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| Farmer Gets Sweetheart Deal From City read the revenue free lease |
Loveland - July 16, 2012
In early November of 2007, Loveland's City Council voted to purchase nearly 100 acres (Erlich Property) west
of I-25 and south of 402 for $4,850,000. While the purchase of the land has been a controversial issue for
the past 5 years, what the city did with the farmland after paying nearly $5 million may be an even bigger
controversy today.
On July 8, 2008, the City of Loveland signed a lease "nunc pro tunc" with Johnson and Sons LLP for that same
property to begin retroactively. The written lease shows a term from January 1, 2008 to December 31, 2008
and provides the tenants free use of the city owned farmland to grow crops and even provides free use of the
city's water to irrigate the crops. Section 4 in the same lease states, "The City shall provide the Tenant with
water to irrigate the Premises for agricultural purposes and pay all applicable assessments."
Perpetuity Clause
The lease has apparently been renewed automatically each year since 2008 due to a perpetuity clause that
states, "This Lease shall automatically continue in full force and effect for successive one year terms until
terminated by either party." The lease recently became a topic of conversation between Mayor Gutierrez
and City Manager Bill Cahill when a Loveland resident noticed a healthy stand of corn on the property and
began making inquiries to the city about who was leasing the property and for how much.
Signed in 2008 by former Loveland City Manager Don Williams and Rick Johnson of Johnson and Sons LLP, the
agreement has no natural expiration date but can be terminated by either party with 120 days prior written
notice. LovelandPolitics made a formal CORA (Colorado Open Records Act) request last week to obtain a
copy of the lease in addition to any recent correspondence on the matter between staff and council among
other documents. To date, no record or documents have been provided by the city but LovelandPolitics has
learned our request is now in the city attorney's office for further review. The lease provided with this story
was obtained by other means.
City Loss Could Exceed $100,000
Local farmers estimate the value of the irrigated 402 city owned farmland that is currently growing a healthy
crop of corn to be between $200 and $300 per acre per year depending on the crop and other factors.
Property leased to grow corn is estimated to be near $200 per acre per year while leases to grow sugar beats
in this area go for around $300 per acre per year depending on the type of irrigation system available.
If Rick Johnson and his family are farming the entire 98 acres of city owned property along 402 then the value
of the city's lease to his business of the land could be estimated between just under $20,000 to $30,000
annually. During the past 5 years the city may have lost a potential revenue of over $100,000.
According to one source who inquired about the lease, City Attorney John Duval defended the city's revenue
free lease as a least cost approach to avoid liability. LovelandPolitics has learned the Johnsons were friends
of both former Loveland Councilman Don Marostica and former City Manager Don Williams who signed the
lease in 2008 on behalf of the City of Loveland. While the potential personal connections may explain past
behaviors it doesn't explain why the current city council allowed the free lease to renew each year without
any apparent reasonable oversight by staff or council.
Leasing of Government Owned Ranch and Farmland
Contrary to Duval's reported explanation, local governments do lease property for farming or ranch uses at a
profit. Tomorrow a group of local officials from Ft. Collins, Larimer County and Greeley will be meeting at a
newly dedicated open space area named River Bluffs to inaugurate the beginning of a bike path connecting
Ft. Collins and Greeley. Approximately 50% of the River Bluffs open space is being leased to grow alfalfa.
According to Kerri Rollins, Larimer County Open Lands Manager, the county will continue to lease that
property using a competitive procurement process to provide a multi-year lease to the most competitive
bidder. Rollins told LovelandPolitics in an interview today, "I think it is a good and fair process to ensure
everyone gets to use these lands that have been acquired..."
According to Rollins, Larimer County traditionally leased back lands acquired for open space to the previous
owner or adjacent property owner. About three years ago the Larimer County Board of Commissioners
approved a competitive bidding process. Since that time, Rollins explained, the county has been phasing-in
existing properties to the competitive bidding as leases expire. Rollins indicated that leases to use county
property whether for grazing or agriculture do include financial payments by the tenants to the county and
also include firm expiration dates.
Rollins explained the leases must "Go through our purchasing department. Just like any county contact,
anyone has an opportunity to apply. We provide an orientation for interested parties before making bids as
part of that procurement process."
Conservation Easement
In cases where land is acquired for open space often it is done with a conservation easement so the owner
continues to farm the land they still control. In cases where other conservation values they want to protect,
like River Bluffs open space, the property is acquired without a conservation easement giving full control to
the new owner. Loveland acquired the 402 property not for the purpose of conservation but instead to
precipitate more retail development along I-25 and move city boundaries south of Johnstown to gain greater
control over the future development of highway 402.
.
In early November of 2007, Loveland's City Council voted to purchase nearly 100 acres (Erlich Property) west
of I-25 and south of 402 for $4,850,000. While the purchase of the land has been a controversial issue for
the past 5 years, what the city did with the farmland after paying nearly $5 million may be an even bigger
controversy today.
On July 8, 2008, the City of Loveland signed a lease "nunc pro tunc" with Johnson and Sons LLP for that same
property to begin retroactively. The written lease shows a term from January 1, 2008 to December 31, 2008
and provides the tenants free use of the city owned farmland to grow crops and even provides free use of the
city's water to irrigate the crops. Section 4 in the same lease states, "The City shall provide the Tenant with
water to irrigate the Premises for agricultural purposes and pay all applicable assessments."
Perpetuity Clause
The lease has apparently been renewed automatically each year since 2008 due to a perpetuity clause that
states, "This Lease shall automatically continue in full force and effect for successive one year terms until
terminated by either party." The lease recently became a topic of conversation between Mayor Gutierrez
and City Manager Bill Cahill when a Loveland resident noticed a healthy stand of corn on the property and
began making inquiries to the city about who was leasing the property and for how much.
Signed in 2008 by former Loveland City Manager Don Williams and Rick Johnson of Johnson and Sons LLP, the
agreement has no natural expiration date but can be terminated by either party with 120 days prior written
notice. LovelandPolitics made a formal CORA (Colorado Open Records Act) request last week to obtain a
copy of the lease in addition to any recent correspondence on the matter between staff and council among
other documents. To date, no record or documents have been provided by the city but LovelandPolitics has
learned our request is now in the city attorney's office for further review. The lease provided with this story
was obtained by other means.
City Loss Could Exceed $100,000
Local farmers estimate the value of the irrigated 402 city owned farmland that is currently growing a healthy
crop of corn to be between $200 and $300 per acre per year depending on the crop and other factors.
Property leased to grow corn is estimated to be near $200 per acre per year while leases to grow sugar beats
in this area go for around $300 per acre per year depending on the type of irrigation system available.
If Rick Johnson and his family are farming the entire 98 acres of city owned property along 402 then the value
of the city's lease to his business of the land could be estimated between just under $20,000 to $30,000
annually. During the past 5 years the city may have lost a potential revenue of over $100,000.
According to one source who inquired about the lease, City Attorney John Duval defended the city's revenue
free lease as a least cost approach to avoid liability. LovelandPolitics has learned the Johnsons were friends
of both former Loveland Councilman Don Marostica and former City Manager Don Williams who signed the
lease in 2008 on behalf of the City of Loveland. While the potential personal connections may explain past
behaviors it doesn't explain why the current city council allowed the free lease to renew each year without
any apparent reasonable oversight by staff or council.
Leasing of Government Owned Ranch and Farmland
Contrary to Duval's reported explanation, local governments do lease property for farming or ranch uses at a
profit. Tomorrow a group of local officials from Ft. Collins, Larimer County and Greeley will be meeting at a
newly dedicated open space area named River Bluffs to inaugurate the beginning of a bike path connecting
Ft. Collins and Greeley. Approximately 50% of the River Bluffs open space is being leased to grow alfalfa.
According to Kerri Rollins, Larimer County Open Lands Manager, the county will continue to lease that
property using a competitive procurement process to provide a multi-year lease to the most competitive
bidder. Rollins told LovelandPolitics in an interview today, "I think it is a good and fair process to ensure
everyone gets to use these lands that have been acquired..."
According to Rollins, Larimer County traditionally leased back lands acquired for open space to the previous
owner or adjacent property owner. About three years ago the Larimer County Board of Commissioners
approved a competitive bidding process. Since that time, Rollins explained, the county has been phasing-in
existing properties to the competitive bidding as leases expire. Rollins indicated that leases to use county
property whether for grazing or agriculture do include financial payments by the tenants to the county and
also include firm expiration dates.
Rollins explained the leases must "Go through our purchasing department. Just like any county contact,
anyone has an opportunity to apply. We provide an orientation for interested parties before making bids as
part of that procurement process."
Conservation Easement
In cases where land is acquired for open space often it is done with a conservation easement so the owner
continues to farm the land they still control. In cases where other conservation values they want to protect,
like River Bluffs open space, the property is acquired without a conservation easement giving full control to
the new owner. Loveland acquired the 402 property not for the purpose of conservation but instead to
precipitate more retail development along I-25 and move city boundaries south of Johnstown to gain greater
control over the future development of highway 402.
.
Councilman Skowron in 2007 objects To City Purchasing Ehrlich's Property in now a prophetic commentary |
LovelandPolitics first broke the story of the city planning to buy the 402 "Erlich" property in October of 2007. Former Loveland City Manager Don Williams along with key council members decided to purchase the property during a secret phone call in October of 2007. Apparently, Councilman Walt Skowron was not included in the phone call and protested loudly when a lameduck council voted to purchase the property on election night, November 6, 2007. Below are links to the previous LovelandPolitics stories about the property in chronilogical order. City Manager tries to sneak purchase of the property at an initially higher price on council's "consent agenda" but later pulls the item when 1. LovelandPolitics breaks story in October 2007 2. Election night purchase story reported November 2007 3. 402 Property Issue Surfaces in 2011 Council Elections |
