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People watch the runners cross the finish line from the Cog Railway as over 1,000 participated in the Pikes Peak Ascent on Saturday, August 19, 2017 in Colorado Springs, Colorado. (Photo by Dougal Brownlie, The Gazette)

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MANITOU SPRINGS Some residents expressed skepticism Tuesday night about city officials’ proposed changes to a 50-year tax-incentive deal with the Pikes Peak Cog Railway.

While the owners determine whether their aging Cog Railway can be rebuilt, the City Council is taking a second look at the pact it passed June 26. The Cog’s owners have said the agreement to let them retain revenue is essential to pay the $85 million or more to rebuild the railway, refurbish or replace the depot and buy new rail cars.

More than 50 people gathered at City Hall to hear about the proposed tweaks and ask questions. Some commended the council for trying to revise the agreement to better meet Manitou’s best interests.

Currently, the city would waive its use tax on the project’s equipment and machinery and would cap excise tax revenue the city collects on Cog ticket sales. Everything over that cap would go to the Cog. The limit increases incrementally, from $500,000 in the first year to $750,000 in the 50th year.

The pact also requires the Cog to pay Manitou Springs $1 million by 2019 to make up for lost tax revenue from the railway’s closure this year.

But city leaders’ proposed changes would tie the Cog’s tax breaks to its ridership, so the city would get more tax revenue when the Cog gets more riders.

The proposal has evolved slightly from changes considered late last week. City officials said the council now hopes to institute these amendments:

• The city still would cap the excise taxes. But in the second 25 years, the Cog would pay at least 3.8 percent of the 5 percent excise tax. If ridership exceeded 375,000 in any year, the Cog would pay the full 5 percent excise tax for every ticket sold above that threshold.

• The use-tax waiver also would apply to the Cog’s purchase of more replacement rail cars expected to be needed in 15 to 20 years.

• In addition to paying the city $1 million by 2019, the Cog would pay Manitou Springs another $250,000 in 2020 while the railway still is being built. When the city began negotiating, construction was expected to start as soon as this fall and be completed in two years. Now the time frame is unclear.

Mayor Ken Jaray and other proponents of the agreement have said it’s the best option for Manitou Springs, which stands to lose about $600,000 a year in tax revenue if the railway is permanently closed.

During the meeting, resident Cory Sutela called the new proposal “an alternative that looks a lot better than the first one.”

Another person at the meeting said the city could lose $35 million in tax revenue over the next 50 years if the Cog isn’t rebuilt — an estimate that interim City Administrator Malcolm Fleming said is fairly accurate.

“We can nickel and dime all we want,” said the speaker, who did not give his name. “This city cannot afford that.”

Audience members applauded.

But other residents later expressed lingering concerns.

Former City Councilwoman Aimee Cox said the city needs more data about the Cog’s effect on the community and the city’s infrastructure over the next 50 years.

“The issue at this point is that we are tinkering with the Cog’s deal. We’re negotiating their deal,” Cox told the council. “We need to present the case based on our needs, not the needs of the Cog.”

John Shada, a former councilman and vocal opponent of the pact, said he still doesn’t understand why the Cog doesn’t just raise its ticket prices to cover the cost of the improvements.

Another resident said he wasn’t satisfied that the Cog’s owners fully justified the deal’s 50-year term.

But without the tax incentives, odds of the project becoming a reality diminish greatly, the Cog’s owners have said. And the agreement must last 50 years if the Cog is to recoup the tremendous cost of the reconstruction, according to Gary Pierson, president and CEO of Oklahoma Publishing Co., which owns the Cog and The Broadmoor hotel.

Friday, Pierson told The Gazette that the company is still in talks with overseas vendors who would provide materials for the project. The bids have come in at about $100 million — about $15 million more than the ownership group’s maximum budget.

The company received engineering reports for the reconstruction design, which will be provided to the vendors before they make their final offers, Pierson said. He said he hopes the bids come next month, and the Cog’s owners can decide whether to proceed.

He previously said discussions with the city about potential changes to the agreement had continued over the summer, but he did not elaborate.

Officials will discuss the proposed amendments further and answer more questions Tuesday before the council takes an initial vote on the changes. A final vote is set for Oct. 23, according to a city news release.

Oklahoma Publishing and The Broadmoor are owned by the Denver-based Anschutz Corp., whose Clarity Media Group owns The Gazette.

County Government Reporter

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