The government enterprise charged with monitoring development and construction wants to partner with the region's largest developer for financial gain.
A pending agreement between the Pikes Peak Regional Building Department and Nor'wood Development Group would create a new entity, to which both stakeholders would transfer land. All the property in question lies within the Southwest Downtown Urban Renewal Area, where the U.S. Olympic Museum and Hall of Fame is to be built. Nor'wood, the master developer of the urban renewal area, would then have the sole option of developing the land held by the new entity.
The RBD would contribute three tracts worth more than $2.1 million, while Nor'wood would add seven tracts valued at roughly $1.2 million. Nor'wood, nevertheless, would control 63 percent of the partnership based on size of the land contributed.
The highly unusual proposed alliance raises many questions, ranging from whether a governmental entity that regulates development projects should invest in real estate in the first place, to whether such a marriage poses a conflict of interest for RBD when it comes to inspecting properties built by its partner, which has projects in the works across the region.
Questions also surround whether the RBD commission complied with Sunshine Laws, designed to ensure the public is properly notified of public meetings and has access to public records. Todd Welch, the RBD's attorney, acknowledges that the RBD commission's agenda notice of the commission's action to approve the deal was "probably insufficient." A revote will take place (See sidebar).
Luis Toro, executive director of Colorado Ethics Watch, who's an attorney, says the agreement is "very weird" and raises questions about RBD's neutrality when performing inspections of Nor'wood's projects.
RBD officials deny there's a conflict of interest in forming a partnership with Nor'wood.
RBD issues building permits and inspects construction, along with other duties, and serves the region's county, cities and towns. It owns a vacant lot at 435 Sahwatch St. valued by the county assessor at $274,258, and a former office building at 101-111 W. Costilla St., which was once occupied by the El Paso County Sheriff's Office, and is valued by the assessor at $1,827,413.
It acquired the lot from a credit union for an undisclosed price in 2010 and the building from the city of Colorado Springs in 1999, land records show. The building is currently rented by El Paso County for about $10,000 on a month-to-month basis as a back-up emergency center. (RBD's office at 2880 International Circle, valued at nearly $16.6 million, is owned by the El Paso County Facilities Corp. and leased by RBD.)
Notably, the Costilla property is immediately south of a block owned by a Nor'wood entity where the city is studying building a 910-stall underground parking garage beneath Nor'wood's planned 1 million-square-foot mixed-use building. Just west of there is the site of the Olympic Museum to be built on land Nor'wood will donate ("Going underground," News, July 6).
If the deal goes through, the two RBD properties will be transferred to a newly created entity, along with neighboring properties owned by Nor'wood, which include the balance of the full city block next to RBD's Costilla tract.
On Aug. 24, RBD commission members unanimously approved a resolution agreeing to move forward with the "participation agreement," hailing it as a boon for economic development, especially in a largely dormant area adjacent to America the Beautiful Park.
According to meeting minutes, commission chair Tyler Stevens, town trustee of Green Mountain Falls, said "he believes this is vital to the improvement of our region and it is a great way for RBD to help participate in the economic development of the area and to help revitalize our community."
Other commission members were equally supportive. El Paso County Commissioner Dennis Hisey "stated a great deal of research, due diligence and negotiation has gone into this Participation Agreement, and he feels it is in the best interest of RBD both now and into the future," the minutes say. City Councilor Larry Bagley termed the deal "key" to "tying the whole downtown community together."
(All three building commissioners have received campaign money from Nor'wood interests: Hisey, $1,300 since 2008; Bagley, $6,000, or about 11 percent of his total raised for the 2015 city election; and Stevens, $500 in his aborted county commission race last year.)
RBD's Building Official Roger Lovell said during the meeting that the deal "maintains RBD's investment in downtown development, while maintaining the ability to fund additional future shortcomings."
An Aug. 30 statement issued by RBD says that under the deal, the land would be marketed and redeveloped as part of the urban renewal district plan, and RBD would have the option to sell its land to Nor'wood at any time, but not to anyone else.
The statement didn't say what, if any, revenue the agreement would generate year-to-year for RBD, but noted that RBD's commission thinks the partnership will cause the value of its property to go up "more than any other arrangement including selling the property now."
"It is in the best interests of Pikes Peak Regional Building Department to partner with Nor'wood, leveraging their interests, investments and expertise to significantly increase our property's value," Stevens said in the Aug. 30 statement. "Nor'wood has dedicated their financial resources to planning, designing, and constructing the district framework to realize the enormous redevelopment potential. And we now have an incredible opportunity to be part of the transformation of Southwest Downtown where they (Nor'wood) assume the responsibilities associated with the property's redevelopment and we (PPRBD) have flexible options that help us achieve our goals."
Lovell and Welch say in an interview there is no time frame for finalizing the agreement, which has been drafted but not yet signed. Welch says the pending pact contains no details of the kinds of development envisioned on RBD's tracts. Also unresolved is whether RBD's property, now tax-exempt because RBD is a government agency, will go onto the tax rolls when transferred to the new entity.
The RBD's new venture with Nor'wood is unusual and has triggered questions about how it was approved and whether the deal constitutes a conflict of interest.
The City and County of Denver's Community Planning and Development Department, for example, has never entertained such a partnership. "I am not aware of our building department doing anything like this," communications director Andrea Burns says via email.
Lovell and Welch assert the partnership with Nor'wood poses no conflicts. "The reason I don't see it as a conflict is the city and county and all the other municipalities have projects as well [that are inspected by RBD]," Lovell says.
He notes RBD's office building at 2880 International Circle was inspected by RBD, as were many other projects built by RBD's members, including the county's remodels of Centennial Hall and the Citizens Service Center and construction of a new pavilion at the county fairgrounds.
Welch further notes that RBD issues permits to builders, not developers like Nor'wood. "There's a difference between the builder and the owner," he says. "We're not called [for inspections] by the owner. We're called by the builder."
But Toro, the ethics watchdog, disagrees.
"It may very well be that an inspector can do his or her job properly even though the agency is in partnership with the developer," he tells the Indy via email. "However, there is an appearance of conflict from this partnership that's different from the scenario where the agency is inspecting government buildings. This is because the developer has a profit motive that is not present when the agency inspects government buildings. One partner naturally wants the other to have a successful project. There is an appearance of a conflict even if the inspector actually does a good job."
Toro, who called the agency's ownership of land "strange," adds, "I think the best course of action would be for them to sell the property and eliminate these questions."
According to the RBD website, the agency's main goal is "to safeguard life and limb, health, property and public welfare by regulating and controlling the design, construction, quality of materials, use and occupancy of all buildings and structures within all zoned areas of El Paso County through the enforcement of minimum building code standards."
The department reviews building plans, issues building permits and inspects for code compliance with regulations on construction; electrical; heating, ventilating and air conditioning; plumbing; elevators; and floodplain management. It also reviews qualifications of contractors and registers plumbers and electrical contractors.
The website does not cite any goals surrounding economic development, revitalizing downtown or acquiring property for its own benefit.
Rather, it notes RBD is self-supporting and doesn't make a profit. "A cost analysis is performed annually by an independent auditor," the site says. "Fee adjustments are proposed when the Commission determines them to be necessary to maintain the Departments' operations." Fees also can be reduced if more money is being collected than is necessary to run the department.
Lovell notes that RBD is doing well financially and hasn't had a fee increase in at least 10 years. But he adds that owning property and developing it would give the agency "padding" in case of an economic downturn. "That asset gives us flexibility in the future should we need that revenue," he says in an interview. "Building department funds are hard to predict and cyclical."
It's worth noting, however, there was no need for a cash infusion following one of the worst downturns in recent memory, the 2008 recession. In fact, the department gave money away. In 2011, RBD tapped its reserves to allow builders $325,000 in the form of fee waivers to encourage construction during the sluggish recovery ("Builders' bonus," News, Feb. 17, 2011).