Air Force Academy may receive funding for new visitors center, If land qualifies.
By RACHEL RILEY | The Gazette | Published: February 26, 2019
COLORADO SPRINGS, Colo. (Tribune News Service) — The Colorado Springs City Council soon will be asked to declare 40 acres of untouched foothills on the Air Force Academy as an urban renewal area.
That designation, typically for blighted areas, would earmark millions of dollars in tax revenue for a new visitors center at the academy.
Supporters say state law allows vacant land to be declared blighted, qualifying it for urban renewal status. But others say awarding the designation to open land could set a risky precedent for a financing mechanism used to breathe economic life into run-down areas of the city.
“It takes away some of the trust of the community in terms of what urban renewal is and what it can be and what it should be used for,” said John Olson, a member of the city’s Urban Renewal Authority. “We may have a really great project in the future that really needs this urban renewal financing to happen. I would hate to put a hindrance on that.”
First, though, the City Council will be asked Tuesday to annex nearly 200 acres west of Interstate 25 along North Gate Boulevard that encompasses the visitors center site. The annexation ultimately could allow the $58 million visitors center to get a $13 million share of $120.5 million in state sales tax rebates through the City for Champions initiative, in the works since 2013.
The visitors center, one of four City for Champions projects meant to spur local tourism, would be part of a development with hotels, office space and restaurants.
The other City for Champions projects are the U.S. Olympic Museum being built at Vermijo Avenue and Sierra Madre Street; a downtown stadium with a hockey arena at Colorado College; and a sports medicine and performance center being erected at the University of Colorado at Colorado Springs.
Mayor John Suthers and the city’s economic development office have urged the council to approve the annexation, warning that rejecting it could hamstring the visitors center.
The development is expected to trigger $2.6 billion in economic growth over 25 years and deliver about 1,200 permanent jobs and 1,700 construction jobs, said Bob Cope, the city’s economic development officer.
“Failure is not an option,” Cope told The Gazette.
“This is something that will enhance your experience coming to Colorado Springs. It will be a crowning achievement for the city, as well as for the Air Force,” said city Chief of Staff Jeff Greene. “If the project proceeds, there’s a financial windfall to the city.”
Even if the annexation is approved, the deal still faces hurdles. The funding plan is not final, and the Air Force has yet to sign an agreement with Blue & Silver Development Partners. In addition, an environmental analysis has yet to be completed on the site, which has habitat for the threatened Preble’s meadow jumping mouse.
At least two council members question the project’s viability and whether it will benefit taxpayers, given the proposed tax incentives.
“I’m not going to vote for (the annexation),” Councilman Bill Murray said, as the Air Force Academy and project developer “are lacking a whole bunch of very specific details.
“What they’re saying is, ‘Annex it, and you now have to agree to all these tax incentives and everything else that they’re requesting to finance it,” Murray said.
A business improvement district for the site would levy 60 mills in property taxes, with 50 mills to pay for construction and 10 mills for operation and maintenance. That district also would levy a 3 percent fee, in addition to local sales tax revenue, plus a 4 percent lodging fee charged to hotel guests. Developers commonly use such “public improvement fees” to pay for needed work such as sidewalks and streetlights.
The Air Force would contribute about $8 million of interior fixtures, furnishings and equipment, Cope said.
The urban renewal designation could allow the visitors center to capture even more tax money over 25 years. Blue and Silver has asked that the center be allotted 1.75 percent of the city’s 2 percent sales tax and 1 percent of El Paso County’s 1.23 percent sales tax during that period, plus about 76 mills in property tax .
The developer also is asking for revenue that the city’s use tax will generate from building materials for the development.
If the council approves the urban renewal area and agrees to share that revenue, about $23 million in city tax dollars would go to the project over 25 years for public improvements, Cope said. The rest of the development, including hotels and other commercial space, would be funded privately.
With the development, the city would gain $37 million in sales tax revenue over the 25 years, in addition to the $23 million that would help pay for the project, Cope said.
The funding plan is still about $4.5 million short of the $58 million needed. But Dan Schnepf, president and CEO of project consultant Matrix Design Group, said he has identified ways to close that gap, such as equity or donations.
Schnepf said the property does not have to be urban to benefit from the urban renewal program.
A study by Littleton-based Ricker Cunningham, prepared for the URA and City Council, found that the area meets seven of the state’s 11 criteria to be declared “blighted” — including that it has “defective or inadequate street layout” and “unusual typography or inadequate public improvements or utilities.” To qualify for an urban renewal designation, an area typically must meet four of those standards. But because the Air Force has agreed to consider its property “blighted,” only one criteria must be present, Schnepf said.
The URA board voted 9-4 in December to approve that study, with Olson, Gary Feffer, Peter Scoville and Valerie Hunter opposed.
“You can call almost anything blighted per the way the code is. The philosophical question is, should we?” said Olson, a director at Springs-based Altitude Land Consultants. He said the other three board members who dissented expressed similar concerns.
This wouldn’t be the first time a vacant swath of land was declared an urban renewal area in Colorado Springs.
In 2010, the council approved that title for about 200 acres — across I-25 from the academy just south of North Gate Boulevard — in hopes that tax revenue produced by future development would pay to extend Powers Boulevard from Colorado 83 to the interstate. The URA had rejected the plan, saying only decaying areas deserved urban renewal status.
That site is now home to Polaris Pointe shopping center, which has Bass Pro Shops as a retail anchor.
But Council President Pro Tem Jill Gaebler echoed Olson’s concerns, saying the council should consider more than the statutory definition of blight when deciding what’s eligible for urban renewal.
“Right now, I’m inclined not to consider a project that is in the far northern reaches of our city, obviously greenfield land, as urban renewal,” she said.
Murray agreed, saying: “This is pristine property. It’s beautiful country. It shouldn’t have been done for Bass Pro. And now, we’re doing the same thing.”
Councilman Don Knight said he’d likely support the annexation because of the benefits the city could realize.
“I think it is going to be a very lively discussion that is going to have strong opinions on both sides of whether straight, undeveloped land is blighted or not,” Knight said. “That’s a decision a lot of us are going to have to wrestle with when we vote.”
Essential lease agreement
The Air Force won’t sign off on a lease until financial details are settled.
As proposed, the agreement gives the developer a 99-year lease on the land outside the academy’s northern gate without cash payment. The Pentagon has used similar leases since the 1990s to add amenities to bases without using Pentagon cash. The same lease program has allowed private developers to build and upgrade homes for troops at military bases across the Pikes Peak region.
The academy once drew more than 1 million tourists a year, making it the state’s top man-made attraction. Post-9/11 security at the school drove visitors away, however, and the annual numbers have been cut in half.
The new center would be outside the academy’s security perimeter and would be an easy stop for travelers on I-25. It also would offer bus tours of the campus, and tourists could go through security screening without tying up traffic on North Gate Boulevard.
The academy has been a cheerleader for the plan and has OK’d the annexation.
“The lease payment in kind that the Air Force is expecting from the developer is the construction of the visitors center,” said Carlos Cruz-Gonzalez, the academy’s head of building projects. “It is tremendous, frankly, for the community.”
In addition to the 32,000-square-foot visitors center, the development would have a conference center and about 180,000 square feet of office space for cyber-related businesses and perhaps organizations associated with the academy, such as the USAFA Endowment. Schnepf is working with Hilton to open two hotels, and an iFLY indoor skydiving facility has been proposed for the site.
The rest of the land, more than 100 acres, would remain open space.
The visitor center proposal has been tied up for years, since developers determined that even with ostensibly free land, the construction cost would leave the deal in the red.
Another request for proposals went out in 2017, and the new deal with Blue & Silver passed muster, earning approval last year.
In December, the state gave the city a one-year extension to complete “substantial work” on the visitors center and another City for Champions project — a deadline that must be met to retain the millions in state sales tax rebates.
Cope said the project is to meet that deadline this summer, when bonds for the financing are issued.
But that schedule assumes that the council approves the urban renewal area, and the Air Force signs the lease this spring.
Environmental concerns also linger. The environmental analysis, required by the National Environmental Policy Act, hasn’t been done, and at the heart of the issue is the Preble’s meadow jumping mouse, the threatened species that lives in shrub-laden, streamside areas along the Front Range.
A biological assessment commissioned by the developer found that the site has less than a half-acre of “low-quality Preble’s habitat.” Brian Mihlbachler, the academy’s natural resources adviser, said the project isn’t likely to jeopardize the species.
But Academy biology professor Kellie Kuhn said in a January Facebook post that the development would threaten not only the mouse, but also several aquatic organisms. She called the area “one of the most aesthetically beautiful parts of the USAFA, and one could argue it should be preserved for that reason alone.”
Environmental advocates also have expressed concerns about how the development could affect wetlands and stormwater runoff into nearby Monument Creek, said Fran Silva-Blayney, chairwoman of the Sierra Club’s Fountain Creek Water Sentinels group.
Schnepf, however, has said the site was selected to have minimal impact on the area’s flora, fauna and landscape, based on previous Air Force studies.
Despite the obstacles, Council President Richard Skorman and other city officials have said the annexation has little risk. It could be reversed in a three-year process if the project does not proceed, city officials have said.
“There’s so many moving parts to this,” Skorman said. “It would be nice to figure out how to at least put this piece in place so the other ones can work.”
The council will consider the annexation at its regular meeting starting at 1 p.m. Tuesday at City Hall, 107 N. Nevada Ave.