COLORADO SPRINGS–In a surprise move Monday, Interquest North Business Improvement District (INBID) attorney Russel Dykstra withdrew a petition previously submitted by developer Interquest Marketplace LLC to exclude the new Scheel’s All Sports store from the district.
The developer had been trying to get the footprint of the store itself, not including the surrounding parking lots and streets, excluded from the district, which if it had been successful would have saved Scheel’s nearly half a million dollars every year in property and public improvement taxes.
After seeing a report by Complete Colorado on a March 28 City Council work session where the petition was presented, Tim Leonard, President of Deepwater Point Company, a development management company representing two business owners in the district objected to the petition and asked that it be given a full hearing by the City Council.
Council agreed June 11 to hear the matter at its regular meeting Tuesday afternoon, but the petition was pulled by Dykstra late Monday afternoon.
Dykstra wrote, “The intent of withdrawing the petition at this time is to allow additional opportunity for the petitioners and the Interquest North Business Improvement District to further evaluate the overall financial structure of the project and the public improvements yet to be built and financed by the District and the impact of the exclusion.”
The developer, Interquest Marketplace, owns most of the property in the district, and it is in turn owned by Nor’wood Limited, Inc., one of Colorado Springs’ largest developers.
Nor’wood founder David Jenkins and his son Christopher sit on the Board of Directors of the INBID. All five of the district’s board members are employees or officers of Nor’Wood Limited.
Developer control of business improvement district boards is not uncommon. State law requires a vote of property owners to form a district. Developers who are also owners will often create the district before they sell any lots. Colorado law says, “if possible, no more than one-half of the members of the board may be affiliated with one owner or lessee of taxable real or personal property in the district.”
Because the developer is sometimes the only owner when the district is created it leaves the developer in control of the district.
Wresting control of a BID board from developers or even gaining a single seat can be difficult to impossible for minority landowners and lessees.
A petition for an election of board members can only be initiated by persons who own 50% or more of the property in the district worth at least 50% of the total assessed value. The total assessed value of the property in the INBID is more than $22 million.
This functionally prevents representation on the board for smaller property owners so long as the developer keeps control of the land by leasing instead of selling.
Despite massive earth-moving and infrastructure construction going on now at the site, Dykstra told Complete Colorado in a June 14 email, “The District is not expending any funds in regard to the earthwork or public improvements that are taking place at the site.”
Presumably the work is under the auspices of Interquest Marketplace and therefore under Nor’wood’s control, but Dykstra did not name the developer in response to questions about the work underway.
This raises the question of how or if the INBID board will eventually pay Interquest Marketplace for the improvements now underway, or if the costs will fall on the developer alone, to be factored in to their business deal with Scheel’s for the lot. It’s unknown if Scheel’s is buying or leasing.
Leonard told Complete Colorado that it’s not uncommon for developers who are also the BID board to build first and then vote themselves reimbursement after the work has been completed. He also said it’s unlikely that the City Council would overrule such reimbursement just because the district didn’t inform it of the major changes to its operating plan and budget.
Bob Cope, Economic Development Manager for the city said the suddenness of the project was unusual.
“This one was not in their 2019 operating plan because it came so quickly,” said Cope. “As of September of last year they weren’t entirely aware of Scheel’s.”
Leonard says his objections aren’t about Scheel’s coming to the district, in fact he’s eager for them to open.
“We’d love to have Scheel’s to come in, we want their customers, we want their tax base, we want everything about them,” said Leonard.
Rather, he maintains, this is about fairness to the other businesses and reducing everyone’s tax burden.
“Almost all the infrastructure is in place for them and we want them to help pay the bonds for the infrastructure they are going to use,” he continued.
Leonard maintains that if Scheel’s stays in the district the $60 million in annual revenues it’s projected to create, combined with revenues from all the other businesses will allow the district to lower the annual mill levy from $50 per $1,000 of assessed value to $5, saving everyone, including Scheel’s as much or more than $200,000 the exclusion petition originally claimed.
Currently the district has more than $3.5 million in tax revenues in the bank, with an estimate of more than $4 million by the end of 2019. The district’s bond debt service and operating budget are just over $1 million and its budgeted operations expenses for 2019 are just under $70,000.
Cope says that this petition is dead and that a completely new petition will have to be submitted if that’s what Scheel’s and the developer decide to do.