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Plan to annex 'slum' raises eyebrows in Manitou



A developer's zeal to double the size of Manitou Springs has left some officials questioning the legitimacy of a proposal to annex Red Rock Canyon.

Two weeks ago, the Manitou Springs City Council gave city staff the green light to discuss a proposal by Zydeco, the New Mexico-based developer, to annex the Red Rock Canyon property, a 787-acre hunk of land fronting Highway 24 near 30th Street just west of Colorado Springs.

The developer wants to build a posh two-hotel and resort complex with 600 hotel rooms and an 18-hole golf course, 512,000 square feet of retail space, 1.39 million square feet of office space, 700 apartments, 800 single-family units and 60 luxury estates on the property.

But to do so, Zedeco wants Manitou Springs to annex the canyon, declare it a blighted ("slum") area and establish a special tax district called an Urban Renewal Authority (URA) that would allow the developer to build the property at considerably lower cost.

Such urban renewal districts are normally created to revitalize slums in inner city neighborhoods, which has left critics claiming that the Manitou plan is a stretch of the law and an effort by the developer to get out of paying for infrastructure fees.

The plan was questioned by Manitou Springs' own attorney, Alan Jensen, more than a month before Zedeco's presentation to the City Council.

In a February 8 "background memorandum" to City Administrator Dan Wecks, Jenson wrote: "I am concerned that it may not be legitimately possible to meet the statutory criteria for City Council to arrive at the conclusion that open, undeveloped land is blighted and in need of renewal. While it is true that there is a trailer park along land fronting Highway 24 ... is it in such shape as to qualify for a slum?

"I think the only finding that Council could make that would make it eligible for [establishing a] URA would be unusual and difficult topography," Jensen wrote. "That phrase may well be used to describe some of the land further back from the highway, but probably not any land right along the highway."

The area Yates wants declared blighted is 200 acres fronting Highway 24, where the lion's share of the retail and office space would be built.

Withholding information

Manitou Springs Mayor Nancy Harkin and City Administrator Dan Wecks were aware of Jenson's concerns prior to Zydeco's presentation on March 14. However, the attorney's memo was not distributed to the rest of the City Council before their vote, upsetting at least one member of the elected body.

"I'm bothered that we weren't shown that memo ahead of time," said Councilwoman Kathy Verlo. "If staff had already looked into this, I would have liked to have had the benefit of their insights."

Hankin insists the memo was forwarded to Council "in a timely fashion."

"I'm pleased that [Zydeco president Richard] Yates has offered Manitou the opportunity to annex the property," she said. "The purpose of that meeting was to introduce the players. It would have shifted the focus if Council had the [memo] in their pre-meeting information packets."

Wecks protested that the Jensen memo "was merely background information for me."

"It wasn't intended for Council," Wecks said. "If I passed along every memo I receive to Council, they'd be overwhelmed with memos."

High stakes slum

Jensen refused to comment on the proposal to have the property declared an urban blight area.

On March 14, Zydeco consultant Ford Frick told Council that the completed "village" would broaden Manitou's tax base from $41 million to $75 million, raise annual sales tax revenues from $1.9 to $3.1 million, and generate annual lodging tax revenues of $200,000.

This week, Verlo questioned how the development could be called an urban renewal project. She also wants to know how freezing property taxes will effect the local school district, what liabilities the city will risk "if we get involved with a development where there are known toxins," and what will happen if there's a downturn in the economy before the bonds are paid off.

"This," she said, "is terrible way to obtain open-space property."

Other council members have termed the proposal "exciting" and gave the green light for city staff to discuss annexation.

Getting stuck with a monster

At the March 21 City Council meeting, several longtime Manitou residents voiced their opposition to the proposal.

"I don't think people are aware of what's going on with this property," said Tim Tiefenbach. "This would increase our population by anywhere from 50 to 100 percent and seriously degrade the quality of life in Manitou Springs."

Resident Tobe Easton protested that "a hot market won't stay hot forever. We could end up getting stuck with this thing. And if this gets approved, we can say good-bye to Manitou Springs as we've known it."

Significantly, Jensen's memo voiced a similar caution, noting that the URA-type financing "works well so long as times are good. But if times turn the other way, this type of financing can run into serious trouble."

Were Red Rock Canyon declared blighted and a URA established, the property's assessed value (now near zero) would be frozen and the URA would issue bonds against future increases in value generated by development.

For an agreed-upon period of time, tax revenues would be split at an agreed-upon percentage between Manitou and the Urban Renewal Authority. The URA funds used to put in infrastructure -- water lines, roads, power lines -- would normally have to be paid by Zydeco.

URAs have been used in over 30 development projects throughout Colorado, but never in an open-space locale like Red Rock Canyon. Frick claimed a 90-acre former dumpsite and several other "problem areas" would justify a finding of blight.

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