Audio By Carbonatix
Elitch Gardens has done its best to keep the financial details of its star-crossed move from northwest Denver to the Central Platte Valley shrouded in secrecy. Following last month’s announcement that the City of Denver would throw another $7 million into the pot–raising taxpayers’ total contribution to more than $30 million–it’s becoming clear why: Some of those details are potentially embarrassing.
The amusement park’s president, Sandy Gurtler, has long insisted he would use only local investors to help pay for the new Elitch’s, whose supporters passed out red buttons with the slogan “Vote for Elitch’s–It’s Denver” when voters were asked to approve $14.9 million in bonds for the project in 1989. Instead, according to a financing scheme that both Elitch’s and city officials have kept hidden from the public, a Japanese bank is lined up to be the largest private lender on the project–and, because it would have the first mortgage, would become the new park’s owner in the event of a default.
That lender, with a tentative commitment of $28.6 million to the project, is Fuji Bank–a fact that’s off-limits to Denver taxpayers but is cheerfully confirmed by an employee who answers the phone at the bank’s San Francisco office. Another $5 million loan commitment has reportedly been received from Total Petroleum, the French oil giant that operates a string of local gas stations.
Meanwhile, the Elitch’s team has apparently chosen not to accept a $10 million loan authorized last month by the board of the Denver Employees Retirement Plan. In the past Gurtler and his representatives have chafed at requests from DERP and other local pension funds for more solid loan guarantees. Gurtler, with a reported net worth of $2 million, has personally vowed to make good part of the city’s $7 million loan, a complex transaction arranged through the federal government.
While Gurtler has provided guarantees, however, Denver City Councilman Ted Hackworth claims that Elitch’s hasn’t put any actual cash into the deal. “I did see it broken down as far as the value of the rides he’s going to move, which is the only real contribution from Elitch’s,” says Hackworth, who describes himself as a supporter of the project.
Gurtler and his representative, Denver lobbyist David Cole, didn’t return calls seeking comment on the financial package. John Huggins, director of the Mayor’s Office of Economic Development, which at the direction of Mayor Wellington Webb is now working alongside Gurtler to put the deal together, insists that Elitch’s has put cash into the deal. But he won’t say how much.
The amusement park has contributed $10 million in equity to the New Elitch Gardens Company, a limited partnership set up to build the new park, says Huggins. Sources say a good portion of that equity comes in the form of appraisals attached to Elitch’s existing rides and equipment, along with $1 million in credit for the amusement park’s “good name.”
The Elitch’s project, to be built in a former rail yard just west of the Auraria campus, would long ago have been declared financially stillborn without its massive public subsidies. In addition to the $14.9 million in bond money and the city’s $7 million loan, the Denver Urban Renewal Authority has committed $8.85 million in tax-increment financing. But despite the public’s help, Gurtler and Cole have remained tight-lipped about nearly every detail of the project. They continue to refuse to reveal the identity of the limited partners who’ve contributed $16.8 million in cash. That apparently is because most–or all–of those partners work for Hensel Phelps, the Greeley-based construction company slated to receive the construction contract for the new park.
Taxpayers are already paying Hensel Phelps for work on the Elitch’s project–the Denver Urban Renewal Authority hired the construction company to oversee infrastructure work stemming from the 1989 bond issue. And the Greeley firm, which bills itself as part of the “Elitch’s team,” is deeply committed to seeing the new park built. At this point, in fact, it seems to be pushing the new project as much as Gurtler himself. In addition to signing on as an equity partner–meaning that it will be an owner of the new park and receive a portion of the profits–Hensel Phelps reportedly has absorbed front-end costs such as plans and drawings.
What’s more, Hensel Phelps recently surfaced as a major player in another area of the project’s financial package: the $7 million loan from the city–actually a guarantee Denver will give to the New Elitch Gardens Company so the partnership can borrow more money on the open market. In a December 7 memo to the city council, Huggins explained that the $7 million loan (not yet approved by the federal government) would be collateralized in part by a $1 million guarantee from a “private party.” Gurtler and Cole initially refused to reveal that party’s identity; only under pressure from Hackworth and other councilmembers did they acknowledge that it was Hensel Phelps.
Hensel Phelps district manager Ron Norby says he can’t comment on the company’s involvement with Elitch’s. But some people familiar with the project suspect that the construction company is also helping guarantee the Fuji Bank loan. Although the bank would receive a first deed to the new park site, lenders who’ve analyzed the project in the past have concluded that a first deed isn’t enough collateral. That’s largely because environmental contamination at the former rail yard would make any alternative development on the site (such as housing) prohibitively expensive in the event of a default. Environmental concerns–along with the fact that the warm-weather Elitch’s generates cash flow only a few months out of the year–were a key reason at least two local pension funds decided not to invest in the Elitch’s deal.
The seemingly ubiquitous involvement of Hensel Phelps is seen as a plus by Councilman Hackworth, who notes that the construction company is agreeing to accept a large amount of risk in return for what it believes will be hefty profits. In a document submitted to the council, says Hackworth, the company indicated it expected a return of between 10 and 15 percent on its investment. That assessment is reportedly based on guarantees made by Gurtler, whose insistence on making sure equity partners got a sizable return helped scare away private lenders who felt creditors, not investors who theoretically freely accept risk, should be first in line for profits. “I think Hensel Phelps is way out on a limb,” says Hackworth.
But Hackworth and other councilmembers insist the same isn’t true for the public, even if taxpayers don’t stand to realize the lucrative rate of return their subsidies will theoretically make possible for Hensel Phelps. For instance, Hackworth and Councilwoman Debbie Ortega say they are confident that Huggins has lined up more than enough collateral for the city’s $7 million loan guarantee. But that collateral consists principally of a first deed on the land–not the improvements–at the old Elitch’s site on West 38th Avenue. Huggins’s office has valued the property at $4 million for purposes of securing the loan. However, the city assessor’s office has appraised the property at less than half that amount–just over $1.5 million. Ortega, whose district would include the new Elitch’s site, says she’s comfortable with the $4 million valuation. “I’m not a real estate person,” she says, adding that she believes it’s important for Elitch’s to move so that jobs can be created for young people who might otherwise get in trouble.
Political support has always been strong for the Elitch’s move. City officials have cited the amusement park’s reputation as a stable employer and contributor to the city’s economy, and noted the need to promote development in the Platte Valley. But despite the powerful political momentum–and the creative financing made possible as a result–the move still isn’t a done deal. A spring groundbreaking ceremony is tentatively planned, but Huggins notes cautiously that his agency is working on what are “hopefully the last pieces” of the project.
It’s equally unclear whether, if and when the new park opens, the public will finally get a full financial report on the amusement park it helped to buy.
