City Council members and Manitou Springs Urban Renewal Authority board members gathered Tuesday, Aug. 23, to clarify the future of the URA, an entity formed 16 years ago to improve Manitou Avenue properties between the U.S. Highway 24 overpass and the eastern city limit.
After nearly two hours of presentations and discussion, City Council voted 4-3 to stop the flow of sales tax revenue to the URA from its area, an estimated $1.7 million annually. Councilors said they need the funds to address the city’s many capital needs.
The action does not affect property tax revenue, a far smaller amount, also going to the URA. It also does not take away any funds already in the URA’s account.
The evening’s first focus was plans for the La Fun motel property at 123 Manitou Ave. The city pulled the owner’s business license after it was troublesome, to say the least, for the Manitou Springs Police Department.
The URA board has spent approximately one year studying plans and proposals to demolish the derelict structure and replace it with something that would generate sales tax for the city.
As URA Executive Director Jim Rees explained, the developer first would have to mitigate an unknown amount of asbestos in the building before demolition can start, likely in April 2023. Construction — of a mix of retail, restaurants or something else — could then take two years.
The URA board was poised to close a deal with a developer on Friday, Aug. 26. However, City Councilors expressed concerns that the developer doesn’t have detailed, firm plans for the site.
This is part of a larger concern that councilors have been grappling with: What happens to Manitou’s sales tax revenues if Colorado Springs voters approve recreational marijuana during the November election?
According to a document dated June 30, 2022, which council members saw, the URA has assets of $2,841,132. Those funds are intended to support development and improvements, such as bridges and public art, in the URA area.
Mayor John Graham summarized the La Fun purchase details as follows:
- The developer would supply $1.1 million;
- The URA would supply $1.55 million to help with the acquisition; and
- The URA also would supply an additional $600,000.
Rees affirmed that interpretation was correct.
“I don’t see that the URA has much leverage on this project,” Graham said.
“The URA does not have any obligations regarding construction and the new facilities, so it’s probably a $5 million investment on the part of the developer,” Rees said.
Graham asked if the developer could delay building on the site, leaving it an empty lot for years.
“The developer is not interested in holding a vacant lot; they’re interested in getting it built. But they’re cautious and wary about market conditions,” said the URA’s attorney, David Neville.
Rees explained that he’s researched a couple of scenarios drawing from the developer’s proposal.
“With the full retail development, it could possibly generate up to $3 million over the rest of the URA lifetime (of nine more years) in sales tax and property tax,” Rees said, adding that the developer would have to attract tenants.
One option would be a grocery store, which could take up the entire 2.2-acre property, or 17,000 square feet of retail and 8,000 square feet of restaurant space, he said.
Councilor Judith Chandler said that, after reviewing the contract and watching the video of the URA’s meeting when it approved the deal, “I do believe this is a sweetheart of a deal for the developer.”
“This is a plan in search of a plan. If the developer had come with a more definitive plan, I might be a little bit more reassured,” she said.
Councilor Julie Wolfe asked what would happen when the URA sunsets in nine years.
“What happens with the rest of the money that is owed to the URA, assuming it’s not completely paid back by then? Does it revert to the city or does the developer not have to reimburse it?” she asked.
Neville pointed out that being paid back is not the URA’s mission or the project goal.
“It’s to get the La Fun motel off the site, fully remediated, and a new commercial development installed. And so from there you have tax revenue-generating development,” the attorney said.
“And when the Urban Renewal Authority expires, all of that tax revenue will go to the city or the county or the property-taxing authority. So the URA is perfectly content not to get paid back.”
URA board president Debra Sagen explained that the board isn’t willing to spend money it doesn’t have, and has carefully considered redevelopment activities.
“We know we’ll sunset in nine years with this current district configuration. We want to end with a zero balance, frankly. So the way to do that is to redevelop appropriately under the Colorado state statute” that governs URAs, Sagen said.
Mayor Pro Tem John Shada questioned the board’s authority over what the developer proposes. Neville replied that, although the board reviews plans, ultimately, the city reviews and approves them.
“So if the developer submitted some drawing on the back of a napkin, that would be for your review. If you didn’t like it, what could you do?” Shada asked.
Rees reiterated that the city has ultimate authority over plans and the URA board does not.
After participants discussed estimates of the potential sales tax revenues from retail businesses on the site, Councilor Nancy Fortuin expressed her appreciation for the worst-case scenarios.
“But I would suggest that investment, by definition, is a risk on both sides. And we have lived without much development in that corridor for many, many years. If we do lose marijuana money, we need alternative sources of tax revenue,” she said.
“I think the potential here is much more likely that the city will benefit greatly, that this could be another catalyst for further development.”
Fortuin also applauded the URA board’s efforts to ensure that any future development would align with Manitou Springs’ values.
After more discussion about how the project’s finances would work over time, Neville said that, “The ultimate goal is to create a tax revenue-generating project.”
State Rep. Marc Snyder, a URA board member, also strove to clarify its mission: First, to eliminate blight in that area.
“I believe the La Fun is the most blighted property within our URA right now. So I think we accomplished that with this project,” he said.
The second goal: “To create and foster and encourage and support redevelopment of the URA into enterprises and projects that will have a long-term benefit to the city of Manitou Springs.”
The former Manitou mayor continued: “Our mission is not to make investments that have a positive rate of return, or any kind of real return other than to accomplish our stated mission, which is to foster redevelopment to expand the tax base of the city. And that’s really what I believe this project is a perfect example of. … There is no downside for the city.”
City Council and URA board members discussed the pros and cons of using the property as a parking lot, then circled back to potential falling revenues from decreased recreational marijuana sales.
Shada pointed out that the URA receives a “pretty big chunk” of tax revenue but encompasses only about 2.5 percent of the city’s total acreage.
“I think there are better ways in our community that we can spend this money, OK?” he said.
Councilor Natalie Johnson, who worked with the URA board while director of the Creative District, spoke up next.
“I feel like this conversation that we’re having today should have happened either six months ago, or in January of next year. I think that we have not figured out our budget for next year,” she said.
“I just think it’s premature to make any decisions right now,” Fortuin said in agreement.
Snyder remarked that the east end of Manitou Avenue has been neglected for decades.
Despite their urging, City Council voted to cut off future sales tax revenues going to the URA’s account, at least indefinitely. It will still honor any pending obligations and contracts.
Councilors Wolfe, Shada, Graham and Chandler favored the action, and Johnson, Fortuin and Michelle Whetherhult opposed it.
City Council will not meet next week, since it’s the fifth Tuesday of the month.