A lawsuit alleging the city of Manitou Springs breached a long-term tax agreement with the company that owns and operates the Pikes Peak cog railway is moving closer toward a jury trial after a judge denied the city’s motion to dismiss the case.

El Paso County District Court Judge Gregory Werner on June 18 denied the city’s motion to dismiss the complaint, filed on April 8 by Manitou & Pikes Peak Railway Co.

The company and Manitou Springs have been at odds over how frequently the city must appropriate reimbursement funds as part of the tax agreement. MPPR argues the city must appropriate the funds yearly, while Manitou Springs argues it is not obligated to appropriate reimbursement funds in any particular year.

The lawsuit accuses the Manitou Springs City Council of breaching its 50-year tax agreement with MPPR that prevented a financial crisis for the city after the cog, which contributes significantly to Manitou Springs’ economy, closed in 2017. The agreement provided continuous tax revenue for the city to prevent a budgetary shortfall.

The rail company agreed to make payments totaling $1.25 million to Manitou Springs instead of taxes while it completed the railway’s $97 million reconstruction from 2017 to 2021. The city agreed, from 2018 to 2067, to reimburse the cog railway annual excess excise tax revenue above $500,000.

The lawsuit alleges Manitou Springs breached its contractual obligations when the City Council in December voted not to appropriate $638,536 in reimbursement funds to the railway for 2025. The council instead marked the funds as “unassigned” within the city’s general fund.

In a 13-page motion to dismiss the case, filed April 30, the city argued it did not breach the contract with MPPR because the agreement states the annual excise tax payments are “expressly contingent” upon the city’s yearly appropriation of the funds.

“By the plain and unambiguous language of the agreement, the city is not obligated to appropriate funds to make the excess excise tax payment in any particular year. MPPR’s complaint not only ignores Section 15 of the agreement, but repeatedly and incorrectly alleges that the city has breached the agreement through non-appropriation,” Manitou Springs said in the motion to dismiss.

In court documents, Werner denied the city’s motion to dismiss the case without elaboration.

Werner also denied a plaintiff’s motion this month that would have required Manitou Springs to deposit with the court or otherwise escrow the $638,536 in excess excise taxes until the matter is resolved.

“The Court agrees (that) requiring the city of Manitou Springs to deposit excess excise taxes into the registry fund of the Court would require this Court to order Manitou to appropriate funds for such a deposit. It appears undisputed that no appropriation has occurred and this Court does not have the authority to order Manitou to make such an appropriation,” Werner wrote in part in his June 9 order.

The rail company is seeking a jury trial and is asking the court to award it damages in an amount to be determined at trial.

No trial date has been set as of Tuesday afternoon, court records show.

The railway is owned by the Denver-based Anschutz Corp., whose Clarity Media Group owns The Gazette.