Loveland's Independent News Source
Election Night Antics
Council Pulls Last Teeth Out of
McWhinney Tax Agreement
Loveland - November 11, 2013

While local partisans gathered on election night last week to celebrate their candidate
victories, the McWhinney's had a celebration of their own - pulling the final teeth out of
their 2004
"Master Finance & Intergovernmental Agreement" (MFA) with the City of
Loveland to fund regional transportation improvements.

Borrowing from a dirty trick of the past, Loveland's partly lame duck council voted without
discussion or even comment to amend the 2004 agreement to relieve the McWhinney's of
past promises to use some of the estimated $600 million dollars of taxes raised through
their  quasi-governmental Centerra for regional transportation improvements.

Anticipating public opposition, the item was cleverly scheduled for a night the local media
and public attention would be focused elsewhere.  Once a champion against secret council  
decisions to amend McWhinney's agreements, Mayor Gutierrez was assured he will not face
voters again for two-years after this political flip-flop.

As extra insurance, McWhinney's chief lobbyist and now director of Centerra Metro
Districts Jay Hardy met councilors weeks prior to the meeting to confirm their votes in
private.  He also appeared at the Larimer County Board of Commissioners hearing to
"answer any questions" the day prior to the vote to ensure nobody from the county would
object.  This resulted in zero questions or comments by councilors of McWhinney in public
before voting for the proposed amendments to the MFA last week.

NOTE: Loveland public officials exempted themselves from the statewide gift ban to
public officials called
Amendment 41.  LovelandPolitics reported on the event in 2006 .  
By not defining  "occasional" gifts the councilors can receive free meals from
McWhinney paid lobbyists without the same limits that  apply to most other state and
local officials who are limited to $50 per year from a single source.

City's Diminishing Returns With Each Amendment - Removing the last teeth

Through a series of strategically timed amendments, the McWhinney's have essentially
removed their Centerra Metro District's legal obligations under the original MFA to fund
regional transportation improvements necessary as a result of the Centerra annexations
into the City of Loveland.  While these series of amendments have slowly ratcheted down
their liability under the agreement, the successive city councils approving the amendments
failed to negotiate any reduction in subsidy commensurate with McWhinney's reduction in
liability under the agreement.

Former Loveland City Manager Don Williams referred to the MFA regional transportation
improvement obligations as the "teeth" in the agreement that would force the developer
controlled metro districts to spend 60% of the district's "annual revenue" on regional
transportation improvements.  However, given the district's high debt carrying costs and
low performance in sales tax generation no monies have apparently been transferred to
the Regional Transportation Fund by McWhinney's Centerra as anticipated using this
methodology. (see definition of 'Regional Allocation' and list of regional improvements
imaged from the original MFA right of this column).

The special sales tax of 1.25% imposed by Centerra (technically called a "fee" and named
Public Improvement Fee or PIF) has fallen short of expectations.  Contrary to what is
regularly reported by city officials and repeated by the Loveland Reporter-Herald, the
Centerra agreement has failed to achieve the sales tax revenue promises of the 2004

According to Exhibit H of the original 2004 agreement, "revenue" from the sales tax (PIF)
would exceed $4.5 million by 2011.  According to the City of Loveland's own
2011 audit
report only $2.5 million in PIF revenue for Centerra was collected that year.   Since signing
the agreement, the McWhinney's have failed to achieve the stated PIF revenue goals every
year since but with little to no accurate reporting by local media.

The failure of Centerra to achieve the sales tax revenue goals has been compensated for by
enlarging the area of property tax subsidies (Urban Renewal) from just over 1,000 acres to
now more than 3,000 acres.  As a result, the anticipated property taxes for school district
operations, ambulance services, and other local governance expected as a result of
Centerra growth has not materialized.  The City of Loveland addressed some of its own
chronic budget shortfall in 2011by implementing severe budget cuts, increased fees upon
residents and reduced services across the city. (
see story)

Transportation Improvements - Amendments

In January 2004, the Loveland Reporter-Herald published an article titled, "Centerra of
" written by Dave Brendsel that spelled out the specific promises of the city's
agreement with McWhinney.  Referring to the "
Centerra Master Financing &
Intergovernmental Agreement" (MFA) the article described listed the promises to include,

"The financing agreement allows McWhinney to pay for all of the Crossroads Boulevard  
interchange, all of the interim improvements to the U.S. 34 interchange and as much as 40
percent of the cost for final improvements to U.S. 34 and I-25....The agreement estimates
$349 million in public improvements — $264 million for local improvements and the rest for
regional improvements."

While largely accurate, it is these specific promises that were later removed by the subsequent
Loveland City Council approved amendments to the MFA.  So faded has the staff memory
become of the original agreement, City Engineer David Klockman told Loveland's Council in a
study session briefing last summer the final Crossroads interchange with I-25 improvements
were not promised in the original MFA.

A careful accounting reveals the McWhinney's Centerra Metro Districts have contributed only
$15.5 million ($12.8 million I-25/34 and $2.7 million for Crossroads) towards the original
Regional Improvements" defined in the 2004 MFA or only 18% of the $85 million the article
in the Loveland Reporter-Herald boasted the agreement would raise.  Subsequent city estimates
for the inflation adjusted contributions by McWhinney's Centerra towards regional improvements
range between $100 million and $125 million.  However, with each successive amendment the
actual contributions diminish greatly.

Instead of paying for "all" of the Crossroads interchange under I-25, McWhinney's Centerra
contributed only $2.7 million.  Due to a later amendment of the MFA, the city now counts
contributions by third parties like the Obama Administration "shovel ready" federal funds as
reducing Centerra's liability under the agreement.  As originally contemplated, McWhinney's
Centerra was obligated to fully fund the regional obligations and any excess money resulting
from third-party funding freed those funds for other regional improvements or eventual debt
reduction of the metro districts.

This is an important fact as the original agreement contemplated Centerra returning any unspent
money in the Regional Transportation Fund towards bond debt reduction at the term of the MFA
in 2029.  The monies set aside for regional transportation funding cannot be spent by
McWhinney in a discretionary way (as are the funds for local transportation improvements) thus
the "teeth" as Williams referred to in the agreement.

To this date, McWhinney has ignored their obligation to fund some $50 million in final
improvements to the Highway 34 overpass arguing the project is unlikely to achieve matching
funds from CDOT as needed by 2024.  This natural tendency to steer monies into near-term
local road improvements and away from regional improvements was the very reason the City of
Loveland created the "Regional Allocation Fund" or teeth to protect and preserve that funding for
regional improvements only.

By allowing McWhinney to fund their local road improvements using the regional trust fund
account (by essentially pretending local roads are now regional) the council essentially removed
the final teeth in the agreement and eliminated the very purpose in segregating funds from the
diverted tax revenue exclusively for regional improvements.

Errors In Reporting Latest Amendment

Last summer the Loveland City Council held a study session where Jay Hardy, McWhinney
employee who currently draws his salary from the Metro District, lobbied for the most recently
approved amendments to the MFA.  

The Loveland Reporter-Herald published a story written by Jessica Maher shortly after the
meeting titled, "
Loveland City Council adds to projects to Centerra agreement." [sic]

Both the title of the article and quotes from the city manager betray the source of council's
confusion.  The article quoted Loveland City Manager Bill Cahill as saying,

"The existing structure of the list and the existing MFA ... is simply a list of the existing five.
It doesn't tell you when you have to build each one of them, but in order to make them
eligible, they need to be on the list," City Manager Bill Cahill said. "Staff is looking for
direction on which areas, if any, you'd like to add to the list."

The City of Loveland maintained list of improvements from the original MFA has always listed
Kendall Parkway underpass of I-25 (previously named Cordova Pass) and the Boyd Lake
improvements as local transportation improvements.  Centerra was already obliged under its
original agreement with the City of Loveland to fund Kendall Parkway underpass and
improvements at $16.3 million and Boyd Lake Blvd. at over $10 million by 2010.  Because
McWhinney enjoys great discretion over which local improvements they fund first, there was no
obvious reason for either to have been elevated to the city council for discussion.

The claim by the Loveland Reporter-Herald these were "added" to the agreement is clearly
erroneous but is likely a misunderstanding by the reporter of the agreement.  

Neither project qualifies as "Regional Transportation Improvements" according the MFA's own
definitions since they are not CDOT (Colorado Department of Transportation) planned regional
improvements and because both greatly benefit McWhinney by connecting McWhinney owned
properties but do not impact the overall traffic congestion on a regional basis.

When City Engineer David Klockman gingerly suggested there was a "disagreement" between he
and McWhinney over whether they qualify as "Regional" improvements Hardy took an interesting
tact.  Hardy explained indeed the projects did not qualify as regional transportation improvements
but acknowledged he was seeking to elevate the status even though they are clearly local
improvements in the near-term benefit of McWhinney.
(see video clip of Jay Hardy
acknowledging to Loveland's City Council last summer that Kendal Parkway and Boyde Lake
Ave. are NOT regional improvements and both are already funded under existing agreement)

Hardy's testimony begged the question later asked by Councilman Dave Clark why make any
amendment to the MFA if those projects are already scheduled to be funded as local
transportation improvements?  The obvious answer was not provided by Hardy who stumbled
around several answers that appeared to confuse the city council.
Click on pages below to enlarge
(images from 2004 MFA)
McWhinney Controlled Centerra has
accumulated over $124 million in debt
city report provided to council copied below

"The 2011 Loan was initially funded by the Lenders,
pursuant to their pro rata share, in the amount of
$120,920,000. The remaining $10,000,000 was
retained by the Lenders and is made available to the
District through multiple advances until September 1,
2014, provided that certain assessed valuation tests
are met. The District was advanced $1,548,665 and
$6,852,944 in 2011 and 2012, respectively. Currently,
$1,598,391 remains available to be advanced to the

The 2011 Loan matures on June 8, 2016. At or prior
to maturity, the District anticipates entering into a new
loan agreement or remarketing the debt in the form of
bonds. The 2011 Loan requires annual principal
payments starting on December 1, 2011. A principal
payment of $2,650,000 was paid in 2012. The current
outstanding principal balance is approximately

The 2011 Loan provides for a variable rate of
interest. There are two different interest  rate
exchange agreements (swaps) relating to amounts
under the 2011 Loan. The larger swap is with the
Royal Bank of Canada for a current notional amount
of $106,570,000 (with annual principal reduction), a
fixed interest rate of 5.5225% (3.46% swap rate plus
2.0625% bank fees), and a final termination date of
Dec 1, 2029. The smaller swap is with the BBVA for a
current notional amount of $9,150,000 (with annual
principal reduction), a fixed interest rate of 3.556%,
and a final termination date of June 8, 2016.
Despite claims by city staff and McWhinney that all
regional improvements have been completed, the $50
million contribution to a final widening of the Highway
34 overpass of I-25 has not been funded.  Below is
the schematic provided by McWhinney in the 2004
MFA which was later sold to the public as a primary
benefit of the agreement.
Centerra's Evolving History

During a council study session last July, Jay Hardy
of McWhinney argued bringing jobs to Loveland
was the primary motive behind his company's 2004
Master Financing Agreement with the City of

On the contrary, the architects of the city's 2004  
Master Financing Agreement with McWhinney
created Centerra to obtain new sources of city
revenue by incentivising retail to locate in Loveland
for the primary purpose of funding regional
transportation improvements using diverted
property and sales taxes.

As documented by LovelandPolitics in July of
2007(six years earlier), Mayor Walsh was appalled
at even the suggestion of Centerra being used to
subsidize non-retail commercial development.

On election night 2013 the Loveland City Council  
removed the city's last leverage to guard Centerra
revenue for regional transportation improvements
while Centerra continues to fall short of its
advertised PIF (sales tax fee) revenue goals.