Avon, Traer Creek disputes span years
September 14, 2012
AVON, Colorado – To say the dispute between the town of Avon and Village at Avon developers is complicated is a little like saying the federal government is a hive of dysfunction – both are gross understatements.
With that in mind, here’s an attempt to make the local dispute a bit more comprehensible by breaking down the conflict into a handful of questions.
How’d this start?
In the 1990s, Swedish businessman Magnus Lindholm – the largest private landowner in the county – started talking about a large commercial/residential project on roughly 1,800 acres of land east of Avon. Most of that property is north of Interstate 70, across the river from Eagle-Vail. The rolling hills filled with sage, pinon and juniper were proposed for hundreds of mostly high-end homes. The land on the valley floor was seen as good property for commercial development and multi-family housing.
Lindholm first pitched the proposal to Eagle County. Officials there urged him to work with the town of Avon, since the project would be better connected to the town’s existing streets and utilities.
Town of Avon officials were eager to have Lindholm’s property – by then called the Village at Avon – in town, primarily because they would then be able to control development on the east side of town. They also believed they could somehow offset the loss of sales tax revenue from the town’s existing Walmart store, which was virtually certain to move in the deal.
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Town officials in 1998 approved the Village at Avon. That deal authorized building about 650,000 square feet of commercial space, 2,400 homes, and was supposed to include a school site, a community center and an ice rink. The deal also created the Traer Creek Metropolitan District, which would collect the town’s share of sales tax to pay for bonds the district issued to pay for roads and utilities. The district also served as a design review board for the subdivision, but that board’s meetings have been private.
While the town wouldn’t see any sales tax revenue from the Village at Avon until the bonds were paid, the developers agreed to make up for sales tax lost when Walmart moved, minus whatever revenue was generated by stores that moved into the old building.
Walmart opened in 2003, followed by The Home Depot and Traer Creek Plaza, a commercial building with several stores.
Those buildings, and the Buffalo Creek Apartments on the north side of the interstate, represent virtually all the building so far at the project.
It’s hard to tell why building stopped, but Traer Creek representatives went to the town in 2003 and asked for several amendments to the original plan, including a gas station on the north side of the new Post Boulevard interchange. Council members rejected that proposal.
The ensuing years have seen more disputes between the town and developers. The stall in building – especially on the commercial side – also put the district into a financial bind, since sales taxes are repaying the district’s revenue bonds.
After several years of back-and-forth – including the Avon Town Council election of 2006, in which Lindholm endorsed the challengers to council incumbents – Traer Creek filed suit against the town in 2008, alleging the town hadn’t given proper review to proposed building at the property. That suit was dismissed later that year.
Meanwhile, the metropolitan district had also stopped making sales tax reimbursement payments to the town.
In 2008, the town filed suit against the developers seeking payment of the sales taxes, as well as payment for municipal services the town had been providing. The developers then sued the town. That suit included allegations that the town had refused to allow the developers to sell units at Traer Creek Plaza, including parts of the parking garage.
What’s in the settlement?
Fast-forward to last year. After legal wrangling and a failed six-month effort to hammer out an agreement, District Judge Thomas Moorhead ordered the parties into mediation, but set a trial date of Oct. 31, 2011.
In early October, the town and the developers announced they had agreed to the basis of a settlement, called a “term sheet.” Parts of the agreement were fairly straightforward: The developers would pay the town – after the bonds are paid off – an agreement would be made to finance and build a giant water tank north of the interstate, and the developers would be allowed to sell units at Traer Creek Plaza. The town will also get a representative on the previously-private design review board.
Other elements have proven more difficult to settle. The Avon Town Council must pass an ordinance clearing the way for the settlement, and that ordinance includes myriad changes to the original agreement, including the size and scope of commercial building, adding a hotel and gas station to the property at the Post Boulevard interchange and the location of a school site.
Most important to both sides is the financial element. Advocates say the deal creates a way to build more commercial space, thus generating more sales tax. That would eventually pay off the revenue bonds, and once those are paid, the town can start collecting sales tax. Opponents say the timeline is impossibly long for the day when the town might see sales tax revenue, and that the town’s commitments to take over road maintenance and other work won’t be covered by the revenue generated with an additional .75 percent “fee” – a sales tax boost- envisioned in the settlement.
Why is a French bank involved?
With the district short on cash, bond payments are being made from a letter of credit held by BNP Paribas, an international banking company. That bank wants to be repaid, and is a party to the lawsuits. Attorneys for the bank have said the settlement’s complex financial arrangements – which include the bank taking a subordinate position on the “who gets paid” list so more financing can be arranged for future development – are essential to complete the deal. If the deal isn’t done, there’s a possibility that the metro district will default on its bond payments, which would make finding future financing all but impossible. A bond default would leave sales tax from the existing businesses as the only way to pay off the development’s debt, a process that settlement advocates say would take decades.
What’s up with these deadlines?
The deadlines associated with the settlement deal have been both self-imposed by the parties and imposed by BNP Paribas. The next deadline is Oct. 15, the date by which BNP Paribas must inform the trustee overseeing payments to bond-holders whether money can be withdrawn from the letter of credit. The bank, which has already granted a 60-day extension on that notice, wants the settlement finished before it will agree to release more money.
That means the town must approve the settlement ordinance in two votes – Sept. 25 and Oct. 9. If the town delays action again, the parties will have to ask the bank for another extension.
What happens with denial?
If the town council doesn’t approve the settlement ordinance, the deal will likely die. If that happens, the town and developer will also likely end up back in court – Moorhead has blocked out two weeks in January for a trial if the settlement doesn’t get done.
Meanwhile, the metro district will probably default on its bonds, and all the parties will go back to the original 1998 agreement.
Opponents say the town – which had spent $1.2 million in legal fees as of October of last year – would be better served to take its chances in court. Supporters, though, say the deal is the only way to get both the town and developer out of a morass that’s lasted a decade.
Business Editor Scott N. Miller can be reached at 970-748-2930 or email@example.com.