At over $100 million in debt, Centerra has more public bond debt now than most cities of Colorado but doesn’t have an office, telephone or even one employee.
Ever since Centerra was constituted as a local government (on paper), it has been described as a “private partnership” with the City of Loveland by its creators but is little understood by most residents of Loveland. Even some members of Loveland’s City Council have erroneously referred to Centerra as developer McWhinney’s “private investment” in Loveland instead of recognizing Centerra as a locally constituted government within Loveland funded by diverted tax dollars and new public debt.
Centerra was organized in 2004 as a “quasi-municipal corporation” when the City of Loveland ceded certain governmental responsibilities and control within its own city boundaries to Centerra. Centerra was created under the authority of the Colorado Special District Act (Title 32, Article 1, Colorado Revised Statutes). Like the City of Loveland, also a municipal corporation, Centerra enjoys the same governmental powers of most any Colorado local government or metro district when assessing fees, imposing taxes and creating public indebtedness.
Like any corporation, Centerra is a legal person with certain rights and obligations under the law but unlike most corporations nobody works for it or owns it. Instead, Centerra operations are conducted entirely by “contracted services” arranged by McWhinney. Not surprisingly, McWhinney is the provider of choice for most services and in return provides Centerra with bills it cannot pay which are converted to interest earning debt by Centerra later to be paid from proceeds raised through taxes or additional public debt. According to the 2009 audit, Centerra owes McWhinney more than $11 million (from advances and in-kind contributions) that will be repaid from future revenue not already committed to the plus $100 million public bonds the district will also need to repay.
Finding the person who looks after Centerra’s long-term interests first in the Centerra Enigma is a little like Dorothy’s search for the all powerful Wizard of Oz. Draw back the curtain and you will not find anyone there for Centerra but instead McWhinney quietly controlling the levers. Self-described Centerra advocates will argue for McWhinney’s interests in the name of Centerra. Rich Shannon, a former VP of McWhinney, will often use the lofty title “Centerra District Manager” without disclosing to the public he isn’t even employed by Centerra but instead a contractor controlled by McWhinney.
Many small non-profit agencies or townships with few if any employees rely on an independent board of directors to provide oversight of their contracted services to ensure the mission and purpose of the organization is being served. Centerra’s board of directors, however, is another McWhinney appendage, so again you draw back the curtain and see only McWhinney operatives.
According to the 2009 annual audit of Centerra, “The members of the Board of Directors are employees, owners or are otherwise associated with McWhinney (Developer)..” Year after year, audits of Centerra have concluded one important point; Centerra’s board is not an independent board but instead controlled by McWhinney (Note 5 page 6 of Centerra 2009 audit). Among those pictured above conducting the Centerra board meeting are McWhinney senior staff members Kim Perry (McWhinney Community Design VP), Jay Hardy (McWhinney VP and General Manager), Doug Hill (McWhinney Chief Operating Officer), Tom Hall (McWhinney Commercial Broker), Joshua Kane (McWhinney Chief Financial Officer) and Alan Pogue (McWhinney attorney).
Colorado law requires any board member of a not-for-profit entity to disclose to the board their material conflict of interest. In most cases, the board decides whether or not the conflicted party can vote on any particular matter before the board for which they have a conflict of interest. In the case of Centerra's board, the majority of the board is conflicted so the intent of that law would be null and void as there is no objective majority to decide.
As a result of McWhinney's monopoly of Centerra's board, tax revenues and public debt generated through Centerra’ s legal status as a local government is spent mostly to benefit McWhinney’s private properties located within Centerra instead of the district as a whole. This process puts into jeopardy the longer-term prospects for Centerra’s financial viability and sustainability as well as creating an enormous disadvantage for any non-McWhinney property owners within Centerra metro districts. It has also put strains on McWhinney’s relationship with the City of Loveland as Centerra attempted to divert monies obligated to build promised regional transportation projects (I-25/US34) towards subsidies for McWhinney commercial projects instead.
Because Centerra is inseparable from McWhinney, even McWhinney partners have found dealing with Centerra difficult because Centerra doesn’t really exist as an entity except on paper but acts as an instrument of McWhinney.
Game Changers The recent foreclosure of the Promenade Shops At Centerra by Key Bank creates a large swath of land in Centerra no longer controlled by McWhinney. This could give the new owner an opportunity to vote-in an independent board member when current terms expire in 2012. Even before the foreclosure, McWhinney’s double interest as both the controlling hand of Centerra and partner of the Promenade Shops created havoc in their business relationship with the managing partner of The Promenade Shops lifestyle center; Poag & McEwen.
McWhinney fought their partner’s attempts to appeal the county’s assessed value of the shopping center which would have reduced significantly the lifestyle center’s annual tax bill thus improving revenues for the troubled project. Instead of helping, McWhinney opposed the reduction in tax assessment since the impact would hurt Centerra’s revenues flowing to McWhinney’s projects. When the dispute landed in court, the judge decided to wait until after the foreclosure auction to determine whether to allow a dispute of the assessment by Poag & McEwen to go before a state arbitrator.
It is little wonder why Poag & McEwen became so upset when they found the beneficiary of their property tax dollars, Centerra, willing to subsidize a competing McWhinney proposed development, Grand Station, after McWhinney sold half of their interest in Promenade Shops to Poag & McEwen. Desperate for the intervention of non-McWhinney controlled entity, Poag & McEwen appealed to Loveland's previous City Council to no avail.
Legally, Centerra’s stated mission is to “provide construction, installation, financing and operation of public improvements, including streets, traffic safety controls, landscaping, water, sanitary sewer, storm drainage, television relay, and park and recreation facilities” within Centerra.
In practice, McWhinney’s governing board of Centerra stretches the definition of “public improvement” to fit the short-term commercial objectives of the developer who employs the members of the board. This has included signage for a McWhinney owned shopping center and auto dealer center, the McWhinney’s unpopular African art sculpture collection on public display and even an $80 million private parking garage for the once proposed Grand Station project.
In rare instances, the City of Loveland has stopped Centerra in stretching their use of public funds for private purposes like the failed attempt by McWhinney to spend $1 million on a trolley system from the public funds in 2007 to further subsidize the now failed Grand Station project. (see LovelandPolitics story on Council Trolley decision)
In 2009 the Colorado Legislature passed reforms of Metro District and their finances that may impact McWhinney’s operation of Centerra. The legislation centers mostly on residential metro districts and was the product of reforms proposed by the Colorado Springs group for Metro District Reform.