Without a $3 million sales tax incentive given by the city of Colorado Springs, the Mining Exchange Hotel might still be a vacant, derelict building, said owner Perry Sanders.
The economic development agreement with the city of Colorado Springs allowed Sanders and his partner to obtain bank financing for extensive renovations to the Mining Exchange properties. The contract stipulates the city will refund half of the 2 percent general fund sales taxes collected at the properties — the hotel at 8 S. Nevada Ave., the Freeman Telegraph building at 117 E. Pikes Peak Ave., the Independence Building at 121 E. Pikes Peak Ave., and the former Colorado Springs Utilities building at 18 S. Nevada Ave., known as the Gold Room.
Incentive payments will stop after the city has returned $3 million in taxes or 2027, whichever happens first. Since signing the contract in 2010, the city has remitted $200,995 to the Mining Exchange Group LLC.
“We were doing our project … just at the time of the Great Recession,” Sanders said. “It was virtually impossible to get financing.” He added the agreement showed lenders that the city supported the project.
“That’s what meant more probably than anything else,” he said.
The contract with the Mining Exchange is one of several economic development incentives the city has made with businesses. Wal-Mart Stores Inc., Kinder Morgan, Bal Seal Engineering, Agilent Technologies, Lowe’s Home Improvement Warehouse and Hewlett Packard have received city incentive packages since 2010. In all, the city refunded more than $1.9 million to the businesses, according to figures from the city finance department.
Choosing the deal
All incentive deals are based on the performance of the business, said Bob Cope, economic development manager for the city. The city negotiates with companies that promise at least a $1 million investment and at least 10 new full-time employees.
In the case of the Mining Exchange, the incentives moved the project forward, he said.
“If you think back to the time frame … and there was very little to [no] private sector investment going on,” Cope said. “That particular building had either been vacant or underutilized in my adult lifetime.”
The agreement only includes part of the general fund sales-and-use tax, said Colorado Springs Chief Financial Officer Kara Skinner. The city keeps the other taxes: money that pays for public safety, Trails and Open Space, the Pikes Peak Rural Transportation Authority, the Lodgers and Automobile Rental Tax and the 2C tax to repair city roads.
“There is a lot of new tax revenue that is being generated by that hotel,” Skinner said.
Cope estimated the Mining Exchange will generate $13 million in sales tax during the term of the contract.
Bal Seal Engineering
Bal Seal manufactures seals, coil springs and connectors for airplanes, medical devices and underwater craft. The 2011 agreement specified that Bal Seal’s plant would create around 211 new jobs.
According to Jon Stillman, Bal Seal vice president of corporate development, the firm now employs 156 people in Colorado Springs, an increase of 75 from the number of employees when the firm leased space on Garden of the Gods Road.
In the deal, Bal Seal agreed to build a $45 million, 137,000-square-foot manufacturing plant in Colorado Springs. In return, the city said it would return the 2 percent sales-and-use tax for building materials and equipment bought locally for the construction. It also agreed to return a portion of the city’s business personal property tax and half the city’s 2 percent sales and use taxes on other purchases related to the construction only.
The agreement helped Bal Seal decide where to expand, Stillman said.
“It was very important to us that the community we chose to expand in really wanted our jobs,” he said. “The incentive agreement was an indication that the Colorado Springs community wanted the jobs as much as we wanted to bring them here.”
So far, the city has refunded Bal Seal $270,568, according to the city’s finance department.
Agilent Technologies Inc.
Agilent agreed to make $121 million in improvements at its data and technology center on Garden of the Gods Road, starting with a $35 million improvement that was completed last year.
Like the Bal Seal agreement, the city agreed to return the 2 percent sales-and-use taxes for building materials bought locally for the expansion. The city also agreed to return a portion of the city’s collection of business personal property taxes. The 15-year agreement was signed in 2011, and to date, the city has returned $248,570. There was no maximum payment in the contract.
Wal-Mart Stores Inc.
Signed July 13, 2011, the city’s contract with retail giant Wal-Mart Stores Inc. also returns sales-and-use tax for building materials bought locally. The retail behemoth agreed to build a $175 million data center at 10405 Federal Drive and hire 20 new employees. The agreement also returns a portion of the business personal property tax.
The Wal-Mart Stores Inc. agreement expires Dec. 31, 2026. So far, the city has refunded $517,814 to the business. The contract did not stipulate a maximum amount.
Lowe’s HIW Inc.
Lowe’s agreed in 2011 to build a 121,000-square-foot store on 10.5 acres at 701 N. Academy Blvd. In exchange, the city agreed to return 25 percent of the 2 percent general fund sales taxes collected at the store. The contract limited Lowe’s annual incentive reimbursement to $50,000 a year for five years beginning in 2014; To date, the city has given $100,000 back to the company.
After Lowe’s bought the land for $7.5 million on Nov. 5, 2008, the recession hit, “and they had to rethink their investments all over the country,” Cope said. At the time, Lowe’s officials told the city they were considering selling the real estate.
“We just sat down with them and asked them if there was a way we could incentivize them into making that investment now,” Cope said. “It is in the Southeast Colorado Springs Economic Opportunity Zone, where we were really trying to focus on bringing more investment into that South Academy corridor.”
Cope’s research estimated the total annual sales to be $28 million at the store, generating $3.6 million in city revenue in the first five years.
Colorado Interstate Gas, Kinder Morgan
This agreement also involves New Colorado Square LLC, the owner of the office building at 118 E. Pikes Peak Ave., where Kinder Morgan has a long-term lease. In the contract with the city, Kinder Morgan agreed to renovate 135,000 square feet of the building for an estimated $11 million. The company also committed to “use best efforts in good faith to employ not less than 350 full-time employees” there.
In return, the city agreed to return all 2 percent sales-and-use taxes for building materials purchased for the project between May 17, 2013, and Dec. 31, 2014. The incentive totaled $119,925 for the company.
Signed in 2009, the agreement between the city and the computer company was based on HP making a $260 million investment in its Colorado Springs operation and adding 10 new jobs.
The incentive included a full rebate of the city’s 2 percent sales-and-use tax on building materials purchased locally for the project, a full rebate of the city’s 2 percent use tax on building equipment and a rebate of business personal property taxes for 10 years.
The city rebated $522,933 to HP in 2010.