Closer look at City for Champions, Part 1: Colorado Springs might back it, if there is 'a very well-defined investment'

February 16, 2014 Updated: February 17, 2014 at 6:50 am
photo - Jacob Kosinski, 12, of Chugiak, Alaska looks at the picture frames of the USA Wrestling's Wall of Olympic and World "Champions" Thursday, February 13, 2014. The City for Champions tourism initiative is expected to have a quarter-of-a-billion-dollars worth of tourism and public improvement projects in Colorado Springs. Photo by Mason Trinca, The Gazette
Jacob Kosinski, 12, of Chugiak, Alaska looks at the picture frames of the USA Wrestling's Wall of Olympic and World "Champions" Thursday, February 13, 2014. The City for Champions tourism initiative is expected to have a quarter-of-a-billion-dollars worth of tourism and public improvement projects in Colorado Springs. Photo by Mason Trinca, The Gazette 

Since Colorado Springs civic leaders unveiled their City for Champions tourism proposal last summer, the enthusiasm displayed by the plan's supporters has been matched only by the skepticism voiced by its critics.

That shouldn't be a surprise. Springs-area residents have a track record of questioning major public policy initiatives - from a plan that took shape in the 1980s to build an airport, to the lease of the city's hospital system to University of Colorado Health OK'd by the voting public in 2012. They want to know what they're being asked to support, why and how it will affect them.

"The community is willing to support investments if they know exactly what it is, if there are clear boundaries around what that is and if it's a very well-defined investment," said Les Gruen, head of the Urban Strategies planning firm and a 30-year resident. "But there are many areas where there's just not that blind willingness to move forward."

So it's no surprise that a multitude of questions have surrounded the project since it was announced. Here are some of the recurring ones that have come up. Today's story focuses on questions over anticipated funding. Monday's story addresses some of the "what ifs" - what if visitor and financial projections fall short, or city and county governments don't OK their part in the plan? And will voters be allowed to weigh in?

Question: What is City for Champions?

Answer: Four proposed tourism projects for Colorado Springs - a downtown Olympic Museum; a downtown sports and event center; a new Air Force Academy visitors center; and a sports medicine and performance center at the University of Colorado at Colorado Springs.

In addition, City for Champions includes several southwest downtown public improvements, including a 1,500-space parking garage and a 500-foot pedestrian bridge to link America the Beautiful Park to the rest of southwest downtown.

Q. Why was it proposed?

A. Colorado's Regional Tourism Act makes state sales tax funds available for development of local tourism projects. After Pueblo and Aurora successfully applied for state funds in 2012, Springs' leaders last year asked, "Why not us?"

Q. What's the price tag?

A. A preliminary financial plan, which supporters say will change, estimates the cost at $250.6 million: $59.4 million for the museum; $92.7 million for the sports and event center; $20.5 million for the academy visitors center; and $27 million for UCCS' sports medicine center. Southwest downtown improvements would cost an additional $51 million, with the biggest piece being $29.5 million for the garage.

Q. How will they be financed?

A. The financial plan, which proponents say will evolve after it receives more scrutiny, has several moving parts.

The Regional Tourism Act provides funding through a mechanism known as tax increment financing or TIF. That money is calculated as a percentage of increased state sales tax revenue expected to be generated by out-of-state tourists who come here because of the new venues.

In December, the Colorado Economic Development Commission awarded the proposal 13.08 percent of increased state sales tax revenue that's to be collected across a large portion of Colorado Springs over 30 years. The amount is projected to add up to $120.5 million for City for Champions over the 30 years, based on an estimate of 513,000 out-of-state tourists who will come to visit the four venues each year and spend money on lodging, meals and the like. The money will be collected in a TIF zone covering roughly two-thirds of Colorado Springs - an area meant to capture tourism spending at most hotels, restaurants and stores.

According to the preliminary financial plan, the $120.5 million will be used to pay off a bond issue of $47.5 million, whose proceeds will help fund the projects and downtown upgrades.

Q. What about the rest of the $250.6 million?

A. Just as the state agreed to earmark a percentage of its increased sales tax revenue for City for Champions, the financial plan proposes that the Springs and El Paso County do the same thing. The two governments would take 13.08 percent of their increased sales tax revenue in the TIF zone over 30 years and designate it for City for Champions. The city and county money, however, would be used only to help build the sports and event center.

It's estimated that the city would capture $83.1 million in sales tax revenue and use it to support a $32.5 million bond issue; the county's sales tax would generate $41.6 million for $16.8 million in bonds.

Meanwhile, the plan proposes that the Colorado Springs Urban Renewal Authority (URA) do the same thing in a broader fashion - capture sales and property tax revenue from development taking place in southwest downtown. The financial plan proposes the URA use those revenues to support a $48.7 million bond issue for the downtown projects.

Q. What about private money?

A. Project supporters expect private donations to pay for $48.2 million of the overall cost; $28 million of that figure would be earmarked for the museum, $15.3 million would go to the visitors center and $5 million to UCCS, the preliminary financial plan shows. Organizers have not yet announced private commitments.

Other major funding sources: the city's Parking Enterprise Fund - fed by fees from meters and garages - would pay for the parking garage; UCCS expects to help fund its project with $13.9 million from revenues and lease payments generated by its facility; the Pikes Peak Rural Transportation Authority would chip in $2.1 million for the pedestrian bridge; and new market tax credits - a federal program designed to spur reinvestment in blighted areas - would account for $10 million more.

Q. What will be the total interest payments over the life of the bonds?

A. City Councilman Joel Miller, a City for Champions critic, says the long-term principal and interest payments would be $350 million, which represents the proposal's true cost - not $250.6 million.

Bob Cope, senior business climate specialist with the city's Economic Vitality Division, says a figure on the bond payments over 30 years isn't available at this time. That figure will be based on several factors still to be determined, such as the amounts to be borrowed and interest rates, Cope said. In turn, he said, the amount of bonds to be issued could change for several reasons, such as if private donations are higher than expected or if a corporation pays a fee to put its name on the sports and event center.

Q. Paying off the bonds will depend on sales tax revenue projections meeting estimates. What if the 513,000 tourists fail to show up, and revenue projections fall short?

A. City for Champions supporters have proposed that the bonds be repaid by tourism-related revenues the projects generate. In that scenario, proposal backers say bond buyers would assume risk; the venues wouldn't serve as collateral to back the bonds, and no general fund revenues would be used to support the borrowing. In other words, they say, taxpayers won't be on the hook. Miller, in posts on his website, questions whether the increased sales taxes collected in the TIF zone truly would be generated only by new visitors to the state. If not, he says, sales taxes collected on everyday purchases by local residents in the TIF zone would be funneled to the City for Champions' projects instead of going for police, fire and other city services.

The proposal's backers counter that the 13.08 percent of increased state sales tax revenue was calculated to capture only the hotel, restaurant and other spending by new, out-of-state visitors coming to town for the four venues.

Miller also said he rejects the idea that bond purchasers should assume all the risk.

Q. How do City for Champions supporters respond to such concerns?

A. Chris Jenkins, president of Nor'wood Development Group and a City for Champions proponent, said the due diligence that's required on the part of bond buyers and the risks they assume are routine in the world of municipal finance. The City for Champions projects would be no exception, he said.

"Those that are supportive of the City for Champions proposal have a lot at stake in our entire community if something that's done is not viable, if a financing structure is put together that is not viable," Jenkins said.

El Paso County commissioners plan to hire a consultant to produce their financial analysis, said Amy Lathen, the commission's vice chairwoman, and the city might join in that effort, Cope said.

"If a third party, independent analyst comes back and says, 'I don't know where they came up with that number, but we're looking at 100,000 people (visitors),' well, obviously, we're going to take a step back and go, 'What was missed? What happened here?' And do more analysis," Lathen said.

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