LovelandPolitics
| Loveland's Independent News Source |
Loveland, January 7, 2015
Loveland's City Council voted 6-3 to approve an unprecedented $2 million upfront cash subsidy
to an LLC responsible for acquiring property and developing a building to locate a Sprouts
Farmers Market on Loveland's busiest intersection of Highways 287 and 34.
After more than an hour of intense debate, the council voted to approve the subsidy on second
reading but not before trading jabs and heated comments.
Councilman Troy Krenning, who was not in attendance during the first vote on the project,
complained the beneficiary is no longer the applicant for the subsidy but instead an LLC
participating in a tax deferred 1031 exchange (IRS term for the form used) to avoid capital gains
tax. The developer's representative, Tyler Carlson, took exception to Krenning's term "shell
game" by interrupting Krenning for which he later apologized.
Councilman McKean emailed the city manager earlier in the week asking for a copy of the
agreement promised in the first meeting that Sprouts is also on the hook for the repayment
should the agreement fall through. Instead of providing such an agreement, Loveland City
Manager Bill Cahill invited McKean to his office to review the lease agreement. Cahill is reluctant
to use city email for documents he doesn't want the public to gain access to through later CORA
(Colorado Open Records Act) requests.
Proponents of the subsidy were angered when both councilors Krenning and McKean responded
to their arguments. Councilwoman Joan Shaffer snapped at McKean that she doesn't want to be
"combated" when expressing an opinion to which Mckean explained they were participating in a
discussion.
McKean's previous attempts to obtain Evergreen Devco's own profit in the transaction have been
unsuccessful. In a last minute switch, the city's two million dollars are no longer being paid to
Evergreen (as originally presented) but instead to a company by the name of Thornton Longterm
Investments LLC (TLI). TLI recently sold a commercial property at significant profit so will fold the
profits into the Sprouts development to postpone paying any capital gains on that profit. Both
McKean and Krenning raised the question of how taxpayers can be called "partners" in a deal
where the tax scheme being employed doesn't benefit (reduce) the city's initial contribution.
Subsidy or loan?
City staffer Mike Scholl first labelled the Sprouts' subsidy a "loan" which was repeated in local
press and by proponents on the city council. The theory is that any additional sales taxes
collected on the sales of food by Sprouts is "extra" revenue to the city thus can be considered as
"repayment" of the loan by Sprouts.
The proposed development will encompass 7 parcels of land totaling approximately 2.3 acres
between Lincoln Ave. and Jefferson Street on the block north of Highway 34. The retail store will
be 27,000 square ft. and rely on Jefferson Street (currently residential) for both retail traffic and
large truck deliveries. According to the developer, the property acquisition cost for a market of
this size should be only $1 million but on this corner he is paying over $3 million. He explained
the higher property values are the result of owners pricing their property improvements as assets
while he believes they are really liabilities. The city subsidy will make-up the difference by paying
the sellers what they want while also reducing the land acquisition costs considerably for the
developer who will than lease the building back to Sprouts.
Loveland's City Council voted 6-3 to approve an unprecedented $2 million upfront cash subsidy
to an LLC responsible for acquiring property and developing a building to locate a Sprouts
Farmers Market on Loveland's busiest intersection of Highways 287 and 34.
After more than an hour of intense debate, the council voted to approve the subsidy on second
reading but not before trading jabs and heated comments.
Councilman Troy Krenning, who was not in attendance during the first vote on the project,
complained the beneficiary is no longer the applicant for the subsidy but instead an LLC
participating in a tax deferred 1031 exchange (IRS term for the form used) to avoid capital gains
tax. The developer's representative, Tyler Carlson, took exception to Krenning's term "shell
game" by interrupting Krenning for which he later apologized.
Councilman McKean emailed the city manager earlier in the week asking for a copy of the
agreement promised in the first meeting that Sprouts is also on the hook for the repayment
should the agreement fall through. Instead of providing such an agreement, Loveland City
Manager Bill Cahill invited McKean to his office to review the lease agreement. Cahill is reluctant
to use city email for documents he doesn't want the public to gain access to through later CORA
(Colorado Open Records Act) requests.
Proponents of the subsidy were angered when both councilors Krenning and McKean responded
to their arguments. Councilwoman Joan Shaffer snapped at McKean that she doesn't want to be
"combated" when expressing an opinion to which Mckean explained they were participating in a
discussion.
McKean's previous attempts to obtain Evergreen Devco's own profit in the transaction have been
unsuccessful. In a last minute switch, the city's two million dollars are no longer being paid to
Evergreen (as originally presented) but instead to a company by the name of Thornton Longterm
Investments LLC (TLI). TLI recently sold a commercial property at significant profit so will fold the
profits into the Sprouts development to postpone paying any capital gains on that profit. Both
McKean and Krenning raised the question of how taxpayers can be called "partners" in a deal
where the tax scheme being employed doesn't benefit (reduce) the city's initial contribution.
Subsidy or loan?
City staffer Mike Scholl first labelled the Sprouts' subsidy a "loan" which was repeated in local
press and by proponents on the city council. The theory is that any additional sales taxes
collected on the sales of food by Sprouts is "extra" revenue to the city thus can be considered as
"repayment" of the loan by Sprouts.
The proposed development will encompass 7 parcels of land totaling approximately 2.3 acres
between Lincoln Ave. and Jefferson Street on the block north of Highway 34. The retail store will
be 27,000 square ft. and rely on Jefferson Street (currently residential) for both retail traffic and
large truck deliveries. According to the developer, the property acquisition cost for a market of
this size should be only $1 million but on this corner he is paying over $3 million. He explained
the higher property values are the result of owners pricing their property improvements as assets
while he believes they are really liabilities. The city subsidy will make-up the difference by paying
the sellers what they want while also reducing the land acquisition costs considerably for the
developer who will than lease the building back to Sprouts.
| Council Approves $2.2 Million Subsidy for Developer of Sprout's Farmers Market |
Boulder businessman and founder and CEO of Colorado based Sunflower Farmers Markets (merged into Sprouts' Farmers Market in 2012) Mike Gilliland still holds stock in the company benefiting from the City of Loveland's $2.2 million subsidy to locate a store in Loveland. Caught in a child prostitution sting in 2011 and arrested by Phoenix Police, Gilliland resigned as CEO before later pleading guilty to pandering for sex to someone he thought was a minor. Lewis Phelps, a spokesman for the natural food store chain described Gilliland's role as, "non-controlling, passive interest." He also has declined to disclose what percentages of the company Gilliland owns. A cursory check of the public SEC filings for Sprouts indicate Gilliland and/or close family members still own shares. Ironically, Gilliland and his wife Libby Cook owned "Lollita's" convenience store in Boulder before founding the successful Wild Oats natural food chain which he later sold to Whole Foods. Gilliland was last reported to be residing in his $2.22 million Arizona mansion he purchased with cash while also spending time at his restored Victorian home in Longmont, Colorado. Whether he has personally followed the saga of Loveland's large subsidy to his company is not known by this publication. Besides criminal prosecutions, Sunflower markets have been to court over numerous civil claims between business partners, former owners and claims of violations of none-compete clauses by Gilliland. Read a Boulder Daily Camera profile of Mike Gilliland. |
| Will sex offender benefit from City of Loveland subsidy? |
| Loveland City Manager Bill Cahill shopping at Sprouts in Ft. Collins |
| See video clips of the January 6, council debate in Sprouts' deal Multiple councilors back and forth Councilman John Fogle comments Councilman Troy Krenning comments |