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Blog Post #15: Response to Julie (Warning: Mass Confusion Ahead!)

8/31/2016

Call out: Obviously, Julie was nearly as confused as the State was about annexation. But the confusion she evidenced in her questions to us was unrelated to the values in the appraisal.

A few weeks before Julie’s hearing, we suddenly got a desperate email from her asking for help in answering some questions. As a reminder to you, the reading public, we had never spoken to Julie or corresponded with her in any way. This was the first time we had ever heard from her directly. Here’s what she wrote, with our responses in red:
Julie: “Hi Sharon ~ I hate to ask you, but this really is important and your tax credits as well as my life pretty much depends on your help. This is what my attorney wants to know.

Is there any evidence in the county/city records that shows the prior annexation was denied?

Us: Not to our knowledge. The City Council voted unanimously to annex the first 120 acres of our land (it was going to be a phased annexation due to the rules about the % of contiguity with the city) on Tuesday, June 19th, 2001 (Resolutions 1(A) and 2(B). At the public hearing on August 7, 2001, no one spoke against the annexation and the City Council unanimously passed the two resolutions. As far as we know, those resolutions are still on record. We have never been contacted with any information to the contrary and we have never read about these resolutions being rescinded.

Some time after that, the City put a moratorium on annexation until the drought was over due to concerns about water. We never understood this as being a “denial.”
Meanwhile, based on the City’s promises over many years, we had invested heavily in this project, and felt we needed to continue at a rapid rate to recover our investment. So, when they put the moratorium in place, we grew weary of working with the City, and began to doubt the benefits to us. So we began to pursue the idea of developing the land in the county instead of in the City, and we received approval on the first two filings (see faxed newspaper article[i]), which is a matter of public record. We continued to negotiate a water agreement with the City and we have an agreement with the City of Walsenburg for extraterritorial water for the subdivision, which was signed on approximately January 28, 2005.

Julie: I think this appears to be a red herring, i.e., that there never was an annexation therefore they assume it was denied. We need to make sure your contacts in Huerfano County will testify that they did support an annexation.

Us: The county officials had nothing to do with our negotiations with the City for annexation. The votes of the City Council are a matter of public record.

Julie: If the annexation you contemplated was mistakenly for Huerfano County instead of Walsenburg, would the subdivision still have been possible?

Us: There is no mistake: we were petitioning the City of Walsenburg to annex our property. The property is in the County. But, then we changed direction and decided to not pursue annexation to the City, and to work in the County instead. Working in the county merely required that we do some zoning changes and follow the county’s requirements for subdivision, which we did (see newspaper article).

Julie: the bulk of the expert report relates to the failed annexation several years back. if we can establish with witnesses that annexation was on the table then we defeat a huge part of their expert report.

Us: There is no “failed annexation.” The City passed the resolution to annex our land (mentioned above) and to our knowledge, the City has never rescinded its resolution. In addition, the newspaper (The Huerfano World) recently reported that the new city manager (Eric Pearson) is very “pro” annexation. (I’m so sorry, but I don’t remember which issue it was in – I will continue to hunt for that article.) In addition, the moratorium must have been lifted (I’m not sure when) because the City is proceeding with an annexation on the north side of the city called “Northlands.”

Julie: i want to have our investigator interview your contact in Huerfano County to "get them on record" that they supported annexation.

Us: Again, the County had nothing to do with annexation. They are on record as supporting our subdivision in the County because they approved the first two filings, and they had a master plan that showed a full build out of all 1000 acres.

Julie: can you set up a phone call so they are not surprised by our investigator's contact? In addition, this failed annexation that they discuss so much, where would that proof be located? would it be in county filings? do you have someone down there that could look at the filings to see if there even was a denial?

Us: Perhaps you can call the City Clerk? To our knowledge there is no such “denial.” I can’t emphasize this enough: the annexation did not proceed because we chose not to proceed.

Julie: I guess the whole case rests on the annexation problem. Would you mind if someone called to to discuss this with you? Please let me know.

Us: We are happy to talk to you, your investigator, or your attorney. Please feel free to contact us.

Obviously, Julie was nearly as confused as the State was about annexation. But the confusion she evidenced in her questions to us was unrelated to the values in the appraisal. We were still at a mental standoff with the State: We thought the appraisals were too low and the state thought they were artificially inflated. Even if we simply compromised on a middle value, it would have been enough to reach the threshold for a conservation easement. But this issue had not come up yet – as you can see, there’s more to the story! © Sharon Cairns Mann

[i] I must have had a hard copy of a newspaper article that I faxed to Julie. Since our house was later destroyed by fire, we’ve lost many artifacts, and I can’t find the article we mentioned at the time.

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Blog Post #14: Storm Clouds -- The Complaint against Julie

8/24/2016

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“Electricity extended the entire length and width of the property and is readily observable on the land.”

As I mentioned in the previous post, Stan wrote a confidential rebuttal of DORA’s Division of Real Estate complaint against Julie O’Gorman and sent it to our attorney. We found the complaint against Julie shocking, on many levels. Terrifying, really. It seems that the government can just allege whatever it wants without stating any facts. That they could swoop in and damage someone’s life by making false allegations still seems terrifying to me. Here is a link to the complaint that they filed, apparently without checking any facts whatsoever. Including the entire complaint in this blog post is not feasible, and I really want you to see it with your own eyes – it’s real, I’m not making this up!

If the state had contacted us before making these allegations and given us the chance to explain their misconceptions, they would not have had a case against Julie. But we still had not been contacted by anyone. So, we simply responded to our own attorney, Todd, about the matter. Here’s what we wrote. (To find the allegations that we were answering point-by-point, please refer to the link above.)

Our Observations on the Complaint Against O’Gorman

Confidential Remarks
Re: Julie M. O’Gorman Matter
June 22, 2007

From: Stan and Sharon Mann

Preliminary Observations:

It appears that virtually no defense was presented in behalf of Respondent O’Gorman because there are so many misstatements of facts set forth by the Attorney General.
No person ever contacted us to check on the veracity of what is stated as fact by the Attorney General.

Initial Factual Analysis: For ease in discussion the following comments will follow the numbered paragraphs set forth in the Notice Of Charges brought against Respondent by the Colorado Board of Real Estate Appraisers.

No Comment.
No Comment.
No Comment.
No Comment.
No Comment.
The appraisal cover letter does indeed state: “The market value of the proposed conservation easement considers the “hypothetical condition” that the proposed improvements of the subject property will be completed according to the preliminary plans and specifications supplied by xxxx, which includes annexation into the Town of Walsenburg and a zoning change from AG-Agricultural to a UR/Urbanizing Residential District. (Emphases added.) This, of course, is not true. The property was being developed in the County, not the City of Walsenburg, and the zoning is County zoning not City zoning. Thus, no discussion with the City planning department would have been prudent.
Clearly a misstatement of facts. Indeed, prior to 2004 the City Council held formal public annexation hearings. No opponents appeared at any of these hearings. As a result the City Council unanimously declared the property to be annexable. The next step was to set up the requirements the City wished to propose. After lengthy discussions with the Land Use Planner employed by the City, and what was believed to be total agreement between the Planner and Developer, the Water Committee wanted a nonrefundable contribution from Developer. Developer then requested and received an Extraterritorial Water and Sewer Agreement from the City in order to do the development in the County. All parties approved this approach. The City never denied annexation.
This statement is also false. The City never denied annexation and the only record that exists in the City records is a formal declaration that the property is annexable--a unanimous decision by the City Council.
Los Leones Ranches is not the same as Los Leones Subdivision. Annexation of Los Leones Ranches to the City had never been requested, and therefore could not have been denied, and was not denied. Annexation of Los Leones Subdivision was initiated, but withdrawn when the City agreed to supply water and sewer service to Los Leones Subdivision on an extraterritorial basis. No denial exists. Development had already begun in the County, and the City had already extended water service to three homesites in the County on an extraterritorial basis. There is no question that both the County and the City anticipated the development of “hundreds of acres” (emphasis added). Neither the City nor the County ever denied annexation or development of the property.
What Respondent could have said or should have said differently we do not know. But the “facts” alleged by the Attorney General are simply false.
1. Filing 1 of Los Leones Subdivision was approved, the zoning changed from AG-Agricultural to UR/Urbanizing Residential District, and two new homes constructed therein. Both those homes obtained City water service and have City water service to this date.
2. Filing 2 of Los Leones Subdivision had been preliminarily approved and the zoning officially changed from AG-Agricultural to UR/Urbanizing Residential District by the County Commissioners. Why Respondent refers to the “Town of Walsenburg” (it is a City, not a Town) in the second paragraph on page 39 of her appraisal we do not know. The City had nothing to do with County zoning.
The Attorney General states facts unrelated to the historical development of Los Leones Subdivision.
1. Further investigation—and a thorough defense—would have shown that electricity was extended (by us) the entire length and width of the property and is readily observable on the land. The prison line was actually placed on someone else’s property.
2. The “Water and Sewer Service Agreement” for Filing 2 was the second such agreement. Obviously there would have been a series of such Agreements as all parties contemplated. Any proper inquiry would have discovered this fact. Again, there never was an annexation denial, and annexation should not be an issue in the appraisal.
We do not have an opinion regarding this allegation. It is common knowledge in Walsenburg that the City owns water sufficient for a city of approximately 20,000 people, but has a population of around 4000.
No Comment.
This you will have to address.
This statement hinges upon the misstatements of fact by the Attorney General.
Respondent probably should have noted that Richard McCabe is a well-known developer with extensive experience and a great familiarity with the Los Leones project.
Already addressed.
It is quite obvious that Tract 10 is included in the development of “a much larger development.”
It appears the Attorney General and the Board are applying an appraisal standard not required for conservation easements.
Black Diamond and Los Leones are very similar.
1. A high percentage of the lots in Los Leones would also border on open space and a running stream.
2. The amenities listed for Black Diamond are just as available to Los Leones, and the difference in distance to these amenities is probably no more than 3 to 4 miles.
3. Los Leones is probably 200 yards off of the same Highway 160, and is about one mile from I-25. Black Diamond has two-lane gravel roads throughout the development. Once cannot enter Black Diamond without utilizing these gravel roads after turning off Highway 160. Los Leones does exactly the same thing.
4. The views from Los Leones are exactly the same as those from Black Diamond but from a slightly different angle. One would be hard pressed to note the difference.
This is a repeat of the same misstatements.
No Comment.
No Comment.
No Comment.
Too bad the Attorney General has immunity from prosecution for making false accusations.
No Comment.
No Comment.

Even a cursory reading of our response should give you an idea of how massively confused the state was in this case. Watch for what happens next! © Sharon Cairns Mann

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Blog Post #13: The Tiny Cloud

8/17/2016

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But, this is where the first plot twist arose. On June 1, 2007, The Colorado Board of Real Estate Commissioners filed a complaint with the State’s Office of Administrative Courts regarding Julie O’Gorman.

In early 2007, we happily sent distribution checks to our partners again. We were gearing up for continued C.E. donations in 2007. We had 16 remaining parcels, and we planned on doing 8 in 2007 and 8 in 2008.

In addition to wanting to take advantage of the favorable conditions (the improved federal and state tax treatment mentioned in Posts #4 and #10), Stan and I were just tired. We had 23 partners, and dealing with all the tax questions that accompanied each transaction was nearly a full-time job, and Stan and I were both otherwise occupied. It made us incredibly busy, and we worked really hard on a lot of boring tax information, memos, research, and spreadsheets. It was natural that we wanted to get it over with as soon as possible!

Plot Twist: The Public’s Safety or Welfare

But, this is where the first plot twist arose. On June 1, 2007, The Colorado Board of Real Estate Commissioners filed a complaint with the State’s Office of Administrative Courts regarding Julie O’Gorman. Julie had been our real estate appraiser, and ran a well-reputed real estate appraisal company in Loveland. The shocking thing about the complaint was that the Division of Real Estate issued an emergency summary suspension of Julie’s license. Summary suspensions are rare and used only where the public’s safety or welfare requires immediate action.

From comments submitted to the Greeley Tribune when it broke the story, we learned that O’Gorman had a long and distinguished career in real estate. It appeared from reader comments that she was well-known and respected, she had been a certified appraiser for 12 years, she was on the Larimer County Board of Appeals, and was a member of both the Loveland and Fort Collins Chambers of Commerce. She had offices in Loveland, Westminster, Cheyenne, Pueblo and Montrose. Needless to say, this action came as quite a shock to Julie and to her community because there was no hearing prior to the suspension.

The hearing was set for August and we learned that Julie was not allowed to work or even visit her own offices during her suspension – almost three months! All of this seemed unnecessarily harsh.

The public’s reaction was mostly supportive of Julie, and became increasingly negative about Division of Real Estate Director, Erin Toll. Over the next months and years, Toll possibly became one of the most-hated public officials in the history of Colorado, but it took four years before Toll’s “take-no prisoners character trait” would “prove to be her undoing.” (From The Denver Post, “The rise (and fall) of Erin Toll, Colorado regulator with a tough reputation.”)

Todd contacted us about two weeks after this startling development to let us know about it. We were especially stunned because one of our appraisals (Tract #10) was mentioned in the complaint, and yet no one had ever contacted us. No one had questioned us about anything related to the appraisals, so we were completely blindsided. The appraisals seemed incredibly thorough to us, and we had, in fact, been utterly shocked at the low valuations – remember, we were going to develop this land, meaning selling many, many lots in each parcel. So, when we got the appraisals we had thought they were very low, but it didn’t matter because they passed the threshold for the valuation for the conservation easements; therefore, the fact that Julie as being investigated for artificially inflating the appraisals was jaw-dropping to us.

Additionally, we were puzzled about how one of our appraisals had gotten into the hands of DORA. After all, it was really confidential material. As far as we knew we were the only ones who had a copy, plus Julie, plus our partner who was assigned to Tract #10, and Todd. It was a mystery for a while, but after some investigation, Todd discovered the root of the problem. Todd had talked to Kevin Shea, who apparently posed as someone interested in brokering the sale of tax credits. Todd gave him our appraisal, and Kevin turned around and gave it to Mark Weston (why would he do that?), who turned around and gave it to Erin Toll (why would he do that?). (These facts were later verified at Julie’s hearing.)

The answer to “why would he do that?” has never been clear – the actions of Shea and Weston just seem petty and mean-spirited – but as the story unfolds, you’ll see a pattern: it appeared that the “Good Old Boys” who had a cozy, insular club of appraisers and land trusts in the conservation arena did not like the new upstarts like Todd and Julie. If you happened to read the article I mentioned in Blog #1 (scroll to bottom), which describes the lawsuit that landowners recently filed against the State of Colorado, you’ll see that we are not the only ones appalled by Mark Weston’s actions – the suit names him “individually and in his official capacity as Director of the Colorado Conservation Easement Commission,” which was not his capacity when he handed the appraisal over to Erin Toll – there was no “oversight” commission at that time. As far as I know, he was just an appraiser at the time.

Our Response to Julie

Of his own accord, Stan wrote a confidential rebuttal to the complaint, and sent it to Todd, merely as an exercise. Julie was represented by another well-known attorney in Denver, with whom we had no relationship. Julie’s hearing was scheduled for August, and we were curious about it, but felt it would blow over and she would be vindicated. While we are exceedingly irritated about Erin Toll’s actions, we were utterly confident that all would go well for Julie, they would straighten it all out, and that would be the end of it. Little did we know what a huge storm would erupt from this tiny cloud. © Sharon Cairns Mann

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Blog Post #12: Happy Futures

8/11/2016

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The state was unquestionably seeking to “incentivize” landowners. If that’s not bait, I don’t know what is.

Can you imagine how happy you would be if you made that kind of money for your family members or friends while doing some good for the environment!?

During 2006, we continued to move forward with another batch of conservation easements. We were able to complete the paperwork (appraisals, baseline reports, etc.,) and by the end of the year we had created another eight conservations easements and donated them to Noah Land Conservation.

Again, we carefully reviewed every document that Todd sent us. The paperwork for each transaction was a bit overwhelming, but we powered through.

Todd handled brokering the sales of the tax credits to the transferees and had no trouble finding people who wanted them. It certainly seemed as if it were true that he had people lining up to buy them. And, we started hearing more about others who were doing conservation easements. It seemed like a gold mine for everyone, and everyone seemed happy. More and more land was being permanently preserved in Colorado. Landowners weren’t making as much as they would have from an outright sale of the land, but they got to live on their own land and enjoy it, protect it from future development, and receive the tax credit or the proceeds from selling the tax credit. And, of course, they also got the federal deduction.

The State of Colorado Is Happy

In fact, the State was so happy with this program that on May 1st, 2006, Colorado Governor Owens signed House Bill 06-1354 into law. This bill:

Adjusted the formula structure of the conservation easement tax credit program. It replaces the previous two-tiered structure with a single-rate structure that allows up to 50% of the fair market value (FMV) of the conservation easement to be claimed as a state tax credit.
The bill simultaneously increased the maximum amount of the credit that may be claimed from $260,000 to $375,000 (50% of the first 750,000 FMV of the donation), meaning we would be able to sell the tax credits for more.

It’s hard to believe, with the passage of an optimistic and incentivizing bill like that, that the state was unhappy with the C.E. program. I can’t overstate this – the state was unquestionably seeking to “incentivize” landowners. If that’s not bait, I don’t know what is.

We closed out 2006 with eight more C.E.s, and in early 2007, we again wrote checks to our partners. By the time we sent this second batch of checks, the return on their original investment was close to 400% and we were thrilled that our patience and their patience had paid off. Can you imagine how happy you would be if you made that kind of money for your family members or friends while doing some good for the environment!?

Just a few more years of doing these donations in batches, and we would be finished. Eventually all the land would be in C.E.’s and we could end the partnership, and feel confident that we had done a beautiful thing. Life was good and we all had happy futures. © Sharon Cairns Mann

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Blog Post #11: Riding High

8/3/2016

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Yes, nine long years after our initial formation, Stan and I could finally write checks to our cherished partners. You can’t imagine our joy in sending them money! Hallelujah, this was going to work. It was a miracle!

By the end of November 2005, we were finalizing the details of a settlement with T.C.*, and ready to move forward with the Conservation Easements.

Todd, our “one-stop shop” C.E. attorney, encouraged us to actually go ahead and make some donations for 2005. After the lawsuit with T.C., we were hurting for cash, so we decided this was “A Miracle” – an answer to our many prayers -- and we moved forward with gusto.

We read all the materials that Todd had given us, and Stan diligently studied the law on conservation easements. As Todd said, “The law was made for us.” There were no red flags. It was golden.

Phasing the Subdivision

The next step was to finish “phasing” the subdivision. We had Phase I and Phase II drawn up and approved by the county. We needed to finish dividing up all the land.

Why? Because a landowner could only make one C.E. donation per year, and at that rate, it would take us 24-to-28 years to make all the 35-acre donations from our 1000-acre parcel.

Wait! Why wouldn’t we just donate the whole thing all at once and be done with it? Because we’d only get the $260,000 tax credit once for the entire 1000 acres, whereas if we divided the 1000 acres into 35-acre parcels (entirely legal), we could do 24-to-28 donations x $260,000. We had 24 partners, so it worked out perfectly. It was a miracle – the law was made for us. In fact, in looking back through my files to refresh my memory to write this post, I found a letter we sent to the partners explaining how the C.E.s worked, in which we wrote, “Interestingly enough, this is also part of the miracle because owning the land in a limited partnership sets us up in an ideal way to maximize the potential of conservation easements -- far more so than if a single individual owned the land.”

One of our partners owned an engineering firm, so he finished up the “phasing” of the subdivision for us, dividing it into 28 parcels, and we were able to create seven qualified donations in 2005.

The Cost of Donating a Conservation Easement

Little did we know how expensive doing the C.E.’s was going to be! There were fees for the subdivision work, high fees for the appraiser (an appraisal was required for the donation), fees for some guy (it turned out to be Todd’s father) to come and do a “Baseline Report,” and, of course, Todd’s bills.

And, honest-to-goodness, I’m not making this up: we had to give a cash donation to the Land Trust to help cover the costs of administration of the land we were donating to them! Sheesh! We began to feel a little frustrated as we saw our profits on each parcel dwindle. Even if we could get the predicted $208,000 for a brokered deal, we were paying tens of thousands of dollars for each donation. We were beginning to feel a little raked over.

Still, we trusted this was The Miracle we needed, and the proceeds, even if they were dwindling daily, would cover our recent legal expenses in our T.C. case, and still net enough to start sending money to our partners. Additionally, we were genuinely excited about preserving the land and the amazing views from the county road that bisects the property. We have to drive right down the middle of that 1000 acre parcel to reach our home, and we were delighted that the land could be preserved.

December was a blitz of paperwork and following Todd’s directions: sign this, sigh this, sign this.

At one point, I remember saying to him, “just let us know when the appraiser is coming down, and we’ll show her around,” and he said, “oh, she’s already been there.” And, sure enough, massive and complex appraisals started showing up. I don’t remember actually having a holiday season that year. It was just a mad scramble to keep up and get all the paperwork done and ready.

The Appraisals Arrive: Sticker Shock in More Ways Than One!

The appraisals were huge documents, hundreds of pages long. We were shocked at the values in the appraisals. They were very low in relationship to the future development value of our subdivision, and C.E. appraisals are to be done taking the “highest and best use” of the land into consideration. Our appraiser clearly didn’t understand how valuable our land was, and what we would earn if we continued to build it out as a development. But, it didn’t really matter, because the appraisal figures were still high enough to get us over the threshold for getting the full tax credit for each parcel. Dear reader, please bookmark this thought as it will be very important in the future!

In addition, the cost of the appraisals was beastly! They were about $3,800.00 each and we did seven, so we had to pay the appraiser more than $26,000. We later found out that was relatively cheap – that other appraisers charged $20,000 to $100,000 for a single conservation easement appraisal! Do you smell a racket?

Writing Checks

The transferees (the people buying the tax credits) have until April 15 of the following tax year to buy the tax credits, so we knew we might have to wait for the all to be sold. But, in December of 2005, the money started coming in, with commitments for all of the money to arrive by April 1, 2006.

After paying all the costs associated with donating the easements, we really did have some money left over, and we began making distributions to our partners in March. Yes, nine long years after our initial formation, Stan and I could finally write checks to our cherished partners. You can’t imagine our joy in sending them money! Hallelujah, this was going to work. It was a miracle. © Sharon Cairns Mann
*Unfortunately, we can’t say a peep about the settlement.

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Hi! Welcome to this blog! I'm a professional writer and award-winning author. I didn't really want to write this blog, but I also believe that the story of the huge conservation easement fiasco in Colorado has not yet been adequately told. So here it is!

It's so long, I've had to serialize it, so please note that you have to START with Blog Post #1 (June 28, 2016) for the story to make sense! So, if you're new to the blog, please go back to the beginning and start there.

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Blog Post #15: Response to Julie (Warning: Mass Confusion Ahead!)

Blog Post #14: Storm Clouds -- The Complaint against Julie

Blog Post #13: The Tiny Cloud

Blog Post #12: Happy Futures

Blog Post #11: Riding High

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