Prospect developer files second lawsuit against Reserve District 2

Seeks injunction on collection of legal fees

The Prospect Development Company filed a second lawsuit against the subdivision’s Reserve Metropolitan District No. 2 board of directors prior to a district meeting on Tuesday, March 19.

The complaint, which was filed in Gunnison District Court, asks the judge to reverse a motion made by the District No. 2 board at its meeting on February 19 that imposes a fee on Prospect lot owners to pay for legal expenses.
District No. 2 is trying to gain separation from the developer and in the process accrued legal costs that it is attempting to pay for through an additional tax on property owners.
After the town of Mt. Crested Butte and the developer sued in February to stop the tax, the District No. 2 board of directors passed a motion adopting the fee that the developer is now asking the court to throw out.
According to state law, the District No. 2 board of directors has the authority to impose “fees, rates, tolls, penalties or charges” on property owners to pay for “services, programs, or facilities furnished by the district.”
In the complaint, the developer’s attorney, Kim Seter, says paying for legal services for the district’s constituents doesn’t meet the requirements of the law. Accordingly, the developer is asking the court to “declare that the District exceeded its jurisdiction and abused its discretion when it adopted [the motion].”
The complaint asks the court for a declaratory judgment against the fee as well as a preliminary and permanent injunction to stop “real, immediate and irreparable injury” that could come from the first priority lien the District No. 2 board of directors placed on each property for the amount of any unpaid legal fees.
Almost immediately after the suit was filed, attorney James Bailey of District No. 2 counsel Bailey & Peterson prepared a response to each of the developer’s claims.
At the meeting March 19, District No. 2 board president and Prospect homeowner Bob Orlinski reported that the District had already collected $38,610 in assessments and fees and was preparing to issue checks to Bailey & Peterson, which is providing the District with legal and other services, for more than $37,000.
The friction between the developer and District No. 2 was evident at Tuesday’s board meeting, when the developer’s representatives on the board, Prospect Development Company vice president and Crested Butte Mountain Resort’s vice president for real estate and development Michael Kraatz and Lynn Kiklevich, were frustrated by the district’s inability, or unwillingness, to provide meeting documents prior to the meeting.
“You’d think it would be common practice to have the resolution come with the agenda so that information can be disclosed to all the board members, as well as to the public, prior to the board meeting,” Kraatz said.
First it was a simple administrative motion that updated the District’s points of contact with the state. Then it was a financial report and a bill for almost $70,000 to pay for legal services for the month of March. The bill for the two months prior was just over $70,000.
The lack of information being provided in advance of the meeting led Kraatz and Kiklevich to abstain from voting on several matters, which didn’t seem to bother the remaining board members.
Attempts at resolving the disagreement between the developer and District No. 2 haven’t been productive. Bailey explained there was a meeting between board president Orlinski and Tim Mueller, who represented the developer’s interests.
“Our president determined that it would not be fruitful to have a meeting of secondary players in the conversation and so we have decided to proceed with filing our [response to the suit],” Bailey said. Subsequently a follow-up meeting was cancelled.
Now the court will have a say, once the developer’s complaint and District No. 2’s response have been considered.