plan would, after revenue sharing, have adverse impacts on the Thompson School District to the tune of $131.2 million, $56.6 million to the county, $62.5 million to the city, $6.5 million to the Thompson Valley Health Services District, $3.5 million to the Colorado Water Conservation District, and $500,000 to the Larimer pest control center. 

“This isn’t just a Loveland issue,” Olson said. “It’s one thing for the city to take action if it only affects the city of Loveland, but this doesn’t.”

Members of the previous council, over Marsh’s opposition, ratified “substantial modifications” to the URA plan in October as a result of Larimer County voting earlier in the month to commit 65% of incremental property-tax revenue within Centerra South to infrastructure costs at the development. The Loveland Urban Renewal Authority ratified those changes in October as well; in Loveland, City Council members also serve as the LURA along with four representatives of taxing districts in the city.

Council member Andrea Samson, who voted for rescinding the Centerra South URA but against ending the financial agreement, said she felt the resolutions were “bulldozed” through without enough discussion.” Council member Patrick McFall cast the other “no” votes.

Samson opposed rescinding the URA but voted with the majority on the first resolution so that she could bring the issue up again. Reached Wednesday, Samson told BizWest that she has submitted the item for reconsideration for the council’s Dec. 5 meeting.

“I wanted to bring it back so we could have a discussion,” Samson said. “The mayor used all the allotted time, and we on the other side didn’t have an opportunity. All of us on the minority side, we all had our lights on. We wanted to ask the city attorney about the legality of all this.”

Samson explained that the 10-minute time limit for Marsh’s resolutions occurred because they were placed under “new business” on the council’s agenda.

“Generally a resolution would go on regular business, not new business, and it would have gotten more time,” Samson said. “The reason this went on new business is because she was rescinding a resolution. 

“This hasn’t happened in my four years on council,” she said. “This is uncharted territory for us.”

New council member Laura Light-Kovacs asked whether, since Ballot Issue 301 passed, “would any decision we’re making now about the URA have to go back to our citizens for a vote? I think that would be welcome for the voters to decide.”

Ballot issue 301 specified that Loveland voters would have the final say on any approvals or modifications to area urban-renewal boundaries, as well as revenue sharing, cost sharing, tax-increment financing, or use of eminent domain or condemnation.

Samson echoed Light-Kovacs’ question on Wednesday.

“I absolutely respected how the people voted on 301 and that they want to have a say,” she said. “But 301 could not be written to be retroactive; that would have been illegal. So does this vote activate 301? How would this play out? That’s something I want to ask the city attorney.

“I respect 301 and think that should be part of the conversation, but it wasn’t.”

McWhinney didn’t name the corporation with whom he was near an agreement about locating in Centerra South but referred to the deal as “Project Treadstone,” one of several proposals approved for state incentives this month by the Colorado Economic Development Commission meeting. As described by the EDC, “the company behind Project Treadstone is a general contractor based in Colorado. Project Treadstone represents the company’s significant expansion and consideration of relocating their headquarters. Due to the nature of the company, further identification would jeopardize the company’s confidentiality.” The EDC said the company is considering locating in Weld County but could land in other Colorado counties instead. The EDC said the company also is considering sites in Phoenix as well as Austin, Texas, and Nashville, Tennessee.

The unnamed company may be Greeley-based Hensel Phelps Construction Co., which in 2020 had proposed building a regional headquarters in McWhinney’s Baseline development in Broomfield and currently is building the new terminal building at Northern Colorado Regional Airport in Loveland.

“Project Treadstone, should it occur in Colorado, expects to create 589 net new jobs at an average annual wage of $80,051, which is 134.5% of the average annual wage in Weld County,” the EDC said. “The jobs will include engineers, administrators and management. The company currently has 4,675 employees, 634 of whom are in Colorado.”

The EDC said it is requesting up to $4,866,978 in performance-based Job Growth Incentive Tax Credits over an eight-year period. According to the EDC, the incentives would be contingent upon the company’s creation of those 598 net full-time jobs at a minimum average annual wage of $59,501, which is 100% of Weld County’s AAW, or 100% of the AAW of any county in Colorado the company decides to locate over eight years. Those jobs would have to be maintained for a full year before any tax credits become vested.