DENVER (AP) – A scathing federal audit released Thursday blasts Denver’s Stapleton redevelopment deal, saying that the Federal Aviation Administration gave up $71 million in revenue by allowing Denver to sell off land at the old Stapleton International Airport for less than half its value.
The audit, prepared by the U.S. Department of Transportation between 2008 and 2010 and released to the public Thursday, is highly critical of how the old Stapleton airport land was sold to developers a decade ago. Stapleton comprised more than 7 square miles, or nearly 5,000 acres, just northeast of downtown Denver.
A Denver developer, Forest City Stapleton Inc., agreed in 2001 to start paying some $79.4 million over 15 years to develop about 2,900 acres. Today, the land is home to about 12,000 people in homes and apartments. The development also includes parks, restaurants and more than 2 million square feet of retail space, including a Macy’s department store, a movie theater and a Bass Pro Shop.
However, the land was worth much more, costing the FAA at least $71 million in lost revenue, according to the audit.
“FAA’s ineffective oversight allowed Stapleton land to be sold for less than fair market value,” the audit concluded.
The audit faults FAA for not requiring more room to require payments to go up as the land value rose. For example, the audit cites a 2004 transaction in which Denver sold a parcel for about $386,000, even though the land was worth $3 million at the time.
“Despite indications that prices on land parcels did not represent their true value, FAA has not revisited how the Stapleton land is priced,” the auditors wrote.
Later, auditors concluded, “While we acknowledge that changes in the real estate market cannot be predicted with certainty, the volatility of this market is well known.
“Yet, the agreement — that FAA allowed — permits the developer, not the airport, to reap the potential benefits of the changing market while the airport incurs the risks.”
The FAA replied with a strident defense. It’s unfair, an agency spokesman argued, to review a land deal a decade after it was struck and faults its terms.
“It’s like the seller of a house asking the buyer of the house for more money 10 years later because the price of the house increased,” said Allen Kenitzer, FAA spokesman for the FAA’s Northwest Mountain Region, which includes Denver.
City officials did not immediately respond to the audit’s conclusions Thursday. Denver’s mayor at the time of the Stapleton deal, Wellington Webb, could not be reached for comment.
A spokesman for Denver International Airport, which succeeded Stapleton and is the nation’s 10th busiest by passenger traffic, sided with the FAA. Jeff Green said the Stapleton followed regulations set out by the federal government for disposing of excess government property. Green dismissed the $71 million estimate of lost revenue.
“That money doesn’t exist,” Green said.
DIA is to the east of the old Stapleton airport and is geographically much larger. DIA sits on 53 square miles, making it the nation’s largest international airport geographically.
It’s unclear what would happen because of the audit. The inspector general’s report recommends that the FAA require more than one independent audit for future land sales. It also recommends the FAA to “assess the difference between the amount that the Denver airport will receive from future sales of Stapleton property and the fair market value at the time of the sales and explore ways the city can provide the difference.”
The FAA disagreed with every recommendation. A spokesman for the inspector general said the DOT has no ability to compel Denver or the FAA to take its recommendations and review Stapleton deals.
Tom Gleason, vice president for the developer, Forest City Stapleton, insisted Denver got a fair deal for the Stapleton land and that the development has been a boost for the city.
“What we’re doing we think brings a lot of value to the citizens of Denver,” Gleason said.
– By Kristen Wyatt, Associated Press
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(Copyright 2011 by The Associated Press. All Rights Reserved.)