By Pam Zubeck, Colorado Springs Independent
An estimate of annual sales expected from the proposed Scheels All Sports store in north Colorado Springs, “was wrong,” says an attorney representing the Interquest North Business Improvement District.
The Business Journal’s sister publication, the Colorado Springs Independent, reported on June 14 that the BID, controlled by Nor’wood Development Group via seats on the board, submitted a document on May 16 that stated Scheels’ annual sales would total $20.4 million. That’s a third of the $60-million estimate previously provided to the city in support of a $16.2 million sales tax break for Scheels. City council approved the incentive in February. The city also confirmed June 13 the $60 million is correct.
Russell Dykstra, with Spencer Fane LLP law firm in Denver, wrote the city an email (see below) on behalf of the petitioner, Nor’wood — which is owned by developer David Jenkins — in which it corrected the figure.
“Of note, the prior information as to the impact of the Scheels store in relation to comparable commercial property in the Interquest North Business Improvement District was based on erroneous information (the projected annual sales amount was wrong) and should be disregarded,” Dykstra wrote.
He then notes that Scheels stores “can do sales of $60 million a year or more,” which would mean the BID would receive “$750,000+ per year from the PIF [public improvement fee, which is collected like a sales tax] alone.”
Two businesses oppose the exclusion, arguing that removing Scheels from the BID means Scheels wouldn’t have to pay 51 mills in property taxes and the 1.25 percent PIF. Together, those levies would bring in roughly $1 million a year — an amount that the remaining BID members would have to pay.
Tim Leonard owns Deepwater Point Co., a development management company that represents the two opponents, BWR Investors LLC, owner and operator of the Burger King, and Riverside Restaurant Group LLC, owner of the Cheddar’s Scratch Kitchen.
Both lie within the BID and oppose excluding Scheels.
Leonard notes that if the BID continues to collect its mill levy and PIF, with Scheels in the district, it would receive $2.8 million a year toward payment of bond debt of $972,000 per year. (The BID has issued debt totaling $11.3 million that’s earmarked for public improvements such as sidewalks.) He further notes the BID’s fund balance this year would swell to $4.1 million.
But, Leonard also says, if the mill levy and PIF were lowered to 5 mills and 1 percent, respectively, the district still would collect ample funds, $1.25 million a year, to meet its debt payments.
“So the issue is not whether Scheels should be subsidized by all the smaller businesses,” Leonard says, “but why does the Board not lower the mill levy as its tax base expands?”
Leonard has said his clients and other businesses in the BID were not notified of the exclusion request prior to a May 28 briefing by city staff to council. According to a certificate of mailing recently submitted to the city, Spencer Fane mailed notices to all BID members on June 13.
That’s two days after council was originally slated to consider the exclusion request (June 11) but delayed it after receiving a June 6 letter from Leonard expressing opposition. Councilor Bill Murray has said council wasn’t told of any opposition until it received Leonard’s letter.
Now, council is poised to make a decision on the exclusion on June 25.
The BID is controlled by Nor’wood through seats on the board. Hence, Nor’wood controls issuing debt, which Nor’wood, in turn, has purchased through entities created by Jenkins and his son, Chris, president of Nor’wood. Those entities are Enterprise Fund No. 6 and Enterprise Fund No. 8. The Nor’wood-controlled board also sets the BID’s property tax rate.
We reached out to Dykstra, inviting him to explain how the $20.4 million sales figure came to be submitted to the city in error, and asking him to comment on any part of the exclusion request he wishes. We’ll circle back when we hear something.
We’ve invited Nor’wood and Scheels to comment a couple of times in recent days and never heard back.
Russell Dykstra, (Spencer Fane LLP law firm in Denver), wrote the city the below email on behalf of the petitioner, Nor’wood:
This correspondence is being submitted on behalf of the petitioners as clarification of the information submitted to you on May 16, 2019 in regard to the Interquest Marketplace, LLC petition for exclusion.
Of note, the prior information as to the impact of the Scheels store in relation to comparable commercial property in the Interquest North Business Improvement District was based on erroneous information (the projected annual sales amount was wrong) and should be disregarded. The information below is in line with the projections and sales information provided by Scheels and as previously submitted to the City in regard to the project.
Scheels stores can do sales of $60 million a year or more which will result in revenue to the District of $750,000+ per year from the PIF alone. A more conservative assumption is sales of $40 million a year that would equate to $500,000 revenue per year to the District.
A typical retail center or competing restaurants would produce a significantly lower level of revenue to the District and residential development would produce no property tax or PIF revenue to the District. Comparable retail/restaurant (based on existing values/PIF in Interquest as previously submitted) would produce approximately $185,000 annually (property tax and PIF combined) for a similar amount of square footage. These are projections and no one knows what the actual sales will be but we are confident that even at a most conservative level the District, and its taxpayers will benefit significantly from the addition of Scheels not only from revenues to the District but increased traffic and sales to all businesses in the area.
Additionally, the Scheels announcement has already generated new activity in the District including a 125 room hotel along with leases and letters of intent for 40,000 sq ft of new users including restaurants, bank, fitness studio, etc. All of these will contribute both property tax and PIF to the BID as a direct result of Scheels coming in.
Per City Council request, we have also sent notice to all property owners in the BID of the exclusion. Please find the list and a certification attached.
Russell W. Dykstra Partner Spencer Fane LLP