Gypsum's Costco revenue-sharing agreement with Eagle will be over at the end of this year.
Gypsum Mayor Steve Carver, council member Tom Edwards and town manager Jeff Shroll notified Eagle Mayor Yuri Kostick and town board member Mikel Kerst at an impromptu meeting Thursday morning. Kostick and Kerst were given an unofficial letter notifying Eagle of Gypsum's decision to end the agreement effective Dec. 31, 2012.
The agreement splits unencumbered sales tax revenues from the Costco retail block at roughly 60/40, with 40 percent going to Eagle. However, the deal does not mean Eagle collects $40 from every $100 in sales tax generated at the big box store.
According to Gypsum Finance Director Mark Silverthorne Gypsum was required to earmark .8 percent of its sales tax revenue for law enforcement services and an additional 1 percent for the Gypsum Recreation Center debt. The town also negotiated a debate incentive with Costco. As a result, the 60/40 cost share comes into play after these required deductions and the end result is lower. For every $100 in sales tax revenues from the Costco site, Eagle receives $16 through the cost share deal.
The letter sent to Eagle yesterday reads, "A little over five years ago, Gypsum conceived a revenue-sharing agreement so that Eagle and Gypsum would see the virtues of mutual cooperation where the two communities would work together to create the most logical and financially viable site for commercial development, limit the amount of financial incentives necessary to attract commercial retail, make sure both towns got adequate revenues and foster a spirit of cooperation between our two communities. Toward that end, the town of Gypsum has already contributed over $1.2 million to the town of Eagle to be used as Eagle sees fit."
Shroll said ending the cost share agreement is a business decision. Basically, now that Eagle voters have approved Eagle River Station, Gypsum doesn't have much reason to keep sharing revenues from its retail development. He said the Costco block was originally envisioned as a location to serve both towns instead of creating two large retail areas that detracted from each other.
"It seemed like with the passing of ERS, Eagle is on its own course and the revenue-sharing options seemed to have vanished," Edwards said.
"Of course Eagle is disappointed to learn the revenue sharing agreement will be ending in 2012, especially in light of the fact that the Eagle River Station approval paves the way for it to become a revenue-sharing agreement versus a one-way street with only Gypsum providing revenue," said Scott Turnipseed, Eagle Town Board member.
Turnipseed noted the town of Gypsum's decision to end the agreement this week demonstrates what many people cited as the weakness in the deal - it was subject to annual approval by the town of Gypsum and could end at any time.
"I just don't think the town of Eagle should be dependent on a revenue sharing agreement we have no control over."
The letter states that prior to the ERS vote, Gypsum expressed interest in making the agreement more permanent and even increase the revenue split. But because a binding deal would involve a multi-year financial commitment, when the agreement was drafted legal counsel from both communities advised that the only way to make the revenue share permanent was to take the issue to voters in both communities.
"Gypsum has also made several requests for additional meetings over the past several years, the most recent in the month prior to the ERS vote, to re-open discussions of the revenue-sharing agreement to perhaps include a better than 60/40 split and expand the territory to include a greater area than what is currently encompassed around Costco," the Gypsum letter states.
"The concept has always been a percentage of something for either community is better than 100 percent of nothing. The town of Gypsum has even entered into some very preliminary conversations with the Colorado Municipal League for direction that would make the revenue-sharing agreement more permanent in nature and thus more reliable. However, with two rounds of intense campaigning for ERS approvals, those talks and discussions never seemed to rise to any level of priority."
Turnipseed confirmed the Eagle officials declined a meeting request from Gypsum by a 5-2 vote two weeks prior to the ERS election. He agreed, as the Gypsum officials pointed out in their letter, that at that time the ERS election was the priority the Eagle Town Board. Turnipseed said Eagle board members did not refuse a meeting, but rather requested that it happen after the ERS issue was decided by the voters. Turnipseed said he would still like to meet with the Gypsum officials regarding issues of mutual concern.
Shroll said canceling the agreement was probably inevitable in the situation of Eagle getting its own large retail development. "To a certain extent, that was the intent, that we would have this agreement as long as we shared a retail center," he said.
Since it was instituted back in 2007, the Gypsum cost share agreement has generated approximately $1.2 million for the town of Eagle. Turnipseed noted that since that time, Eagle has spend $1.4 million on planning/design/right-of-way work for the Eby Creek road project and has stockpiled $3 million toward the construction project, which is estimated to cost more than $14 million.
"The intent of the revenue sharing agreement was to mitigate the impacts that regional retail has in one community or the other. We didn't take that $1.2 million and blow it, it has gone toward our Eby Creek Road work - exactly the type of project is was designed for," said Turnipseed.
In conclusion, the Gypsum letter states, "It has been reported that ERS plans to go vertical in 30 months. With that being the case, we are saddened that it appears we are back to square one where the town that offers the largest incentive package deal will land the large retail outlets. Unfortunately the retail outlets know all too well how to play that game and are very experienced at it. Thus, with that battle looming on the horizon, it no longer makes sense for the revenue sharing agreement to continue.
"This letter is to serve as notice that, due to the conditions listed above, Gypsum is hereby discontinuing the revenue sharing agreement that was put in place with the town of Eagle. Gypsum will issue payment through the month of December 2012.
"We do believe that there are a number of issues the two communities can still work on together. The future of U.S. Highway 6 widening between the two communities and perhaps an ECO shuttle service between the two towns to connect key places of interest are a couple of examples of these.
"We wish Eagle the best of luck with ERS and hope that it meets the expectations of the town of Eagle."
Gypsum will continue to split revenues through the end of the year as stipulated in the agreement, and the money has already been appropriated in each town's budget.
"We thought (the agreement) was a cutting-edge idea, so we're disappointed to see it end," Shroll said. "We still want to be open and working together with Eagle on the many things we have in common."
"I am disappointed with Gypsum's decision but am hopeful that this could be an opportunity to open dialogue between the two communities," said Eagle Mayor Yuri Kostick.
"We are separate towns with unique character but have many identical community needs. I am interested in working with Gypsum to find common ground," Kostick said. "There may be ways in which we might be able to work together to provide better service to our towns and I advocate for exploring those possibilities. Conditions have changed in both places since the revenue agreement was established and it is time to see if new agreements and collaboration could be forged or not. This decision, obviously, sets the stage for that discussion to happen."
Eagle Valley Enterprise editor Pam Boyd contributed to this report.