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Springs' deal for contaminated land remains pending a year after approval 

Toxic trade-off

click to enlarge The city’s original coal gasification plant left behind soil tainted with hydrocarbons. - COURTESY COLORADO SPRINGS PIONEERS MUSEUM
  • Courtesy Colorado Springs Pioneers Museum
  • The city’s original coal gasification plant left behind soil tainted with hydrocarbons.
City officials and developers alike have envisioned several plots of vacant land as a springboard for downtown development for nearly 20 years. But the land comes with a toxic legacy.

Saturated with pollution left behind from a coal gasification plant a century ago, the 5.6 acres on Cimino Drive and across from America the Beautiful Park finally got new life in April 2017 when City Council agreed to swap it for a smaller tract to the south to accommodate a trail extension. The new owners of the contaminated lots would be Nor’wood Development Group, owned by David Jenkins, the region’s biggest developer.

Developer Chuck Murphy, who owns land to the north, called the deal “a no brainer” for the city. “We looked at this property in detail,” he told Council on April 25. “It looked like the Love Canal [a Superfund site in New York that infamously sickened people who lived there] and I was scared to death. We’re looking at hundreds of thousands of dollars [in remediation costs], and how many people have the ability to handle it?” He went on to herald the swap as “a great thing for the city,” adding, “I don’t know of anybody else that would take it on.”

Jenkins has major projects underway in the Interquest Parkway area, at First and Main on Powers Boulevard and downtown. He’s also the majority land owner in the 20,000-acre Banning Lewis Ranch, for which Council is considering changing the annexation agreement to unlock the land from what developers consider onerous infrastructure requirements imposed in 1988.

For his ambitious plan to bring office and residential space to downtown, Jenkins has obtained taxing authority for several special districts in the vicinity of the U.S. Olympic Museum, under construction at Sierra Madre Street and Vermijo Avenue. A pedestrian bridge from the museum to America the Beautiful Park will span the polluted site.

The property at issue is so crucial to invigorating the lower downtown area that although it’s not a potential site for the City for Champions sports stadium — a topic that has lately dominated the conversation about downtown development — Downtown Partnership President and CEO Susan Edmonson nevertheless called it a “linchpin” in moving forward.

But the pollution problems have sterilized the land, and while Council approved the swap last April, the deal still hasn’t closed, largely due to complications posed by a recent Colorado Supreme Court ruling in a lawsuit over the city property’s alleged befouling of a neighboring tract.

Neither the city, nor Nor’wood, which uses the name Southwest Downtown No. 1 LLC in the trade agreement, would comment on the project. But Southwest Downtown is trying to avoid being dragged into the lawsuit, records show, though so far, the city has given no such assurance.

At issue are three parcels immediately east and south of America the Beautiful Park. The land lies within the Southwest Downtown Urban Renewal Area for which Nor’wood is the master developer.

The city’s two east parcels, totaling 5.58 acres, hosted the coal plant from about 1890 to 1925 under private ownership and from 1925 to 1931 under city ownership, when it was converted to natural gas. The plant was dismantled in the middle of the 20th century and replaced with a brick office building used by Colorado Springs Utilities’ gas division.

The plant left behind soil permeated with cancer-causing hydrocarbons from coal tar, a byproduct of the gasification process.

On March 4, 2013, well before a deal with Southwest Downtown was struck, Kat Tudor, founder of the Smokebrush Foundation, which owns two condos in the Trestle Building just north of the plant site, was smacked in the face with debris as workers demolished the brick building and cleared the site amid high winds. Feeling sickened, she and business partner Don Goede filed a lawsuit that same month alleging the city and its contractor, Hudspeth & Associates of Englewood, “allowed asbestos, heavy metals and other toxic substances to migrate offsite in a manner [that] has harmed Plaintiffs.”

Subsequent testing showed the dirt was “not good clean dirt,” Tudor has said. After a district court judge refused to grant the city’s motion to dismiss, the city appealed and won a reversal from the Colorado Court of Appeals. Then Smokebrush appealed, and on Feb. 5, nearly five years after the initial incident, the Colorado Supreme Court ruled Smokebrush’s coal-tar pollution claims could be litigated, meaning Smokebrush can now return to district court to try to prove its assertions and seek damages, if warranted.

That’s extra baggage tied to the already polluted city property, and it appears that the land exchange agreement, executed in August 2017, asks Southwest Downtown to take the baggage with the land. Specifically, the agreement states that Southwest Downtown will accept the city property “AS IS WITH ALL FAULTS” and be given “the opportunity to assess the claims asserted in the Pending [Smokebrush] Litigation and the potential costs, losses, and liability associated with accepting title to the City Property.” That includes assuming responsibility, at Southwest Downtown’s “sole cost and expense,” remediation of environmental contamination and releasing the city of liability.

On Nov. 8, Southwest Downtown’s attorney David Isbell asked the city via email for “some assurances from the city” that the firm won’t be drawn into the lawsuit or forced to accept liability “simply by virtue of Southwest Downtown ... becoming an owner of the property.” Isbell raised the issue again in a Dec. 13 email, saying Southwest Downtown wants to avoid being “drawn into litigation in connection with the existing environmental issues merely because it has become an owner of the property.”

After all, Southwest Downtown will have enough to worry about mitigating contamination as it excavates the property to a depth of four stories for an underground parking garage.

Asked about the city’s response to those concerns, city spokesperson Kim Melchor referred to City Council’s resolution, which states that Southwest Downtown agrees to take responsibility “for any environmental remediation of the City Property necessary” and relieve the city of liability.

In December, Nor’wood president Chris Jenkins asked if the Trestle Building’s 13 owners might sell, according to the Smokebrush’s Goede, who’s an officer in the building’s condo association. The answer was no, he says, but he’s confident Jenkins will carry out the required mitigation. “Chris has been very positive and forthright about his efforts to clean up the property,” Goede says.

click to enlarge The land parcels in question surround America the Beautiful Park. - CITY OF COLORADO SPRINGS
  • City of Colorado Springs
  • The land parcels in question surround America the Beautiful Park.

The exchange’s other component is a 1.12-acre tract near Cimarron Street and Interstate 25 owned by the Jenkins family. The city wants to make a trail connection and improve water quality with a pond as part of the interchange project. Though Jenkins still owns the property, the city has installed a path there, Melchor says, citing Nor’wood’s cooperation and the idea that “regardless of the eventual ownership of the property it would be a valuable amenity for Colorado Springs.”

That general area has some history of contamination of its own. In July 2014, excavation crews working on a playground project north of the Jenkins land unearthed floor tiles and a vent pipe containing asbestos. The city paid $220,000 to mitigate those problems in 2015.

That prompted Councilor Don Knight to wonder if the city is trading one polluted site for another. “It worries me that that property [trail link] is 100 yards from land that is fully contaminated,” he said. “I don’t think we’re doing our due diligence if we don’t do borings, or do some kind of testing below ground.”

Mayoral Chief of Staff Jeff Greene told Knight, “I assure you, we will do a thorough due diligence in terms of the contamination of that property.”

Bore tests performed in August 2017 found asbestos at levels in line with “established regional background concentrations,” which require no further cleanup, LT Environmental, Inc., reported. Tests also revealed the presence of benzo(a)pyrene, a cancer-causing hydrocarbon, at levels that comply with EPA regulations for industrial property limits, but that require remediation if the ground is excavated.

Melchor reports the bike trail meets all state and city requirements “for environmental clearances.”

All of this adds up to a sweet deal for the city, which is not only getting a property valued at $903,000 from the Jenkins family compared to the city’s property value of $360,000, but is foisting cleanup of the city tracts onto Southwest Downtown, a tab that LT Environmental estimates at a whopping $4.4 million.
Whether the city will allow Southwest Downtown to escape some liability isn’t known. Asked about that, Melchor says via email, “Not resolved,” and Council President Richard Skorman says the question hasn’t come to Council.

But further delays beyond the new closing date of April 20 could jeopardize timing of building the much-ballyhooed pedestrian bridge, funded in part with tax money, because the exchange agreement requires Southwest Downtown to remediate the bridge site prior to construction, which is to begin this fall and finish a few months before the museum’s November 2019 opening.

If the land swap falls through, how would the city fund the bridge site cleanup?

Perry Sanders, who owns the Antlers Hotel and a Trestle Building space and has practiced environmental law, said in an April 24 letter to Council this might be the city’s best chance for “transformational redevelopment” which could “elevate the entire city.”

“But the biggest advantage we see for the city,” he wrote, “is an assumption of risk, associated with the pollution, and a hold harmless [release of the city from liability] by a company strong enough for the hold harmless to actually have meaning.”

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