Glendale, a pint-sized city surrounded on all sides by southeast Denver, has always had outsized ideas. A municipal rugby complex? Yes! The only King Soopers in the state that sells booze, just blocks from the only Target in the state that sells booze? Sure! A big new marijuana store next to a big new strip club, both of which are owned by the mayor’s wife? Why not!
Glendale’s biggest brainstorm involves building a $150 million entertainment district full of bars and restaurants on the banks of Cherry Creek. But in the years since boosters first dreamed up what was originally called the Riverwalk, the idea has hit some snags. The latest is a lawsuit alleging that the city stacked the deck in a recent election by allowing five landowners — all people to whom it had sold tiny plots of land years ago — to vote on whether to form a “downtown development authority” to help finance the project.
Each of the landowners owns just one square foot of land. The parcels are on the northeastern edge of a neatly mowed grassy area that was once a landfill, next to a small city park studded with picnic tables, volleyball nets, a public restroom where the stalls have no doors, and a gazebo where four people with a shopping cart are listening to rock music, smoking cigarettes and sharing a watermelon one sunny afternoon. On the other side of the park is another patch of grass where the city’s wastewater treatment plant once stood. The park and the two grassy patches, which span 7.5 acres in all, are bounded by East Virginia Avenue to the north, the Cherry Creek bike path to the south, an extended-stay hotel to the west, and South Cherry Street to the east.
Glendale sold the five tiny parcels of land, each about the size of a record album, in 2012 for $10 each. The buyers included two city employees and two local businessmen who have ties to rugby, Glendale’s official sport. The transactions were part of a plan to create metropolitan districts — special districts that can issue bonds and levy taxes to pay for public infrastructure like sidewalks and sewers. A metro district needs at least five landowners to serve on its board; it also needs people to vote on raising taxes to cover those improvements. In 2012, Glendale used these property owners to form metro districts to help finance the basics for the Riverwalk.
Three years later, on August 4, 2015, those five landowners were voters in a different election to create a different type of district — a downtown development authority, or DDA — though the purpose was the same: to help fund the Riverwalk project, now renamed Glendale 180. Even though Glendale has a population of 5,115 residents and boasts 2,534 registered voters, only landowners, tenants and residents who live within a proposed DDA are allowed to vote on creating one. In this case, only ten of them did: The vote was 7-3 in favor of forming the DDA.
But one of the entities that voted against the DDA claims that the election was bogus. Summit Hospitality, a Texas-based company that owns the Staybridge Suites extended-stay hotel and the 3.3 acres of land underneath it, is suing Glendale for gerrymandering the DDA boundary. Its lawsuit argues that the five landowners who were sold tiny plots back in 2012 are “carefully chosen agents,” none of whom live in Glendale.
The lawsuit claims that the five landowners’ deeds are so restrictive that they’re not true landowners and their votes shouldn’t count. The lawsuit also claims that the DDA election violated the Taxpayer Bill of Rights, or TABOR, which requires that voters approve certain tax increases.
Glendale has filed a motion to dismiss the lawsuit. The Glendale City Council also canceled an election scheduled for November that would have asked those same voters to raise property taxes within the DDA and authorize up to $200 million in bonds to pay for Glendale 180.
Mike Dunafon, the city’s cigar-smoking mayor, says the lawsuit is a nuisance. Glendale wants to buy Summit Hospitality’s land for the Glendale 180 project, and Dunafon thinks Summit is using the lawsuit to drive up the price. But he figures that canceling the November election takes that leverage away from Summit. “This whole thing is scattered, frivolous nonsense,” Dunafon says.
Glendale was incorporated in 1952 on land that was once a dairy farm — but the founding fathers’ intentions may not have been so wholesome. A Rocky Mountain News story from May of that year notes that Glendale, which had just 600 residents scattered across the half-square-mile enclave, had applied for thirty liquor licenses. State liquor-department officials “charged that the primary purpose of incorporating the new town was to obtain approval for new taverns and liquor stores denied the area by both Denver and Arapahoe county,” the News reported. Glendale’s attorney denied it, telling the paper that the main reason was “to prevent annexation by Denver.”
It was a valid fear. Denver had been trying to lay claim to the area for years, and it didn’t give up even after Glendale incorporated. Denver’s mayor complained to the Denver Post in 1961 that Glendale was a “goat yard” whose flashy attractions, including the Disney-backed Celebrity Lanes (later renamed Celebrity Sports Center), didn’t make up for its ramshackle houses, junk-filled fields and abandoned cars.
“Even if it weren’t so unsightly,” he said, “there would be no sense in having a little enclave, independent of all Denver policies, right in the middle of the city.” That same year, a state senator from Denver introduced a bill that would have allowed Colorado’s capital city to annex Glendale without a vote. But the Colorado Supreme Court found the bill to be unconstitutional, and Governor Stephen McNichols vetoed it.
Safe from being swallowed up by Denver, Glendale proceeded to establish itself as a nightlife hot spot. Low taxes, cheap land and the city’s reputation for freely handing out liquor licenses drew restaurants, bars and, soon, discos. “Anyone who hasn’t spent the last fifty years running from the law is going to get a liquor license,” Elba “Buck” Scott, owner of the legendary (and long-closed) Colorado Mine Company, told the News in 1977; the paper dubbed Glendale “a roisterous ‘island’ for singles.”
And the Post noted that Glendale made so much money from the customers who lined up to drink at its dozens of popular watering holes that it paid its bills in cash. “It’s the swingingest square mile in Colorado,” said Dean Peterson, co-founder of the still-going-strong Bull & Bush. And that, the paper wrote, was good news for the rich city officials who had their hands in Glendale’s most profitable businesses.
But the party didn’t last. When disco died, so did many of the city’s nightclubs. Topless bars moved in, and Celebrity moved out. The singles who’d flocked to Glendale on Friday nights began packing the bars in Denver’s revitalized lower downtown — or settling down and moving to the suburbs.
In the late 1990s, city boosters, including Dunafon, came up with a plan to bring the party back: the Riverwalk. By 2012, the financing scheme for the project involved creating metropolitan districts, which led the city to sell those tiny one-foot-square parcels. So who are the five people who bought them?
One is Joshua Bertrand, the city’s director of public works. Another is Mary Kay Bateman, clerk of Glendale’s municipal court. Barret O’Brien owns O’Brien Rugby, a store that sells rugby gear; it’s located next to Infinity Park, the only municipally owned rugby pitch in the country.
The Infinity Park complex, which also includes an event center and a gym, opened in 2007; it was championed by Dunafon, a former player and coach. The 61-year-old got involved in Glendale politics when city officials threatened to impose restrictions on Glendale’s strip clubs, the most famous of which, Shotgun Willie’s, is owned by Dunafon’s now-wife, Debbie Matthews.
Matthews is also part owner of the Smokin’ Gun Apothecary, a retail marijuana store being built right next door to Shotgun Willie’s, on the club’s former site. Dunafon is pro-pot, a position he made clear in his unsuccessful run for governor of Colorado last year. As part of his campaign, he made a rap video with Wyclef Jean, a vocal supporter of legal weed. Snoop Dogg — another blunt supporter of marijuana legalization — lent a verse to the song, called “The Trap.” Sample lyric: “Hemp is just a plant/Prohibition is the problem/But we could change all of that/Vote Dunafon in the autumn.”
Rich Gilman, another of the five landowners, is a certified public accountant in Glendale. The bio on his firm’s website notes that he’s involved with Infinity Park’s youth rugby program. He may also be involved in the Smokin’ Gun; the official address of Smoking Gun LLC, the pot shop’s parent company, is the same address as that of Gilman’s accounting firm.
Gilman did not return phone calls or e-mails for this story. Neither did O’Brien or landowner Steve Anderson. Bertrand and Bateman say they can’t comment because of the pending lawsuit.
Linda Cassaday, Glendale’s deputy city manager and finance director, says the city chose those five individuals for the land sale because they were “known to the city.” The idea, she adds, was to pick people who were familiar with the project and were willing to help set up the metro districts.
That was back when the plan was grander than it is now. In 2011, when Glendale applied for major state sales-tax rebates under a new law called the Regional Tourism Act, it envisioned a $400 million riverwalk with a man-made canal, electric riverboats, a 4,000-seat outdoor amphitheater and dozens of restaurants, bars and stores. Glendale was one of six municipalities to apply in the first round for the state tourism incentives, but it didn’t get them. In May 2012, state economic-development officials chose two other projects, including the massive Gaylord Rockies Hotel and Conference Center that recently broke ground in Aurora but has hit its own set of snags.
So Glendale set about finding other ways to fund the project. City officials contemplated using revenue from two sources: local property- and sales-tax rebates collected by the Glendale Urban Renewal Authority, which was set up in 2004 to remedy blight in the city, and tax revenue authorized by voters in metropolitan districts that would blanket the area.
Many development projects are funded with help from metropolitan districts; examples include Highlands Ranch, Stapleton, the redevelopment of Union Station and the construction of City Set in Glendale, which includes seven restaurants and two hotels at the corner of Colorado Boulevard and Cherry Creek Drive South. There are 1,460 metro districts in Colorado, according to the state Department of Local Affairs website.
In August 2012, Glendale formed three metro districts with the help of Kristen Bear, a Centennial attorney who specializes in organizing special taxing districts. The districts are layered on top of each other, which Bear says is a common strategy that allows a city or a developer to build a project in phases. At the time, she explains, the city didn’t know how many phases the project would have. “We chose three districts as a magic number out of the air,” she says.
The districts encompassed a much smaller area than the original Riverwalk vision. That’s because the city didn’t own all of the land it needed to build the project (it still doesn’t), and Cassaday says it wasn’t practical to ask landowners to participate when the city was hoping to eventually buy their property. “When you’re putting a metro district together, you know you’re not going to implement that at all until you’ve assembled the land,” she says. “To include existing property owners...doesn’t make sense, because it’s not going to impact them.”
So the city employed a scheme that Bear says is “very standard”: It sold five one-foot-square parcels of land it did own, where the landfill once stood, to five separate people in order to create metro districts that are five feet square, with the goal of expanding them once the city acquired more land. Those five landowners became the districts’ boards of directors. “It appears from the documents creating the metro districts that all was done according to statute,” says Ann Terry, executive director of the Special District Association of Colorado.
After that, the districts sat dormant as the timeline for the complicated and costly project grew longer. Finally, in April, the city unveiled Glendale 180, a scaled-back version of the Riverwalk that returns Glendale to its heyday as an entertainment center. Gone were the man-made canal, the riverboats and other expensive features; gone also was half the projected cost. Instead, the city now envisioned a complex with 25 bars and restaurants and maybe a movie theater, bowling alley and hotel. And because of the common-consumption law that Glendale had earlier pushed through the state legislature, the plan also called for allowing patrons to walk from bar to bar with to-go cups of alcohol.
“We will be returning to the metro area an international destination,” Dunafon said at the unveiling of Glendale 180.
But then in May, the project suffered another setback. Governor John Hickenlooper signed a bill into law that forced Glendale to once again reevaluate how it would fund its party-city comeback.
The purpose of the bill was to level the playing field between cities, counties and school districts when it comes to tax-increment financing for urban-renewal projects. Tax-increment financing, or TIF, refers to the increased tax revenue generated by an urban-renewal project — say, an abandoned factory that gets redeveloped into fancy condos. Those fancy condos generate more property taxes than the abandoned factory did, and the TIF allows a city’s urban-renewal authority to collect the difference and use it to repay the cost of building the condos.
But the new law, which goes into effect January 1, requires urban-renewal authorities to offer to share that money with the counties and school districts that are impacted by the project instead of keeping it. “Nobody saw that coming,” says Mike Gross, the city’s representative for Glendale 180. “So after that happens, we go, ‘Wow, that’s an attack on urban renewal.’”
City officials were afraid that the new law would cause banks to become hesitant about lending money for urban-renewal projects. So “out of an abundance of caution,” Gross says, the city decided to form a downtown development authority, or DDA. A DDA is similar to an urban-renewal authority in that it can use a TIF to pay for redevelopment projects. But there are several key differences, and the most important one is that DDAs are not subject to the new law.
Glendale’s DDA includes the park and the two grassy areas, plus the Staybridge Suites property at 4220 East Virginia Avenue and just under an acre of land at 4490 East Virginia occupied by the red-brick offices of the Gamma Construction company. The DDA does not include One Cherry Center, a towering eleven-story office building at the corner of East Virginia and South Cherry, nor does it include 5.4 acres owned by the Kholghy family at the high-profile corner of Colorado Boulevard and East Virginia. The original plan for Glendale 180 did include that land, but the city revised it after a feud erupted between the family and the city over efforts to acquire the property.
To set up a DDA, a city must hold an election of the landowners, tenants and residents within the proposed boundary. In Glendale’s case, there were thirteen, including the city, which owns the area where the landfill once stood; the Glendale Urban Renewal Authority, which owns the park and other land; Williams Square Properties, which owns the Gamma Construction land; Summit Hospitality, which got one vote for owning the land under its hotel and another for being the leaseholder; and three people who’d used the hotel’s address to register to vote. (Of those three, only one, Henry Combs, is still living at the hotel; he says that he was out of town when his ballot arrived in the mail and didn’t fill it out in time.) The remaining five voters were Bertrand, Bateman, O’Brien, Gilman and Anderson, the people to whom the city sold the one-square-foot parcels.
City officials say they couldn’t have predicted that three years after setting up the metro districts, the city would hold an election in which those five landowners would make up nearly half of the voters. “We don’t have a crystal ball over here at the City of Glendale,” Gross says.
Nonetheless, the arithmetic worked in their favor. On August 4, ten of the thirteen eligible electors cast ballots. Seven voted in favor of the DDA and three voted against it. Two of those votes came from Summit Hospitality, according to the company’s lawsuit.
On September 3, Summit Hospitality filed suit in Arapahoe County against the City of Glendale, the Glendale Urban Renewal Authority and the Glendale Downtown Development Authority, claiming that the city gerrymandered the DDA boundary to ensure that Glendale would have enough votes to pass it. That left just two private entities — the hotel and the construction company — inside the boundary, the lawsuit says, noting that if the DDA decides to raise taxes within the district, those two companies would be most affected.
But now there’s only one: Last week, Glendale bought the Gamma Construction property for $2.67 million. The city also agreed to pay the company $100,000 in relocation costs and to lease the building back to Gamma rent-free for the next several months, according to Cassaday.
“We’re excited about this, and it’s been a great negotiation,” she said before the sale was finalized. Keith Williams, president of the Texas-based Williams Square Properties, did not return phone calls for this story. But in 2010, he wrote a letter addressed to “interested master developers” stating that his company strongly supported the Riverwalk plan.
Even so, the Summit lawsuit assumes that Williams Square Properties voted against the DDA, an assumption that Dunafon made at a recent public meeting as well. The lawsuit also guesses that five of the seven “yes” votes came from the landowners, which it accuses of being pawns: “The City of Glendale directly or indirectly voted seven times in favor, thus assuring the 7-3 result.”
The suit calls the deals that allowed those five people to own one square foot “a subterfuge of property ownership.” After all, those deeds grant wide-ranging rights to the city, including the right to go “over, under, upon and through the property for construction, operations or maintenance.” If the landowners die or move out of Colorado, the land is automatically transferred back to Glendale. And if any landowners want to sell a parcel, they have to offer it to Glendale first for $10.
A “close examination” of the deeds reveals that the five landowners are not the type of property owners that are qualified to vote in DDA elections, the lawsuit says. It asks the court to determine that the actual vote tally in the August 4 election was just two in favor and three against.
Tim Flanagan, the Denver attorney representing Summit Hospitality, declined to comment. Summit Hospitality did not respond to phone messages or an e-mail seeking comment for this story.
In its motion responding to the lawsuit, Glendale argues that the hotel company missed the generous 28-day deadline for challenging the election; therefore, the city says, the suit should be dismissed. It also emphasizes that the five landowners’ votes are secret. “A voter may...vote without a court looking over her or his shoulder,” the motion says. “Accordingly, the court cannot make a determination that the City voted ‘indirectly’ through votes cast by individual voters.”
Jeff Springer, Glendale’s city attorney, agrees with Dunafon that the Summit lawsuit is strategic. “You have landowners who may be attempting to maximize the amount of money that they would get from the city, either in negotiations or if there was ever a condemnation proceeding,” he says.
The Glendale Urban Renewal Authority has the power to condemn land by eminent domain for the Glendale 180 project, thanks to a controversial vote of the city council earlier this year. City officials say eminent domain is still on the table, though they hope they can come to a sale agreement with Texas-based Summit Hospitality without using it. “It kind of blew us away when we got the lawsuit,” Cassaday says. “We were arranging to go down to Austin to start to have those negotiations. That’s why we feel it’s a negotiation tactic.”
The Arapahoe County judge has not yet ruled on Glendale’s motion.
Earlier this year, a judge in Adams County invalidated an election in which a single person voted to raise taxes to help finance the massive Gaylord Rockies Hotel in Aurora. In that instance, the City of Aurora created an “enhanced tax area” for the Gaylord site and held an election asking the landowners to raise lodging and admission taxes, a portion of which would be rebated to the developer to help pay for the construction of the 1,500-room hotel. But there was only one landowner, and that entity appointed a single person to vote in the election.
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Aurora appealed the judge’s ruling, but city officials later dropped the appeal.
Glendale’s funding scheme is different than Aurora’s because it involves metro districts and a DDA, not an “enhanced tax area.” Glendale officials insist that everything they’ve set up is legal — down to the one-square-foot land sales — and that they expect to prevail in court.
“Everybody has to follow state statutes,” says Dunafon. “And believe me, I’m a small-government guy. They pile all of these regulations on everybody, [and] the lawyers get rich while we choke in regulations. So we have to follow the way they do it.”
And the lawsuit? “It’s a shakedown,” Dunafon concludes.