When it comes to the Banning Lewis Ranch bankruptcy, Colorado Springs officials say there’s no place like home.
The city has asked a federal judge in Delaware to move bankruptcy proceedings related to the ranch to Colorado, a motion opposed by the property’s owners and their lenders.
A hearing is scheduled Wednesday in bankruptcy court in Delaware on the request.
Two California-based limited liability companies — Banning Lewis Ranch Co. and subsidiary Banning Lewis Ranch Development I & II — filed for Chapter 11 bankruptcy protection Oct. 28 in Delaware, which is where the ranch’s ownership is incorporated. The owners cited more than $242 million in debt.
The companies own the 21,400-acre Banning Lewis Ranch, which makes up most of the eastern one-third of Colorado Springs and where planners have estimated some 75,000 residences will be built over several decades.
Colorado Springs annexed the ranch in 1988, then the property went through different owners before homes started being built in 2007. The national recession and housing downturn have stalled much of the construction on the ranch; only a small portion on the property’s far northwest corner has been developed.
Many businesses — from Fortune 500 giants to small companies — incorporate in Delaware even as their headquarters and operations are elsewhere. The state’s laws, court system and taxes generally favor businesses.
In a motion filed last month, an attorney representing Colorado Springs said because the owner’s day-to-day decisions related to the ranch’s development take place in the Pikes Peak region, bankruptcy proceedings should occur in Colorado. The vast majority of creditors — including relatively small ones — also are here, the motion stated.
Likewise, an annexation agreement, special taxing districts and other matters affecting the ranch are governed by Colorado law.
“Colorado Springs has a very important interest in having local controversies decided by Colorado courts,” William Hazeltine, a Delaware attorney, wrote in a requested transfer of venue.
City Attorney Patricia Kelly said the city’s motion isn’t routine.
“The Banning Lewis Ranch is very important to the city and to its community and that’s why the motion to transfer venue was filed,” she said.
Kelly will be in Delaware for Wednesday’s hearing. She added she didn’t know whether the judge would rule at that time or later.
In response to the city’s request, attorneys for the ranch’s owners argued the bankruptcy involves the “sale and recapitalization of Delaware entities” — a reference to the owners’ incorporation in that state. The bankruptcy, the attorneys said, isn’t about “the administration of a dormant, undeveloped property located in Colorado...The vast bulk of the property — 17,706 acres — is raw land that is not even in the development phase yet.”
As with the city’s legal representative, the ranch’s attorneys cited creditors, saying those who have filed the vast majority of claims aren’t located in Colorado and have made their claims under Delaware law.
Also, the city of Colorado Springs isn’t a creditor, the ranch’s attorneys said in their response.
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