Fraser Rec: Contract clause behind recall, lawsuit |

Fraser Rec: Contract clause behind recall, lawsuit

Will Bublitz
Fraser, Colorado

The Concerned Citizens claim that clauses in the contract between the Fraser Valley Metropolitan Recreation District (FVMRD) and Grand Park is providing them with more ammunition in their battle over the recreation center being built in Fraser.

The local group, which formed three months ago, said it is working on both a lawsuit over the contract as well as circulating a petition for a recall election of the FVMRD directors who signed or supported the contract with the developer of Grand Park.

“We’re preparing a two-track approach to this problem with a lawsuit and a recall,” said Winter Park attorney Mark Rudis, the Concerned Citizens’ lawyer. “Our ultimate goal is to compel Grand Park to pay for the rec center. The taxpayers of this district should not have to pay for this project because it’s really Grand Park’s project.”

The controversy over the recreation center revolves around it being built on land donated by the Grand Park development and its developer Clark Lipscomb. The Concerned Citizens have argued that an alternate site should have been found for its construction and have opposed the contract between FVMRD and Grand Park.

The construction of the recreation center began in late August. It has a total budget of $14,942,378, paid for with part of the $19.5 million bond approved by district voters in last November’s mail-in ballot election.

Reversionary clauses

The proposed lawsuit by the Concerned Citizens is based upon the so-called “reversionary clauses” in the contract. They claim these clauses give Grand Park “extraordinary powers” to take back its donated land and any structure that was built upon it with public money.

While the reversionary clauses in the contract have been publicly discussed at length over the past months, Pat Rupert and Viki Bale, two leaders of the Concerned Citizens, claim the public has been misinformed. They accuse the district board, its supporters and its paid public relations effort of misdirecting the public’s attention away from what they consider to be dangerous clauses in the contract.

“We agree the six-month reversionary clause is a standard reversion clause about if the building is not used as a rec. center,” Bale said. “And then there’s the clause about naming the rec center. But that’s all they talk about.”

Rupert agreed. “There are not two reversionary clauses but three. It’s the third clause that nobody talks about, which is the real problem.”

The first clause in the contract allows the donated land and any improvements made on it will revert back to Grand Park if after six months the property is not used as a recreation center. Rudis, the group’s lawyer, agreed that this is “ordinary reversionary clause” in donated land agreements and the Concerned Citizens admit that there is “nothing unusual” about it being in the contract.

“The six-month clause is not where the problem is,” Rudis said. “Our problem is with the two other clauses which are not ordinary. Actually, they are very extraordinary because of the powers they grant Grand Park and Clark Lipscomb.”

Rudis said the problem lies in the contract’s Special Warranty Deed where it states the reversion of the property to Grand Park will go into effect “immediately if grantee breaches the provisions of Section 9(a)(ii) and 9(a)(iii) of the Donation Agreement…”

Section 9(a)(ii) is the clause that requires the new building to be named the “Grand Park Community Recreation Center or some other names to be mutually agreed upon between the parties.”

Rudis said this “naming rights clause” has already gotten a “lot of public discussion,” although few have realized that refusal to yield to Grand Park’s choice would cause the reversionary clause to activate immediately.

“Boobytrap” clause

However, the clause that Rudis described as “particularly onerous” is 9(a)(iii). It calls for an “eventual physical connection” of the rec center to a hotel that will be built adjacent to it. A provision of that clause requires the district to “grant an easement to accomodate the connection on the property, in a form acceptable to Grand Park.”

Describing the contract’s required connection as an “annexation,” Rudis explained the clause specifically requires the rec center to be built to “permit access to the hotel and vice versa.” He called this reversionary clause “extraordinary” because it dictates the district to build the rec center to “Grand Park’s specifications” or have the property taken away immediately.

“Grand Park gets to dictate the name of the rec center, the design of the rec center and hotel, and require the district to get the job finished,” Rudis said.

“But there’s the boobytrap. If some future rec board doesn’t want this design concession or grant the legal right to connect it to the hotel, their hands are tied. If they refuse, the land and the building reverts back to Grand Park at no cost. Lipscomb simply takes it.”

Rudis said the Concerned Citizens requested the chance to review the terms of the contract between FVMRD and Grand Parks prior to the district board’s signing on July 22. He claimed they were never able to obtain a copy of it until August.

When he publicly challenged the board about the reversionary clauses at the FVMRD board meeting on Sept. 10, Rudis claimed one of the directors admitted they did not understand the reversionary clauses, but had relied upon the advice of the district’s lawyer who had reviewed the contract.

Possible lawsuit

While it might appear the signed contract between FVMRD and Grand Park is a “done deal,” Rudis said that may not be true.

“My area of legal expertise is tax law,” he said. “These events and the documents associated with them may have unfortunate consequences.”

Rudis said the two “extraordinary” reversionary clauses could result in the “recharacterizing of the municipal, tax-free bonds as taxable.”

“If that happens, the bondholders may seek damages against the district board,” he said. “At this time, I am researching the law, particularly the IRS Code, Section 141 to determine whether the tax-free bonds may be challenged by the Internal Revenue Service.”

Rudis admitted there are “a lot of if’s and whether’s” involved in getting such a lawsuit ready to be filed with the court.

“But we’re moving forward with it,” he said. “We’re doing the research and evidence collection. When we’re ready to go, we’ll go.”

Recall effort

While the proposed lawsuit is being prepared, the Concerned Citizens said they are continuing with their effort to seek a recall of three members of the FVMRD board of directors.

Rupert and Vale said the first signatures on the recall petitions were taken Tuesday, Sept. 30, and the Concerned Citizens’ petitioneers are continuing to canvass the community. They declined to say how many signatures they have collected so far.

Rudis filed documents requesting a recall election with the court in Hot Sulphur Springs on Aug. 22. On Sept. 16, Judge Shelley Hill of the 14th Judicial District Court appointed a designated election official for the recall.

The duty of a designated election official is to verify that the signatures on the recall petitions are by qualified voters who live within the recreation district’s boundaries.

The Concerned Citizens petition is asking for a recall of three district directors ” Dan O’Connell, Beth Sands and Pete Strohecker.

Judge Hill handled the recall petition after Judge Mary Hoak, who is the district court judge for Grand County, recused herself. She is married to John Kacik, who is a director of the recreation district.

A total of 300 valid signatures are needed for a recall election to be conducted. Once the Concerned Citizens have 300 valid signatures officially confirmed with the District Court, the Grand County Clerk will prepare a draft ballot for the recall election.

Rudis said the Concerned Citizens are also planning to seek the recall of a fourth director, John Kacik. They are not seeking his recall along with the three other directors because under state law an official cannot be recalled until after he or she had served a minimum of six months. Kacik was elected to the Fraser Valley Metropolitan Recreation District’s Board of Directors in May.

The Concerned Citizens are seeking the recall of O’Connell, Strohecker and Kacik because they voted July 22 for the approval of a contract with the Grand Park development for the donation of 4.9 acres of its land as the site for the construction of the recreation center.

Although Sands abstained from the vote on the contract, the group also wants her recalled, claiming she had a “conflict of interest” because she was an employee of Cornerstone Holdings LLC, the developer of Grand Park during the time of the contract negotiations. She has denied having any conflict of interest or having influenced other directors to vote for the contract. Since the signing of the contract, she has left her position with Cornerstone.

The only director whose recall is not being sought by the group is Greg Gallavan, who voted against accepting the contract.

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