Friday, June 7, 2019

Businesses object to proposed property tax break for Scheels All Sports

Posted By on Fri, Jun 7, 2019 at 5:15 PM

click to enlarge Scheels could end up with another big tax break. - COURTESY CITY POWER POINT PRESENTATION
  • Courtesy city Power Point presentation
  • Scheels could end up with another big tax break.

UPDATE: On June 11, City Council postponed consideration of excluding Scheels from the Interquest North Business Improvement District (BID) at the request of the applicant, the BID, which is controlled by Nor'wood Development Group. Council President Richard Skorman tells the Independent that the developer asked for time to meet with the opponents of the exclusion and "resolve the issues."

Council will take up the item at its June 25 meeting.

———————-ORIGINAL POST 5:15 P.M. FRIDAY, JUNE 7, 2019——————————-

Two property owners in the Interquest North Business Improvement District (BID), controlled by Nor'wood Development Group, oppose excluding mega-store Scheels All Sports from the district, saying it's not fair to force other members of the district to pick up the tab for improvements from which Scheels will benefit.

The opposition arises just days before City Council is slated, on June 11, to consider a request by Nor'wood to exclude the 3.85 acres from the BID as a consent item. Consent items are lumped together for a aggregate vote of Council without discussion.

click to enlarge Councilor David Geislinger says he needs more information before making a decision. - FILE PHOTO
  • File photo
  • Councilor David Geislinger says he needs more information before making a decision.
However, Councilors Bill Murray and David Geislinger say they'll ask to pull the item off the consent calendar for a full Council discussion.

"I want to go through the reasons for, and objections to, this request before committing," Geislinger tells the Independent via email.

Murray says Council wasn't told of opposition until it received a June 6 letter from Tim Leonard, who represents BWR Investors LLC, owner and operator of the Burger King, and Riverside Restaurant Group LLC, owner of the Cheddar's Scratch Kitchen, both in the BID.

"The council was assured by the city and the developer there were no objections," Murray says in an email. "I will be pulling it from consent on Tues[day] and including this letter. The budget committee raised these issues. We were told there were none."

Leonard says in an interview it's a little hard to raise objections to a proposal his clients knew nothing about until June 3, although both are members of the BID and the exclusion petition was submitted to the city on April 2.

The BID is located north of Interquest Parkway and west of Voyager Parkway, an area which is under development by Nor'wood, owned by David Jenkins, the region's biggest developer.

A groundbreaking event was held on June 5.
Council, at the behest of Mayor John Suthers' office, already approved a $16.2 million sales tax break for the retailer in February.

Now, Nor'wood is asking that the property where Scheels will be built be relieved of property taxes associated with the BID.
click to enlarge Councilor Bill Murray says Council wasn't told about opposition before getting a letter from two businesses who are against the exclusion. - FILE PHOTO
  • File photo
  • Councilor Bill Murray says Council wasn't told about opposition before getting a letter from two businesses who are against the exclusion.
The BID is controlled by Nor'wood through seats on the board. Hence, Nor'wood controlled issuance of bonds to pay for public improvements, such as streets and sidewalks, and also purchased those bonds through entities controlled by Jenkins and his son, Chris. In other words, Nor'wood created the district, runs the district, sets the property tax mill levy, receives the property tax money, contracts with itself to do improvements, has issued roughly $11.3 million in debt, and purchased that debt, which the district (controlled by Nor'wood) will repay to Nor'wood.

According to city documents, bonds issued in 2010 have an interest rate of 8.5 percent, and additional bonds issued in 2016 have an interest rate of 6.5 percent. The BID, controlled by Jenkins, has certified the maximum allowable debt service mill levy of 50 mills, along with proceeds from a 1.25-percent Public Improvement Fee (PIF) collected on all sales. The BID also levies 1 mill for operations and administration.

Nor'wood currently owns the property where Scheels will be built, but Scheels officials have estimated it will cost $84 million for land, the building, furniture and equipment for its new Colorado Springs store.

Leonard says all of Nor'wood's involvement in setting up and running the BID is legal, but the lack of transparency troubles his clients.

In a summary to Council for its May 28 meeting, at which the exclusion request was explained, city staff wrote that the petitioner assured the property would "continue to contribute sufficiently to meeting the financial obligations associated with this BID" through the PIF tax.

Staff also wrote, "An e-mail from this BID’s counsel, describing this justification, is attached."

But there was no such email available to the public among the backup materials for the agenda item online. Moreover, a PowerPoint presentation about the exclusion contained no financial analysis as to how much property tax money would be essentially waived for Scheels.
click to enlarge This is the only mention of a property tax break for Scheels All Sports contained in a city Power Point presentation given to City Council on May 28. The break will amount to millions of dollars over time, one opponent says. - CITY OF COLORADO SPRINGS
  • City of Colorado Springs
  • This is the only mention of a property tax break for Scheels All Sports contained in a city Power Point presentation given to City Council on May 28. The break will amount to millions of dollars over time, one opponent says.
The recommendation from city staff contained in backup materials states, "All comments received have been in support and/or with no stated concerns."

But Leonard's clients have many concerns. Leonard says that tax break for Scheels will have to be made up by the remaining dozen or so property owners within the BID, none of whom received notice of Nor'wood's exclusion request.

"Without question, we should have been able to get notice, have a discussion, see all the financials," Leonard says. "This has nothing to do with Scheels as a retailer. We want [more customer] traffic. We want retailing, density, all those things. The only thing is, after the infrastructure is built, all the bonds need to be paid for by an expanding tax base."

By giving Nor'wood/Scheels a pass on property taxes, the others will have to make up that lost revenue, Leonard says. The Cheddar's property is billed about $24,500 a year in taxes for the BID. The Burger King BID bill is roughly $10,800 a year.

Leonard says the exclusion would give Scheels a multi-million-dollar tax break over two to three decades. He notes the proposal calls for excluding the Scheels building but not the parking lot, meaning the BID's revenues, paid by others, would fund construction of the Scheels parking lot, while Scheels pays nothing to the BID for its building.

"It's pretty unprecedented that a BID can give an incentive to one of its landowners without informing its landowners," he adds. "I think what is needed is more disclosure. We are now going to be far more engaged with our district, knowing that our district board members are also landowners, who are also the people responsible for construction of roads, issuing the bonds, even buying the bonds. I've never seen this where the board is giving an economic incentive at the cost of other members."

Asked to comment on the proposal, mayor's spokesperson Jamie Fabos says in an email, "The Mayor has no position on the matter." Mayor John Suthers backed the $16.2 million sales tax incentive for Scheels.

Chris Jenkins didn't respond to an email seeking comment about the exclusion request. The Indy left a phone message for Scheels and will update when we hear back.

Here's Leonard's letter to City Council:

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