Friday, June 21, 2019

Business district now admits Scheels sales figure "was wrong"

Posted By on Fri, Jun 21, 2019 at 3:08 PM

click to enlarge Aquariums are one attraction that appear in some Scheels stores. - COURTESY CITY OF COLORADO SPRINGS
  • Courtesy city of Colorado Springs
  • Aquariums are one attraction that appear in some Scheels stores.

A low-ball estimate of annual sales expected from the proposed Scheels All Sports store in north Colorado Springs, "was wrong," says an attorney representing the Interquest North Business Improvement District (BID).

The Independent reported on June 14 that the BID, controlled by Nor'wood Development Group via seats on the board, submitted a document on May 16 that stated Scheels' annual sales would total $20.4 million. That's a third of the $60-million estimate previously provided to the city in support of a $16.2 million sales tax break for Scheels. City Council approved the incentive in February. The city also confirmed June 13 the $60 million is correct.

Three days after the Indy's blog post, Russell Dykstra, with Spencer Fane LLP law firm in Denver, wrote the city an email on behalf of the petitioner, Nor'wood — which is owned by developer David Jenkins — in which it corrected the figure.

"Of note, the prior information as to the impact of the Scheels store in relation to comparable commercial property in the Interquest North Business Improvement District was based on erroneous information (the projected annual sales amount was wrong) and should be disregarded," Dykstra wrote.

He then notes that Scheels stores "can do sales of $60 million a year or more," which would mean the BID would receive "$750,000+ per year from the PIF (public improvement fee, which is collected like a sales tax) alone."

Read the email here:

Two businesses oppose the exclusion, arguing that removing Scheels from the BID means Scheels wouldn't have to pay 51 mills in property taxes and the 1.25 percent PIF. Together, those levies would bring in roughly $1 million a year — an amount that the remaining BID members would have to pay.

Tim Leonard owns Deepwater Point Co., a development management company that represents the two opponents, BWR Investors LLC, owner and operator of the Burger King, and Riverside Restaurant Group LLC, owner of the Cheddar's Scratch Kitchen.

Both lie within the BID and oppose excluding Scheels.

Leonard notes in an outline provided to the Indy that if the BID continues to collect its mill levy and PIF, with Scheels in the district, it would receive $2.8 million a year toward payment of bond debt of $972,000 per year. (The BID has issued debt totaling $11.3 million that's earmarked for public improvements such as sidewalks.) He further notes the BID's fund balance this year would swell to $4.1 million.

But, Leonard also says, if the mill levy and PIF were lowered to 5 mills and 1 percent, respectively, the district still would collect ample funds, $1.25 million a year, to meet its debt payments.

"So the issue is not whether Scheels should be subsidized by all the smaller businesses," Leonard says, "but why does the Board not lower the mill levy as its tax base expands?"

click to enlarge Councilor Bill Murray: Council didn't know about opposition. - FILE PHOTO
  • File photo
  • Councilor Bill Murray: Council didn't know about opposition.
Leonard has said his clients and other businesses in the BID were not notified of the exclusion request prior to a May 28 briefing by city staff to Council. According to a certificate of mailing recently submitted to the city, Spencer Fane mailed notices to all BID members on June 13.

That's two days after Council was originally slated to consider the exclusion request (June 11) but delayed it after receiving a June 6 letter from Leonard expressing opposition. Councilor Bill Murray has said Council wasn't told of any opposition until it received Leonard's letter.

Now, Council is poised to make a decision on the exclusion on June 25.

The BID is controlled by Nor'wood through seats on the board. Hence, Nor'wood controls issuing debt, which Nor'wood, in turn, has purchased through entities created by Jenkins and his son, Chris, president of Nor'wood. Those entities are Enterprise Fund No. 6 and Enterprise Fund No. 8. The Nor'wood-controlled board also sets the BID's property tax rate.

We reached out to Dykstra, inviting him to explain how the $20.4 million sales figure came to be submitted to the city in error, and asking him to comment on any part of the exclusion request he wishes. We'll circle back when we hear something.

We've invited Nor'wood and Scheels to comment a couple of times in recent days and never heard back.

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