The Colorado Springs City Council granted the tax rebate because they expect the store to generate $1.5 billion in economic activity over 25 years and provide hundreds of jobs. In August, the retailer said it expected to hire 350 people.

The incentives were needed to bring the retailer to town because it was considering other locations in Monument, Boise, Idaho, and Madison, Wis., among others, Jenkins said. The business was particularly attractive because its indoor Ferris wheel, aquarium and other attractions draw shoppers when the country has an overabundance of retail stores and more people are buying online, Jenkins said.

“They are a massive contributor of economic velocity to the overall BID,” he said.

However, several businesses in the district, including Burger King, and Cheddar’s Scratch Kitchen, are concerned because the additional incentives were not communicated to them even though as taxpayers they will be among those subsidizing them, and they do not believe their positions is well represented on the business improvement district board, which consists of Nor’wood employees, said Tim Leonard, who represents the concerned businesses. The business improvement district was formed by Nor’wood in 2004 to help fund the public improvements, such as roads and landscaping, across about 100 acres in the commercial district where Scheels will be built. 

“District members have no say. … There is no representation on the board,” Leonard said. 

The businesses found out through Leonard’s advocacy and engagement about the district’s plans to build the Scheel’s parking lot and keep fees collected from shoppers. 

Burger King owner Rick Stucy said compared to other business improvement districts he’s been involved with, the Interquest North district has been more of a problem when it comes to communication with members.

“Nothing is transparent with those folks,” he said.

Jenkins said the parking lot the business improvement district is building in front of Scheels is centralized to the entire development and will be a public amenity for customers of all the nearby businesses. 

As property of the district the 9-acre lot is exempt from property taxes that would otherwise be owed to El Paso County, the city, Academy School District 20 and other entities, according to county records. In a covenant, the district granted Scheels the right to hold events and other activities in the lot.

Through Interquest Marketplace, the company that owns the property, Nor’wood will also allow Scheels to keep up to $200,000 annually in public improvement fees that otherwise would have to be remitted to the district to pay back bonds for public infrastructure, according to district documents. Shoppers pay the fees in the form of a 1.25% fee on purchases in the district.

The incentives will result in a net gain for the district, which will see an additional $825,000 a year in revenue from Scheels. The revenue from Scheels will allow the district to lower property taxes in the district from 50 mills to 17 mills in 2023, a 67% reduction, Jenkins said.

However, Leonard said he thinks its doubtful that property taxes in the district will go down since the maximum amount of property taxes has been charged since the district was formed.

“That 50 mills hits the bottom line of every single business,” he said. 

Developer driven districts

Historically, business improvement districts were formed by merchants who wanted to work together on projects such as improving shared infrastructure and collaboration was naturally a part of the governing process, said Associate Professor Todd Ely, director at the Center for Local Government Research and Training at University of Colorado – Denver. When business improvement districts are formed by developers to fund greenfield construction and the developer runs the board as the largest property owner there is generally less involvement from the businesses in the district, he said.

“There just isn’t much of an incentive for genuine engagement when the BID is dominated by one property or business owner,” he said

However, business improvement districts are necessary to fund infrastructure because Colorado voters passed the Taxpayer’s Bill of Rights, which limited government spending, he said. Governments, such as cities, began to rely on developers to fund infrastructure by forming public districts that guarantee investments are repaid through property taxes or fees. The taxing structure in those districts is generally set up before businesses move in.

Interquest North businesses intervene

Burger King and Cheddar’s proposed a lower overall property tax rate that would benefit all businesses in the Interquest North Business Improvement District instead of a subsidy for Scheels in a June 2019 letter to City Council. 

“Instead of forcing an incentive to Scheels with a complicated political, legal, and financial scheme which will leave in its wake far more losers than winners, the district board has in its authority the most obvious solution: lower its taxes,” wrote Leonard, on behalf of the businesses.

At the time, the district was asking the Colorado Springs City Council to exclude Scheels from the district boundaries, which would have exempted the store from district property taxes.

The district later withdrew its request to exclude Scheels from the district after hearing concerns from businesses, but went forward with the other incentives without consulting its membership, Leonard said.

Jenkins said the district was surprised businesses were concerned about the incentives offered Scheels because of the additional shoppers it is expected to draw to the area that will benefit all the businesses. 

After Leonard found out the Scheels parking lot was purchased by the district and is now tax exempt, he alerted  El Paso County Assessor Steve Schleiker, noting that a covenant allows the retailer to hold up to six annual events a year and repair gear in the parking lot now owned by the district.

Since then, Schleiker has requested any leases, contracts and other agreements between the business improvement district and any retailer occupying the commercial center at 1226 Interquest Parkway to determine if any has taxable interests. However, he is only expecting to receive information on the Scheels agreement, he said.

Typically the value, and therefore the taxes, on a lease are less than the value and taxes on property, Schleiker said.

The businesses in the district may also challenge the $200,000 in fees Scheels is allowed to keep. But they don’t expect the the business improvement district to take action , Leonard said.

“To talk to the business improvement district is a total dead end,” he said.

While the concerns of Burger King and Cheddar’s were considered, they represent about 2% of the property value in the district and overall project goals must be achieved, Jenkins said.