Third-party analysis forces City for Champions revisions

Mayor Steve Bach’s City for Champions proposal didn’t impress Economic and Planning Systems, the third-party analyst hired by the Colorado Economic Development Commission to evaluate the city’s request for state tax increment funding.

EPS found that visitor estimates by the city were overly optimistic; financial data was skimpy, insufficient and/or inaccurate; and cost and revenue estimates for all four projects were speculative and unsubstantiated.

EPS didn’t mince words. Notwithstanding the report’s polite bureaucratese, there was no attempt to soften the blow.

The city asked for $82 million in TIF funding. EPS reduced the figure to $31.4 million, but made it clear that none of the projects appeared to be eligible for Regional Tourism Act funding unless local private and public funding first could be secured and committed, sites acquired, and precise cost and revenue estimates provided.

Refusing even to consider the proposed UCCS Sports Medicine Center, the analysts noted that “EPS’ review of the Application indicates that this project component is not defined clearly enough or far enough along in the development process to be evaluated for an RTA funding request.”

Estimating that the three remaining projects would only draw 214,000 net new visitors annually, as opposed to the city’s estimate of 521,000, EPS declared that the city could qualify for at most $31.4 million in TIF funding, more than 60 percent less than the City for Champions request. The analysis was forwarded to city officials on Oct. 28 and was released to the public late Friday, Nov. 1.

The city has until Friday, Nov. 8, to respond to the report. The city will also make a presentation to the Colorado Economic Development Commission on Dec. 4. The commission will decide the fate of this City for Champions proposal on Dec. 16. Doug Price, CEO of the Colorado Springs Convention and Visitors Bureau and a spokesman for City for Champions, told The Gazette in a story published Monday that he was confident the city would be able to make all needed revisions.

It’s not clear whether the city can, at this late date, change its application so that it conforms to RTA criteria. To go forward with the proposal as originally conceived may require that sites be acquired for both the Baseball Stadium and the Olympic Museum, that the UCCS and Air Force Academy Visitor Center projects be better defined, that the sources of approximately $150 million in public and private funds be identified and that final designs, construction costs and credible revenue estimates be available for all projects.

Clearly not impressed by the structure of the application, the consultants wrote:

“As noted throughout this report, there are major deficiencies in the information provided in the Application … RTA funding is intended to act as gap financing for projects in which there is a financial hurdle that is impeding development; it is not intended to function as a grant program. In order to demonstrate financial need, it needs to be shown that the financing gap is the only impediment to a project moving forward. As described in the 2013 Application Guidelines, this criteria therefore requires an Applicant to also demonstrate some degree of ‘project readiness’ so that there is an assurance that any State funding that is committed will go to a project that is defined and approved based on the Application and does not substantially change after funding is granted.

“As described in more detail in this Report, none of the four project components have met either the financial need or development readiness criteria. No firm funding commitments, letters of interest, letters of intent, or other evidence, have been provided by the Applicant. The funding and financing plan described in the Application only notes ‘high levels of interest’ from potential project funders. In addition, the Applicant does not own or have an option or contract to purchase or otherwise acquire the land needed for the Museum or Stadium. For the USAFA project, it is EPS’ opinion that additional clarification is needed on the need for any permits or other approvals from the Federal Government or Air Force Academy, since the Visitors Center would be on Federal Government property.

“The Applicant is also requesting RTA funding for 30 to 45 percent of the project costs for each individual Project component, and 37 percent of the total cost of the four Project components. It is EPS’ opinion that the Applicant is treating the funding as grant funding that can be used with more flexibility than gap financing.”

EPS also poked holes in city methodologies, noting that “the average length of stay included in these estimates is 
4.5 nights, (implying that) visitors to Colorado Springs RTA venues will only visit Colorado Springs; their trip will not include stops at any attractions outside Colorado Springs and that 100 percent of these per trip expenditures are made within Colorado Springs.”

The consultants gave the Olympic museum a nod of approval, but stressed that project documentation is weak.

“Of the four projects proposed in the City for Champions Project,” the analysts wrote, ”the U.S. Olympic Museum has, in our judgment, the best potential to draw new visitors to Colorado. With the backing of the USOC as planned, this could be a unique attraction in Colorado. However, the Applicant has not demonstrated that the project’s development program and financing is sufficiently defined to allow it to be built as proposed with RTA funds.

“The project financing plan is in fact backwards. RTA funds are assumed to provide the initial 45 percent of project cost and that other public, private, and philanthropic funds will be raised to fill the financing gap.”

EPS saved the worst for last. Decrying the absence of information needed to complete its analysis, the consultants were particularly disturbed by the city’s unsupported assertions that each project would produce positive net operating income, amounting in aggregate to $6.2 million. Noting that “museums, stadiums, and visitor centers do not typically generate positive operating cash flow and often rely on operating subsidies from non-profit or local government partners to fill any operating funding gaps,” EPS wondered why this net operating income wasn’t applied toward any project financing.

It may be possible to refocus the proposal, however. One person who has been close to the process believes that the city should concentrate on the two downtown projects, which together would be eligible for $24.6 million in RTA funding. The Olympic museum would likely attract substantial private funding, while the baseball stadium and infrastructure improvements throughout southwest downtown could be funded through the creation of a comprehensive downtown area Urban Renewal District. Such a “super-district” would replace all of the existing downtown URAs.

City Councilor Jill Gaebler, while acknowledging that the report revealed many shortcomings in the original proposal, nevertheless remains optimistic.

“(The report) can be a great tool for those who created the proposal to make it better,” she said. “We should consider it a positive thing that gave us a lot of feedback, so that both the state and our citizens can better understand the proposal.”

Dick Celeste, who has spearheaded the Olympic Museum project, was even more sanguine.

“They (EPS) are just doing their job,” he said. “It’s an important step in the process. We look forward to moving it down the field.”

Asked whether museum backers had secured a specific site for the facility, or whether any private or foundation donors could be identified in the near future, Celeste was noncommittal.

“We’re moving in the right direction,” he said.

 

 

 

 

4 Responses to Third-party analysis forces City for Champions revisions

  1. This project is probably dead. But, hopefully not buried but will be a crash and burn the flames of which will ignite a new passion that can really fire up a downtown re-development program that will excite all of us as a public body and something we can support and look forward to.

    The value of a learning curve is the ‘learning’. It would be hoped this will bring talent from all segments of the community together in what will be a truly community project to boost the local economy and make a jeweled setting out of that ragged old part of town ! It can happen.

    Can you share your thoughts? We have a page where you can write out what turns you on about this project – what turned you off – - and what it would take to gain community support. Thank you.

    Rick Wehner
    November 4, 2013 at 11:36 am

  2. I find this article and the Colorado EDC finding (via EPS) to be very interesting. First I applaud Mayor Bach for getting a proposal out there. I believe we all agree Colorado Springs, in general, and our downtown specifically could benefit from some new revenue generating venues/museums/etc. However, when I read what was in the City for Champions proposal, I was not comfortable with the choices. This independent look, I believe, has validated some of my concerns.
    I also felt the best of the four major ideas in the Mayor’s proposal was the US Olympic Museum. Colorado Springs is not only the most logical place for this museum, it also increases the pressure to keep USOC here and improves our ability to attract other athletic venues. This is a key point to finding the best economy-generating projects. We need venues that attract other venues so that a multiplicative growth value self generates.
    As for a downtown stadium, I believe there is potential…but a replacement stadium for the Sky Sox doesn’t make a lot of sense to me. Our current stadium is in good shape, and I do not believe moving it will generate that much more attendance. I recommend the Mayor and the City Council consider a multipurpose stadium, one that might contain a reconfigurable soccer stadium, velodrome, summer concert venue, field hockey, track, swimming, and perhaps other Olympic/sports and/or other entertainment venues. There are several multi-level and multi-purpose stadium venues around the country to evaluate and possibly emulate. From this we might be able to capture several “2nd tier” professional sports teams beyond just the Sky Sox (we cannot compete with Denver for football and baseball). Therefore, I think the City should consider a multi-venue re-configurable stadium that permits a broad range of activities, and then determine the viability of revenue generation under this concept. With multiple uses, I believe the revenue model would be much better.
    As for the downtown power plant, I recommend the Mayor and City Council leave it alone. Sure it’s not that pretty, but it provides excellent economic value to us. I also recommend establishing some kind of energy research center next to it where R&D could, under an agreement with Colorado Springs Utilities, assist with our energy generation. Then when our downtown power plant has reached it’s useful life, we might be established as an energy development research center.
    I also encourage the Mayor and City Council to evaluate our bicycle pathways. We certainly have a lot of bike trails, but some are not paved and others are not fully integrated. Several locations in the City also do not have excellent access. I believe we could generate multiplicative economic value if a strategically integrated bike system, keeping in mind several possible uses (bike racing venues, commuting to work, recreation), is fully developed.
    I also encourage the Mayor and City Council hire a company to determine the possible value/design of a river walk with restaurants and stores. If done right, it might connect well with downtown redevelopment, our bike system, and much of the Springs community.
    Finally, I encourage the Mayor and City Council to keep pressing forward, accept all constructive criticism, and keep designing economic development options until the costs, revenues, and citizen value line up. Two or more rounds from this point forward, if necessary to get it right, would be time well spent. Conversely, DO NOT give up. With the right design and citizen support, it could be the next great thing in making Colorado Springs the finest city in the nation.

    Stan VanderWerf
    November 4, 2013 at 4:42 pm

  3. Excellent comments, Rick and Stan.

    A few attractions scattered around the city such as those proposed in “City of Champions” are not going to make a real difference. What will make a difference is a commitment to reestablishing the beautiful city the forefathers created. When people come to Colorado Springs they do see beautiful mountains to the west, and a few well maintained neighborhoods. But driving around the city, mostly they see dead trees, thriving weeds, and poorly maintained roads.

    The former Confluence Park, now America the Beautiful Park (both terrible names, in my opinion), could have been a great start toward a revitalized area with a thriving Riverwalk district that would be attractive to both tourists and residents. But the Cottonwood Arts Center was driven away, the Farm and Art Market moved (twice), and mostly the park just sits there alone.

    In a largely libertarian atmosphere such as Colorado Springs, this is not a popular notion, but code enforcement would go a long way toward making this city more attractive (and thus more likely to attract businesses and visitors). Code enforcement would probably pay for itself initially with fines from the scofflaws, and as time went on and property owners realized the codes were actually going to be enforced, the cost would be minimal. Many cities schedule regular code checks and notify property owners in advance, with a list that clarifies what they will be looking for. After awhile, it becomes a habit to simply follow the code, and the entire city looks better for it.

    If Colorado Springs looked like it had some pride of ownership, maybe companies like Trader Joe’s would be interested in coming here. Heck, maybe some airlines would come, too.

    Of course, jobs that pay well would help the tax base and overall economy a lot. But that’s hard to accomplish in a town where the economy is so dependent on the military.

    Cassiopeia
    November 4, 2013 at 8:04 pm

  4. Perhaps the City should submit a fresh proposal to replace the aging Summit House on Pikes Peak with a new visitor’s center. Sounds like this would more closely follow the State’s RTA guidelines and the plans are already in place.

    Jimmie Bensberg
    November 5, 2013 at 9:42 am