LOVELAND — The day after McWhinney Real Estate Services slapped a lawsuit against the city of Loveland over city councilors unraveling a taxpayer-subsidized urban renewal project agreement, the council held a special meeting to hire an outside attorney to represent the city.
Several issues were raised, including whether there was a conflict of interest with the attorney ultimately selected, whether several council members conspired behind the scenes to select that attorney, and whether the Loveland’s insurance provider will coverage damages should the city lose.
The main issue stems from an agreement between Loveland, Larimer County, and other taxing districts to partner with Chad and Troy McWhinney to develop Centerra South, a 148-acre urban renewal project that would bring new retail and housing to the area near the existing Centerra development at the junction of US Hwy 34 and Interstate 25. The deal included a controversial public funding method known as tax increment financing (TIF) which obligates the city to give up 1.25 percent of all sales tax revenue from retail within the development for 25 years to help with the infrastructure for the project.
However, at the November 21 regular city council meeting, a newly seated council voted to unwind all that, despite a strong warning from the developers that it would bring a breach of contract lawsuit against the city if it did so.
On Tuesday, the McWhinneys filed two motions on behalf of their company asking for both a Temporary Restraining Order (TRO) and permanent relief from the repeal.
What creates a conflict?
At the Wednesday special meeting, division among the nine-member council over the nearly year-long Centerra South development debate continued for more than an hour. Councilors talked over each other, and at times, the disagreement concerning the hiring of attorneys turned into a discussion of the merits of the lawsuit, despite City Attorney Moses Garcia repeatedly warning the council that they needed to avoid talking about the case.
The debate started when Councilman Troy Krenning recommended using a national law firm, which includes an attorney he has previously worked with. Some council members were concerned with a possible conflict of interest, as the same firm already represents Discovery Air, which is currently in a legal battle with the Loveland Airport.
“I really don’t like that this same firm is going to potentially bring litigation against us, and then will also be representing us,” Councilwoman Andrea Samson said, adding it is a very large firm, so she hopes they can compartmentalize.
Krenning said if the firm determines it is a conflict of interest, the council can always select a replacement, but that hiring a large, nationally known firm was necessary because the McWhinneys were “bringing a gun to the fight,” with their selection of attorneys, so Loveland needed to bring a “gun to the fight,” as well.
Garcia had also presented the board with a selection of attorneys that he said were well-schooled in Urban Renewal Projects, as well as attorneys that are both local and used heavily by the city’s insurance provider, which is currently reviewing the lawsuit to determine if it will cover the costs in a loss. The company does not cover breach of contracts, which is what McWhinneys are claiming.
Councilman Dana Foley, who works in risk management and loss control for a living, attempted several times to get the council to take a step back and make sure they weren’t putting the city at more risk.
“It is probably best to distance any relationship or perceived relationship to the city or to members of council, especially the five people that voted for this (repeal of the agreement) is to back out and be quiet,” Foley said. “There is a potential that you can continue to create more liability.”
His efforts fell on deaf ears, as ultimately the firm recommended by Krenning, Lewis Roca Rothgerber Christie, was chosen.
Prior knowledge alleged
The firm charges an average of up to $750 an hour, Krenning said, adding that if the insurance does cover the lawsuit, the city is on the hook for a $250,000 deductible.
Foley and Samson also questioned how much other councilors knew about Krenning’s plan to recommend the firm.
“I feel like the minority up here was left in the dark,” Samson said. “I feel like five people up here kind of knew what was going to go on, similar to when things were rescinded.”
Although at the end of the night Krenning said he did not plan to propose the motion until he was at the meeting, nor did he talk to anyone about the firm in advance of the meeting, prior comments by Mayor Jackie Marsh contradicted that statement, leading to a possible appearance of prior conversations among select members of the board.
Marsh said at the beginning of the meeting that she was turning the meeting over to Krenning because he had a motion he had prepared to recommend a lawyer. Marsh also admitted, when asked directly by Foley, that she had already sent the information pertaining to the lawsuit to the firm Krenning recommended.
Garcia told the board he would contact the firm selected and get the contracts going so that a response to McWhinney’s initial filing could be prepared as soon as possible, as the TRO could be in front of a judge at any moment.
Although the complaint and TRO filed in Larimer County District Court are seeking action against the city, there is still a possibility for more lawsuits taking personal action against the individual members of the city council. The city’s insurance policy does not cover breach of contract.
The TRO claims the project has already incurred more than $10 million on the estimated $1 billion development, that included a total of about 15 percent in government subsidies from Loveland, Larimer County and several other taxing districts.
“To be clear, absent a TRO and injunctive relief from this court, Defendant’s unlawful abuse of political power will torpedo the Centerra South development as currently planned,” the TRO reads.
Complete Colorado has extensively reported on the story and will continue to do so.
