Developer sues Denver, says rules threaten $20M Globeville housing project

Fox Street Investments LLC has filed a lawsuit against the City and County of Denver, alleging that the city’s development rules for the Fox Island area in Globeville are unconstitutional and have blocked the company from moving forward with a proposed 20-story, 400-plus unit apartment project.

Filed last Tuesday in the U.S. District Court through attorneys at Ireland Stapleton, the complaint alleges that for decades the city has failed to invest in sufficient public traffic infrastructure in Globeville, one of Denver’s most economically disadvantaged neighborhoods.

While the city has identified Fox Island as an area where additional housing should be built to help solve the city’s growing affordability crisis, the complaint said it has failed to invest in infrastructure to account for the anticipated increase in traffic flows.

It also alleges the city adopted development rules within Fox Island that unlawfully shift the burden onto developers trying to build housing in the neighborhood.

The rules also violate basic principles of due process and equal protection by treating new developments differently from existing land users, who also contribute to traffic issues in the area, the complaint said.

“Fox Street Investments would have preferred to work collaboratively with the city to address transportation concerns and bring more housing to Denver, but the City has refused to revisit its arbitrary and illegal land-use rules,” Fox Street Investments said in an email to The Post about the litigation.

“Instead, the city is attempting to impose all transportation impacts on a single landowner, without any standards or opportunity for appeal. Until these rules are repealed, the neighborhood will continue to suffer from the same problems.”

The lawsuit also alleges the city has never adopted, implemented, or enforced comparable rules in any other neighborhood.

Fox Street said it has invested millions of dollars to acquire, maintain and prepare the property for development.

However, all plans for the project are now on hold because the city has refused to process further development applications while the Fox Island Rules remain in place, and has refused to tell Fox Street what steps are required to move forward, according to a complaint.

Instead, the complaint said, the city claimed that FSI “enjoys” the option of spending tens or even hundreds of thousands of dollars to design proposed traffic infrastructure improvements, improvements the city could ultimately decide are insufficient to allow development.

Fox Street said the delays are causing significant financial harm and could result in the loss of the entire investment unless the city agrees to rescind or waive the rules governing the property.

“The city’s actions have caused significant and ongoing damages, resulting in the property essentially being worthless,” the complaint said.

“Whereas, if not for the unconstitutional rules, the property would have an estimated market value in excess of $20 million.”

As this is pending litigation, the city’s attorney’s office told The Post in an email that it is not able to issue a statement at this time.

However, the city was aware of the potential lawsuit after being contacted by Ireland Stapleton in September.

In an October email responding to Stapleton’s letter formally notifying the city of Fox Street’s claims, the city acknowledged infrastructure concerns.

“The city and potential developers within the station area recognize the limited capacity for increased traffic in the area and the resulting need for additional infrastructure,” the city said.

The city also disputed the legal basis of the claims, stating, “While the city disagrees with your characterization that rezoning creates a vested right, or that your client has any valid legal claims, the city remains willing to discuss this matter.”

Fox Street owns about two-thirds of an acre at 3901 N. Elati St. in the Fox Island area, between Interstate 25 and the passenger and freight rail tracks to the west of the 41st & Fox Light Rail Station.

The Fox Island area in Globeville is predominantly made up of vacant lots and underused industrial space.

Anticipating future development opportunities, the company purchased the property in 2007 for $1.5 million, with plans to rezone it for multifamily housing.