City, others could reshape Banning Lewis

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Many people don’t realize Banning Lewis Ranch is larger than Manhattan Island in New York.

Many people don’t realize Banning Lewis Ranch is larger than Manhattan Island in New York.

Nearly nine decades ago, the Banning Lewis Ranch was created in the late 1920s, when heiress Ruth Banning and her husband Raymond “Pink” Lewis assembled more than 30,000 acres of land east of Colorado Springs.

Ruth Banning raised prize Herefords on the property, and she was an exceptionally careful steward of the land. In 1948, the ranch received the Colorado Soil Conservation program award.

Ruth Banning died in 1963, and Lewis sold the ranch in the same year. It passed through multiple owners during the next 20-plus years until Arizona developer Frank Aries bought the 21,500-acre property in 1985.

Three years later, the ranch was annexed into Colorado Springs, amid grandiose plans for its future that included the Olympic Hall of Fame.

What could go wrong? Everything.

City officials thought they’d covered all of the bases. A detailed master plan and annexation agreement would protect city taxpayers from footing the bill for expensive infrastructure upgrades, which would be the developer’s responsibility. The agreement meant that city growth to the north and east would be orderly, predictable and rational.

Piecemeal, unregulated sprawl would be a thing of the past. Aries would make the massive infrastructure investments envisioned by the agreement, and the future of the city would be assured.

At build-out, conservatively estimated at 30 to 50 years, a vast suburb of more than 100,000 residents would rise from the empty prairie. Pike Oliver, who wrote the master plan for developer Aries, had previously worked on master-planning the Irvine Ranch development near Los Angeles.

In a 1988 interview, Oliver was asked what Banning Lewis would be like in 25 years.

“It’ll have dive bars and strip clubs,” Oliver replied, “and churches, schools, offices, apartments, and houses. We’re building a new city with 100,000 people — so it’ll have everything a city has.”

The annexation agreement was based on five assumptions, all of which seemed eminently reasonable — in 1988.

• Aggressive annexation made sense for Colorado Springs, which had already added 37,000 acres in dozens of separate annexations during the previous two decades.

• Colorado Springs Utilities could supply a permanent, reliable source of water to new development, while the scattered water providers in eastern El Paso County could not do so.

• Absent annexation, unregulated development in unincorporated areas of the county would drain future tax revenues from the city, and those remote suburbs would require city water when their taps ran dry.

• The city wanted to avoid Denver’s fate — becoming a landlocked city unable to grow in any direction. To do so, the city had to prevent future development of satellite jurisdictions such as Aurora — and what better way to do so than to annex empty land before such communities took root?

• And all this could be achieved without any cost to the taxpayers, since eager-to-annex land developers would absorb all initial infrastructure cost as a condition of annexation.

City leaders were living in a fool’s paradise. Although they didn’t know it, the ground was already shifting under their feet.

Collapse

Mayor Bob Isaac, always skeptical of developers’ promises, insisted that rigid conditions be imposed on the Banning Lewis annexation agreement — conditions that went far beyond any imposed on previous annexors. To his surprise, and to the surprise of many in the development community, Frank Aries readily agreed to the deal.

Aries had acquired the property three years before, paying the breathtaking sum of $92 million, more than four times as much as Mobil Land had paid for the ranch a decade earlier. An awed Colorado Springs business community treated Aries as it would treat Philip Anschutz a generation later.

He’s rich, successful and smart — so he must know what he’s doing!

What Aries knew was that he’d financed every nickel of the deal with a sweetheart loan from a Phoenix moneylender, Western Savings & Loan. Impressed by Aries’ successful development ventures in Arizona, the institution opened the money spigot.

The initial $92 million was just the beginning. Interest payments accrued, and periodic drawdowns were freely available as Aries attained predefined goals.

Aries had structured the deal in such a way that a separate entity (wholly owned by Aries personally) contracted with the landowner (himself) to create the master plan and get it approved by the city. Once approved, the land company could tap Western for millions and use the funds to pay a rich performance bonus to the planning entity.

Less than a year after the annexation, much of the savings and loan industry collapsed under the burden of bad real estate loans. Western was one of the worst offenders. When Aries cheerfully surrendered title to the lender in 1989, the S&L’s note had ballooned to $240 million.

The non-recourse note was secured only by the property, so once Aries handed over the land, he had no further liability.

Were the S&L managers dumb or crooked? Apparently both. Aries had given the “Driggs boys,” three brothers who owned Western, profit-sharing deals that would kick in when the development matured.

It’s a chapter in the city’s history that many would like to forget. Aries suckered everyone in town. At an elaborately choreographed 1987 ceremony, Aries “gave” the U.S. Olympic Committee 150 acres of land on the ranch and promised a substantial cash donation for — hold your breath! — an Olympic Hall of Fame. He also promised nearby land to the Space Foundation for a new headquarters, as well as $3 million for an IMAX theater that both facilities could utilize.

Was Aries a crook and a con artist? Not really. He believed his own story, and Springs leaders desperately wanted it to be true. He walked off with a few millions, but he expected billions.

The city had anticipated decades of prosperity, rivers of tax revenue and an end to county-enabled sprawl.

It struck out on all three.

Aftermath

Soon after Aries handed over Banning Lewis to Western, the S&L closed its doors and handed over its loan portfolio to the Resolution Trust Corporation, an entity created by the federal government to clean up the S&L mess.

The RTC finally sold the ranch to a Saudi-backed investment company in 1993 for $18.5 million, saddling taxpayers with a $221.5 million loss. Remarkably, the ill-fated scheme had been financed by government-guaranteed savings and loan deposits.

The Saudis held it for eight years. In 2001 a sleepy California developer, Capital Pacific Holdings, acquired the property for $51.5 million. Years passed until development finally began on the northern portion of the ranch in 2007.

Less than 300 houses had been built on the northern fringe of the ranch when the ranch’s owners of record (Banning Lewis Ranch Co. LLC and Banning Lewis Ranch Development I & II LLC), filed for bankruptcy in 2010, citing debt of more than $240 million.

In 2011 a Houston-based oil and gas company, Ultra Resources, acquired 18,000 acres of the ranch from the bankruptcy court for $20 million, raising hopes that Banning Lewis would yield an unexpected bonanza of jobs, tax revenue and lasting prosperity to the region.

It was not to be. After drilling a couple of dry holes, Ultra pulled out in 2013, put the property back on the market, and there it sits.

Had all gone as planned, the ranch would now be home to 50,000 happy tax-paying residents of Colorado Springs. But development leapfrogged the ranch, with its tangled ownership history and restrictive master plan. Communities such as Falcon Estates grew and thrived in unincorporated El Paso County, attracting the very families who might have settled in Banning Lewis.

Big plans for the future, again

Mayor Steve Bach has often expressed the belief that Colorado Springs needs to concentrate on infill development. Excluding Banning Lewis, thousands of acres of developable land remain within the city. In addition, entire commercial districts, such as South Academy Boulevard, are ripe for redevelopment.

Bach called on City Council to plan for a sprawl-free future.

“It’s my continuing hope,” Bach wrote in an email, “that City Council re-envisions the long-term plan concurrently with truly committing to infill development.”

Such a commitment might include preserving much of the ranch as open space, parkland or even leaving it as a historic cattle ranch.

“I think that the right people are at the table talking about this,” said Susan Davies, executive director of the Trails and Open Space Coalition.

The “right people” might include the Trust for Public Land, GOCO (Great Outdoors Colorado), the Nature Conservancy and the Palmer Land Trust.

Of the 18,000 acres currently owned by Ultra, conservation advocates have long coveted 2,480 acres near the central portion of the property. The parcel would effectively link the 522-acre Corral Bluffs open space with the 693-acre Jimmy Camp Creek Park, creating a huge 3,695-acre regional park on the city’s eastern border.

The land, which features sweeping views of Pikes Peak and the Front Range, is home to more than 70 species of birds, including endangered raptors.

In a 2010 interview with the Business Journal, Davies noted that funding for such a purchase could come from multiple sources.

“TOPS would have to be involved,” she said, “and GOCO (Great Outdoors Colorado), maybe the Trust for Public Land. And El Paso County, since the park would benefit county residents as well.”

“But,” she noted then, “it’s far too early to be fantasizing about it. If and when there’s a viable proposal, we’ll be leading the charge.”

Four years later, this may be the time. While Ultra has officially put the ranch on the market, its owners do not appear receptive to a partial sale of the ranch.

“There have been lots of offers,” said local developer John Cassiani, who headed efforts to develop the ranch in the early years of the century, “but they’ve refused them all.”

Is this the time for a bold initiative, one that would put much of the ranch off-limits to development forever?

“I think that’s too big a dream,” said open-space advocate Lee Milner who has been involved in efforts to preserve open space for more than 20 years, “and not really feasible.”

Yet a major effort appears to be underway to acquire and preserve much of the property.

New plans and new partners

Under one scenario, the ranch would be essentially divided into three parcels. The northern third of the property would be acquired by an unnamed Colorado Springs real estate investor who would work with the city to create a master plan that would better accommodate future development.

“The early conversations are underway, and we need to get ahead of this. Time is important.” – Jan Martin

The central portion, including Jimmy Camp Creek and Corral Bluffs, would become the regional park so long desired by conservationists. The remainder to the south would remain ranchland, with much of it potentially available for any future expansion of Peterson Air Force Base.

“That’s exactly what I’ve heard,” said Councilor Jan Martin. “The early conversations are underway, and we need to get ahead of this. Time is important. I think that Mayor Bach and Council can work together on this. Every time I’ve talked to him in the last year, he always asks me what we’re going to do about Banning Lewis.”

But there’s a problem.

“The new form of government means that we don’t have ready access to city staff to research and flesh out alternatives,” Martin said. “We either have to have that access, or have designated staff working for us on this project.”

How could such a complex deal be financed?

Whoever buys the northern portion would presumably fund it conventionally, but could fulfill a portion of the open space dedication requirements associated with any large development by being part of the large transaction with Ultra.

Funding for the central portion might come not only from entities such as GOCO, TOPs, and the Trust for Public Land, but also from local private donors and foundations.

The preservation and protection of the rich fossil and archeological resources of Corral Bluffs is particularly important to other prospective partners, possibly including the Denver Museum of Nature & Science.

Sequestering the southern third of the ranch from commercial development, pending possible use by Peterson, might mean that El Paso County and the city would be among those partnering to acquire the land, since retaining and strengthening the regional military presence is important to both entities.

Councilor Andy Pico, whose district includes the ranch, has been designated the Banning Lewis contact person by his peers.

“Ultra still owns the property,” he said, “and they’re in no hurry to sell. They may be waiting to see what happens with the other company that’s drilling a deeper formation in El Paso County — that might make them reconsider their plans. But there are a lot of groups that are talking, a lot of ideas that are jelling. I think that we’ll see some major movement pretty soon.”

As Councilor Martin pointed out, nothing can go forward unless the two warring branches of city government agree to suspend hostilities and work together for mutual benefit..

A modest goal — but one that might be harder to realize than raising $20 million to buy out Ultra.

One Response to City, others could reshape Banning Lewis

  1. As usual, Hazlehurst does his research, and then skillfully crafts an excellent article bringing readers up to date on a very important issue. Thanks, John!

    Bill Ruskin
    February 25, 2014 at 2:29 pm