Last month, the Cog Railway filed a lawsuit against the City of Manitou Springs, claiming that the City has failed to honor the 2018 Tax Incentive Program Agreement. Manitou Springs and the Cog entered a 50-year agreement to provide tax revenue to the city, preventing a budget crisis.
Under the Agreement, the Cog Railway made payments totaling $1.25 million to the City between 2018-2020 to prevent a budget shortfall and provide tax revenue to the City. In exchange, the City agreed that it would thereafter annually reimburse excess excise tax above $500,000 to MPPR. The lawsuit claims that on Dec. 3, 2024, during adoption of the 2024 budget, City Council voted not to appropriate at least $638,536 in funds to MPPR for Excess Excise Tax reimbursement for 2024 and to instead allocate those funds to the City’s general fund.
According to the lawsuit, “the City abruptly reversed course and decided to not appropriate 2025 funds to pay [the Cog] for excess excise tax collected in 2024, even though the City has publicly acknowledged that it has a ‘very healthy fund balance’ in 2025.”
However, during November Council meetings, Councilors routinely discussed concerns over the impact of Colorado Springs’ approval of recreational marijuana on the city budget. “We may lose half of our income because of the marijuana taxes,” said Councilor Julie Wolfe, during a Nov. 19, 2024 Council meeting. “I think we should have some analysis on how much might we lose next year, and if so, how best to prepare for that.”
During the Dec. 3, 2024 meeting, Wolfe suggested holding the funds for the Cog. According to the meeting minutes, “Councilor Wolfe commented on the memo for the budget and the portion relating to the Pikes Peak Cog Railway (Cog) payment. She suggested that the funds for the payment be put on hold until the City Council can gain a better understanding of the impact of Colorado Springs allowing recreational marijuana.”
Wolfe’s plan was supported by Councilor John Shada, who in 2019 unsuccessfully sued the City of Manitou Springs over the 2018 agreement. “Councilor Shada suggested that the City Council remove the funds for the Cog payment until the budget is amended, and then the Council can follow the procedure to determine what funds they will appropriate for the Cog payment,” note the Dec. 3 minutes.
City Administrator Denise Howell said during the Nov. 19 meeting that council could revisit the budget in 2025. “There’s a lot of questions we don’t have answers to,” she said. “We’ve called the state to figure out what this means, and if that means they’ll be opening in 2025 or if they’ll have to wait until 2026. As you know, [Colorado Springs City] Council passed another ordinance. There’s a lot of questions yet. I recommend that about March, hopefully, March or April, we have a better sense of what’s going to happen.”
During the Dec. 3 meeting, Wolfe moved to amend the proposed 2025 budget to remove the $685,000 appropriated for the Cog in the general fund under economic development and put the funds in the general fund under unassigned funds, to be determined and discussed during the first quarter of 2025. The motion was seconded by Councilor Judith Chandler, and council voted to approve the motion, with Councilor Nancy Fortuin as the dissenting vote.
In the interim, budget concerns have continued to plague Manitou’s capital improvement projects, most notably the much-needed renovations of Ruxton Avenue, a key artery for traffic to the Cog Railway. During a contentious Feb. 11 Council meeting, discussion centered on how to address the wide variety of repair needs with limited funds. With only the $4.8 million to work with, City Engineer Andrew Morren presented council with four options, requiring the city to choose between undergrounding electric lines and forgoing walkability and stormwater enhancements or focusing on the sidewalks and water lines while leaving the electric lines overhead. Morren recommended Council focus on the option that would provide new asphalt, improve water, stormwater and sewer, and install new curbs, gutters and sidewalks for the portion of Ruxton from New York Avenue to Manitou Avenue. Ultimately, the council declined to pursue any option and Mayor John Graham instructed Morren to come up with new proposals. Morren resigned shortly after.
During the meeting, Wolfe suggested using the money originally set aside for the Cog payment for the Ruxton repairs. “We can afford to do that if we stop giving the Cog a kickback of all their tax money,” she said.
The Cog is seeking a jury trial and is asking the court to award it damages in an amount to be determined at trial.
