| Why
the LRC's consultant, Leland
Consulting, has no credibility |
| Leland Consulting is a large consulting
business with offices throughout
the nation. It sells its services to a wide
range of private developers, including home builders and land
developers like McStain Enterprises. It also sells its services to
municipalities, like the City of Louisville and municipal bodies like
the Louisville Revitalization Commission, or LRC. The conflict of interest problems faced by a consultant like Leland are difficult to ignore. When on behalf of a city Leland "conceptualizes development," "determines building uses," and "analyzes complex finances," does Leland do so with one eye to the city and one eye to potential private developers who also want Leland to conceptualize their own development, determine its building uses, and analyze their proposed development's complex finances? Would Leland ever tell a city that building houses harms the city financially when Leland knows such counsel would foreclose the possibility it would ever be hired by a housing developer? One way to solve the conflict-of-interest problems would be for Leland voluntarily to decide that it won't work on development projects in a city when that city has hired it to perform work for the city. Leland does not do that. Another way to solve it is for the city to require Leland to refrain from working for developers who want to develop in that city. Louisville hasn't done that. Or the city could choose to hire consultants who don't typically work for developers. But Louisville hasn't done that either. Case Study No. 1: "If it's not already developed, it's blight." Leland is under contract with the City to do work relating to the LRC, the City's urban renewal authority. It was tasked with determining whether there is blight in the Hwy 42 corridor and, if so, creating and helping to implement an urban renewal plan to remedy the blight. It's obvious that the more blight Leland found the larger would be the boundaries of the urban renewal district and the greater would be the money the district could generate. In June 2004, Leland Consulting was under contract with the City to provide a neutral, professional and competent fiscal analysis for the Comprehensive Plan, which guides development in the City. For this, it was paid many thousands of dollars. The LRC was "reactivated" in 2003 for the purpose of implementing the Hwy 42 Framework Plan. In 2005, Leland completed a blight study for the area described in the Framework Plan. In 2006, Leland significantly increased the size of the area. As Councilmember Don Brown acknowledged at the October 3, 2006, Council meeting, the urban renewal district was enlarged to “increase the potential for increment” and to “expand potential funds.” (DVD of meeting available at City Hall.) On August 15, 2006, Leland's principal Anne Ricker told the City Council that the urban renewal district was blighted and therefore needed investment of tens of millions of dollars of taxpayer money to "incentivize" developers to redevelop it because if it weren't blighted it already would be redeveloped. She said this again on October 29. As we have noted, this "analysis"—for which Leland presumably is being paid handsomely—is nothing more than a meaningless tautology. If it's true, all vacant land in Louisville—indeed, throughout the nation—is blighted and needs public investment of many millions in tax dollars to "incentivize" developers; otherwise, it would have already been developed. Then the other shoe dropped. On behalf of the LRC, Leland submitted a report to Boulder County saying that the LRC expects to divert upwards of $77.5 million in sales and property tax revenues from the City, Boulder County, Boulder Valley School District and the Louisville Fire District. And the LRC intends to keep all of it. Notably, nowhere in the LRC's or Leland's "analysis" of the urban renewal district and blight in the district is there any discussion of the impact on the need for public investment—on "blight"—after the RTD has pumped tens of millions of taxpayer dollars into the Hwy 42 corridor to build a commuter rail station and 400-car parking lot. Through this prism, the tautology begins to make some sense. Case Study No. 2: The $35 million flip-flop. When LRC Chairman Chuck Sisk said sales-tax TIF revenues would be collected and held by the City—thus suggesting that it would not go to or be used by the LRC—Leland's principal and LRC consultant Ms. Ricker remained silent, suggesting she agreed with that statement. Yet, the public record is replete with categorical statements from public officials and Ms. Ricker that the LRC fully intends to collect and use $35 million in sales-tax TIF revenues diverted from the City. Case Study No. 3: The 4,500% question. Leland through its principal, Bill Cunningham, created an economic analytical model and delivered its product. On July 12, 2005, here's what Mr. Cunningham told the City Council: Taking into account services provided by the city and revenue generated by occupants in each Louisville house, there is an annual net gain of $6 for each house in Louisville. That is to say, each Louisville house generates more revenue (e.g., because its residents buy groceries in the City and therefore pay the City sales tax) for the City than the cost to the City for services it provides (e.g., library services) to the house. A year later, in July 2006, Leland was under contract with the big housing developer, McStain Enterprises. McStain had a plan to build on vacant land near the corner of McCaslin and South Boulder Road. It was entitled to build 7 homes on the east side of McCaslin; it was asking for rezoning so that it could build 350% more—25 homes. It was required under City law to provide an analysis of the development's fiscal impact on the City. On July 24, 2006, Leland through its principals, Bill Cunningham and Anne Ricker (who is Leland's LRC representative), delivered its product. Using the same economic model the City's taxpayers paid for, Mr. Cunningham and Ms. Ricker reached this remarkable conclusion: The 25 houses its new client proposed to build would generate an aggregate net gain of $6,991 a year for the City, or $270 per house per year. That is, according to Mr. Cunningham and Ms. Ricker, each McStain home will generate 4,500% more revenue for the City than the average Louisville home, which allegedly generates $6. Mr. Cunningham and Ms. Ricker's conclusion is all the more remarkable when you consider that the Town of Superior's staff conducted its own fiscal analysis and concluded in March 2006 that each new $350,000 home results in a net operating loss of $300 each year. If Leland's number is to be believed, Superior provides more services to its residents than does Louisville, even though Superior does not have, among other things, its own police department, library or recreation center. What makes Leland's conclusion—any of its conclusions—completely unbelievable is the fiscal analysis done by Markel Homes, another developer. Markel Homes is proposing to build the so-called North End Development. As currently proposed, the development will have 350 units of housing—single-family and multi-family. As required, Markel Homes' financial consultant Andy Knudtsen conducted an analysis to determine the fiscal impact of the development on the City. Mr. Knudtsen, using essentially the same economic model as Leland, concluded that each housing unit would lose a weighted average of $376—each single-family house would lose $327; each multi-family home would lose $385 (Markel Homes proposes to build 53 single-family units and 297 multi-family units). Notwithstanding Leland's conflicted service of different masters—the City and private developers—the City continues to reward Leland and its agents with contracts and money.
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