Scheels All Sports, a large retailer coming soon to northern Colorado Springs, is expecting additional breaks on property taxes and fees, on top of a $16 million sales tax rebate provided by the city — incentives neighboring businesses see as unfair.
The Interquest North business improvement district, an independent government organization controlled by Nor’wood Development Group, has taken ownership of a parking lot in front of the Scheels store, making it tax exempt.
Nor'wood formed the BID in 2004 to help fund the public improvements, such as roads and landscaping, across about 100 acres in the commercial district where Scheels will be built.
Nor'wood will also allow Scheels to keep $200,000 annually in fees paid by shoppers. Shoppers pay the fees in the form of a 1.25% fee on purchases in the district.
The incentives will result in a net gain for the district, which will see an additional $825,000 a year in revenue from Scheels. The revenue from Scheels will allow the district to lower property taxes in the district from 50 mills to 17 mills in 2023, a 67% reduction, Jenkins said.
The incentives were planned in conjunction with the 25 years of tax rebates provided to Scheels by the the city of Colorado Springs in exchange for building an $84 million store near Interquest Parkway and Interstate 25 that is expected to open in March, said Chris Jenkins, president of Nor’wood Development and a member of the business improvement district board.
The Colorado Springs City Council granted the tax rebate because it expects the store to generate $1.5 billion in economic activity over 25 years and provide hundreds of jobs. In August, the retailer said it expected to hire 350 people.
The incentives were needed to bring the retailer to town because it was considering locations in Monument, Boise, Idaho, and Madison, Wis., among others, Jenkins said. The company was particularly attractive because its indoor Ferris wheel, aquarium and other attractions draw shoppers at a time when there is an overabundance of retail stores and more people are buying online, Jenkins said.
“They are a massive contributor of economic velocity to the overall BID,” he said.
However, several businesses in the district, including Burger King, and Cheddar’s Scratch Kitchen, have voiced concerns because the additional incentives were not communicated to them — even though as taxpayers they will be among those subsidizing them. They do not believe their positions are well-represented on the business improvement district board, which consists of Nor’wood employees, said Tim Leonard, who represents the concerned businesses.
“District members have no say. … There is no representation on the board,” Leonard said.
The businesses found out through Leonard's advocacy and engagement about the district's plans to build the Scheels' parking lot and keep fees collected from shoppers.
Burger King owner Rick Stucy said compared to other business improvement districts he’s been involved with, the Interquest North district has been more problematic when it comes to communication with members. “Nothing is transparent with those folks,” he said.
Jenkins said the parking lot the BID is building in front of Scheels is central to the entire development and will be a public amenity for customers of other nearby businesses.
As property of the district, the 9-acre lot is exempt from property taxes that would otherwise be owed to El Paso County, the city of Colorado Springs, Academy School District 20 and other entities, according to county records. In a covenant, the district granted Scheels the right to hold events and activities in the lot.
However, Leonard doubts that property taxes in the district will go down since the maximum amount of property taxes has been charged since the district was formed.
"That 50 mills hits the bottom line of every single business," he said.
Historically, business improvement districts were formed by merchants who wanted to work together on projects such as improving shared infrastructure, and collaboration was naturally a part of the governing process, said associate professor Todd Ely, director at the Center for Local Government Research and Training at the University of Colorado at Denver. When business improvement districts are formed by developers to fund greenfield construction and the developer runs the board as the largest property owner there is generally less involvement from the businesses in the district, he said.
“There just isn’t much of an incentive for genuine engagement when the BID is dominated by one property or business owner,” he said
However, business improvement districts are necessary to fund infrastructure because Colorado voters passed the Taxpayer’s Bill of Rights, which limited government spending, he said. Local governments began to rely on developers to fund infrastructure by forming public districts that guarantee investments are repaid through property taxes or fees. The taxing structure in those districts is generally set up before businesses move in.
Interquest North businesses intervene
Burger King and Cheddar’s proposed a lower overall property tax rate that would benefit all businesses in the Interquest North Business Improvement District instead of a subsidy for Scheels in a June 2019 letter to the City Council.
“Instead of forcing an incentive to Scheels with a complicated political, legal and financial scheme which will leave in its wake far more losers than winners, the district board has in its authority the most obvious solution: lower its taxes,” wrote Leonard, on behalf of the businesses.
At the time, the district was asking the council to exclude Scheels from the district boundaries, which would have exempted the store from district property taxes.
The district later withdrew its request to exclude Scheels from the district after hearing concerns from businesses but went forward with the other incentives without consulting its membership, Leonard said.
Jenkins said the district was surprised businesses were concerned about the incentives offered Scheels because of the additional shoppers the retailer is expected to draw to the area.
After Leonard found out the Scheels parking lot was purchased by the district and is now tax exempt, he alerted El Paso County Assessor Steve Schleiker, noting that a covenant allows the retailer to hold up to six annual events a year and repair gear in the lot now owned by the district.
Since that time, Schleiker has requested any leases, contracts and other agreements between the business improvement district and any retailer occupying the commercial center at 1226 Interquest Parkway to determine if any has taxable interests. However, he is only expecting to receive information on the Scheels agreement, he said.
Typically, the value, and therefore the taxes, on a lease are less than the value and taxes on property, Schleiker said.
The businesses in the district might also challenge the $200,000 in fees Scheels is allowed to keep. But they don't expect the business improvement district to take action, Leonard said.
“To talk to the business improvement district is a total dead-end,” he said.
While Burger King and Cheddar's owners concerns were considered, they represent about 2% of the property value in the district, Jenkins said.
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