Will Eagle reap taxes or fees?
EAGLE, Colorado –Is all money green? What does it mean to a customer or to a town if a sales receipt details a “sales tax” or a “public improvement fee?”
The proposed financial deal for Eagle River Station hinges on the idea that no matter where it comes from, all revenue spends the same. Some Eagle residents, however, don’t buy it. They have protested a plan to channel Eagle sales tax collections toward paying off roads and other improvements for the shopping center while imposing an additional public improvement fee to give the town additional revenue.
As the Eagle River Station public hearing process before the Eagle Town Board winds to a close, this week will feature a discussion of the development finances.
Eagle River Station is a mixed used development proposed on an 88-acre tract located on the eastern end of town, south of Interstate 70. The plan includes 552,000 square feet of commercial space, including a 132,000 square foot Target that would anchor the development.
Eagle River Station also calls for 581 residential units and a 150-room hotel. The estimated cost of the development is $346 million. Of that amount, $62.4 million is earmarked for public improvements including a new Interstate 70 interchange
Trinity/RED Eagle, the developer of Eagle River Station, has proposed a revenue sharing plan to finance the public improvements package. That plan calls for formation of a metropolitan district to issue bonds for the infrastructure. The town of Eagle would not issue the bonds.
Under the agreement, the town would rebate revenue collected from its 4 percent sales tax to the developer, but only from collections generated at Eagle River Station businesses. That money would go toward paying off the public improvements bonds. When the bonds are paid, the sales tax money would go back to the town. In the interim, a Public Improvement Fee would be charged on Eagle River Station retail purchases. Proceeds from the fee would go to the town.
The amount of the fee was a sticking point between the town and the developer. Originally proposed as 1 percent for Eagle River Station purchases, the town pushed for 1.5 percent. The developer countered at 1.3 percent and then agreed to a compromise – the fee will be 1.3 percent at the anchor and junior anchor sites and 1.5 percent at smaller businesses located in the Eagle River Station ‘lifestyle center.’
Throughout the hearing process, Eagle Town Trustee Yuri Kostick has criticized that deal. He has suggested the town and the developer split the existing 4 percent sales tax revenues evenly. Kostick has noted that Eagle needs more sales tax revenue and argued that turning over Eagle River Station collections seems counter-productive.
Trinity/RED and a various financial advisors have testified that revenue-sharing plans are the basis of virtually all development deals like this across the nation. Eagle hired its own financial consultant, Arne Ray of Ray Real Estate Services, Inc., to study the deal. Ray has advised that the plan is fiscally solid and that the revenue sharing proposed by Trinity/RED is reasonable. Ray also has advised the town that the public improvement fee proposal would not represent additional risk.
Kostick has responded that if the public improvement fee financing is solid, why can’t the developer be the recipient instead of the town?
“Maybe its not a real risk (accepting the fee instead of sales tax) but it is more than we do now,” he said.
Ray has noted that to complete the various public improvements that are part of the package, Eagle River Station must issue bonds and the bond market simply prefers a sales tax guarantee for such deals.
But, Ray stresses, that doesn’t mean that public improvement fee – or, PIF – funding is shaky. “The record of collection on PIFs is absolutely equivalent to sales tax,” he said. “I don’t say many things categorically, but I have worked with enough people that I can say categorically that it is not a risk to the town.”
He noted that various municipalities in Colorado currently collect public improvement fees as part of shopping center development deals including Glenwood Springs, Broomfield, Sheridan and Aurora.
“Eagle’s deal is unique, but there is enough history with PIF that it is well known that is its comparable to sales tax,” said Ray.