The proposed convention center and resort hotel in Aurora, Colorado, just hit another road block, and it’s just about as formidable as the Rocky Mountains.
According to an article in the Denver Business Journal, County District Judge Ted C Tow III declared as unconstitutional a key part of the city of Aurora's plan to direct $300 million in tax subsidies to the proposed Gaylord Rockies Hotel and Conference Center, saying it violates the Colorado Taxpayers' Bill of Rights (TABOR).
According to TABOR, voters who could reasonably be predicted to pay any proposed increased taxes needed to be able to vote on such increases before they could take effect.
According to the judge, the city bypassed this vote in its haste to get the project moving.
If the judge’s ruling holds up to appeal, Aurora might be back to square one, and will have to re-create the subsidy ordinance, this time holding a vote of the entire city's residents before the subsidy plan could be valid.
And that doesn’t make developers, sports event planners, convention professionals or hospitality industry members happy at all.
Plans call for a 1,500-room hotel and conference center plus a water park, developed by Houston-based Rida Development Corp. Aurora economic development officials say the project will create as many as 2,500 permanent jobs plus temporary construction work, attract thousands of new visitors and contribute $273 million a year to the local economy.
Colorado, long a magnet for sports, would enjoy yet another host hotel, as well as a potential venue for large indoor sporting events – if the project ever goes through.
Construction plans for the Gaylord Rockies project have been on hold since a group of 11 hotels in downtown Denver and Colorado Springs sued Aurora over the project in 2013. Developers have said finding investors for the project is difficult while the project is under the cloud of lawsuits.
Questions Regarding Tax Incentives
Of course, that’s not the only issue plaguing the proposed development.
State Treasurer Walker Stapleton has also raised questions about a separate package of $81 million in state government tax incentives granted by the Colorado Economic Development Commission.
Tow's ruling is in a case brought by two Adams County residents who claim the ordinance creating the tax district financing the proposed subsidy is unconstitutional.
To entice the developer of the project, Aurora adopted a special taxing district and agreed to rebate up to $300 million in revenues from a so-called "enhanced" tax levy on sales inside the district once the hotel and convention center is up and running.
All the land inside the proposed district, however, was owned by one entity -- LNR CPI HighPoint, LLC. The corporation designated one of its employees, Brandon Wyszynski, as it's designated elector, and he cast the lone vote in favor of the tax plan.
No other Aurora voters were allowed to vote on the tax plan. Wyszynsk doesn't live in Aurora.
Judge Tow, in his ruling, noted that at least some Aurora residents could be guests at the Gaylord hotel in the future and yet Aurora voters were not allowed to vote on the increased taxes.
The judge wasn’t the only one who noticed the discrepancy, either. An editorial in The Denver Post noted: “It always seemed odd that an ‘election’ in Aurora in 2011 to authorize higher tax subsidies for the Gaylord Rockies Hotel and Conference Center involved just a single voter who represented the landowner, was not a resident of the city and who would probably never pay the taxes.”
But, noted the Denver Business Journal, the city carefully drafted the language "to avoid any indication to an outside observer that there was only one elector, even though this fact was clearly known to the City at the time it drafted the ordinance. Given this secretive approach, the elimination of any notice essentially eliminated any opportunity to be heard by City residents. While the motivations behind the project are undoubtedly in good faith, the City's actions toward its citizens were not."
"Instead of allowing voter participation, the city created a scheme by which taxes would be increased for many individuals upon the approval of a single elector who would likely never pay the tax."
"...the city did not satisfy its obligation to obtain the approval of impacted voters in advance, in direct contravention of the purpose of TABOR," Tow said in the ruling.
Therefore, Tow ruled, the one-vote election approving the financing scheme is without effect.
City of Champions Affected as Well?
The Aurora ruling has sent shockwaves through the sports and event planning community. In Colorado Springs, dubbed ‘the City of Champions’ because of its relationship with the U.S. Olympic Committee and the presence of multiple USOC-affiliated national governing bodies and training centers, the judge’s ruling could play a role in how a major project is to be funded.
An article in the online edition of the Colorado Springs Gazette notes that Judge Tow’s most recent ruling, that pertaining to TABOR, could play into funding for a proposed downtown events and sports center, one of four City for Champions projects that were approved to receive the same type of state incentives as the Aurora project. (However, it is essential to note the state incentives are not at issue in Tow's ruling).
According to the Gazette article, voter input could become a factor for Colorado Springs. Unlike the other three projects, which mainly use private funding to augment the state money, funding for the sports and events center has not been determined. But, based on the ruling, any financing proposal for the center that requires taxpayer support would have to go to voters, City for Champions spokeswoman Laura Neumann said.
Neumann said the Adams County decision "certainly cinches a vote" if taxpayers end up paying for any part of the project. The judge's decision gives "me a great lesson as we go forward and do our due diligence" on how to fund the stadium and arena project, so it "means a lot more research is required," she said.
The Colorado Springs City Council passed a resolution that promises citizens will get to vote if any taxpayer money is used for the project.
With more than one sports and event center project in more than one city coming under increased scrutiny, it is likely other areas will re-examine their own plans for subsidizing such developments.
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