McWhinney sues to stop Loveland council’s reversal of Centerra South decisions

LOVELAND — The Loveland City Council acted illegally and unconstitutionally in rescinding the Centerra South Urban Renewal plan, and McWhinney Real Estate Services and related development entities are already out more than $10 million as a result, a lawsuit filed Tuesday afternoon alleged.

The lawsuit filed in Larimer County District Court seeks a temporary restraining order and an injunction to prevent the city from moving forward with reversal of the approval of the URA and the related master finance agreement.

McWhinney followed through on its warning that it would file a lawsuit if the city attempted to reverse the actions of the previous city council. The company said it followed all the prescribed procedures to establish the URA and to attain the finance agreement, only to have them discarded by “recent political gamesmanship led by Mayor Jacki Marsh.”

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“After conferring with these new council members (those newly elected in the Nov. 7 election) off-the-record and believing she now had five votes in hand, Mayor Marsh added two motions to the next City Council agenda to repeal the May resolutions that enabled the Centerra South development.”

The council “did not provide the lawfully prescribed 30 days public notice of a substantial amendment to an urban renewal plan. Nor did the City Council make an effort to submit the motions for voter approval, as required by a newly adopted ballot measure,” the lawsuit said.

The actions also violate the “irrevocable pledge[s]” in the master finance agreement, it said.

McWhinney alleged in its lawsuit that its developments in Loveland have provided “regional development, local jobs, tens of millions ($57.7 million in net new sales tax revenue) of tax revenue and economic growth.” Its developments also have included infrastructure improvements such as the Interstate 25/U.S. Highway 34 interchange, express lanes on I-25 and a mobility hub. 

In pursuit of Centerra South, and with the support of the previous city council, the company retained “two civil engineering firms, a traffic engineer, three landscape architecture firms, a parking consultant, a market research firm, two planning firms, three commercial building architectural firms, a multifamily site architectural firm, a mechanical/electrical firm, a structural engineer, a geotechnical consultant and made payments to the city to being design of a sewer lift station on the project,” all at a cost of more than $10 million so far.

The lawsuit cited the decision of Whole Foods to establish a grocery store in the development and referenced a “Fortune 1000 company looking to relocate its world headquarters signed on to join the community.” The company is widely believed to be Hensel Phelps, the Greeley-based general contracting firm, which plans to add 600 or so additional jobs to the community.

The lawsuit claims breach of contract, including an agreement in the master finance agreement that requires the city to cooperate with McWhinney “and to irrevocably pledge the city increment to District No. 1” of the development. “The MFA also does not permit the city to terminate the MFA,” the lawsuit said.

Even if the city could terminate the agreement, “as a matter of equity …(the city would be) required to restore the opposite party … to the place it occupied before the contracts were negotiated.”

The lawsuit claims unlawful termination of the urban renewal plan and the MFA. The city is bound by the terms of the agreements themselves and its actions to rescind “exceed the power granted to the city council” and are therefore void, it said.

The lawsuit also claims unlawful procedure in that discussions may have occurred outside of public meetings and violations of the city charter.

It asked the court for a speedy hearing, a declaratory judgment, a restraining order and injunction.

Reached late Tuesday, Marsh predicted that rescinding the urban-renewal authority and financial agreement for Centerra South would stand up in court.

“It was an illegitimate URA from the start,” she said, adding that state House Bill 1107, passed in 2010, was meant to stop farmland being used for urban-renewal projects. The bill’s Exemption E, she said, was a “grandfather clause to allow existing URAs to finish their 25-year clock, but this doesn’t fall under that because urban renewal is to cure urban blight, not used for undeveloped farmland.”

Marsh said her interpretation of the legislation was supported by Morgan Carroll, Randy Fisher, Steve Johnson and John Kefalas, who all served in the Legislature and testified about HB 1107’s intent.

Marsh also contended that the May 2 Loveland City Council meeting at which the URA was approved was held without proper notice.

“It was intended to be heard on April 18, but the plan was not ready, so the city manager and city attorney put it on the agenda for May 2,” she said. However, she said that according to state statute 3125-107, notice of the May 2 meeting’s agenda had to be given 30 days prior in a newspaper of record – which would have been the Loveland Reporter-Herald – “with a date certain, time of day and location. When you look at what ran, it had the date but did not give the location or time of day.

“So what happened on May 2 was null and void, even if the council passed it,” Marsh said. “If this goes to court, I think they’ll agree. And there’s no breach of contract if that’s what the court finds.”

Even if McWhinney were to win the lawsuit, Marsh added, the judgment “would be limited to damages, how much money has been spent on the project to date — not what you might have collected in the future. That was the urgency of passing it last week.

“Even if we have been found liable,” she said, “that liability is very small compared with the 25 years of tax revenue we’ll be losing” in the financial agreement the council passed but that was rescinded last week. “We’ll eat the costs of extra police, extra fire, more people using our parks and open space. Where does the money come from to provide those services?”

Marsh also pointed to an example she used at last week’s meeting.

“Right next door to this project are 22 apartments going up,” she said, “and that developer is paying for everything. No metro district, no URA.”

BizWest reporter Dallas Heltzell contributed to this report.