McWhinney Wants Out of Legal Obligations
Hein Family Trust Sues McWhinney & KB Homes
Loveland - February 5, 2010

Arguably the most costly, litigious and controversial piece of ground in Loveland Colorado is an inconspicuous 133 acres
of vacant land north of 28th St. SW (C.R. 16) and east of S. Taft Avenue in south Loveland.  

Since this property was annexed from the county into the city of Loveland in early 1999, political careers have been
ruined, national builders evacuated, fortunes made and lost all at least in part over the controversial actions related to
these 133 acres that still sit vacant.

The proposed development, named Aspen Knolls, has been the epicenter of an eminent domain battle, failed metro
district application, a controversial affordable housing fee waiver extension request and a court action against the latest
owner - Loveland developer McWhinney who purchased the property for $3 million in late 2006.

Property History

In 2000 most developers in Loveland would have not given this property a second look.  The expansive soils, high water
table, lack of local utilities and limited 60 foot easement to Taft. Ave. made this semi-rural land just another candidate for
undeclared open space.

Ken Merritt, however, saw it differently.  Merritt’s firm, Landmark Engineering Ltd. was hired by California builder KB
Homes to design a residential and commercial development to be built on the land.  According to one source close to the
matter, Merritt's firm billed KB Homes over $500,000 in engineering and design work planning Aspen Knolls.  One
problem with the property was the limited access to Taft Ave. by an adjacent road.   The existing 60 ft. easement is too
narrow to accommodate new city lane standards which include bike lanes.

Loveland's building boom was still on in 2004 when KB Homes was ready to move forward and details like easements
from adjoining property owners could be remedied by calling on friends in city hall.  

One friend of Merritt, former Loveland Mayor Pro Tem Don Marostica, was the insider who helped the “adverse
condemnation” or eminent domain against adjacent property owners succeed.  Merritt’s firm made the application to the
city in late 2004 on behalf of KB Homes of California after KB Homes.  Claiming the street improvements were the only
hold-up to going forward with the project, Merritt lobbied the city council to facilitate his client’s private development by
taking away the property rights of the neighboring land owners through government fiat.

Merritt, in fact, did what some engineering professionals may not do at any price – he asked the City of Loveland to use
the heavy hand of eminent domain to force adjacent property owners to give-up their land to facilitate approval of a
private and not public endeavor.  Marostica has argued the improvements would be needed in time anyway regardless of
Aspen Knolls so the private development only accelerated the deadline for widening the roads and intersections.

Eminent Domain & Don Marostica

The Loveland City Council voted to condemn adjacent properties on March 16, 2004 to assist KB Homes at the request
of Landmark Engineering.  The only member of the City Council to vote no was Councilman Glenn Rousey.  It is
important to note the now infamous eminent domain case (
Kelo vs. New London, Connecticut) was making its way
through the federal court system at the same time in 2004.  Kelo argued that the permissible "public use" under the
Takings Clause of the Fifth Amendment of the U.S. Constitution did not apply to a private development.  

A year later the United States Supreme Court ruled in favor of the City of New London in 2005 causing an incredible
public backlash.  Questions regarding the abuse of power later plagued failed election campaigns of Dave Clark, Steve
Dozier and Jan Brown who all voted for the condemnations and also failed to win another election in Loveland.

Facing certain condemnation in 2004, the adjacent property owners did sit-down with KB Homes and create agreements
to avoid the negative consequences of a city enforced adverse condemnation or taking of their property.   

Marostica, once he became a member of the Colorado State Legislature, defended himself regarding the vote by saying
he personally facilitated the agreement struck between the Hein Family Trust (one adjacent property owner) and KB
Homes.  The agreement provided the Hein Family Trust with $230,000 cash plus an agreement to make promised
transportation improvements required for the development by 2006.  Marostica later bragged that he convinced the Heins
that allowing the street improvements would create a better value for their remaining property as Aspen Knolls is being
built and allow future development of their property by bringing the city utilities closer.

The legally binding agreement between the Hein Family Trust and KB Homes promising the street improvements be made
by 2006 was recorded onto the title of the 133 acre Aspen Knolls development.  

McWhinney Buys Aspen Knolls -- Looking To Cash-Out Water Shares

While Aspen Knolls appeared to be a Loveland developer's Vietnam, it was a gold mine for Landmark Engineering
President and CEO Ken Merritt who had already earned lots of work from the various sagas surrounding the large parcel
of land.

Merritt approached Chad McWhinney (according to a source familiar with the property) and pitched Chad McWhinney
on purchasing the land.  At a sales price of only $3 million, McWhinney saw a bargain, in part, because the water shares
(a right that goes with the property) were worth around $4 million at the time.   In other words, the water per acre foot
(often called water shares) that go with the property could be used by McWhinney elsewhere to satisfy any off-site water
requirements on other properties in Loveland.  In addition, McWhinney could just sell the water share rights to another
developer at approximately $1 million more than McWhinney paid for the land.

In late 2006, McWhinney Real Estate, Inc. created Loveland Aspen Knolls LLC (on file with Colorado Secretary of
State) which promptly bought the Aspen Knolls property a few months later.

The problem with Aspen Knolls, however, was the City of Loveland had already placed the water shares from the Aspen
Knolls property into a city "water bank" when the property was approved for development of 400 homes and some
commercial buildings.  Once a share has been placed in the "water bank" to allow a subdivision and increase the density
of a property's zoning they cannot be taken back out.

McWhinney sought ways in which the City of Loveland would credit the water shares already in their water bank back to
McWhinney as the new owner of the property.  Through months of negotiations the city's Water/Wastewater Department
and McWhinney reached a deal.  If the property is re-zoned than the city would credit the water shares placed in the
water bank by KB Homes back to McWhinney as the new owners of the property.

In April of 2009, McWhinney's application to vacate the subdivision and rezone by "down" zoning the property to DR
"Developing Resource District" where no uses are permitted by right went before the Loveland Planning Commission.  In
staff's report to the Planning Commission, McWhinney's request was described as "highly a-typical" but staff also argued
there was no adverse impact to the neighboring properties thus staff wasn't against the proposal.  Troy Bliss, a member of
Loveland's Planning Staff, sent a memorandum to the Loveland Planning Commission describing McWhinney's request.  
Bliss's memo stated it was KB Homes that failed to develop the area until the first quarter of 2008 when McWhinney
bought the property.  County records show McWhinney bought the property in late 2006 not 2008 thus it was
McWhinney that failed to initiate the development and make good on the agreements with adjacent property owners.

Curiously, the proposal was not well received by the Planning Commission and after being postponed once by Rob
Molloy (
current Ward 1 candidate for Loveland City Council), McWhinney later dropped the request.

Hein Sues McWhinney - Landmark Engineering Misses the Mark

In 2008 the Hein Family Trust, that owns another large parcel of land in the vicinity of Aspen Knolls, sued McWhinney
and KB Homes for not installing the road improvements KB agreed to make by 2006 when Hein settled out of the
eminent domain action proposed by KB Homes that Loveland was preparing.  In that agreement, Hein lost property that
was necessary for easements to build road improvements provided the owner of Aspen Knolls made the improvements
by 2006.

Landmark engineering estimated the total road improvements would cost only $600,000 for McWhinney to come into
compliance with the agreement KB Homes struck with Hein (the agreement was recorded on the deed of the land).  That
is when Hein hired their own expert and discovered the $600,000 estimate was way off the mark.

According to Hein, Landmark Engineering failed to consider the eight major utilities running under the ground where the
proposed road improvements would be made.  Among those is a high pressure natural gas line that supplies natural gas to
Estes Park.  Moving the gas line is an expensive endeavor since it is 1500 PSI and only has a shut-off valve about once
every 2 miles.   In all the Hein estimate for completing the road improvements total $3.7 million.  Unlike the Landmark
Engineering estimate, Hein considered all the costs associated with completing the road improvements and moving the
major utilities necessary to complete the road work.

One source reported to LovelandPolitics that Chad McWhinney "blew a gasket" when he and his attorney, Tim Goddard,
learned the true cost of complying with the agreement that runs with the Aspen Knolls property.  An angry McWhinney is
reported to have said he would only pay for the costs his engineer estimated and no more.

Buyer Beware

Curiously, McWhinney has also been presenting to members of Loveland's City Council an entirely different story
regarding their plans for the Aspen Knolls property.  
McWhinney went before council late last year in an attempt to delay
the 2012 deadline of building 99 units of affordable housing in Aspen Knolls in exchange for the building fees for the
whole project being frozen at 2001 city fees.  It appeared as though McWhinney's attempts to down zones the property
and cash-out the water shares from Loveland's water bank was not known by the Loveland councilors like Larry Heckel
who complimented McWhinney for taking over the project with the ambition of "improving" the south part of town.

Council failed to approve the request however, saying they needed time to study the fee waiver extension issue which
McWhinney has asked City Manager Don Williams to place back on council's agenda for this month.  If McWhinney
attempts to develop the land they will likely ask the city to abandon the road improvement requirements which will begin a
new round with the many neighbors of the property protesting such a decision.

Even if the city abandons the traffic mitigation requirements on Aspen Knolls because McWhinney now owns the
property it will not release McWhinney from their obligation with Hein to complete the street improvements as agreed by
a date certain regardless of whether or not they develop the property.

In April of 2003 KB Homes requested the Loveland Planning Commission drop the street improvements required for
going forward with the ambitious Aspen Knolls development.  Below was the recommendation by city staff to the city
council in 2003 that was followed.

Move to recommend that City Council deny the requested amendment to the Aspen Knolls GDP and PDP,
based on the following considerations:

1. The applicant agreed to make the required improvements to South Taft Avenue north of the Aspen
Knolls project at time of GDP and PDP approval.

2. Whether made by the developer now or not, South Taft Avenue north of the Aspen Knolls project will have
to be improved eventually to correct the existing substandard condition.

                                                         Staff report to Loveland Planning Commission
                                                         April 28, 2003

After 5 years of good faith efforts to work with the developer of Aspen Knolls the surrounding property owners are in no
mood to start over from scratch.  They mostly want to see McWhinney complete the agreements they bought into when
they purchased the property for only $3 million from KB Homes back in 2006. Whether or not they develop the property
as planned or instead take back the water shares doesn't appear too important to the neighbors.
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Archives, stories and documents
Related to Aspen Knolls

January 2004

City staff memo describing the eminent domain
necessary to develop Aspen Knolls by condemning
the property of Ray W. Hein Family Trust

March 2004 report
Candidate Don Marostica mistakenly sends out
campaign brochure contradicting his vote on
Eminent Domain for Aspen Knolls

July 2006

Blog comments and posting on the Eminent Domain
along with a description of the
Hein Family Trust deal

August 2006 report
KB Homes Application For Aspen Knolls Metro
District to pay for traffic improvement promise

October 2007 report
Metro District similar to Aspen Knolls approved.  
This article compares the proposals and council
history approving such proposals

February 2008 report
Owners of KB Homes in the Greenbriar
development sue KB Homes for poor construction
and code violations

November 2009
McWhinney (new owner of Aspen knolls) asks
council for fee waiver extension

City Council Approved Eminent Domain
(minutes from the meeting)
Adopted 16th day of March, 2004.

Res. #R-30-2004:

Aspen Knolls Condemnation Request

Greg George, Director of Community Services
introduced this item which is consideration of a resolution
authorizing the City Attorney to take all necessary legal
including condemnation, to acquire a
portion of the Hein Family property for the purpose of
constructing roadway improvements to South Taft
Avenue associated with the Aspen Knolls PUD.

The applicant is Landmark Engineering on behalf of KB
Homes of Colorado. This item was first considered on
January 6th and continued for two weeks to allow the
parties more time to negotiate. On January 20th it was
continued again with direction to Staff and the applicant
to revise the request so that the land areas being
considered for condemnation would allow roadway
improvements meeting City standards. Council was
presented with hundreds of pages of documents outlining
in detail the offers and counteroffers.

Ken Merritt, representing Landmark Engineering came
forward with a power point presentation. He reviewed a
log of negotiation attempts with the Hein Family. At the
conclusion of Mr. Merritt’s presentation, Ben Waldman,
LSC Transportation spoke next.

No one from the Hein Family was present to address

Mr. Merritt entered several exhibits into the record:

1) certified mail receipt & proof of delivery;

2) correspondence from South Side Extension Ditch
Company; and

3) memo from Jeff Olhausen of Landmark Engineering.
Mr. Merritt responded to questions.

After considerable discussion between Council, Staff and
Mr. Merritt, Councillor Dozier moved to approve the
following resolution determining the necessity of and
authorizing the acquisition of certain parcels by
negotiation or condemnation and Mayor Protem
Marostica seconded. A roll call vote was taken with all
Councillors voting yes with the exception of Rousey who
voted no. Motion passed 8-1.
How It All Began

Resolution #R-105-98

finding the annexation petition for Aspen Knolls to be in
substantial compliance with CRS 31-12-107(1) and
setting a public hearing date of January 19, 1999 for
City Council to consider the annexation of 133.2 acres
of land to be known as Aspen Knolls Addition. Byrlon
Milke and Gaylen Williams filed the petition.

The property is located north of and adjacent to 28th St.
SW (C.R. 16), east of and adjacent to S. Taft Avenue.

The petition was filed with the City of Loveland on
December 10, 1997. Under Colorado State Statutes, a
public hearing on the annexation petition must be held
not less than 30 days and no more than 60 days from
the effective date of the resolution setting the public

The proposed annexation is scheduled for Planning
Commission consideration on December 22, 1998. The
Planning Commission will also consider on December
22, 1998 a request to zone the property to Aspen
Knolls PUD and a general development plan for the site.
The PUD proposes 400 to 600 residential dwelling units
and approximately 3.05 acres of commercial uses.
Council is scheduled to consider the PUD at a public
hearing on January 19, 1999.         
Aspen Knollss