Denver’s Proposed Retroactive Gas Station Ban Threatens Investments

A proposed Denver ordinance could cost landowners and developers millions of dollars by retroactively limiting new gas station development. 

The ordinance, set for a Feb. 18 city council vote, would prohibit new gas stations within a quarter-mile of existing fueling stations and rail transit stations and within 300 feet of residential areas defined as protected in Denver’s zoning code. Three council members proposed the ordinance, arguing that the city is facing a land shortage and the parcels could be better used for affordable housing.

The most contentious element for the commercial real estate sector, however, is its retroactive enforcement date of May 13, 2024, meaning any project submitted to the city after that date would automatically be rejected. The clause is referred to as a “grace period” in the bill.

For developers and property owners who purchased land and began designing gas stations under existing zoning rules, the retroactive clause could mean sunk costs in land acquisition, planning and architectural fees, potentially adding millions of dollars.

“Many of these owners purchased their properties with the understanding that they could sell to buyers for any permitted use under existing zoning laws,” Mike Quinlan, a director at NavPoint Real Estate Group, said in an emailed statement. 

NavPoint works with property owners and small businesses it says would be directly impacted by the proposed ordinance. 

Industry estimates say building a gas station from planning to completion in Denver costs between $8M and $12M. The process typically takes more than a year, so 2023 land purchases could theoretically be impacted by the legislation, depending on when plans were submitted to the city.

“New regulations — especially those applied retroactively and with questionable legality — create uncertainty and financial challenges for these businesses,” Quinlan said.

Similar ordinances have been considered in smaller West Coast cities with varying levels of success. But in Eugene, Oregon, and Berkeley, California, for example, they’ve been successfully challenged in court. The U.S. Court of Appeals for the Ninth Circuit found that Berkeley’s ordinance was preempted by federal energy policy. Providence, Rhode Island, has successfully passed a similar ordinance, however, and cities in British Columbia, Canada, are also considering these rules.

Quinlan warned that changes proposed in the regulations could derail legal transactions already in progress, leaving property owners in financial limbo.

There are about seven such properties, according to the office of Councilman Paul Kashmann, who is the bill’s sponsor along with Diana Romero Campbell and Amanda Sawyer. 

Several CRE players, as well as Romero Campbell and Sawyer’s offices, declined to comment or give specific numbers.

The retroactive provision creates instability for investors and property owners, Kathie Barstnar, executive director of NAIOP Colorado, told Bisnow in an interview.

“If there’s anything the real estate industry hates, it’s uncertainty,” she said.

Barstnar noted that many of Denver’s roughly 200 gas stations are decades old, and newer stations are built with safer environmental standards, better emissions controls and even electric vehicle charging options. She also said that gas station retail and restaurants are often some of the only options in food deserts.

Both Barstnar and Quinlan said the bill threatens property rights.

Kashmann defended the ordinance as a necessary step to preserve limited land for community-serving uses. 

“The crisis in our city right now isn’t that we don’t have enough gas stations. It’s that we don’t have enough land left, and we’re in a housing crisis,” Kashmann said.

He pointed to Lakewood, which passed similar restrictions, and also said that a one-acre plot could be part of a larger mixed-use and mixed-income multifamily development. 

Kashmann acknowledged some developers may take a loss on preplanned projects but argued the city’s broader goal is to prioritize land use in alignment with Blueprint Denver and neighborhood small-area plans approved by city council.

“It’s always a weighing of values,” Kashmann said. “Do we look at the thousands of families that can’t afford to buy in Denver: our firefighters, our teachers? Do we edge in that direction as our adopted city plans encourage us to, or do we decide, ‘Heck with them; let’s give even more of a grace period to corporations making enormous amounts of profit?’”

Quinlan challenged the idea that small commercial parcels once earmarked for gas stations are viable for affordable housing, saying that high-traffic intersections often lack the space and infrastructure necessary for cost-effective multifamily development.

The ordinance has sparked a flood of public comments, according to The Denver Gazette, with 42% in support and 35% opposed, primarily concerned with property rights and business competition. If approved Feb. 18, the bill’s sponsors have requested that it go into effect Feb. 25.