Editor’s note: This article has been updated to correct the breakdown of the Dillon Town Council vote.

Dillon Town Council voted Tuesday, Aug. 15, to not extend an expired development permit for a partially constructed 80-unit luxury condominium complex in the town core.

The decision, which split the council 5-2, throws a potential wrench into bankruptcy proceedings involving Uptown 240, the embattled company behind the project. Uptown 240 requested the extension through their attorney in an effort to maintain the property’s value, Dillon Town Attorney Nick Cotton-Baez said.

“If the development permit is not extended during the bankruptcy proceeding, the project value may plummet, thus significantly diminishing the sums available for repayment (of) creditors,” Cotton-Baez wrote in a memorandum to the council.

That effect of council’s decision on Uptown 240 remains “an uncertainty,” Cotton-Baez said. Uptown 240 President Danilo Ottoborgo nor an attorney representing the company responded to emailed questions about the impact of the decision before Summit Daily’s publication deadline Wednesday.

Since the original financiers behind Uptown 240 backed out during the pandemic, little progress on the project has been made beyond pouring a foundation. Construction was supposed to resume in November 2020 and again in February 2021 but never did. Then this past February, Uptown 240 filed for bankruptcy the day before a scheduled foreclosure auction.

Uptown 240 President Danilo Ottoborgo told the Town Council in May that the company had been “surprised” to learn that the building permit — and with it the rights to construct the planned 80-unit luxury condo complex — expired at the end of April.

Through Chapter 11 bankruptcy proceedings, Uptown 240 has proposed two paths forward: refinancing and completing the project or selling the property at a bankruptcy sale scheduled for next month.

Both those options are intended to maximize returns for creditors, Cotton-Baez wrote, but the expiration of the development permit may affect Uptown 240’s ability to refinance or sell the property.

“The matter of the development permit expiration has become a critical issue of the bankruptcy proceeding, as the development permit and property entitlements are primary drivers of the project’s value, and thus crucial to the intent of maximizing returns to creditors,” Cotton-Baez said.

The town of Dillon is a creditor, Cotton-Baez noted, as are those who paid deposits on the unbuilt units, many of whom are Dillon residents.

Town Manager Nathan Johnson said in an email that the town is a creditor because it is owed past-due water charges and other fees Uptown 240 is responsible for under its development agreement with the town.

“I think the resolution has become a necessary and appropriate step here,” Town Council member Brad Bailey, who voted in favor of the extension, said.

Bailey said that the development permit should increase the value of the property because potential buyers may be more interested in a shovel-ready project than having to start the expensive and time-consuming planning process from scratch.

“It’s much easier that way, much faster, and it’s certainty,” Bailey said. “They know they can build. If they come back to us, they have no idea it’s going to be approved. That puts timing, dollars, financing in jeopardy.”

Council member Kyle Hendricks, who voted against the extension, noted his long opposition to the project and questioned why Uptown 240 representatives didn’t attend the meeting Tuesday.

“I would have expected to see (Uptown 240) here arguing for themselves tonight, arguing for themselves or for their investors — just out of respect, dignity,” Hendricks said. “So I would not like to see this project go any farther.”

Still, other council members raised concerns that Uptown 240 had promised several times over the years that it would complete the project.

“I don’t think this is in the town’s best interest,” council member Renee Imamura said. “I think this is holding the hand of the Ottoborgo family, and they’ve had three years to do this. I don’t think it’s going to devalue the property.”

Still, while some council members said they are not willing to extend the development permit for Uptown 240 right now, they could be interested in extending it for another developer who comes into ownership of the property in the future.

“It might be worth relaying to maybe not the current developer but to the bankruptcy court that should there be a sale that there is probably a willingness to extend the development permit at that time,” Mayor Carolyn Skowyra, who voted against the extension, said.

Cotton-Baez warned, however, that not extending the development permit for Uptown 240 but extending it for another developer could raise legal questions. He opined that the council might be able to legally do that if they had a reasonable basis for making that decision.

“If you were to act in that way, it would open you up to lawsuits,” Cotton-Baez said.

Skowyra asked, “Is it reasonable to say for three years (Ottoborgo) has been telling us he’s about to close on a loan and has given us — I can think of probably three specific deadlines that we’ve seen come and go where he’s supposed to have financing by that date?”

Cotton-Baez said it is possible that that argument could pass legal arguments. He also noted that there is not a mechanism by which Dillon voters petition to overturn the ordinance, as had been suggested at a meeting earlier in the year.

The bankruptcy court “had no faith that the town council was going to extend the development permit and that was concerning them about the value and how they might advertise this to potential buyers,” Cotton-Baez added.

Skowyra noted that no matter what decision the council made, much uncertainty would continue to surround the project.

“It was a roll of the dice either way,” she said.