Loveland mayor to propose rescinding Centerra South pacts

LOVELAND – Reacting to Loveland voters’ resounding decision in the Nov. 7 municipal election that reined in the city’s urban-renewal authority, Mayor Jacki Marsh on Tuesday will move to rescind the City Council’s May 2 resolution that approved the Centerra South Urban Renewal Plan as well as the May 16 resolution that established a master finance plan and intergovernmental agreement with the developers.

In a response late Monday, an attorney for the Centerra South developers threatened legal action if the resolutions are approved.

Ballot issue 301, passed by 70% of Loveland voters, 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. The ballot issue included 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. Although it took effect immediately, it was not retroactive and thus didn’t cover the Centerra South agreements.

Marsh had been the lone voice on the City Council opposing city taxes going to help McWhinney Real Estate Services Inc. fund its proposed $1 billion development planned for farmland on the city’s eastern edge. However, the margin of the ballot issue’s victory coupled with a new makeup on the City Council created a different political climate.

Council members in October, over Marsh’s opposition, ratified “substantial modifications” to the URA plan 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 LURA ratified those changes in October as well; in Loveland, City Council members also serve as the Urban Renewal Authority along with four representatives of taxing districts in the city.

“I’ve always maintained since the beginning that Centerra South was illegitimate,” Marsh told BizWest on Monday, referring to House Bill 1107. Passed in 2010, the legislation prohibited farmland from being declared “blighted” and thus eligible for urban-renewal incentives.

Marsh said she has spoken to the bill’s sponsor, Sen. Morgan Carroll, D-Aurora, who confirmed that an exemption in the bill “was specifically dealing with retroactive decisions. It didn’t want to pull the legs out of any URA that was properly formed.” However, Marsh said, “it was never intended that someone would want to pull land out of an existing URA to create a new one.”

The urban-renewal process, Marsh said, “is for urban blight, a part of town that’s fallen on hard times, that might be blighted or have a lot of crime or drug use. That is a general use for a URA and we’ve used it in Loveland, especially for downtown.

“It is not a development tool to be used for someone to take a vacant field and turn it into housing or retail.

“I’m just following through on what the voters said, and the voters were very clear,” Marsh said. “They don’t think that farm is blighted, clearly.”

Late Monday, BizWest received a copy of a letter that Carolynne C. White, an attorney at Denver-based Brownstein Hyatt Farber Schreck LLP who represents McWhinney, sent to Marsh and the City Council. In the letter, White expressed “McWhinney’s extreme disappointment” in seeing Marsh’s intended resolutions on the council agenda.

“As you undoubtedly know, city staff and McWhinney have worked diligently for approximately a year to realize a shared community vision for the transformative, approximately billion-dollar project known as Centerra South,” White wrote. “Centerra South will benefit the city of Loveland … and its residents in a myriad of ways, and it will fulfill the vision set forth in the Create Loveland Comprehensive Plan … for the city’s future. Centerra South is envisioned to be a vibrant and walkable mixed-use community that seamlessly integrates the built environment with the area’s natural beauty. In short, Centerra South is expected to be a cutting-edge community where people can live, learn, work and play in a walkable community, easily accessible by public transportation.

“In light of Centerra South’s importance to the city’s future and the city’s approval and execution of a legally binding contract, the development team is stunned by the proposal to rescind the Centerra South resolutions. This attempt to overturn a validly approved urban renewal plan and legally binding contract is disappointing, unprecedented and illegal. These contracts were properly approved and executed by the city. Overturning them now would be an unlawful breach of legally binding contracts. McWhinney has expended considerable resources acting in reliance on these contracts. Given the investment by McWhinney to date in Centerra South and the city as a whole, if either of these motions is approved by City Council, McWhinney will have no choice but to pursue all legal options available to it,” White wrote.

“If the Centerra South resolutions are rescinded, McWhinney and the metropolitan district cannot execute the project as envisioned. This will result in the city losing the potential for a development that could become a cornerstone of the community. Traffic in and around the Centerra South segment of Highway 34 will continue to worsen as other development occurs and much-needed traffic relief valves are not constructed.

“While these motions to rescind are seemingly targeted at McWhinney, members of the City Council must realize that overturning the Centerra South resolutions would send a clear message not just to McWhinney, but to the entire business community – the city does not honor its promises,” White wrote. “Overturning the validly granted prior approvals (and executed agreements and documents) would unequivocally demonstrate to the entire development community that approvals granted, and promises made by the city, cannot be relied upon and City Council is willing to consider illegal actions to repudiate binding obligations. This message would echo regionally and nationally, creating a chilling effect on investment and economic development within the city. It also would signal to the city’s own investors that the city’s promises cannot be trusted, which undoubtedly would damage the city’s creditworthiness now and into the future.

“On Tuesday night, you will have two options, one legal and one illegal,” White wrote. “You can choose to honor the city’s promises, retain an approximate $1 billion investment and encourage smart growth with a mixed-use community that benefits your constituents and fulfills the  Comprehensive Plan, or you can choose to try to overturn a legally binding contract and announce to the world that the city is closed for business, and prioritizes political grandstanding over the wellbeing of its citizens.

“The approved urban renewal plan and contract are binding and enforceable,” she concluded. “Any attempt to rescind them is illegal and a breach of a valid and binding agreement. We urge you to think about what is best for the city and its future, honor your legal obligations, and to vote against overturning the Centerra South resolutions.”

The mayor acknowledged that her resolutions, if passed, could prompt legal action from McWhinney, but suggested that whatever penalties Loveland might face pale in comparison with the adverse financial impact the city and other entities would incur.

“The city may have to deal with breach of contract,” she said, “but not much has been done yet with that property, so their damages at this point are pretty small. That’s why rescinding needs to move very quickly. The damage to the city of diverted property tax over 25 years is a lot more damaging.”

McWhinney may have been waiting to see the outcome of the election, she said, because a lot of the developer’s funding was based on tax revenue it would receive from food purchased for home use; McWhinney had proposed adding a Whole Foods Market to Centerra South. Loveland voters also repealed that tax by approving Ballot Issue 300.

“The school district and the county are giving up part of their property tax revenue for this, too,” Marsh said, “and I think that’s a hell of a lot of money compared with incidental damages.”

On election night, George Garklavs, a spokesman for Let Us Vote Loveland, hailed the votes on 300 and 301 as sending “a mandate to the City Council to establish a dialog with citizens about how they’re taxed and how they contribute to the city. Both results, he said, “really followed a similar trend, where people felt as though they were left out of the decision-making process. With the URA vote, something as large as millions of dollars for 25 years, a lot of folks felt they needed to have a say in that. That’s why the vote on 301 was even more lopsided than the food-tax vote.”

Marsh also has contended that the May 2 vote to approve the Centerra South Urban Renewal Area was illegitimate. “They opened the item on April 18 and continued it until May 2 but did not include the place and the time of day in the public notice for the May 2 meeting,” she said.

The Loveland City Council meeting will begin at 6 p.m. Tuesday in council chambers at 500 E. Third St.

Two City Council members were replaced in the election. “The reason you have a different council now is Centerra South,” Marsh said. “I think Centerra South was a big reason why. So we’ll see if I have the votes on council.”

Editor’s note: This story has been updated to include McWhinney’s response.

on Facebook on LinkedIn