The city's herculean effort to retain the U.S. Olympic Committee has survived multiple challenges over the past two years, but a new lawsuit may deliver a lethal blow.
On the afternoon of Sept. 2, after a two-hour court session, Fourth Judicial District Judge Scott Sells told city attorneys he would not dismiss local attorney Lindsay Fischer's complaint. Fischer says the city's plan to finance the USOC deal is illegal, because the collateral used for the certificates of participation — the Colorado Springs Police Department's Police Operations Center and a fire station — is so essential that future City Councils would have no choice but to pay off the loan.
That, Fischer argues, makes paying off the COPs a multi-year obligation. And multi-year obligations must be approved by voters under the Taxpayer's Bill of Rights.
So Fischer thinks the city should either rework the deal, or ask for voter approval: "They can still put this on [the November ballot]."
The city is not likely to do either, and believes it has legal precedent on its side — courts have ruled repeatedly that COPs are not multi-year obligations.
"There have certainly been a long line of cases upholding the legality of COP issuance by local or state government," City Attorney Patricia Kelly says.
Fischer concedes strong precedence for cities using important government buildings as collateral to pay for other government buildings. But, he notes, the USOC structures are not government buildings.
Indeed, that's where this starts to get a bit fuzzy. City representatives didn't comment on whether there was a specific precedent for this type of situation, and an expert hired by the city said he couldn't comment until the case was settled.
One thing's for sure: As the suit remains unresolved, the city can't issue tens of millions in COPs for the USOC project, putting the new contract in jeopardy.
The first USOC economic development agreement (EDA), inked in spring 2008, expired amid a sour economy and a lawsuit from then-partner and developer LandCo Equity Partners. City staff spent thousands of hours resolving those two disasters, and crafting this new contract.
All that work could soon be wiped out, whether or not the courts agree with Fischer's logic. See, Fischer doesn't have to win his case to flush the USOC deal; he just has to keep the city in court.
When the city signed the latest EDA and settled with LandCo, it committed to aggressive time schedules. By the first deadline, Sept. 25, the city must issue up to $31 million in COPs.
There's still about two weeks' worth of work ahead to meet that deadline. But the process is frozen. With a lawsuit dangling, the city hasn't been able to get a bond rating or bond insurance, meaning it can't issue the COPs. Which probably also means it can't meet its deadline, right?
"I gotta tell you," City Councilor Scott Hente says, "I don't find fault with your logic."
If the lawsuit causes the city to miss that Sept. 25 deadline, LandCo could choose to refile its lawsuit. If the COPs still aren't issued by Oct. 3, the USOC could send notice of termination of the EDA the very next day. Then, the city would have 30 days to meet its obligations or lose the USOC deal. Again.
The city doesn't appear to be panicking quite yet. If it looks like deadlines will be missed, Kelly says, the city may ask LandCo and the USOC to extend their contracts. But, she says, "I hope the court will set this so rapidly that we will still be able to meet that [Sept. 25] deadline."
Lots of uncertainty
On Thursday, Sept. 10, Sells will meet with both sides of the case. He may issue a summary judgment in the city's favor — essentially dismissing the case for lack of merit. (His earlier denial-of-dismissal was related solely to jurisdiction.) He may also set a trial date.
Sells has said he will expedite the case. But if the city's still tied up in courts a few months from now, a number of things could happen. The USOC might pull out, and look for some other city to woo it. It may show patience and not file to terminate the contract. Or it may ask to have the contract dates revised.
Likewise, LandCo could ask to revise its settlement or head for the courts.
Unfortunately for the city, Sells' decision could be just the beginning of its problems. If Fischer loses, he could drag the case to the Colorado Court of Appeals, maybe even the Colorado Supreme Court.
If Fischer wins, the city would have two options: Ask voters to approve the current financing (either in November or in a special election) or try to issue COPs with less-essential collateral. The latter may not fly in a market that's been snubbing its nose at less-secure bonds.
With the deal on the rails, some are already fingering Fischer as the ultimate party-pooper.
"If Mr. Fischer is single-handedly the person who makes the deal fall apart, then he can be proud of himself," City Councilor Jerry Heimlicher says wryly. "He can be known as the guy who kept the U.S. Olympics from staying in Colorado Springs."