Lawmakers debate merits of urban renewal tax breaks
May 16, 2014
EAGLE COUNTY — Opponents of urban renewal projects such as Vail's Arrabelle and Avon's Westin say the projects just move money from their pockets to someone else's.
Supporters say without those projects, there wouldn't be any new money in either pocket.
Urban renewal authorities give developers a property tax break, known as tax increment financing, for up to 25 years. The policy is good for cities trying to redevelop run-down areas, but counties and other taxing entities funded by property taxes say that the money the projects pour into cities is drained from their coffers, while their costs to deal with these projects go up immediately.
From that perspective, the tax break for local hotel and mall developments has cost Eagle County schools $9.4 million since 2007, and the county government $3.9 million over the same period. The state provides money to cover the schools' lost revenues, but not the counties, and county officials want a bigger piece of that pie up front.
“You need the increment to make projects like these work, and they want a piece of the increment. If we start peeling off pieces of the increment, the money won’t be available.”
Policy advocate, Colorado Municipal League
Toward that end, on the last day of this year's legislative session, Colorado lawmakers approved House Bill 1375, which would do just that. Gov. John Hickenlooper has not indicated whether he will sign it.
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TIF is lifeblood
Urban renewal comes into play when a municipality has run out of options to rescue a failing property, said Mark Radtke, policy advocate with the Colorado Municipal League, a statewide organization of cities and towns.
An urban renewal project can be a failed retail or residential area that, generally speaking, has been declining in value, Radtke said.
Vail Mayor Andy Daly has said repeatedly that without urban renewal and the tax increment financing that goes with it, Vail's Arrabelle would not have been possible.
"In general, without the URA (urban renewal authority), there wouldn't be a project. The property just sits there and no one gets anything," Radtke said. "It is a tool that will allow redevelopment of properties that aren't going to be redeveloped any other way."
The tax increment financing runs for 25 years. Counties and other taxing districts receive the property taxes and other revenue they were receiving before the property was redeveloped, Radtke said.
Theoretically, properties around the TIF project are supposed to increase in value — a rising tide lifts all boats. Villa Italia in Lakewood is a successful URA project. So is Denver's Stapleton neighborhood, Radtke said.
"You need the increment to make projects like these work, and they want a piece of the increment. If we start peeling off pieces of the increment, the money won't be available," Radtke said.
THe downside of tif
Cities funnel that property tax money away from counties, school districts and special districts without their permission, says Colorado Counties Incorporated, a statewide organization of counties.
CCI says that in 2012, Colorado cities diverted $160 million in property taxes away from other local governments. Half of that, $80 million, was supposed to go to schools.
In 2012, the state had to cough up $40 million from its general fund to make up the difference in school funding, CCI said. Another $80 million in property tax revenue didn't make it to counties and special districts, such as ambulance, fire, and water and sanitation districts.
Besides the $9.4 million from local schools and $3.9 million from Eagle County since 2007, county tax records indicate that another $690,000 didn't make it to Eagle County's voter-approved open space fund.
In 2013, Avon's Westin generated $105,102 in additional sales taxes for Eagle County. However, 15 percent was returned to the town of Avon, and another 35 percent to the urban renewal authority to pay off the bonds.
That leaves the county with just over $50,000. Property tax records say the Westin costs the county $100,000.
In 2008, Eagle County calculated that it costs $1,242 to serve one resident, not including affordable housing subsidies.
"Avon is fully committed to working with the county and the school district, so we can all understand the impacts of a urban renewal authority both inside and outside the URA's boundaries," said Rich Carroll, Avon mayor. "It's been great for the broader market, and we'll make sure we get the best analysis possible."
House Bill 1375 requires cities to pledge a larger percentage of their sales-tax revenues to proposed urban renewal districts and mandates that county governments get a seat on the boards that oversee the districts.
The bill also prohibits cities from taking more in taxes than they've pledged. In other words, cities must provide the same amount in sales taxes that they're taking in property taxes.
In metro Denver, most of the urban renewal projects are for malls or hotels that pay low-wage jobs, and those workers often have to be subsidized with food assistance and other relief county agencies, said the Front Range Economic Strategy Center looked at three TIF projects in Denver. They found that wages at TIF-subsidized projects fall short of family self-sufficiency by $23 million. Those workers collected $10 million in aid from various public aid programs.
Staff Writer Randy Wyrick can be reached at 970-748-2935 and firstname.lastname@example.org.