The NRCDC Divestiture
Upon granting the TRO restraining the City from removing the NRCDC board, the District Court scheduled a hearing for December 20, 2016. To prepare for the hearing, City Attorney Kahn filed extensive court papers defending the City’s position and accusing NRCDC counsel of attempting to mislead the court (see City’s Response to Motion). For this he charged the City $33,457.23 (see Bills, matter 259). But on the night before the scheduled hearing, the Salida City Council called a special meeting at which, without public input, it surrendered power to replace NRCDC board and gave up on the Fire Sale. This action mooted the case in the District Court, which the NRCDC agreed to dismiss.
The City’s surrender was in the form of Resolution 2016-97, drafted by the City Attorney, purporting to “divest” the city of the NRCDC. With this Divestiture, the City avoided a potentially adverse decision in the NRCDC’s law suit as well as a possible declaration by the Court that no TABOR violation existed. Instead, as Fire Sale proponents claimed, the Divestiture removed “control” of the NRCDC by the City, which they contended was a cause of the alleged TABOR violation.
So whether the Divestiture had saved the City from a TABOR violation or merely saved face for certain city officials, it had a number of other legal consequences for the City.
Prior to the Divestiture, three sets of documents governed the relationship between the NRCDC and the City: 1) the NRCDC Articles and Bylaws, which created the NRCDC and gave the City power to appoint and remove NRCDC board members and to approve or reject amendments to those documents; 2) the NRCDC/City Development Agreement, as amended, which gave the City most of its rights in the Vandaveer property; and 3) an unrestricted general warranty deed, which conveyed the Vandaveer Ranch title to the NRCDC. The Divestiture essentially eliminated the first two.
Under the Divestiture resolution:
The City surrendered on behalf of itself and its citizens the power to remove and appoint NRCDC board members or to approve changes in the Bylaws and Articles of the NRCDC, leaving that power solely in the hands of the NRCDC board itself; and
The City repudiated the NRCDC/City Development Agreement and the only other source of the rights of the City in the Vandaveer Ranch, as none were reserved in the deed of the Vandaveer property to the NRCDC. The City thereby:
- lost all rights to reacquire the Vandaveer Ranch without cost, whether upon completion of all projects, upon payoff of the indebtedness on the property, or otherwise, leaving the property perpetually owned by the NRCDC, to be managed, developed or sold at the sole discretion of the NRCDC board;
- lost all rights to approve or reject any sales of parcels of the Vandaveer property by the NRCDC;
- lost all rights to influence the development of the Vandaveer property other than merely as a governmental regulator and service provider;
- lost any residual rights to land that had been at least partially used for governmental purposes, arguably in violation of Colorado law; and
- lost the ability to enforce any other rights of the City might have had under the Development Agreement.
By terminating an agreement that contained no unilateral right of the City to terminate, and by repudiating all of City’s obligations under the agreement, the City in all likelihood breached the Development Agreement with the NRCDC, and lost all rights the City had to enforce any part of the agreement, notwithstanding self-serving language in the Divestiture resolution that it was reserving its rights.
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