The El Paso County District Court has ordered a business improvement district on Colorado Springs’ north side to release all construction contracts, plans and payments related to public improvements, such as roads and water lines.

“It’s a blockbuster decision,” said John Henderson with Coloradans for Metro District Reform. “We are going to use it every chance we get to pull the curtain back.”

The court decision could set a higher standard for transparency around spending by contractors that is later reimbursed by taxes and open the door to public inspection of documents that show whether the millions in reimbursements developers ask taxpayers to pay for are justified, Henderson explained. The attorney has worked on statewide reform for developer-run taxing districts but did not work on this case.  

“There is no accountability unless you have access to the financial records that account for the expenditure of public money,” he said. 

Previously, developers argued that private contracts for infrastructure, even if it included work on public projects such as roads, were not public documents. However, developers in Colorado are often reimbursed for public infrastructure through property taxes paid to special districts that they control. Since those districts are forms of local government, records of spending on public infrastructure should be available to taxpayers, Henderson said. 

“As soon as you create that district, I’m sorry, you are the government and you are obligated just as every other government in the United States to disclose financial records on how you spent public money,” Henderson said.

Colorado developers have argued in the past a third-party engineer’s certification is enough to determine whether the requests for reimbursement of public infrastructure are proper. But Henderson and others noted that engineers hired by the developers who control the districts are not truly independent. 

2023-07-10 Order Granting in Part Motion to Compel Compliance (Denying Discovery) (1).pdf

In this case, the recent ruling will allow the public to complete an audit of how the Norwood Development Group spent money on public infrastructure in the InterQuest North Business Improvement District, enabling greater transparency, said Tim Leonard, who represents a business in the shopping district, Cheddar’s Scratch Kitchen in district elections.

The InterQuest North district controlled by Norwood covers businesses near InterQuest Parkway and Federal Drive, such as Scheels All Sports and Great Wolf Lodge. The businesses pay property taxes to the district to cover the payments on about $25 million in debt spent on public infrastructure. 

Prior to the district court’s decision on July 10, Leonard said he received 9,000 pages of documents from the district via open records requests, but they were a “nightmare” to review and did not show how much was spent on public improvements. They did show that Norwood packaged together both public and private improvements in the same contract, he said.

Open records case to shed light on InterQuest shopping center

Tim Seibert, Norwood’s senior vice president, said the company contracted for both public and private improvements on the same projects because it allows for efficient construction and engineering. Once the work is complete, the company asks the district to reimburse the cost of improvements that benefit the whole district through property taxes. 

He defended the practice of using an engineer hired by the developer-controlled district to certify improvements, saying the engineers could lose their licenses if they are not completing work properly. 

In terms of transparency, Seibert said Norwood and the district it controls have worked to comply with the state’s open records law throughout the suit. 

The district did not disclose contracts initially because the district’s attorney advised it could set a “dangerous precedent” that the state’s open records law requires the inspection of “the internal records of any private entity which does business with the public entity.”

The first court ruling sided with Norwood. When the Court of Appeals reversed the decision, Norwood provided records to Leonard, such as spreadsheets and supporting invoices, Seibert said. He also noted the July court ruling denied Leonard’s request for depositions of contractors and Norwood employees and to issue subpoenas to district engineers.

Following the final court ruling this month, Leonard said he planned to file another request for documents dating back to the beginning of the InterQuest North project in the mid-2000s in a form that would be easier to review. 

He also called on the Colorado Springs City Council to require more transparency from business improvement districts. 

In a letter to the council, Leonard noted that the city declined to support his call for more transparency from the district in the past saying it was a private matter and so his fight for transparency through the courts has lasted three years and cost tens of thousands of dollars that will have to be reimbursed by the district. 

“I would impress upon the current Councilmembers to request more transparency and accountability from the BIDs and metro districts which are under your oversight. Shifting this responsibility to single taxpayers is unfair and very inefficient,” he wrote. 

Colorado Springs is home to about 20 business improvement districts, which include about 10 controlled by Norwood, such as districts used to fund construction near Barnes Road and Powers Boulevard and the First and Main shopping center near Powers and Carefree Circle. 

The City Council reviews the business improvement districts’ budgets each year, but City Auditor Jackie Rowland said previously the city does not have the authority to audit them, because they are separate entities. 

City Council President Randy Helms said business improvement districts must follow approved plans and budgets, but he planned to look into whether the city should provide greater oversight after budget approvals.