Mayor Lionel Rivera was pounding the pavement last week, soliciting support for a 1 percent public improvement fee that would be collected by the Downtown Metro District on downtown restaurant and bar sales.
Revenue generated by the fee would be used to secure a $1 million loan from the Colorado Office of Economic Development to help save the downtown U.S. Olympic Committee headquarters building deal.
That money is just a small part of a proposal to salvage the deal which the mayor and headquarters developer Ray Marshall of LandCo Equity Partners outlined in a letter dated Feb. 6 to the USOC’s then-CEO Jim Scherr and real estate consultant Jim Didion.
“As of today, the city and LandCo are prepared to fully perform on their commitment to make the headquarters building and the NBG building available to the USOC,” the letter says. “The only hurdle that we have not overcome relates to the $16,000,000 of improvements at the Olympic Training Center.”
Last summer’s original agreement between LandCo and the USOC, in which the city had no direct involvement, called for LandCo to provide the entire $16 million in funding through the sale of metro district bonds. That plan, which rival developers characterized as “far-fetched,” became impossible to implement as the current economic crisis grew and deepened.
Rivera and Marshall wrote that the city and LandCo believe that “we can have at least $13 million available … within 90 days,” and “the remaining amount can be raised by June 30, 2011.”
According to Exhibit A, which was attached to the letter, LandCo would provide $6 million, which would “be fully backed by a loan from United Western Bank in Denver. The loan would be secured by two floors in the HQ building that LandCo will own.”
However, at least one City Council member, who asked not to be identified, was skeptical about the developer’s ability to secure the loan. “I doubt whether LandCo can come up with a million.”
The letter also promises that $1.5 million will be raised from “community leaders” within 90 days. “This fundraising effort will be led by Mayor Rivera, and will be facilitated by the fact that donations qualify for a 25 percent Colorado Enterprise Zone tax credit.”
For consumers, the public improvement fee would be indistinguishable from an additional tax on downtown purchases.
Randy Price, who owns Sonterra Innovative Southwest Grill and Slayton’s Tejon Street Barbecue, located across Tejon Street from the headquarters building, said that the mayor had contacted him about the fee.
“He asked if we’d be a part of it, and I said absolutely,” Price said. “Whatever we need to do to make this happen.”
But Tony Leahy, owner of The Famous, wasn’t as supportive.
“Absolutely not,” he said. “I’m not going to stick my customers with another tax.”
In addition to the proposed fee, the Rivera and Marshall letter also offers a significant concession to the USOC.
“You are understandably concerned about the funding for Phase II,” the letter says. “The city is confident enough in our collective ability to raise the funding that it is willing to issue the COPs (certificates of participation) and complete purchase of the headquarters building without asking the USOC to waive its rights to terminate under the Economic Development Agreement. We are not asking the USOC to take any risk on the delivery of the Phase II funding.”
Such a waiver could place the city at considerable risk.
If Rivera and Marshall are unable to raise the $16 million and the USOC decides to seek greener pastures, taxpayers would be stuck with a vacant building and $27.5 million in construction debt.
And it appears that not everyone on City Council was aware of the offers that Rivera and Marshall were making on behalf of the city.
Vice Mayor Larry Small was surprised to learn about the contents of the letter.
“That’s the first I’ve heard of it,” he said this morning. “I don’t recall ever seeing it, or any discussions about the waiver.”
Small said that Rivera might not have had the authority to offer such a waiver.
“I’d think that council would have to agree to any modified agreement,” Small said.
Councilman Jerry Heimlicher also was surprised by the letter’s content.
“It would appear that communications were made on behalf of the city that weren’t authorized (by City Council),” he said, “And in any case, I would never vote to approve the COPs without a signed lease from the USOC.”
However, the USOC’s real estate consultant was notably unimpressed by Rivera and Marshall’s offer.
Didion sent an e-mail to Marshall, copying several other people, including Assistant City Manager Mike Anderson, on Feb. 17 saying that “… unless there is at least $13 million in unrestricted and USOC controlled funding available for OTC improvements within the next 90 days, I will recommend withdrawal from all the agreements and advise the USOC to consider all options available to it in finding new headquarters space and funding for its desired OTC improvements …”
Heimlicher and Small also were caught off guard by the ultimatum.
“That’s the first I’ve heard of any 90-day deadline,” Heimlicher said, “And I’m pretty sure that I would have noticed something like that.”
Small agreed. “We shouldn’t be learning about these things in the press,” he said.
But limiting press coverage is exactly what Penfield Tate of Greenberg Traurig, one of LandCo’s lawyers, wanted all the parties involved to agree to.
“… (W)e understand that the press continues to be curious about the project and its status,” he wrote in an e-mail dated March 5. “Understanding that, we would like a confidentiality agreement prepared that will require all of the parties to confer with one another, and agree upon the content of, and the spokesperson for, any public statement about the transaction or the documents.”