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A sweeter deal? 

City approves USOC agreement and eyes possible $12 million donation from developers

Mark Morley bends over a piece of notebook paper and starts drawing a map.

The dot that represents downtown Pueblo lies just west of where two squiggly lines, representing Fountain Creek and the Arkansas River, meet. And there, at this prime exchange, sits Stonewall Springs Quarry.

Morley, his brother Jim, and their partners own this land. But they're offering most of it to Colorado Springs Utilities for the apparently bargain-basement price of $38.8 million. The Morleys say Utilities needs this land for the Southern Delivery System water project. And here's the cherry: If Utilities bites, the Morleys will donate $12 million to the city for use in funding the just-revised U.S. Olympic Committee retention deal.

The clock is ticking for Utilities' decision and, like any proposal involving water, this one's full of details. Here's what is certain: The city could use the money. And the Morleys know it. In fact, everyone in City Council chambers knows it.

Great day for a bailout

It's Tuesday, Aug. 11, and the city has just approved a new contract to keep the USOC here for another 30 years. It's also agreed to settle a lawsuit waged by developer LandCo Equity Partners after the first retention deal crumbled.

City Council, for the most part, puts on a happy face about this deal. But there are some real downers. The old deal would cost the city $27 million. Now, the city needs to cough up about $31 million, and raise another $4.5 million in community donations.

The city must issue certificates of participation (COPs) for financing to buy the USOC's downtown headquarters building — a shell at this point — in less than 45 days. It has 90 days to secure $13 million for the first improvements to the Olympic Training Center. (Most of that money will come from the COPs.) Headquarters construction has to wrap up by March 31, and the refurbished National Governing Bodies Building near America the Beautiful Park must be finished by Dec. 31, 2009. In the next 25 months, the city has to finish its fundraising.

"I feel very hopeful — I've stopped using the word 'confident' lately — that this will work out OK," Vice Mayor Larry Small tells the small crowd at the meeting.

But Small, who voted for the project, as did all other Councilors except Darryl Glenn, says he has doubts. He hopes the city isn't committing itself to impossible deadlines, and risking too much.

The $12 million question

Given these realities, the Morleys' offer looks tempting. Utilities CEO Jerry Forte says he has been negotiating with the Morleys, and his staff is evaluating the details. The city enterprise, he says, needs to decide if this is the land it wants; a decision should come shortly.

That's good news for Councilors, who need to figure out if they're getting that $12 million, and if so, where they want to put it, before they sink too deep into the process of issuing debt related to the USOC deal. City Attorney Pat Kelly says the $12 million could go to anything, from covering that fundraising hole to reducing COPs.

Of course, it may not matter what Forte and Co. think. Council doubles as the Utilities board, and those nine people make the big decisions. Some — including Scott Hente, Small, Jan Martin, Mayor Lionel Rivera and Tom Gallagher (the latter of whom has recused himself from any Morley discussion due to a conflict of interest) — sounded pretty chipper Tuesday about the prospect.

Hente, for instance, said Jim Morley was setting an example for the rest of the community by "putting his money where his mouth is" in supporting the USOC.

Money pits

What the Morleys want to sell is basically a swath of gravel-packed soil.

For people in the water business, though, it's prime. It can be dug up to create storage reservoirs that could hold 34,400 acre feet of water. The gravel that's removed in the process can be sold, or used for another purpose, like, say, bedding for the SDS pipeline. The Morleys' project is also fully permitted, which means Utilities could avoid a lengthy, expensive approval process.

And, the Morleys say, the location is ideal.

Here's why: In the SDS system, treated wastewater from Colorado Springs will flow down Fountain Creek to Pueblo, where it meets the Arkansas. Colorado Springs owns this water and wants to be able to sell it to as many people as possible. But right now, that water just flows on by the ditches of many possible buyers, and ends up in a reservoir over 60 miles away.

Two things happen in that process. First, a lot of water evaporates. Second, by passing by all those ditches, the Springs loses a lot of customers for its water — unless it wants to pay to pump the water back uphill.

With the Morleys' land, Utilities could store the water much sooner, which minimizes evaporation and gives the Springs more possible downstream buyers. Also, gravity will draw the water into the reservoir, and back out of it as well, eliminating the need for expensive pumps. The Morleys say their reservoirs could replace one of two reservoirs Utilities plans to build, at less than a fifth of the cost. The kicker: Utilities doesn't need to make a payment to the Morleys for five years.

"We're asking [Utilities] to pay a discounted price, based on established comparables, and we're going to take the hit on our side," Mark Morley says.

So the Morleys get a small profit, the city gets $12 million (which the Morleys will get by taking out a loan), and Utilities saves money. Not a bad deal. Only problem is, Utilities wasn't planning on even thinking about its reservoir issue until 2016, and as good as the Morleys make it sound, Utilities may see drawbacks.

Another possible negative: The Morleys paid just $6.275 million for the whole lot of land in 2005, and now they want nearly $40 million for just one part of it. The Morleys say it's worth the extra cash — and then some — because the land is permitted and the reservoirs are partially engineered. But Utilities may disagree.

The latest twist

If this $12 million offer seems a little odd, it's nothing new for the USOC deal.

When it was first signed in the spring of 2008, the USOC contract was supposed to be simple. Three partners — the city, the USOC and LandCo — were coming together to build a new USOC headquarters, remodel a building for the member sports and make improvements to the OTC. It would keep one of the Springs' proudest assets here for another 25 years.

But the financing fell apart. Then it was discovered LandCo had lawsuits and a district attorney investigation pending. After that, the mayor was accused of ethics violations in connection with the deal. (He was cleared this week.) Meanwhile, LandCo sued the city and the USOC. Council conducted many a closed-door session over the past few months before settling on a new deal and settlement.

As Councilor Jan Martin put it, "A year ago, when we had our first agreement, we actually had a big celebration afterwards because everybody was so excited about it. A lot has happened since that first agreement has passed."

No kidding. And, with $12 million on the line, the wild ride isn't over quite yet.

stanley@csindy.com

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