Business/Economy, Peter Blake, Politics, Taxes, Top News

Blake: Aurora's defense of crony capitalism

The city of Aurora suddenly finds itself having to fight a two-front war in defense of crony capitalism, for which there is no defense.

The crony, in this case, is the Gaylord Hotel and Conference Center, whose construction near Denver International Airport the city wants to subsidize.

Nothing against Gaylord, but if it can’t succeed without special city and state help, it should abandon or scale down the 1,500-room, $824 million project.

The project was given an early boost in May 2012 when the Colorado Economic Development Commission tentatively awarded an $81.4 million state subsidy to Gaylord Entertainment. The money was to come through the legislature’s misbegotten Regional Tourism Act, which allows the CEDC to smile upon two city-sponsored projects a year. The projects are supposed to bring additional tourists to Colorado, not just move them around.

Winning an award meant that Gaylord would be entitled to pay down its construction debts with the 2.9 percent sales tax on hotel rooms that it would normally forward to the state. Tax increment financing, they call it.

When critics complain about government picking winners and losers, this is what they’re talking about.

But the project was delayed when a group of Denver hotels attacked Aurora on its western front, filing a suit in Denver District Court last September. They noted that within days of the award, Gaylord Entertainment decided not to follow through with the project and sold its rights to Marriott International, which eventually hired RIDA Development Co. to build it.

The project was changed considerably and the Denver hotels argued that Marriott should have to resubmit its application. After all, Aurora didn’t meet various deadlines for submitting final plans and it neither asked for nor was given extensions by the CEDC, the hotels argued.

Are the Denver hotels selfishly trying to protect their own share of the state’s convention business? Sure, but that doesn’t mean they don’t have a strong case. The city has filed a countersuit against the hotels, in Littleton District Court, and claims they don’t even have standing to sue. More motions are expected soon.

Last month other plaintiffs attacked the planned subsidies on different grounds on Aurora’s northern front, filing suit in Brighton District Court in Adams County. Two citizens, backed by a taxpayers’ group, alleged that the entire project violated both the state’s Taxpayer’s Bill of Rights and a 2010 statute prohibiting the designation of agricultural land as “blighted” for urban renewal purposes.

Representing the plaintiffs are an improbable pair of lawyers: Former state Sen. Shawn Mitchell, R-Broomfield, and Mark Grueskin, a lawyer whose specialty is defending the interests of Democrats and the Democratic Party.

How did they get together? Said Mitchell: “He was getting some feelers from business people and I was getting feelers from tax people and we got in contact with each other and decided working together was something we needed to cross off our bucket list.”

The suit alleges that the local subsidies would run to $800 million over 30 years, largest in the history of Colorado. To make it work the Aurora city council created something in 2011 it called an “enhanced taxing district,” composed entirely of the land on which the project was to be built. It is owned by a corporation named LNR CPI Highpoint. This way, Aurora was able to give the developer the power to set higher tax rates for the property. The city would then return the tax proceeds to the developer to finance the project.

And who voted to approve the higher tax rate inside Aurora? Just one person, appointed by the landowner: Brandon S. Wyszynski. Of Denver.

“That’s taking one-man, one-vote to a whole new level,” said Sean Duffy, spokesman for the plaintiffs.

According to the suit, the city waived the notice, public hearing and bond requirements concerning LNR’s petition for the “enhanced taxing area,” thus shutting out other Aurora voters from having a say in the matter, let alone a vote.

The suit asks that the ordinance creating the special area be voided since TABOR says that all city voters get to vote on the imposition of higher tax rates, the spending of extra revenue raised by the higher taxes and the award of tax revenues to the Gaylord project.

“There is no precedent for saying a part of the city’s land needs to be subject to a higher tax rate than the rest of the city and not asking city voters,” Grueskin was quoted as saying in The Denver Post.

The city’s urban renewal authority was also named as a defendant because it pledged to give available taxes to Gaylord for 30 years, even though there’s a statutory limit of 25 years.

The suit noted as well that in 2010, the legislature passed House Bill 1107, which specified that urban renewal areas, such as the land going to Marriott, “shall not include agricultural land,” except under limited circumstances — which the development doesn’t contain.

As it happens, when Mitchell was in the legislature, he long tried to get agricultural land out of the definition of the “blight” which urban renewal projects require. The 2010 bill wasn’t his, but he voted for it.

There’s no predicting how the suits will turn out. But until they are resolved they are serving to discourage Aurora and Marriott from proceeding with the project. In an ideal world, Aurora will lose on at least one front — and then we’ll see if the developers have the will and ability to proceed without the subsidies.

(Correction: The original publishing of this article misidentified the court system in which a suit was filed by a group of Denver hotels.  The original publishing said the suit was filed in Littleton.  It has now been corrected to identify that the suit has been brought in Denver District Court.)

Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at pblake0705@comcast.net You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com

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