Loveland - December 5, 2011

In 2007 the City of Loveland bought the Home State Bank building and property located at 533 N. Lincoln
Ave. in downtown Loveland for $1.1 million.  Tuesday night the City Council is being asked by staff to
authorize a negotiation to sell the same property for $200,000 early next year.

Bought largely with museum CEF dollars, the Home State Bank building will be demolished as part of a plan
by the Brinkman Partners to build multi-family housing with the future potential of attached artist studio/lofts
in downtown Loveland.  If the property has not increased in value since 2007, the discounted price will
represent a $900,000 subsidy for the private developer Brinkman Partners out of Ft. Collins, Colorado.

CEF’s (Captial Expansion Funds) are fees attached onto private developments (other than McWhinney)  to
pay for the cost of expanding the capital assets of services provided to residents of the City of Loveland.  
State law requires the funds collected as fees for CEF’s be used only for the purposes intended (not general
fund monies) due to the fact they were not approved by voters as a general revenue source as required under
TABOR (Taxpayer’s Bill of Rights).

Acquisition of the Home State Bank building in 2007 was paid primarily from CEF’s collected from developers
for the purpose of expanding Loveland’s museums.  Home State Bank presented the City of Loveland an
appraisal for $1.3 million in late 2006 while the city hired an independent appraiser who valued the property at
$900,000.  A commercial real estate broker hired by the city of Loveland to negotiate the contract proposed
the city pay $1.1 million (difference between the two conflicting appraisals) which the Loveland City Council
appropriated and approved in March of 2007.

At the time, the City of Loveland intended to expand the Loveland Museum onto the Home State Bank
property and therefore used mostly CEF dollars to acquire the old Home State Bank building for $1.1 million.  
However, the City of Loveland had only budgeted $900,000 of CEF’s to pay for the acquisition.  The Erion
and Kroh Foundations made-up the difference by donating to the city the extra $200,000 necessary to
purchase the Home State Bank property.

The current sales price for the property located at 533 N. Loncoln Ave. in Loveland has been set at $200,000
to recover only the private donations contributed to the acquisition of the Home State building.  This means
the City of Loveland will effectively lose $900,000 in CEF money invested in the property when the
transaction is complete.  CEF’s cannot legally be provided as a subsidy for a private artist loft development
proposed by Brinkman Partners especially since they will not be using the funds to expand the Loveland
Museum as required by state law.  

If the money cannot be used for the specific purpose the fee was supposed to fund, than it must be refunded
to the parties paying the fee according to state law.  Selling the property at what legally appears to be a market
loss is the city’s back-door way around the restrictions in the law against subsidizing a private development
with funds that cannot otherwise be used to subsidize a private development.

The City of Loveland will be “losing” $900,000 of CEF’s invested in the property as opposed to illegally
subsidizing a private development using public funds earmarked for a specific public purpose.  This may
prove problematic later for the city if developers bring an action against the city to recover fees paid and later
used for purposes not intended by state law.

County and Schools Pay the Difference
In an unrelated transaction, the City of Loveland intends on making up for the $900,000 loss in Loveland
Museum CEF’s by capturing an estimated $2.1 million in future property tax revenues otherwise bound for
Larimer County and the R2J Thompson School District.

Last September, Loveland’s development staff first proposed the idea to council of diverting future urban
renewal tax dollars from the “Finley Addition” or Lincoln Place URA (Urban Renewal Authority) to another
area of the downtown not currently part of the Lincoln Place URA (
see story from last September).
Loveland’s Council inquired to staff about the view of both Larimer County and Thompson School district of
giving-up sure property tax revenue to assist in the expansion of the Loveland Museum.  Loveland than
presented its plan to expand the URA and divert future tax dollars away from the county and schools to the
respective local government agencies per council direction.

The Loveland Reporter-Herald ran a
puff piece on November 22, 2011 following a presentation to Larimer
County by Loveland City Manager Bill Cahill and city planner Mike Scholl regarding the plan that described the
County’s reaction as “Cozy” to the plan.  In fact, no reporter attended the hearing that is available on the
Larimer County website.  During the hearing, Larimer County Commissioners asked difficult questions
regarding the plan that sounded anything but “cozy” with the city’s objective to divert millions of future
property tax revenue away from the county to make-up for the $900,000 subsidy to Brinkman Partners of lost
CEF’s for museum expansion.  You can listen to the presentation by Loveland City Manager Bill Cahill and his
response to questions at the Larimer County website (
link to November 22, Commissioner Meeting).  The City
of Loveland presentation is approximately 50 minutes into the audio recording of the County Commissioner's

Ron Cabrera, Superintendent of Thompson School District, sent Loveland City Manager Bill Cahill a
memorandum supporting the city's intent to divert future school tax dollars in an apparent misunderstanding of
the economic impact to the school district.  The memo stated,  

“Further, we understand that by moving the parcel at 6th Street and Lincoln Avenue back into private
ownership, the property tax base to the School District will increase.”

On the contrary, city staff reported to council last September that $150,000 in revenue currently received
from the TIF (Tax increment Financing) for the Lincoln Place project will revert to the schools and county in
only two years when the bond debt it paid.  Cabrera, by his memorandum, agreed to forego approximately
$100,000 per year of revenue for the school district until 2027.

By expanding that Urban Renewal District another 14 years to include Loveland’s museum and to offset the
anticipated $900,000 loss of selling the Home State Bank to Brinkman Partners, the city hopes to divert from
school and county coffers more than $1 million additional funds over the next fourteen years.  This is needed
to repay new bond debt the city will take out on behalf of the museum expansion to be repaid by dollars
otherwise destined for the county and schools from Lincoln Place URA.  

Larimer County Commissioners have not taken an official stand on Loveland's proposal.  During his
presentation to the Larimer County Commissioners, Loveland City Manager Bill Cahill, said the city intends to
include extra sales tax increment in the Lincoln Place URA.  No such mention of sales tax is included in the
resolution going to council December 6, 2011.  Following Loveland's presentation, the Larimer County
Commissioners thanked Cahill for his presentation and reiterated the fact the county has no legal ability to stop
the city from expanding the Lincoln Place URA.
City To Lose $900,000
On Home State Bank Building Sale
Loveland City Manager justifies a
sales price for the former Home State
Bank property at 80% less than what
Loveland paid in 2007

November 22, 2011

Larimer County Commissioner
Tom Donnelly
"You bought the property for $1.1 million
and are selling it for $200,000?"

Loveland City Manager
Bill Cahill
"There have been some adverse market

Listen to the tape
(discussion begins at 50 minutes into the meeting and
quote above appears at end of discussion)

County / City Discussion
During the November 22, meeting with the Larimer
County Commissioners, City Manager Bill Cahill
agreed the city would look to "TIFing" future sales
taxes of the city to reduce the impact of the
reduced property taxes caused by increasing
boundaries of the Lincoln Place URA.

Cahill estimated the county will give-up
approximately $50,000 a year until 2027 should the
city expand the Urban Renewal Authority (URA).

Contrary to what was promised to Larimer County,
the Loveland City Council is being asked to
consider only property taxes for the expanded
URA in the information packet being presented to
council. Staff is not recommending any "sales tax"
TIF as presented to Larimer County.

What Wasn't Presented:
County officials appear to mistakenly believe the
term of the Lincoln Place URA (20 years) would
continue diverting funds for the full term of the URA.

School Position
School Superintendent Ron Cabrera, based on his
memorandum to Loveland, also appears to
misunderstand the impact of the debt being satisfied.

Cabrera's memo to the city supports the diversion
of an estimated $100,000 per year from district
revenue until 2027 ($1.5 million).  Cabrera reports
his belief the school will not any lose revenue in his