A bank that played a major role in financing Centennial’s Streets at SouthGlenn development has sued the city in federal court, saying Centennial isn’t paying what it owes.
BNP Paribas sent Centennial a notice of default in April, according to the lawsuit, complaining that the city has yet to put any money into a special fund to pay back the bondholders who bankrolled the development. Because of that, BNP alleges the SouthGlenn Metropolitan District, which controls the fund, soon will run out of reserve money and welch on its debt.
If that happens, BNP would be on the hook for $77 million owed to bondholders. It is asking the court to find Centennial in breach of contract and order the city to pay BNP damages.
“BNP faces significant additional uncertainty, risk and expenses, all which will continue to accumulate and increase as a result of Centennial’s conduct,” BNP states in its lawsuit, which was filed Monday in federal court in Denver.
A spokeswoman for BNP said Tuesday that she couldn’t comment on the lawsuit. Messages left for multiple Centennial officials were not returned.
Bob Blodgett, the manager of the SouthGlenn Metropolitan District, said he was not aware of the lawsuit. But he said he believes Centennial is complying with its legal requirements and blamed a bad economy for producing less sales-tax revenue than expected.
“Reserves are declining, but we don’t intend to default,” Blodgett said. “We’re confident the city is paying us everything that is due.”
The Streets at SouthGlenn opened in 2009 on the site of the former Southglenn Mall, which had been declining.
The new development, which cost $310 million, features a Macy’s department store, a Whole Foods grocery and other big-box retailers and small boutiques.
Centennial used a method known as tax-increment financing to redevelop the site. In such an arrangement, the city determines a baseline amount of sales tax that the old development generated, then pledges revenue over that amount from the new development to go to paying back the cost of building the new development. To get investors to purchase the bonds that provided the up-front money for the project, BNP agreed to back the investments.
BNP alleges in its lawsuit that Centennial inflated the development’s baseline revenue figure by nearly $200,000 a year. Centennial officials admitted the error, according to the lawsuit, but have done nothing to correct it.
Centennial has until August to formally respond to the lawsuit.
