Mayor peddling new fee to salvage USOC deal

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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.”

3 Responses to Mayor peddling new fee to salvage USOC deal

  1. You can’t be serious……MayorLionel is out commiting to deals that have no city council knowledge, much less approval, with the potential for a $27 million + hickey (or is it black eye?….or both…) on the city budget?

    And it needs to be kept a secret? From who? The USOC certainly has no problem disclosing where they’re coming from……..

    No doubt the mayor couldn’t raise any donations from the downtown business types, (I threw my letter away, in disgust…), so now its the downtown improvement district who needs to raise funds for this deal (and save reputations in the process….). The Enterprise Zone Credit is nice….but so what? You still have to write the check………..

    Meanwhile, HP is announcing a new call center to employ some number of folks, after they got snubbed by the city and moved 200 families out of here….

    Mayor Lionel should be out kissing a few…………..cheeks…………at HP, since they had no reason to come back here after the way they were treated.

    Anyway…..anyone who thinks Landco (Real Estate Advisor to the Stars!) can raise $16 million is on something…..the deal appears to have become so toxic that no one will touch it. The only way the bonds get issued is if the full faith and credit of the city are behind them…anybody want to bet that?

    This is the civic equivilaent of believing in the Tooth Fairy…..who, based on what has been made public so far, may have had some input in this latest plan……….

    It would also be hard to believe that council would approve such a deal…….but then, in view of everything that has happened so far, maybe its not so far fetched…….

    Maybe the USOC needs a way out….is it possible that the new Exec Director would like to make a dramatic statement about who’s in charge? And maybe repay a few of her supporters on the Board at the same time? Can you see them in Chicago? New York? Atlanta? Welshire Blvd in L.A.? I certainly can……….

    When its all said and done, this maybe another reason to change the city charter, and get a paid mayor and council….and maybe merge with the county……..At least the prospect of getting decent leadership would be improved……

    John Whitten
    April 27, 2009 at 4:24 pm

  2. Mayor Lionel is an incompetent buffon. The LAST thing I need right now is a higher bar tab with the way these morons are driving me to drink! Can’t wait for the indictments and dirty laundry being aired in court via LandCo’s lawsuit.

    As Avery Brundage used to say …”Let the Games begin …!”

    RJF
    April 28, 2009 at 7:32 am

  3. It doesn’t make sense that only downtown business should be affected by a new Public Improvement Fee. I thought the entire city is benefitting from all the USOC, NGB’s, and all those local vendors they support. Isn’t it something like 300 million annually they pump into our local economy? I don’t believe all those companies are in the downtown district, the employees live everywhere in this city and certainly the USOC types will be staying at the Broadmoor-so wheres all city participation in this deal? I read its about 300 employees relocating to downtown, hardly enough to justify a BOON to the Tejon Street lunch/dinner crowd.
    It fixes ONE million of a 16 million dollar problem. Maybe he should find a plan for the other 15 million before making more people RUN from downtown.

    Candice
    April 28, 2009 at 9:36 pm