Littleton Village, mired in problems, comes to city for help

Costly sinkhole adds to trouble in metro district that still lacks commercial development

David Gilbert
dgilbert@coloradocommunitymedia.com
Posted 5/28/21

Struggling with acres of vacant land where a walkable commercial development should be — and a growing sinkhole that has left a central road unusable — representatives of the Littleton Village …

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Littleton Village, mired in problems, comes to city for help

Costly sinkhole adds to trouble in metro district that still lacks commercial development

Posted

Struggling with acres of vacant land where a walkable commercial development should be — and a growing sinkhole that has left a central road unusable — representatives of the Littleton Village metro district are asking for help from the City of Littleton.

Hundreds of residents who began moving into the 77-acre master-planned community in 2017 are still waiting for walkable shops and restaurants promised in the early days of the development at Broadway and Dry Creek Road.

A Starbucks, a dentist's office and a Culver's fast-food restaurant face Broadway, but otherwise much of the remaining commercial parcels sit unused. The residential portion is home to hundreds of apartments, condos and townhomes, and when all projects are complete will have an estimated 900 residential units.

At a May 25 city council study session, developer Jack Buchanan said high taxes, inadequate zoning and a tumultuous market are to blame for the stagnant commercial portion.

Watch the May 25 study session

Buchanan's company Loch Lomond LLC once held partial ownership of several commercial parcels in Littleton Village, but they fell into foreclosure in 2019, according to county records. The parcels were bought at public auction by Michigan-based Bloomfield Capital, which had previously been Loch Lomond's lender. Buchanan hopes to buy the parcels back in the future, he told Colorado Community Media.

2018: Littleton Village retail inches ahead

Littleton Village is organized as a metro district, a quasi-governmental entity to manage private developments. Buchanan, who lives in Evergreen, remains the president of the board of the metro district's commercial portion. Former Littleton Mayor Phil Cernanec, a Littleton Village resident, is the president of the residential portion's board.

The taxman cometh

Buchanan told council that commercial development has been hampered by high property tax assessments levied by Arapahoe County Assessor PK Kaiser, which Buchanan called a “show-stopper.”

Buchanan alleged Littleton Village's property tax rates are two to three times those levied against comparable properties in neighboring counties, saying the Starbucks building was initially assessed at a property tax rate of $25 per square foot.

“A tenant would never pay that,” he said. Buchanan said the building's owner successfully appealed the rate down to under $19 a square foot after lobbying for Kaiser to apply a principle called economic obsolescence, a form of depreciation on property due to external factors.

Buchanan said he has asked Kaiser to apply the same principle to future buildings on the site, but said Kaiser told him he would not make any promises before buildings were built.

In a statement to Colorado Community Media, Kaiser said Littleton Village's property tax valuations have been determined according to state statute and national standards, said Buchanan's comparisons to properties in other counties don't hold water, and added he cannot predict how future buildings will be assessed.

“Any assertion that Littleton Village is being taxed 2-3 times higher than other developments in other counties isn't relevant, because this claim is based on comparisons with older/inferior properties, or on larger properties in inferior locations,” Kaiser's statement reads in part. “Some of the 'comps' these developers are using included valuation of only the underlying land, as the improvements were not complete at the time of valuation… It is well beyond our scope to appraise speculative construction as of an unspecified date in the future, and we will not commit to a valuation outside of our statutorily required mandates.”

The slow pace of retail development at Littleton Village has been an issue since residents began moving in — Buchanan told Colorado Community Media in 2017 that commercial development was being stymied by a slow city permitting process. City officials pushed back against the assertion.

Getting in the zone

Buchanan also said the site's zoning is a problem, saying it's hard to draw an anchor tenant when the prime spot on the north end of the site limits the size to 22,000 square feet, adding that the city's projected timeline of eight or nine months to complete a rezoning is too long for potential tenants who make business decisions more quickly than that.

In fall 2020, city council expressed support for a plan to give tax breaks to Alfalfa's Market and a boutique liquor store, but those plans fell through when Alfalfa's went out of business this spring. A previously proposed hotel never materialized. Other deals ended with Buchanan's Loch Lomond company owing liens to business owners, according to county records. Murphy USA hopes to build a convenience store and gas station at the western edge of the development, according to city documents.

Councilmembers at the May 25 meeting were perplexed why the district has not gotten the ball rolling on a rezoning.

“You can still put in an application, right?” asked Mayor Pro Tem Scott Melin. “We can't act without a rezone request… Let's get on with it. I'd like to see an application ASAP, please.”

Buchanan said Littleton Village leadership hasn't pressed ahead with rezoning applications, fearing it would be useless if the assessor's valuations remained where they are.

That sinking feeling

Meanwhile, there's the matter of the sinkhole.

Engineers observed a portion of Hinsdale Avenue, a newly-built stretch of road in the heart of the property and just steps from the edge of a large condo building, appeared to be sinking in the fall of 2019. City crews barricaded the street in early 2020. Now, the sinkhole has begun to swallow an adjacent stretch of sidewalk and is undercutting an adjoining dog park.

Cernanec, the former mayor who now heads the residential district's board, appealed to the city to help repair the sinkhole.

There's a snag, though: the city never formally “accepted” the stretch of road into its road network, saying it was clear there were problems from the start.

The street showed signs of deterioration several years ago, Public Works Director Keith Reester told council, and the city accepted all other newly-built streets in the development except for that short stretch, with the idea that the contractor would fix the street before the city took ownership.

City engineers have inspected the sinkhole and determined it could cost upward of $500,000 to fix. Cernanec said Littleton Village simply doesn't have the money to cover the cost.

“We can't do it, and if the city doesn't, it's not going to happen,” Cernanec said.

Reester said $500,000 amounts to one-sixth of Littleton's annual road repair budget.

“We're willing to be part of the solution because we want to get it open, and residents deserve it,” Reester said. “On the flip side, we don't have half a million dollars sitting around.”

Melin said he was dismayed that Littleton Village never attempted to take the contractor to court to fix the road.

Trish Harris, an attorney representing Littleton Village, said the development didn't pursue the contractor in court because they felt it was a losing case, because the unstable ground that caused the sinkhole was likely deeper than a contractor could reasonably be expected to probe for abnormalities. Regardless, the statute of limitations has passed, she said.

Buchanan said the district didn't want to waste money on a bad case, which could sap funds that could be applied toward fixing the problem.

Councilmember Carol Fey said unstable ground should have been expected because the property was formerly home to Marathon Oil, which riddled the ground beneath the property with tanks and tunnels.

Cernanec said the street should be considered de facto Littleton property because the city has provided services like police protection and snowplowing to the area.

“You can talk about the legal position, I'll talk about the ethical position perceived by the citizens of Littleton,” Cernanec said.

Fey called Cernanec's characterization unethical, saying she worked hard to secure better city services for Littleton Village residents.

When Cernanec, whom Fey defeated to represent Littleton's third council district in a contentious race in 2017, began to respond, Fey grew heated.

“Carol,” Cernanec began.

“Do not lecture me, Phil,” Fey said. “He doesn't get to start it with a 'Carol' as if he's lecturing me as if I'm a child.”

Councilmember Kelly Milliman asked if Littleton Village could levy a special assessment on residents to raise money to fix the sinkhole, but Cernanec and Buchanan said residents are already hugely burdened by the metro district's mill levy, which largely goes to pay off infrastructure debt — which remains immense because of the lack of commercial development to pay for it.

“Sounds like tomorrow is the day a rezoning application ought to be filed, then,” Melin told them.

City Manager Mark Relph said at the end of the day, there's a growing infrastructure problem that must be addressed, and said he was interested in hashing out some sort of compromise.

Relph told Colorado Community Media he is interested in bringing in a consultant to research the allegation that the county's property tax assessments for the site are too high, and could be open to applying some of Littleton's forthcoming federal funds from the American Rescue Plan Act toward fixing the sinkhole.

Mayor Jerry Valdes agreed there's room for compromise.

“They are citizens of Littleton over there, so we want to make sure we're working to help them out,” he said. “Bad deals happen sometimes.”

 

Arapahoe County Assessor PK Kaiser's full statement:

The Assessor’s Office is aware of this situation and has connected with the relevant parties, including the developer(s) and the Littleton City Council, throughout this process. We have asked the developer(s) to provide us with feasibility studies or appraisals for the proposed development on the vacant parcels in Littleton Village but have not received any such information to date.

Our office is committed to providing fair and equitable values to all properties within Arapahoe County, and it would be unethical and unfair to all other commercial property owners within the County to place an arbitrarily low value on any development, including Littleton Village. We follow State statute, the ARL (Assessors Reference Library by the Division of Property Taxation), Case Law and standards and ethics of the appraisal community, adhering to USPAP (National Standards of Professional Appraisal Practice by the Appraisal Institute) and other licensure requirements for appraisers. However, we cannot complete an estimate of value for something that does not yet exist or is only in its initial stages of planning.

Similarly, any assertion that Littleton Village is being taxed 2-3 times higher than other developments in other counties isn’t relevant, because this claim is based on comparisons with older/inferior properties, or on larger properties in inferior locations.  Some of the “comps” these developers are using included valuation of only the underlying land, as the improvements were not complete at the time of valuation. There are no provisions in generally accepted appraisal methodology to ‘adopt’ another jurisdiction’s value on a different property in a different location.  We also have no authority to determine mill levy, feasibility of development or success/failure of any development. 

Any properties on this parcel, once constructed, will be valued in a consistent manner with all other real property in Arapahoe County, based on quality, age, location and other attributes deemed to be important by the market. All property owners have numerous appeal rights if they disagree with our valuation. It is well beyond our scope to appraise speculative construction as of an unspecified date in the future, and we will not commit to a valuation outside of our statutorily required mandates.  It is further beyond our scope to review other counties’ mass appraisals, and it is inappropriate to comment on their accuracy.

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