McWhinney Seeks Another Tax Break
Loveland - November 17, 2009

While Loveland Councilman Daryle Klassen has said he believes McWhinney is “beyond reproach” he may find that view is no longer in the majority as the
newly elected Loveland City Council meets for the first time tonight.

McWhinney is asking the Loveland City Council to extend fee waivers on a development they bought in 2008 just when they were receiving subsidies from
Loveland for other developments as the result of the city believing they were short on resources.  A curious question that hasn’t yet been raised is why the
same company that cannot afford to “close” on any projects without city intervention in Loveland due to the economic downturn is publicly saying financing is
a cinch for McWhinney elsewhere.  In addition, McWhinney has continued to acquire new investments and projects during the same time money isn’t
apparently available to fully fund previous commitments to Loveland like the I-25/U.S. 34 interchange again due to the economic downturn.

What McWinney Is Asking For This Time

Loveland Municipal code allows projects that include some “affordable housing units” to freeze the Capital Expansion Fees (CEF's), water rights
requirements and any other building fees imposed by the city on new development for 12 years without an increase.   A KB Homes development acquired
by McWhinney in 2008 called Aspen Knolls was approved in November of 2001 for the fee freeze and therefore must have the first certificate of occupancy
by November of 2013 to keep the building fees at 2001 levels.  According to city code, the council may extend the deadline but only if good cause for the
delay is shown by the developer.  As always, McWhinney is citing the national economic downturn in the economy and the lack of dollars available for
commercial financing as the reasons why they require an extra-ordinary extension to the 2012 deadline.

This is ironic as a McWhinney project in Southern California that is displacing 100 poor people from their homes doesn’t appear to have difficulty obtaining
financing.  McWhinney is receiving subsidies from the City of Garden Grove to develop the country’s largest indoor and outdoor water park and a large
resort hotel just down the road from Disneyland.  
According to the attorneys representing the displaced residents of a rundown RV park,

"Destroying over 100 units of affordable housing to build a water park at public expense is not responsible redevelopment - particularly
without a plan for replacement of the housing or adequate relocation for the tenants," said Remy De La Peza, attorney for Public Counsel, a
pro bono law office."

Another article states,

“Groundbreaking for this new project could happen as early as 2012, said Trae Rigby, project manager for McWhinney Enterprises. Rigby
said he does not see the current economic downturn as a challenge.....The next critical step is to get the city council’s blessing Tuesday,
Rigby said. Once that is accomplished, McWhinney would be faced with selecting a hotel brand and operator. That would be followed by the
design process. They also would need to get the project financed, which Rigby is optimistic about as well.”

The irony of McWhinney’s request in Loveland is to delay the allowance for Aspen Knolls until 2018 thus enabling further delays of the project.  Often
McWhinney argues for subsidies to accelerate a project but this time in Loveland it is to incentivize a delay in the project.  McWhinney can also resell the
property at a profit reflecting the new extension of the reduced building fees to 2018.  KB Homes sold and likely priced the property according to the city’s
condition the construction begin soon to qualify for the 12 year incentive.  If McWhinney succeeds in getting council to support an extended deadline, the
property will likely have a much greater value as development could wait until 2018 long beyond the period the city intended for the incentive.  By 2018 the
local construction industry will likely have recovered thus eliminating the need to incentivize the projects.

Background on Aspen Knolls

McWhinney acquired the Loveland property and associated project from Southern California builder, KB Homes.   While no houses have yet been built, the
proposed development and the developer were the center of three important controversies in Loveland over the past decade.  Despite receiving the
affordable housing allowance to freeze the building fees at 2001 levels, KB Homes never moved forward with the project.  Inhibiting their success included
ambitious density objectives that put them at odds with city staff over issues of access to South Taft Ave., a failed Metro District request to Loveland's City
Council and an ongoing lawsuit representing hundreds of Loveland homeowners who bought KB Homes from another development in Loveland plagued by
problems caused by poor construction methods and oversite of subcontractors.

Below is a summary of KB Homes and Aspen Knolls issues in Loveland;

1.        March 16, 2004 Loveland City Council approved Eminent Domain procedures against property owners unwilling to sell land to KB
Homes for the Aspen Knolls development

2.        August 15, 2006 the Loveland City Council rejected KB Homes’ request to establish a Metro District to subsidize the development.  
One year later an all residential Metro District by McWhinney called Lakes At Centerra was approved by the same council which later
approved a similar residential district for Cascade Ridge.

3.        Aspen Knolls developer, KB Homes, was the subject of a $5.5 million lawsuit by Loveland home owners for shotty construction in
Greenbriar paired and townhomes which settled only two weeks ago.

1.  Eminent Domain (Council said yes)

KB Homes’ failed to develop the Aspen Knolls project long before the current recession or slump in home prices.  The project was made famous in
Loveland when a majority of Loveland’s City Council voted to approve the use of eminent domain for private purposes to assist KB Homes in acquiring
additional land it required for the project.  KB Homes acquired the agricultural land and later proposed building 500 homes on the property.  The lack of
proper access for so many homes to Taft Ave. directly from the project became the main impediment to approval.  Unable to buy enough property adjacent
to Taft Ave. to build roads for that access, KB Homes sought help from the city council which later voted to impose eminent domain on adjacent property
owners should they not agree to KB Homes’ demands to sell a portion of their properties.

On March 16, 2004, then City Councilman Don Marostica seconded a motion to impose Eminent Domain against the Hein family property in Loveland after
his colleague Steve Dozier made a motion for approval.   Notably one councilman stood against the use of eminent domain in the matter, Councilman Glenn
Rousey.  Don Marostica has long since tried to distance himself from the official governmental act by claiming the property owners finally agreed to sell the
land directly to KB Homes.  Of course, he fails to add that failure to do so would have resulted in loosing their land anyway to Eminent Domain
condemnation Marostica personally coordinated directly with city staff to accomplish.

2.  Aspen Knolls Metro District (Council Said no)

Before considering or approving an even further extension of the “Affordable” housing fee waivers for Aspen Knolls, the Loveland City Council should first
inquire as to whether McWhinney plans to resurrect KB Homes’ request to use a Metro District to develop Aspen Knolls.  Historically, McWhinney has
been able to pass such plans past council while other developers haven't received equal consideration.

On August 15, 2006 the developer of the proposed Aspen Knolls development, KB Homes, asked the Loveland City Council for permission to create a
Metro District to offset the cost of construction.

Developers use Metro Districts to raise public debt by way of municipal bonds that are later paid back over a long period of time by new home owners
through a higher assessment on their property taxes.  KB Homes requested from Loveland’s City Council permission to establish such a Metro District to
assist them in developing the proposed 500 home neighborhood.

During the 2006 meeting a number of councilors voiced concern over a Metro District that would benefit just one single housing development while dumping
millions of dollars in debt upon unsuspecting home buyers to repay over 20-30 years via their higher property taxes.  In addition, the higher property taxes
often impact the home’s overall resale value thus causing surrounding neighborhoods to experience a drop in value as mass appraisal analysis often depend
heavily on price per square foot without considering the different property taxes between two adjacent developments.

On September 4, 2007, Loveland’s City Council reversed its stand against Metro Districts for residential neighborhoods and approved unanimously a
request by McWhinney to use a residential only Metro District to subsidize the development of Lakes At Centerra.   Jan Brown, previously against such
districts for such a “narrow use” had no objection to McWhinney using the same method to finance their Lakes At Centerra residential development.  Lakes
At Centerra, in fact, created even more Mill Levys than those proposed by KB Homes and provides no offset towards general city services like libraries,
education or parks and recreation.

Councilors Jan Brown, David Clark, Glenn Rousey and Steve Dozier all voted against a similar proposal for another Metro District for a residential
development only two months later on October 3, 2007. The proposed development is called Dakota Ridge and sits in a newly annexed area of Loveland in
the foothills just north of Namaqua Hills.  Despite the determined opposition to the proposed Metro District by some on council it did pass on a 5-4 vote.  
Unlike the public hearing for McWhinney, Dakota Ridge developers were subject to intense questions surrounding their efforts to inform buyers and criticism
for including Metro District funds to offset the cost of the development on city parks and education.

3.  KB Homes Settles Lawsuit by 100's of Loveland homeowners

Two weeks ago KB Homes settled a $5.5 million lawsuit with Loveland homeowners over shotty construction practices.  Part of the lawsuit included the
accusation that KB Homes was allowed to violate city code by ignoring the requirement to place special construction paper or insulation behind vinyl siding
on every attached unit with vynil siding in the development.

All of the paired homes and townhouses in the Greenbriar development near Taft Ave. and 43 Street were built in violation of these standard construction
methods and building codes.  Residents in the area were angry the City of Loveland inspectors signed-off on the non-code compliant homes.

The specific terms of the settlement are not being released but homeowners will receive all new exterior siding on every unit, concrete work and other general
repairs to the properties in the Greenbriar development in Loveland.

It is likely KB Homes was concerned about trying to sell new homes again in Loveland given their poor reputation, the lagging economy and the 2012
deadline to obtain at least one certificate of occupancy to meet the city's affordable housing fee waiver deadline.
a non-partisan, not for profit, news website reporting on Loveland, Colorado.
BLOG - Post your comments here
Archive - view the archived blogs
BLOG - Post your comments here