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HomeMy WebLinkAboutMemo - Read Before Packet - 5/4/2021 - Memorandum From John Duval Re: Agenda Item 17 - Foothills Metropolitan District Board Of Director AppointmentsCity Attorney’s Office 300 Laporte Avenue PO Box 580 Fort Collins, CO 80522 970.221.6520 970.221.6327 fcgov.com MEMORANDUM TO: Mayor and City Councilmembers FROM: John Duval, Deputy City Attorney THRU: Carrie Daggett, City Attorney DATE: May 4, 2021 RE: Agenda Item No. 17 – Foothills Metropolitan District Board of Director Appointments ______________________________________________________________________________ Due to a last-minute change in the approach being taken to qualify the three persons being proposed for appointment as directors to the now vacant Board of Directors of the Foothills Metropolitan District, edits have been made to Resolution 2021-054 and its Agenda Item Summary. Attached are the edits shown in redline and strike-out. If you have any questions, please let me know. cc: Darin Atteberry, City Manager Agenda Item 17 Item # 17 Page 1 AGENDA ITEM SUMMARY May 4, 2021 City Council STAFF Clay Frickey, Redevelopment Program Manager John Duval, Legal SUBJECT Resolution 2021-054 Appointing Directors to Fill Vacancies on the Foothills Metropolitan District Board of Directors. EXECUTIVE SUMMARY The purpose of this item is to appoint three directors to the Foothills Metropolitan District Board of Directors (Board). In December 2020, the Foothills Mall, owned by Walton Foothills Holding VI LLC (Walton), went into foreclosure and a receiver was appointed by the courts to control the property during the pendency of the foreclosure (Receiver). As a result, two representatives of the Receiver became directors on the Board. In late 2020, Walton mistakenly transferred a parcel of real property to the Foothills Metropolitan District (District), in which property these two directors, as well as the Board’s other director, had a contractual interest. It was these directors’ contractual interests in the property that qualified them to serve on the District’s Board. The effect of this conveyance was to disqualify these three directors from serving on the Board resulting in a vacant Board. To remedy this, the disqualified directors have entered into a contract to purchase from Walton another parcel of real property within the Foothills Mall development. As a result, these three past directors are again qualified and willing to serve as directors on the Board if appointed by City Council. the property has been reconveyed to Walton, and tThe District is asking Council to adopt this Resolution to appoint these three past directors to serve again on the Board. State law authorizes Council to make these appointments when a metropolitan district’s board of directors becomes vacant in a situation like this, but it also requires the newly appointed Board to call within six months of its appointment for the nomination of new directors and to hold a special election for these offices. Without these temporary appointments, the District will be hindered from providing its services to the residents and businesses in the District. These appointments are also needed because Walton currently has a contract with McWhinney Enterprises (McWhinney) to sell the Foothills Mall to McWhinney and this sale cannot be completed until the District’s Board is fully operational. STAFF RECOMMENDATION Staff recommends adoption of the Resolution. BACKGROUND / DISCUSSION The District is a metropolitan district established pursuant to Colorado’s Special District Act (the “Special District Act”) under the Amended and Restated Service Plan for the Foothills Metropolitan District approved by City Council on May 7, 2013, in Resolution 2013-044 (Service Plan). The District is located entirely within the City’s boundaries and was organized to provide public improvements and services for the redeveloped Foothills Mall. The District is governed by a board of directors (Board), the directors of which are elected by the District’s “eligible electors.” For a person to qualify under the Special District Act to be a director on the Board, the Agenda Item 17 Item # 17 Page 2 person must an “eligible elector” of the District. The Special District Act defines an “eligible elector” of a metropolitan district to be a registered voter in Colorado who is a resident in the District or is the fee title owner of taxable real or personal property in the district or is a person who is under contract to purchase taxable property in the district and obligated under that contract to pay property taxes for the property. Until recently, the qualified directors on the District’s Board were Patrick Bunyard, Suni Devitt and Michael Staheli (Past Directors). These Past Directors were qualified to serve as directors on the Board based on them having a contract to purchase a certain parcel of real property (Property) within the District and being obligated under that contract to pay the property taxes for the Property (Purchase Contract). The Past Directors recently lost their qualifications to serve as directors on the Board when the Property was inadvertently conveyed by Walton to the District and, as result, the Past Directors lost their qualifying interest in the Property under the Purchase Contract. Section 32-1-905(1)((d) of the Special District Act provides that a director’s office on the board of a metropolitan district “shall be deemed to be vacant . . . if the person who was duly elected . . . ceases to be qualified for the [director’s] office.” However, Section 32-1-905(2.5) of the Special District Act provides that when there are no duly elected directors on the board of a metropolitan district and the failure to appoint a new board will result in the interruption of the district’s services, the governing body of the municipality within which the district is located “may appoint all directors from the pool of duly qualified, willing candidates.” Also, within six months of such appointments, the newly appointed board must call for nominations for a special election to be held in accordance the Act and applicable Colorado election laws to elect directors. The City recently received a letter (Attachment 1) from the District’s lawyer asking Council to exercise its authority under the Special District Act to appoint directors to the District’s now vacant Board so that the District’s ability to continue to provide its public services will not be hindered. The District’s lawyer has also recently adviseds that the District and Walton and the Past Directors have entered into another contract to purchase a different parcel of real property within the Foothills Mall development and the District.have recently recorded a correction deed to reverse the conveyance of the Property from Walton to the District so. As a result, the Past Directors are again qualified to serve as directors on the Board and may do so if appointed by Council as authorized in Section 32-1-905(2.5). She also advises that the Pas t Directors are willing to serve again as the directors. The District is therefore asking that the Past Directors (Patrick Bunyard, Suni Devitt and Michael Staheli) be appointed to the Board by Council. And, as already mentioned, if Council adopts the Resolution making these appointments, the Special District Act requires the new Board to call an election within the next six months for the election of directors. It is also the case, as indicated by the District’s lawyer, that Walton has defaulted on its financing for the Foothills Mall, so the Mall is now in foreclosure and being operated by a court-appointed receiver. In an apparent attempt to avoid this foreclosure, Walton has a contract with McWhinney to sell the Foothills Mall to it and the currently closing date for the sale is mid-May. However, this closing will apparently not occur until new directors are appointed to the Board. It should also be noted that Past Directors Suni Devitt and Michael Staheli are also representatives and agents of the court-appointed receiver now operating the Foothills Mall. ATTACHMENTS 1. Letter of Request (PDF) -1- RESOLUTION NO. 2021-054 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPOINTING DIRECTORS TO FILL VACANCIES ON THE FOOTHILLS METROPOLITAN DISTRICT BOARD OF DIRECTORS WHEREAS, the Foothills Metropolitan District (the “District”) is a metropolitan district duly established under Colorado’s Special District Act (the “Act”) in Title 32 of the Colorado Revised Statutes (“C.R.S.”) under the Amended and Restated Service Plan for the Foothills Metropolitan District approved by City Council on May 7, 2013, in Resolution 2013-044 (the “Service Plan”); and WHEREAS, the District is located entirely within the City’s boundaries and was organized to provide public improvements and services for the development known as the Foothills Mall; and WHEREAS, in order for a person to qualify under the Act to be a director on the board of directors of a metropolitan district, the person must an “eligible elector,” which the Act defines as a registered voter in Colorado who is a resident in the district or is the fee title owner of taxable real or personal property in the district or is a person who is under contract to purchase taxable property in the district and obligated under that contract to pay property taxes for the property; and WHEREAS, until recently, the qualified directors on the District’s board of directors (the “Board”) were Patrick Bunyard, Suni Devitt and Michael Staheli (collectively, the “Past Directors”); and WHEREAS, the Past Directors were qualified to serve as directors on the Board based on them having a contract to purchase a certain parcel of real property (the “Property”) within the District and being obligated under that contract to pay the property taxes for the Property (the “Purchase Contract”); and WHEREAS, the Past Directors recently lost their qualifications to serve as directors on the Board when the Property was inadvertently conveyed in fee title to the District by the previous fee title owner of the Property, Walton Foothills Holdings, VI, LLC (“Walton”) and, as result of this conveyance, the Past Directors lost their qualifying interest in the Property under the Purchase Contract; and WHEREAS, the Property is part of the Foothills Mall development, which development is owned by Walton, however the development is currently being foreclosed upon by Walton’s lender, MUFG Union Bank (the “Lender”) and in control of a court-appointed receiver, Cordes & Company LLP (the “Receiver”); and WHEREAS, two of the Past Directors, Suni Devitt and Michael L. Staheli, are representatives and agents of the Receiver; and -2- WHEREAS, C.R.S. Section 32-1-905(1)(d) provides that a director’s office on the board of a metropolitan district “shall be deemed to be vacant . . . if the person who was duly elected. . . ceases to be qualified for the [director’s] office”; and WHEREAS, C.R.S. Section 32-1-905(2.5) provides that when there are no duly elected directors on the board of a metropolitan district and the failure to appoint a new board will result in the interruption of the district’s services, the governing body of the municipality within which the district is located “may appoint all directors from the pool of duly qualified, willing candidates” and within six months of such appointments the newly appointed board must call for nominations for a special election to be held in accordance the Act and applicable Colorado election laws; and WHEREAS, the District and Walton have recently recorded a correction deed to reverse the conveyance of the Property from Walton to the District so the Past Directors are again qualified to serve as directors on the Board and may do so if appointed by the City Council as authorized in C.R.S. Section 32-1-905(2.5); and WHEREAS, the Property is part of the Foothills Mall development, which development is owned by Walton, however the development is currently being foreclosed upon by Walton’s lender, MUFG Union Bank (the “Lender”) and in control of a court-appointed receiver, Cordes & Company LLP (the “Receiver”); and WHEREAS, two of the Past Directors, Suni Devitt and Michael L. Staheli, are representatives and agents of the Receiver; and WHEREAS, Walton, through the Receiver, has recently entered into a new contract with the Past Directors to purchase a different parcel of property owned by Walton within the Foothills Mall development and the District and, as a result, the Past Directors are again eligible electors of the District qualified to serve as directors of the Board and may do so if appointed by the City Council as authorized in C.R.S. Section 32-1-905(2.5); and WHEREAS, the current lack of directors on the Board will cause an interruption of the District’s services and will interfere with a current contract between Walton, the Lender and a third party for the third party to purchase the Foothills Mall in lieu of the foreclosure; and WHEREAS, the Past Directors, as are currently eligible electors of the District, are and therefore qualified to serve on the Board and are willing to do so to provide continuity in the District’s governance as to its ongoing matters, including the pending potential sale of the Foothills Mall; and WHEREAS, the City Council, having been advised of the need to make the appointment of new directors to the District ’s Board and having been advised that the Past Directors are duly qualified and willing to serve as directors on the Board, finds that it is in the best interests of the City and the District that the Past Directors be appointed to serve as directors on the Board as authorized in C.R.S. Section 32-1-905(2.5). -3- NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FORT COLLINS, COLORADO as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That the City Council hereby appoints, in accordance with C.R.S. Section 32-1-905(2.5), Patrick Bunyard, Suni Devitt and Michael Staheli to serve as directors on the Board until their successors are duly elected as provided in C.R.S. Section 32-1-905(2.5). Section 3. That pursuant to the requirements of C.R.S. Section 32-1-905(2.5), the Board shall call for an election within six (6) months hereof for the purpose of electing directors to the Board in accordance with the Act and all other applicable statutory requirements. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 4th day of May, A.D. 2021. _________________________________ Mayor ATTEST: _____________________________ City Clerk