City’s Federal Center Development Scheme -
A Rube Goldberg Design of
Multiple Moving Parts
Why keep it simple when we can confuse voters with complexities?
City Entering Into the Development Business
posted October 15, 2015
In the next few days, the Bob Murphy/Adam Paul administration plans to buy the contaminated corner of the Denver Federal Center for nearly 25 million dollars by mortgaging city facilities and using the City’s reserves. To get around the TABOR requirement that borrowing to put to a vote of the people, the Murphy/Paul group plans to “lease” city hall and other city facilities.
Their financing scheme also calls for taking millions of tax dollars from the City’s reserve funds (emergency savings) to come up with the 25 million dollars to pay the Federal Government for sole ownership of 59 acres in the northwest corner of the Denver Federal Center (referred to as the horseshoe property).
They will create a couple new layers of government (with more government employees) to run this project. The new government entity will hire a master developer and sub-developers to build various components of a new village. The developers will then be given tax subsidizes to fund the construction of 1400-unit upotian village.
In addition to the questions around 1.) the propriety of the city getting into the development business, 2.) creating indebtedness without a vote of the people, and 3.) using tax monies from our reserves, there is also the matter of the land’s contamination and the potential legal liability it may create for Lakewood citizens in the future.
The same Council group that promised that it was okay to giveaway city parkland (2090 S.Wright St.) is now assuring us this plan is ok. The complicated Rube Goldberg scheme for pulling off this foray into the business of development is examined in detail below.
City's Complex Financing Scheme
To come up with $25 million to buy the 59-acre Federal Center site, the City has cobbled together several pieces.
The major piece is to borrow tens of millions of dollars. Technically TABOR requires “any multiple-fiscal year direct or indirect debt or other financial obligation whatsoever” be put to a vote of the people.
The City did not explain how they were going to get around this problem other than making references to “leasing”. For investors to buy pseudo bonds, they require financial assets to use as collateral for the loans. For this collateral, the City is offering up City Hall and other city facilities.
Several million will come from using the City’s reserve funds. You may recall during the debate over the recent doubling of our storm water fees, some council members proposed using some of this reserve money to offset the $2.5 million raised by the fee increase. This proposal was rejected because the City’s reserves were to be saved for future emergencies. Turns out the future emergency was the upcoming purchase of the Denver Federal Center site.
Environmental Contamination Concerns
The 59 acres at the NW corner of the Denver Federal Center was one the most contaminated parts of the Federal Center. It included landfills with dioxins/furans, PAHs, pesticides and metals. The Federal Government recently removed some of the contaminated soils and put a foot deep layer of clay over other parts to serve as a “cap”.
The State of Colorado, the Federal Government and the City claim this cleanup work now makes the site safe for development. However, a one-page executive summary of the environmental conditions (dated September 2015) cautions, “all of the GSA Parcel land was used for industrial-like purposes and despite the thorough investigation and cleanup, it is possible that pockets of contamination, such as asbestos containing materials remain in soils in some locations that may require cleanup as future development proceeds.”
Although the City insists the site is safe for residential development they are looking into taking out a special contamination mitigation insurance policy. If it turns out that something was missed and contamination is discovered during the development then there is the possibility of future lawsuits.
While the City’s lawyers assure us that in the event of future lawsuits the City will be held harmless, private attorneys aren’t so convinced. In an imperfect world anything is possible and Murphy’s Law (no pun intended) says it probably will happen.
Other Contamination Cleanup
On an unrelated matter, work is currently underway to clean up some of the contamination on a portion of the eastern side of the Federal Center called Downing Reservoir. From 1945 through the 2000s the pond was used for storm water detention. Due to the runoff from other parts of the Federal Center, the sediment and sludge in Downing Reservoir was found to have elevated levels of metals such as copper zinc, lead, silver and chromium as well as petroleum related chemicals. For details of the cleanup go on-line to http://www.gsa.gov/portal/getMediaData?mediaId=121226.
Creating New Layers of Government
One of the basic tenets of any socialistic plan is to create more government agencies and acquire more employees. True to form, this scheme requires a couple more layers of government. The first step is to declare the Federal Center site to be a “blight”. This makes it eligible to be designated as an “urban renewal district”. The new UR district will require an high paid executive director.
This urban renewal district can then proceed to sell bonds (COPs - Certificates of Participation - a bond that gets around the TABOR requirement by calling itself a "lease") in the financial markets.
They will then form a neighborhood authority with a board to determine all the design rules, etc.
Federal Center Purchase Plan Suffers Setback
Former Mayor Bob Murphy’s plan to buy 59 acres of contaminated land on the northwest corner of the Denver Federal Center ran into a firestorm of opposition and was put on hold.
In the month or so before the hastily-scheduled Council vote, the City spent thousands of tax dollars in a major publicity campaign (city website, Looking at Lakewood newsletter - see page 4) to persuade voters to support the plan. Instead citizens were outraged at the power play and demanded the City slow down and critically evaluate whether it was appropriate to spend tax dollars to go into the development business of creating a new neighborhood called the “Federal Center neighborhood”. The final straw was when the plan was modified again three days before the rush vote to add yet another $3 million, to build a bridge over 6th Avenue, on top of the $25 million price tag.
At the last City Council meeting before the election City Hall was packed with the largest crowd ever seen demanding a new Council look at the project with a critical eye. Reading the tea leaves, the mayor made a last minute decision to postpone the vote until March. Attorneys for the federal government and other presenters were caught by surprise and left out to dry.
Conventional political wisdom is the mayor knew rushing a vote through his crony Council would have been reversed by a citizens initiative petition drive. Furthermore the outrage at the power play would have resulted in a backlash against the mayor’s candidates for mayor and Council. Note in the election story that concern came very close to reality.
After the election the federal government demanded the City complete the purchase contract by January or they would put the project out to bid. The new Council with its reinforced independent faction would not be cowed and rejected the ultimatum. At last report, the federal government did put the purchase proposal out to private bid but we have not heard whether or not there was any interest. While the issue appears dead for the moment, pundits predict the matter will come back in the near future.
With the decision to stay out of the development business the City has several million dollars available for government services and infrastructure improvements. Some of the ideas mentioned during the Federal Center purchase debate -
Build a bridge over 6th Ave. to divert Union Blvd. traffic, Additional re-cycling locations
Increase the number of police officers, Redevelopment of the Sheridan corridor,
Modernize parks and playgrounds, Improve bike and hiking opportunities,
More services for seniors including Lakewood Rides, Put in more left turn signals,
Landscape the median strips on mayor streets, Add additional snow plowing equipment,
The Revenge of
the Lame Ducks
Five Council members (Bob Murphy - Mayor, Karen Kellen - Ward 1, Cindy Baroway - Ward 2, Adam Paul - Ward 4 and Tom Quinn - Ward 5) are term-limited and will be out of office in November.
As their parting gift to the new mayor and City Council, they are using their voting block to rush through the $25 million dollar purchase with only a few weeks notice to the public. What’s the hurry?
Social engineering / beginnings of socialism done without any accountablity to the voters.
The $25 million price tag comes out to $172 per resident or $690 for a family of four. (based upon city population of 145,000)
Federal Center Status
A year ago, the City administration tried to purchase 59 contaminated acres at the northwest corner of the Denver Federal Center for $28 million dollars under the guise of an “exchange”. At the time voters were told if the City did not buy it developers would rush in and build Walmarts and car lots.
When the new Council sought to take adequate time to examine the situation the Feds responded with a January deadline ultimatum. When the Council refused to buckle, the Feds said they would put the property on the market. Finally eight months later, in August, the Feds did sent out bid requests. There is no word yet as to whether any developers put in a bid.
On an related matter, the federal building closest to the proposed sale site (Building 85) was closed in September and the employees evacuated after it was discovered employees had tracked toxic chemicals into the building after walking through nearby contaminated land.
Editorial - City Should NOT use your Tax Dollars to go into the Development Business
The latest case of the proposed purchase of the contaminated Federal Center site has all the earmarks of another Council debacle. What is common in these cases is the Council doesn’t want the public to have time to debate the merits of the issue.
While the general notion of developing part of the Fed Center has been around for a couple years, the scheme to purchase the property and develop it ourselves just came to light a couple weeks ago. In the classic case of hurry up before someone figures out what’s going on, the Administration revealed their scheme at the end of September. They propose to pass it a little over a month later at the end of October.
Why the hurry? Besides avoiding giving citizens time to review the case and develop any opposition, the Council wants to get this done before their majority is gone in November. Five members are term-limited with their power expiring in November.
If they wait until the new Council comes to power then the new councilors would be susceptible to public pressure because they would be subject to recall or re-election. The lame ducks have no constraints on them and so are determined to get it done while they still can.
In addition to the usual problems associated with haste, this half-baked scheme hasn’t addressed the questions that need to be answered. In addition to a lack of any detail on the mechanism of the deal, the City’s presentation can only be described as a “sales job”. In the City’s summary of the scheme the $25 million dollar price tag is not mentioned nor the plan to mortgage city hall and use reserve money.
They claim there has been citizen input over the years but this was limited to a few insiders. None of the citizen input even considered the City being the developer nor review any of the financial scheme.