Financing Village at the Peaks • The city of Longmont is financing the $90 million new mall with $27.5 million in public improvements • The city issued Certificates of Participation, which are like bonds, to raise the $27.5 million • A bank is holding the titles to the Civic Center, the Safety and Justice Center, the library and the Development Services Building • The Twin Peaks Metro District will help to pay back the $27.5 million. The city gets 2.5 cents on every dollar of assessed property value • The city will also use a tax increment to pay back the $27.5 million. There’s a property tax increment and a sales tax increment • The property tax increment doesn’t start generating revenue until the property taxes on the property exceed the 2012 base level. Once it does, the city will get 9 cents on every dollar of assessed property value • The sales tax increment doesn’t start generating revenue until the sales tax for the property exceeds the 2012 base level. Once it does, 2 percent sales tax will go to the city

The decisions by Whole Foods and Sam’s Club to delay the Village at the Peaks stores’ openings has caused a financial domino effect and left the city stuck with an upcoming bill.

The city must now dip into property tax revenues and its rainy day fund in order to pay a debt payment due June 1.

In order to get the project off the ground, Longmont approved financing the $90 million project to the tune of $27.5 million in public improvements.

On June 1, the city must pay $636,227 in interest on the Certificates of Participation it issued to raise the $27.5 million.

The Twin Peaks Metro District will earn the city $105,000, projections indicate.

But that still leaves a projected gap of $531,277 the city must fill.

Longmont Director of Finance Jim Golden said the city’s original projections had Whole Foods and Sam’s Club opening ahead of both of the stores’ now-2016 opening dates.

The property tax increment piece of the financing will likely take care of the bills in the future, leaving the sales tax revenue for the city coffers, Golden said.

But 2016 is unique. The property tax increment revenue won’t hit the tax rolls until a year and a half after construction is done.

So staff was counting on sales tax from the three anchor tenants — Whole Foods, Sam’s Club and Regal Cinemas — to pay the bill coming due in June.

The city doesn’t receive the sales tax increment revenue unless it exceeds the 2012 levels for the property. Without Sam’s Club or Whole Foods open, that’s not likely to happen by June.

“If one or both of those anchors had opened at the beginning of the year, I don’t think we’d be in this position at all,” Golden said.

Delays

Whole Foods announced in December that its quarterly earnings came in lower than expected and so the Longmont store would open in December 2016 instead of December 2015 as originally planned.

It’s unclear when Sam’s Club was originally supposed to open, but there was a perception in the community that most, if not all, of Village at the Peaks would open in time for Christmas 2015.

“When it opens in late 2015, the formerly enclosed mall will be transformed into an all-new, 480,000 square-foot retail destination that will showcase the exceptional mountain views of Longs Peak,” a July 2014 news release from Village at the Peaks developer NewMark Merrill Mountain States read.

Instead, the wholesaler is set to open in late June 2016.

Allen Ginsborg, NewMark Merrill regional director, said the city’s projections were just that — imprecise predictions based on facts that are subject to change.

“It’s the nature of our business,” Ginsborg said. “Retailers are in control of their own destiny and sometimes make decisions that none of us appreciate.”

Howard Davidowitz, chairman of New York-based retail consulting and investment banking firm Davidowitz & Associates, said there are many factors that could influence a retailer’s decision to delay an opening — some in the control of the developers and some not.

Sam’s Club and Whole Foods “could have had conditions on their opening,” Davidowitz explained. “It could be that the developer had certain obligations and it could be that those things were not done on that time frame.”

Ginsborg said NewMark Merrill had fulfilled its contractual obligations to both companies and that the decision to delay openings was made by the retailers for their own reasons.

“The decision was an internal decision,” said David Redick, Whole Foods’ associate coordinator for marketing in the Rocky Mountain region. “It was not the best time for a new store opening. The developers have been nothing but wonderful to us.”

Redick said the city’s circumstances were “unfortunate” and that Whole Foods “will accept responsibility for any part” it played in the cash shortage.

“We’re committed to the long-term development of the Longmont community, and we’re thrilled to be part of (their) vibrant growth,” Redick said

Sam’s Club did not respond to requests for comment.

Some agreements can impose penalties upon tenants that do not open according to a set timeline. Because of the proprietary nature of the contracts, Ginsborg could not comment on if that was the case with Sam’s Club or Whole Foods.

“We certainly want to do everything within our power to help the city make its payments, and we have pushed as hard as we are able to under our agreements with our retailers to make that happen,” Ginsborg said.

Finding the money

In June, the city must pay $636,277. Staff projects that the city will have $105,000 from Twin Peaks Metro District property tax revenue.

That still leaves a gap of $531,277.

Add on another $208,900 from COP savings that include investment earnings and savings on a job the city found it didn’t need to fill.

That still leaves the city seeking $322, 377 in time for the June 1 payment, which is where the City Council comes in.

The Longmont City Council will need to approve using $117,076 of citywide property tax revenues and $244,505 from the emergency fund for the June payment

The $117,076 comes from property taxes paid by Longmont residents. Using the money for Village at the Peaks would represent the first direct infusion of taxpayer dollars into the project, not counting salaries for city employees who work on the project.

The city hadn’t assigned a use for the $117,076 yet because there’s a part of the year when property tax revenue could dip due to some homeowners filing appeals. Now, staff will tell council at the meeting on Tuesday that the $117,076 in property tax needs to go toward paying the mall bill.

Using the $117,076 brings the gap down to $205,251, which staff plans to pull out of money designated for the emergency fund.

The city planned to bolster the $4.46 million emergency fund with a contribution of $480,163 in 2016.

Instead, the payment to the emergency fund will be slashed in half in order to pay the pending bill.

Golden said that making debt payments is one of the purposes explicitly assigned to the emergency fund.

“There might be other options, but this is the most logical option and so this is what we’re bringing to (the council) because that’s what their policies call for,” Golden said.

After the June bill is paid, the city will face another $636,277 bill for the COPs due Dec. 1. The December bill also has a funding gap, but it isn’t as dire as the June bill because the city expects to have $491,973 in sales tax increment revenue by then.

With $105,000 in Twin Peaks Metro District revenue and $491,973 in projected sales tax revenue, the December bill has a gap of $39,254.

Staff plans to pull that from the emergency fund as well, making the total amount coming out of the money meant for the emergency fund $244,505.

Golden said that in the future, when the Village at the Peaks project is generating more revenue, staff will make the emergency fund whole again.

The City Council is set to discuss the debt payments and Village at the Peaks 7 p.m. Tuesday in council chambers at 350 Kimbark St.

The Future

Golden said they are confident that once the anchors open, the city will be able to make its debt payments with room to spare.

“But it all comes down to the timing of those anchors,” Golden said. “And it seems like we are going to have one fall in place very soon and hopefully the second one by the end of the year.”

Ginsborg said his goals were aligned with those of the city, and that despite the delays, the mall will bring in “a good share” of revenue this year.

Securing two “powerhouse” companies such as Sam’s Club and Whole Foods as anchors was a major win, Davidowitz said, and should spell success for Village at the Peaks.

He agreed that wrangling such huge companies could be difficult but, at the end of the day, that is the developer’s job.

“It’s the mall owner’s responsibility to get all this together,” Davidowitz said.

Karen Antonacci: 303-684-5226, antonaccik@times-call.com or twitter.com/ktonacci

Shay Castle: 303-473-1626, castles@dailycamera.com or twitter.com/shayshinecastle