IT TAKES A VILLAGE AND MULTIPLE SOURCES OF REVENUE: A CASE STUDY OF THE DENVER UNION STATION REDEVELOPMENT PROJECT

IT TAKES A VILLAGE AND MULTIPLE SOURCES OF REVENUE: A CASE STUDY OF THE DENVER UNION STATION REDEVELOPMENT PROJECT CATHERINE C. GALE, ESQ. EMMA R. KEYSER, ESQ. BROWNSTEIN HYATT FARBER SCHRECK, LLP I. Introduction The Denver Union Station Redevelopment Project (the Project ) has been locally referred to as the Mother of all Transit Oriented Developments. 1 This Project is one of the largest transportation redevelopment projects in North America and combines the creation of a mixed use urban transit-oriented development with critical improvements to the Denver regional transportation system. The Project involves the redevelopment of 42 acres of land in downtown Denver, including approximately 19.5 acres of land ( RTD Site ) owned by the Regional Transportation District ( RTD ), 2 located around the historic Denver Union Station (the Historic Union Station ). At the center of the Project is the preservation and renovation of the Historic Union Station for its continued use as a public transportation and mixed use activity center. The developed RTD Site will serve as a regional transportation hub which connects commuter rail, light rail, commuter transit, and inter-city regional and circulator bus facilities, and includes the development of major public spaces. The Project includes approximately $500 million in public improvements and the sale of a portion of the RTD Site to a private master developer for the development of approximately 1.3 million square feet of leasable/saleable space for commercial, office, retail and residential development. The Project is often described in two components, the horizontal development and the vertical development. Generally speaking, the horizontal development is comprised of the rail and bus facilities and the public spaces (referred generally as the transit facilities ), the financing of which is the responsibility of the public entities involved in the Project. The vertical development is comprised of the commercial, office, retail and residential development constructed by the private developers utilizing private funding sources. In order to integrate the public-private development, a private master developer is responsible for providing development services to the overall Project. The transportation elements of the Project are anticipated to be completed by 2014, while private build-out of the properties within the Project is projected to occur in phases over a 15-year period after completion of the public portions. 1 Statement of Peter Park, Director of Planning for the City and County of Denver at press conference on Nov. 15, 2006. 2 RTD is the regional transportation authority operating public transit services in eight of the twelve counties in the Denver metropolitan area. RTD is governed by a 15-member, publically elected Board of Directors.

The Project is a true public-private partnership involving a village of participants, including multiple private developers and landowners, the general public, and public entities from the federal, state, regional and local levels. The funding for the Project involves multiple sources and includes federal loans, federal and state grants, regional sales tax revenues, tax increment revenues, special district tax revenues and private sources of funding. The private developer, which is comprised of two private regional developers, played an important role in bringing private dollars and private development expertise to the Project. This paper summarizes the history of and parties involved with the Project, the major public infrastructure to be constructed as part of the Project, the unique financing structure utilized to facilitate the redevelopment, and the key development agreements which establish the terms of the public-private development of the RTD Site. II. History and Description of the Parties Involved in the Project In 2001, RTD acquired the RTD Site, with financial participation pursuant to an intergovernmental agreement with the City and County of Denver ( CCD ), 3 the Colorado Department of Transportation ( CDOT ) 4 and the Denver Regional Council of Governments ( DRCOG ) 5 (collectively referred to as the Partner Agencies ). The Partner Agencies initially worked together in a loose governance structure through an Executive Oversight Committee comprised of one appointee from each of the Partner Agencies. Through the Executive Oversight Committee, the Partner Agencies developed a master plan for the RTD Site that, along with the zoning and historic landmark designation for the Historic Union Station, was approved by CCD in September 2004. In November 2004, voters from the eight-county RTD district in the Denver metropolitan area approved a regional sales tax increase to fund FasTracks, which is a 12-year program to build and operate rail lines and expand and improve bus service throughout the RTD district. This sales tax increase included partial funding for improvements of the transportation components to the RTD Site. RTD will be the primary user of the developed transportation infrastructure within the Project and will own and operate the transit-related facilities. CCD will continue to own the rights of way that connect these transit improvements. 6 All of RTD s commuter rail lines, four of six light rail lines and over half of RTD s regional bus lines will use the new transit facilities on the RTD Site. In November 2006, after a competitive bidding process, the Partner Agencies selected regional developers Continuum Partners, LLC ( Continuum ) and East West Partners ( East West Partners ) to jointly serve as the private master developer of the Project. 7 In 2007, 3 CCD is a combined home rule municipality and a county. 4 CDOT is a department of the State of Colorado charged with addressing the state s transportation systems. 5 DRCOG is a nonprofit association of local governments funded by membership dues and federal and state grants which promotes cooperation for regional issues in nine counties in the Denver metropolitan area. 6 In fact, the new underground regional bus facility constructed as part of the Project is situated within the right of way pursuant to a right of way encumbrance permit granted by CCD. 7 Continuum Partners is a Denver-based real estate development company that specializes in mixed-used development projects. Continuum Partners focuses its projects in the Denver metro area which currently include the Belmar shopping development in Lakewood, the Art House Townhomes in downtown Denver and a 120-acre neighborhood development in Westminster, Colorado. East West Partners is also a Denver-based real estate 2

Continuum Partners and East West Partners formed, as a joint venture, the Union Station Neighborhood Company (the Master Developer ), to oversee the planning for the development of the RTD Site and to undertake the funding, design, construction and development of the private components of the Project. 8 In July 2008, the Denver City Council created the Denver Union Station Project Authority ( DUSPA ), to oversee the financing, construction and renovation of the transportation and public infrastructure for the Project. DUSPA is a non-profit Colorado corporation authorized to act as an on behalf of issuer of tax exempt bonds or other obligations for the benefit of CCD as a political subdivision under Internal Revenue Ruling 57-187. 9 While DUSPA is a separate and distinct entity from CCD, it is not a district (or part of a district); rather it is a government-owned corporation. DUSPA is authorized to issue debt for the sole purpose of financing the Project and the debt is payable solely from the financing, refinancing, sale, leasing or operation of the Project or other property of DUSPA. DUSPA has no independent power to levy taxes or make assessments of any kind. However, monies paid to DUSPA by the Partner Agencies, or the applicable special districts (as discussed below), constitute revenues derived from the operation of the Project and any contractual rights under such project related agreements are considered property of DUSPA. The Partner Agencies, through membership on the DUSPA board 10 and the various intergovernmental agreements, provide financial support and assistance to DUSPA for the Project. For its role, DUSPA was tasked with implementing all the agreements for the Project among the various public entities, but DUSPA will not take title to any public improvements. RTD will continue to remain in title to the public portion of the RTD Site and is responsible for operating and managing the transit facilities. CCD will be responsible for maintaining the streets within the rights of way and the applicable special districts (discussed below) are responsible for maintaining the pedestrian portions of the rights of way. DUSPA s services have been provided through an experienced construction and development manager, Trammell Crow Company ( Trammell Crow ). Trammell Crow was selected after a public proposal process and is often referred to as the owner s representative for the Project. As the owner s representative, Trammell Crow works with representatives from RTD in overseeing the build-out of the transit improvements and the public infrastructure for the Project. In addition to working with RTD and the contractor for the transit infrastructure, the development company that started in 1986, and has developed and sold over $3 billion of residential and commercial real estate. East West s most recognizable local project is Denver s Riverfront Park, a 25-acre development within the Central Platte Valley, which is located on the north side of the Project. East West is also involved in the Concord Park redevelopment in Charleston, South Carolina, and several developments in the ski areas of Deer Valley, Utah, Lake Tahoe and the Vail Valley region in Colorado. 8 For information about Union Station Neighborhood Company, see www.unionstationdenver.com. 9 Internal Revenue Service Revenue Ruling 57-187 allows the use of constituted authorities of a government to provide tax exempt financing for public purposes in accordance with certain requirements. DUSPA was created by ordinance of CCD on June 30, 2008 pursuant its home rule powers under Article XX of the Colorado Constitution and the City s Charter. 10 The Board of DUSPA has eleven voting members and two non-voting members. CCD appoints six voting members (none may be employees of CCD) and two non-voting members. RTD appoints two of the voting members and the governing bodies of CDOT and DRCOG each appoint a voting member. The final voting member is appointed by the DUS Metropolitan District 2. In order for DUSPA to maintain its status as a government-owned corporation, there must be indicia of DDC s control over the corporation. Here, CCD exercises its control by maintaining a majority membership on DUSPA s board of directors. 3

owner s representative is tasked with coordinating with the Master Developer for the planning and development of the public plazas and spaces consistent with the public transit infrastructure requirements, the needs of the public and the requirements for the vertical private development on the RTD Site. In August 2008, Denver City Council approved the creation of a Downtown Development Authority ( DDA ) which established a tax increment area with boundaries on the RTD Site and within an approximately 40-acre area around the Project. The DDA was created pursuant to the Colorado Downtown Development Authority Act 11 to halt or prevent deterioration of property values or structures within the central business district and to prevent the growth of blighted areas. 12 The tax increment includes property and sales taxes generated in the DDA area and is authorized for use in the redevelopment of the area, including the Project. The collection of tax increment under the DDA is limited by statute to 30 years. 13 Special taxing districts ( Metropolitan Districts ), which included property on the RTD Site, were created in 2008. These Metropolitan Districts were established to levy property taxes to fund certain public improvements and provide services, operation, maintenance and support to the vertical development within the applicable Metropolitan Districts boundaries. 14 The Metropolitan Districts were authorized to pledge certain of the Metropolitan Districts property taxes generated within the Metropolitan Districts boundaries to the debt service for the Project. The Final Environmental Impact Statement was completed and signed on July 22, 2008 and a Record of Decision was awarded on October 17, 2008. 15 In May 2009, a design build contract between DUSPA and Kiewit Western Company (the Contractor ) was signed that 11 CRS 31-25-801 et. seq. 12 CRS 31-25-801(1). The City of Denver created the DDA pursuant to Ordinance No. 400, Series 2008. Pursuant to the statute a DDA is a separate body corporate and politic from the municipality and is governed by a board appointed by the creating municipality in accordance with statutory requirements. The DDA does not have taxing or assessment powers, but rather its funding comes through tax increment revenues. 13 CRS 31-25-807(3)(a). 14 Under Colorado law a Metropolitan District is created pursuant to CRS 32-1-103 et. seq. and is authorized to finance, construct, operate and maintain certain types of improvements. Five Metropolitan Districts were created on the RTD Site and the Market Street Station Parcel. District No. 1 is comprised of a small portion of one of the parcels on the RTD Site and serves as the master district, with all operations and funds ultimately flowing through District No. 1. District No. 2 was created to encompass all of the commercial property within the RTD Site. District No. 4 includes the commercial development on the Market Street Station Parcel. District Nos. 3 and 5 were created to encompass any future residential development that may be developed on the RTD Site and Market Street Station Parcel respectively. Currently, District Nos. 4 and 5 have elected per statute to be on inactive status as they currently collect no revenue and perform no obligations. 15 In May 2009, the Colorado Rail Passenger Association ( CRPA ) filed suit against the Federal Transit Administration (the FTA ) claiming the FTA failed to comply with the NEPA process. In March 2010, CRPA also filed suit against DUSPA and RTD, and the cases were consolidated (together with the FTA, the Parties ). Colo. Rail Passenger Ass n v. Fed. Transit Admin., 2010 U.S. Dist. LEXIS 25388. The CRPA claimed the Parties failed to comply with the NEPA process and requested injunctive relief and a temporary restraining order. The District Court for the District of Colorado denied CRPA s request for the temporary restraining order. In December 2010, both RTD and DUSPA filed a motion to dismiss the plaintiff s request for injunctive relief. The court held that any claim against RTD or DUSPA for violation of NEPA was barred by the statute of limitations and as such, the case was dismissed with prejudice. Colo. Rail Passenger Ass n v. Fed. Transit Admin., 2010 U.S. Dist. LEXIS 137754. Both RTD and DUSPA were dropped as named parties in this case. The plaintiff s case against the FTA is still pending; however, the case has not halted the construction of the Project. 4

provided a guaranteed maximum price for most of the public components of the Project based on 30% design. III. Public Development A. Description of Public Improvements The Project will significantly upgrade the Denver region s rail and bus systems and is comprised of the following multimodal transportation improvements: 1. Light Rail and Mall Shuttle. The first major component of the Project is a new light rail station and the addition of a new light rail corridor. Currently, the RTD Site is served by a light rail line that connects commuters to the southwest and southeast areas of the Denver metropolitan area. The new light rail station is a double track station that includes two platforms to serve both the existing southeast and southwest light rail corridors, as well as a new west corridor, which is being developed by RTD in a separate initiative as part of FasTracks. 16 In connection with the new light rail station, the 16th Street Mall bus route (the Shuttle ), which travels along the 16th Street pedestrian mall in downtown Denver and connects two regional bus terminals, has been extended from the western regional bus terminal to the new light rail station on the RTD Site. This Shuttle extension currently provides light rail and regional bus passengers, and will in the future provide other rail passengers, a convenient method of access to reach destination points throughout the downtown Denver area. 2. Commuter Rail. The second transit element involves a commuter rail terminal. The new facility will include eight at-grade tracks for commuter rail lines to service the Denver metropolitan areas, RTD s commuter rail lines, as well as existing Amtrak service and, in the future, a potential return of the seasonal Ski Train. 3. Regional Bus Facility. The third major component of the Project is an expanded regional bus facility, which will replace the current terminal known as Market Street Station, located four blocks east of the RTD Site. The new facility will be located underground and will include 22 bus bays and improvements constructed to facilitate transfers within the bus facility itself, as well as between light rail and the commuter rail elements of the Project. Regional and express bus lines, commercial bus carriers and other public and private carriers will service this facility. 4. Streets and Public Spaces. The redevelopment provides for five major public spaces and amenities for pedestrian and passenger access. The public spaces include (i) the Wynkoop Plaza, which extends from 16th Street to 18th Street along Wynkoop Street, (ii) the Commuter Rail Train Hall, located next to the Historic Union Station, including the area around the commuter rail tracks and platforms, (iii) the Pedestrian Bridge over the Commuter Rail Terminal, located on the upper-level connection across the commuter rail tracks and continuing down to the commuter rail platforms, (iv) the 18th and Wewatta Plaza, which is located at the northeast corner of 18th and Wewatta Streets and provides another access point to the RTD Site from the Central Platte Valley, and (v) the 17th Street Promenade, which is located 16 Freight rail lines for north and south shipments through Colorado will also use the new light rail facility on the RTD Site. 5

to the east of the Historic Union Station and extends from the east side of the Commuter Rail Train Hall to the new light rail station. In addition, there is an extension of the 16 th Street pedestrian mall to accommodate the expanded service for the Shuttle and the light rail station. The master plan for the Project provides that the public spaces will be developed and programmed for general public events and other activities by the public on the RTD Site. In particular, the public spaces are planned to provide opportunities for the adjacent private landowners to develop street-level retail and restaurants, and will also provide public seating, public art and wireless computer internet access. In addition, in order to accommodate the multimodal transportation hub, the Project requires reconstruction of existing streets in the surrounding area and additional rights-of-way and parking facilities. B. Public Sources of Funding The total budget for the public portion of the Project is estimated at approximately $500 million. DUSPA is charged with managing the various financial agreements required to fund the public redevelopment of the Project. DUSPA receives revenues from multiple sources including (1) state and federal transportation funds and grants, (2) federal funds through loans under the Transportation Infrastructure Finance and Innovation Act ( TIFIA Loan ), which is administered by the Federal Highway Administration and under the Railroad Rehabilitation and Improvement Financing Program ( RRIF Loan ), which is administered through the Federal Railroad Administration, and (3) proceeds from land sales associated with the private redevelopment of the RTD Site and the sale of the Market Street Station Parcel (as defined below) owned by RTD. 1. State and Federal Transportation Funds and Grants The Project received state and federal transportation grants totaling approximately $150 million through the Partner Agencies. Such funds included: (i) State funding pursuant to Colorado S.B. 97-001; and Recovery Act; (ii) Federal grant funds received under the American Reinvestment (iii) Federal funds under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users of 2005; (iv) Funds under the State Transportation Improvement Program as approved by the Federal Highway Administration; and (v) State funds received by CCD and assigned to RTD. 2. TIFIA and RRIF Loans When DUSPA was originally created, the Partner Agencies intended to seek funding for the Project with capital appreciation bonds. However, with the deterioration of the financial 6

markets in 2008, including the unavailability of bond insurance, the Partner Agencies structured a plan of finance with DUSPA borrowing funds from the TIFIA and RRIF loan programs. The use of these federal loans presented unique challenges. First, the provisions of the loans anticipated that the loans would be secured by physical collateral rather than revenue pledges. However, in this case DUSPA is not the owner of the property upon which the loan-funded improvements were and are to be built; rather title to the RTD Site and the public transit improvements will remain with RTD. Further, the improvements funded by the loans are unique to this Project and therefore have limited market value separate from the Project. DUSPA could, however, allow a security interest to be created in accounts, proceeds and notes. As such, the collateral issues were resolved with the security for the TIFIA and RRIF Loans consisting of a variety of pledged tax revenues instead of physical collateral. Second, with respect to the two federal loans, there were issues requiring resolution between the federal agencies regarding the application of the different requirements for each of the loan programs and the priority of the loans. In this case, the TIFIA Loan is the senior loan for the Project. 17 This Project is the first recipient wherein the RRIF Loan is the subordinate loan. 18 In addition, there were differences between the two loan programs with regard to the types of Project costs that were eligible to receive funds. For example, the RRIF Loan funds are specifically designated only for those Project costs that directly relate to the commuter rail portion of the Project, whereas the TIFIA Loan funds are designed for more encompassing transit projects that include transit-oriented development attributes. 19 Third, the prior public selection processes used and contractual arrangement with DUSPA s owner s representative and the Master Developer raised issues concerning compliance with federal procurement procedures and other federal funding provisions. Contracts for the Project in place at the time of the loans had to be revised for compliance with the applicable federal programs. The development agreement with the Master Developer was specifically amended to incorporate federal contract provisions relating to federal access to records, federal reporting requirements, provisions concerning disbarment in federal programs, certifications related to lobbying and compliance with federal programs regarding program fraud. In the amendment, the Master Developer agreed to make good faith efforts to meet specific contract goals for participation in the work covered by the agreement for Disadvantaged Business 17 The maximum principal amount of the TIFIA loan is $145.6 million, provided however, the maximum principal amount, together with any credit assistance provided by the act may not exceed 33% of eligible costs under the loan. The interest rate is 3.99% per annum. 18 The maximum principal amount of the RRIF subordinate loan is $155 million. The interest rate is 3.91% per annum. 19 Several transit-oriented development projects around the country have received TIFIA credit assistance. For example, the Transbay Transit Center in San Francisco, California, secured a $171 million TIFIA loan in 2010 for the redevelopment of its outdated transportation terminal, extension of high speed rail lines and the development of a new neighborhood with homes, offices, parks and shops surrounding the new Transit Center. The completion of the new Transbay Transit Center is expected in 2017. TIFIA credit assistance has also been extended to the Interlink project in Warwick, Rhode Island. Interlink (formerly the Warwick Intermodal Station) is an intermodal project connecting air, rail, bus, automobiles, and rental cars at T.F. Green Airport in Warwick, RI that serves the Providence area and Southern Massachusetts. U.S. Department of Transportation, Federal Highway Administration Office of Innovative Program Delivery. TIFIA Projects & Project Portfolios. 1 Dec. 2011. Web. 19 Jan. 2012. <http://www.fhwa.dot.gov/ipd/tifia/projects_project_profiles/index.htm>. 7

Enterprises and the development agreement was further amended to segregate the scope of work that was eligible for federal funds and those tasks that were not eligible for federal reimbursement. 20 Fourth, obtaining acceptance of the market study for the loans and for buy in from the public entities proved challenging. At issue were the assumptions for the schedule and type of development of the private properties within the Project and the impact of the proposed timing of such development on the tax revenue to be generated to pay the debt service. Regarding both loans, DUSPA is the borrower for the Project with a term for the loans of 30 years. The indenture for both of the loans creates a security interest in the following sources of revenues: (i) RTD Bond. RTD and DUSPA entered into a funding agreement pursuant to which RTD agreed to issue a bond to DUSPA in consideration for DUSPA financing a portion of the Project for its benefit. The total amount to be paid by RTD to DUSPA is approximately $167 million and such amount is payable in installments based on a maximum term of 30 years at a stated interest rate (the RTD Bond ). Annual payments to DUSPA equal $12 million and DUSPA pledged this payment stream as security for both the TIFIA Loan and RRIF Loan. The RTD Bond is scheduled to terminate prior to its 30 year maturity if both loans are repaid. The RTD Bond is not subject to annual appropriation as it is authorized pursuant to voter approval of the FasTracks project. Payment of the bond is secured by sales tax revenue received by RTD from within its eight county taxing area. (ii) Tax Increment Revenue Pledge from the DDA. Pursuant to an agreement between the DDA and DUSPA, the incremental tax revenues generated in the DDA area are remitted to DUSPA. These revenues include both property and sales tax increment and are pledged for 30 years to support the repayment of both loans. (iii) DUS Metropolitan District Tax Revenue Pledge. DUSPA entered into a cooperation and pledge agreement with three of the five Metropolitan Districts (the DUS Districts ). 21 In the agreement, the DUS Districts pledged property tax revenues from the imposition of a mill levy on property within the DUS Districts. Pursuant to this agreement, DUSPA agreed to construct and maintain certain public improvements in the Districts. The period of this pledge to DUSPA is for the shorter of 40 years or until the debt service on the DUSPA debt is paid. This 40-year pledge term is important as it increases the time period in which revenue is available for the debt service beyond the limitation of the 30-year term period allowed for the tax increment revenue from the DDA. 20 These amendments required DUSPA to reallocate and seek alternate funding sources for certain portions of the budget. 21 DUS District No. 1 serves as the management district with the responsibility to provide administrative and management services to DUS District Nos. 2 and 3, and to collect the tax revenue from the imposition of the mill levy on taxable property in DUS District Nos. 2 and 3. Pursuant to this agreement between DUSPA and the Districts, the Districts agreed to pay the revenue from the imposition of a 20 mill levy on the properties within the Districts to DUSPA as pledge revenues to the TIFIA and RRIF loans. Pursuant to a separate agreement between the Districts and RTD, the Districts agreed to pay to RTD the revenues from the imposition of a 10 mill levy on certain property within the Districts. 8

(iv) Lodger s Tax Revenue Pledge. If a hotel is built on the RTD Site, a portion of the lodger s tax is pledged to repay the loans under an agreement between CCD and DUSPA. CCD agreed to provide, subject to annual appropriation, 3.75% of the total lodger s tax levied on a hotel room rented for less than 30 days on the RTD Site. 3. Property Sales A third source of funding for the Project, which is often categorized as the private equity contribution of the Project, comes from the sale of land on the RTD Site for private commercial redevelopment. As described above, the original land for the Project was acquired in RTD s name using funding from the Partner Agencies. After the Master Developer for the Project was selected, RTD and the Master Developer agreed to enter into separate agreements for the Master Developer to purchase the five specified parcels of land on the RTD Site for future private development, as more particularly described in Section IV below. 22 RTD contractually agreed to provide to DUSPA an amount equal to the proceeds that RTD obtained from the sale of such RTD owned land. In addition, funds from the sale of a parcel of real estate owned by RTD located off the RTD Site were contributed to the Project. In order to provide cash flow required to pay for nonfederally eligible expenses for the Project, RTD and CCD agreed to the sale of RTD s existing regional bus terminal facility before the completion of the new bus facility on the RTD Site. RTD agreed to sell to CCD, for approximately $11 million, the RTD regional bus transit station know as Market Street Station (the Market Street Station Parcel ), which is located just to the east of the Project. CCD agreed to lease the Market Street Station Parcel back to RTD for nominal monetary consideration in exchange for RTD continuing to operate and manage the property as a bus transit terminal until such time as the new bus terminal station on the Project became available. It was a condition of the sale that RTD pledge the proceeds of this sale to DUSPA. 23 CCD in turn agreed to grant the Master Developer an option to purchase the Market Street Station Parcel under specific conditions. IV. Private Development and the Master Developer A. Private Development on the RTD Site The vertical private development on the RTD Site includes five separate parcels of land (herein referred to as the Private Development Parcels ) which RTD contracted to sell to the Master Developer for commercial development with private funds. This portion of the Project is anticipated to include approximately 1,350,000 square feet of gross leasable/saleable area of commercial, retail and residential uses. Of course, the development of the private portion of the RTD Site required master planning of the entire Project, including the development of the transportation infrastructure and the public plazas. To facilitate the planning and development of the RTD Site, the public entities wanted a private master developer to manage the planning and development process for the entire Project and to implement a vision for the Project which 22 See Letter of Intent and Master Development Agreement for reference to general terms for the Purchase and Sale Agreements. 23 See Section IV-A herein. 9

integrates the transportation components, the public spaces and the private development on the RTD Site. The Master Developer was selected by the Partner Agencies after an extensive public selection process, which included a national Request for Qualifications ( RFQ ) followed by a two-step Request for Proposals ( RFP ). The initial RFQ resulted in eleven development teams and the RFP resulted in two comprehensive team proposals. Once selected, the Master Developer entered into two general development agreements, a Letter of Intent and a Master Development Agreement. B. Development Agreements The development agreements with the Master Developer contained general terms and provisions and referenced future agreements, as well as separate agreements to be entered into between only some of the parties. The following is a brief description of the general development agreements: 1. Letter of Intent with Partner Agencies In 2008, the Master Developer entered into the Letter of Intent ( LOI ) with the Partner Agencies. 24 In the LOI, the Partner Agencies laid out a common vision for the Project and a plan for the development of the transportation infrastructure on the RTD Site. In addition, RTD agreed to pay the Master Developer a project development management fee in exchange for the Master Developer (i) providing design plans and architectural drawings associated with the Project, (ii) coordinating transportation and other public improvement design and implementing logistics with development requirements to ensure efficiency and optimal results, (iii) participating in necessary public processes, presentations and outreach, (iv) selecting, hiring and compensating third party professional consultants for services related to the development of the general development plan and the design standards and design guidelines for the Project, up to a total cost of $500,000, and (v) managing the overall coordination between the public and private aspects of the Project. In connection with the vertical development on the RTD Site, the LOI required the Master Developer to purchase from RTD the five parcels of property located on the RTD Site, known as the North Wing, South Wing, Triangle parcel, A-Block Parcel, and B-Block Parcel, (which collectively make up the Private Development Parcels ). The LOI laid out an appraisal process for establishing the price of each of the Private Development Parcels, a take down schedule for closings for the properties, and a provision that RTD and the Master Developer would enter into separate purchase and sale agreements for each of the Private Development Parcels. In 2010 and 2011, the Master Developer purchased the North Wing, South Wing and Triangle parcels. Currently, the A-Block Parcel and B-Block Parcel purchase and sale agreements are under negotiation, and the parties have established a purchase price of 24 Letter of Intent for Project Agreements on Transportation Infrastructure and Redevelopment, Denver Union Station RTD Site dated January 31, 2008 by and between the Union Station Neighborhood Company, LLC and Regional Transportation District, the City and County of Denver, the Colorado Department of Transportation and the Denver Regional Council of Governments, as amended by the Letter of Intent Supplement dated October 14, 2008. 10

$10 million for each parcel. It is estimated the Private Development Parcels will be redeveloped over a 15-year period from the completion of the public portion of the RTD Site. The LOI also outlined the terms and conditions for an option for the Master Developer to purchase the Market Street Station Parcel from CCD. Terms of the option are set forth in a separate agreement between RTD, CCD and the Master Developer. 25 Under the terms of the agreement, the Master Developer is granted an option until December 31, 2015, to purchase the Market Street Station Parcel from CCD for $14.5 million on the condition that (i) the Master Developer has purchased A-Block Parcel and B-Block Parcel on or before December 31, 2014, and (ii) the combination of (a) the total tax increment revenues received by the DDA generated from the Project, and (b) the total tax increment projected for the Project through 2016 equals at least $1.6 million. The option purchase price reflects CCD s purchase price for the Market Street Station Parcel from RTD of $11,436,000 plus an annual 5% escalator. 2. Master Development Agreement After the creation of DUSPA, the Master Developer entered into the Master Development Agreement with the new entity dated as of August 7, 2009 (as amended, the MDA ). 26 Pursuant to the MDA, DUSPA is responsible for overseeing the financing, design and construction of the public transportation and public infrastructure, and implementation of the Project agreements among various public and private entities involved in the Project. The MDA specifies that DUSPA is obligated to make a minimum total investment of $58.9 million into construction of specified improvements of the public portions of the Project. The Master Developer is responsible for assisting DUSPA with managing the process for the design of the public portion of the Project relating to the public plazas, gathering places and pedestrian connections among the transit facilities. In the MDA, DUSPA agreed to pay to the Master Developer a $6.3 million fee with payment over a specified period for its development services. The terms for the fee for the Master Developer in the MDA superseded any prior terms in the LOI for development management services. In addition, the MDA provides certain conditions for an early development incentive for the Master Developer if the tax increment revenues generated on the RTD Site for a specified period meet a certain target amount. The MDA outlines DUSPA s investment into the Project as follows: (i) $28 million for continuing design activities and construction costs associated with the public open-space surface improvements, (ii) $10.9 million for the construction costs associated with the commuter rail main canopy, (iii) $12 million for the construction costs for transit architectural improvements, and (iv) a minimum of $8 million for necessary expenses associated with the renovation or replacement of mechanical systems for the Historic Union Station. In connection with the foregoing improvements, the MDA requires the Master Developer to provide design services and timely coordination and review relating to the construction of the applicable improvements, including working with DUSPA to develop a joint plan for management of the design review and approval for the public spaces and transit architectural aspects of the Project, and to provide assessments of design elements and to review budgets for the Project. Also, the MDA requires 25 Agreement of Purchase and Sale by and between the Regional Transportation District, the City and County of Denver, and the Union Station Neighborhood Company, LLC dated May 4, 2011. 26 The Master Development Agreement was first amended as of September, 2010 and then amended in a Second Amendment as of December, 2010. 11

DUSPA to cause the design build contractor to cooperate with and provide the Master Developer with 60% and 90% complete plans for the certain specified horizontal public space surface improvements. The Master Developer has the right to approve plans, material selections and specifications for such surface improvements. The Master Developer s involvement in the design and development of the horizontal public development provides the Master Developer the opportunity to integrate the horizontal public aspects of the Project with the vertical aspects to complete the commercial development. V. Historic Union Station The Project provides that the Historic Union Station, which is listed in the National Register of Historic Places and is a Denver Landmark, will be restored and continue to have a prominent role in the new multimodal transit development by continuing to serve transit passengers. All development in the area around the Historic Union Station must be done in a manner sensitive to the historic structure and must be approved by the Denver Landmark Preservation Commission. The plan for this portion of the RTD Site provides for the building to be rehabilitated to its historic prominence as the transportation gateway to Denver, to serve as an architectural anchor connecting the east and west sides of the RTD Site and to provide for active uses on the RTD Site. In the MDA, DUSPA committed to work with the Master Developer, RTD, CCD and any other stakeholder to identify a long-term ownership structure and development approach for the renovation, leasing and management of all spaces within the Historic Union Station, including commercial space and space relating to Amtrak. 27 The Project budget allocated $17 million for the renovation for the Historic Union Station. The MDA between DUSPA and the Master Developer specifically allocated $8 million for necessary expenses for the renovation for the transit operations and passenger use and the replacement of mechanical systems in the Historic Union Station in order to meet necessary code requirements. However, the LOI and MDA did not specifically authorize the allocation of funds or determine the plan for redevelopment of the retail and commercial aspects of the Historic Union Station. As a result, in August 2011, RTD commenced a public process requesting proposals from entities interested in serving as the developer of the Re-Use portions of the Historic Union Station building. In November 2011, RTD considered two proposals for re-use of the Historic Union Station. The teams competing for the redevelopment project are the Master Developer, whose $21.1 million plan includes a market, bar and other retail use and the Union Station Alliance, 28 whose $48 million plan includes a 130-room boutique hotel in the building, along with a restaurant and other retail uses. 29 RTD recently announced the selection of Union Station Alliance as the team to head up the redevelopment of the Historic Union Station and at the time this paper was submitted, RTD is in early stages of negotiations with this team. 27 MDA Paragraph 5.1(e). 28 For information on Union Station Alliance, see www.unionstationalliance.com. 29 Developers present two views of the future for Denver Union Station The Denver Post http://www.denverpost.com/commented/ci_19265175?source=commented-#ixzz1eitgpdqh. 12

VI. Guidance from this Project A public-private partnership with the scale and complexity of this Project required an extensive public process and public involvement and the cooperation and commitment from all parties involved. The following is a list of the steps and actions which contributed to the success of this Project and provides guidance for future public-private development projects. 1. Cooperation among governments and governmental agencies is essential. Critical to the success of this Project was the cooperation among the local governments, the transit authority, the state and the regional association. The use of the LOI and MDA as general development agreements served as a valuable tool in outlining not only the responsibilities of the developer, but also the roles and responsibilities of the various governmental entities. 2. Significant public involvement and public process are critical to obtain the required buy in from all the public entities. Throughout the process, the public agencies provided numerous opportunities for public involvement. The master developer selection, the master planning process, the rezoning of the RTD Site, the historic designation and the design of the public improvements each went through an extensive public process and numerous public meetings. In fact, according to the owner s representative, there have been over 100 public meetings conducted to date with respect to the Project. This public process and public involvement continues today with the public request for proposals and public meetings relating to the selection of the developer for the Denver Union Station Historic Building Re-Use. In addition, DUSPA continue to provide for public input through its standing Public Outreach Committee. 30 3. Anticipate as a long lead item, and expect extensive discussion of, the market study for the redevelopment. The market study for this Project was reviewed by each of the lending federal administrative agencies and by each of the governmental entities required to pledge applicable tax revenues for the Project. 4. It is important to find the right structure for implementing the Project. The creation of DUSPA, as an independent non-profit corporate authority, with representation by each of the local public partners and private citizen members in its governance structure, proved to be effective in creating a structure for involvement of the public entities that was necessary for their financial commitments to the Project. Commencing in 2001 and continuing until the creation of DUSPA, involvement in the Project by the Partner Agencies was through a committee structure. The committee, the Executive Oversight Committee, was comprised of four members with one representative from each of the four public entities that provided funds to purchase the RTD Site. The committee had no independent authority and could not incur debt. While the public partners were able to use this structure to select a private master developer and establish a common vision, a different structure was needed to obtain the required financing and manage the design build construction contract for the Project. DUSPA was formed and effectively satisfied the role of managing the financing, design and construction of the public portions of the Project in cooperation with the applicable public entities. 30 DUSPA S Public Outreach Committee is chaired by one of DUSPA s private citizen members appointed by CCD and includes representatives from the Partner Agencies and the Contractor. 13

5. The parties should be mindful of federal procurement procedures, federal contracting requirements and applicable federal provisions concerning eligible expenditures under the various federal programs as a condition to obtaining federal funds. The TIFIA and RRIF loan programs required compliance with federal contracting requirements in order for the applicable Project contracts to be eligible for federal funds. The fact that there was a competitive selection process for the master developer and the owner s representative was important for compliance with the federal procurement requirements. While there were Project agreements in place at the time DUSPA applied for the federal loans, the applicable parties agreed to amend these contracts to incorporate the required federal provisions. Flexibility on the part of the parties, including the design builder, to meet these requirements was critical for the funding of the Project. 6. The Project will evolve and the agreements between the parties must provide for flexibility while safeguarding private investment in the Project. The two general development agreements, the LOI and the MDA, established a common vision and framework and set out a process for the development of the Project and the RTD Site. The LOI and MDA as development agreements outlined general terms for the negotiation of future agreements and for separate agreements to be entered into between certain parties, such as the purchase and sale agreements for the Private Development Parcels between the Master Developer and RTD and the purchase and sale agreement (with option) for the Market Street Station Parcel between RTD, CCD and the Master Developer. As such, these development agreements incorporated the concept that the Project would evolve, particularly with respect to the funding for the public improvements, and that the parties would need to enter into future agreements accordingly. The LOI and MDA are attached for your reference. For continuing information on the Project, see the following web sites: Informational web sites: DUSPA s web site www.denverunionstation.org Union Station Neighborhood Co. www.unionstationdenver.com RTD s web site www.rtd-fastracks.com 14

* I would like to thank Jennifer Welborn, Assistant City Attorney for the City and County of Denver, Dawn Bookhardt with Bookhardt & O Toole, attorney for DUSPA and William E. Mosher, Senior Managing Director, Trammell Crow Company, for their comments and assistance regarding the information in this paper. 15