AURORA | Aurora officials say there’s economic danger in a new legislative weapon touted by counties, the latest salvo in the ongoing battle over tax dollars and how cities like Aurora finance redevelopment projects.
“Nobody knows how it’s going to work,” Mayor Steve Hogan said. “It will take more time and meetings to settle things between the city that wants urban renewal and the county.”
A pending state law would restrict how cities can finance urban renewal projects by changing how much in “new” taxes can be used to repay city development loans and how much should be sent on to counties and other governments. “New” taxes refers to tax money collected in an area above the level of taxes collected before a development is created.
Aurora officials say the changes made by House Bill 1375 could hamper or even stall redevelopment efforts in the city. County officials, however, say changes were needed because the growing number of urban renewal and redevelopment projects across the state were shorting other governments of tax revenues needed to provide county services.
The controversy stems from the way many city and town governments in the state pay for redevelopment and infrastructure projects through tax increment finance districts. They’ve been used for decades in Colorado as a way to pay for improvements to vacant land, or finance redevelopment of urban blight. Cities draw an imaginary line around an area, such as light-rail train station development, and determine how much in taxes is annually collected from this “district.” After rebuilding or developing the new TIF district project, new taxes collected, above the baseline, are used to repay loans issued to bring the development to
fruition.
Cities argue in favor of these districts, saying that the “new” taxes would never have materialized if the redevelopment hadn’t been funded and created, and that new businesses and residents that result from these TIF districts add new economic activity and taxes to a community. Counties have balked at the increased use of the districts, saying that they need a cut of the “new” taxes raised in TIF districts to help provide county services.
Lobbyists for Colorado counties won the ear of state lawmakers this year, pushing House Bill 1375 through the state House and Senate. The bill has yet to be signed by Gov. John Hickenlooper, who has not signaled what he might do.
The measure forces cities to give a predetermined percentage of “new” taxes collected in a TIF district to counties. For every portion of “new” sales taxes collected in a TIF district and used for redevelopment loan costs, cities must give the same percentage of “new” property taxes collected in the district to the counties.
Proponents say the measure will help bring in new revenue to counties, which under the current law, can have any amount of new property tax revenues withheld without their approval. Urban renewal authorities say the bill will put even more financial burden on cities, which issue bonds, acquire land, and provide municipal services for TIF projects. Opponents of the bill say counties take on no upfront costs and still receives the base property tax at the site throughout a TIF project’s construction, and later counties benefit from increased property taxes when a project is successful and paid off.
About half of the city’s urban renewal areas use potential property taxes to fund redevelopment projects, according to Andrea Amonick, Aurora Urban Renewal Authority manager and director of the city’s development services. Not all of the districts are reaping “new” taxes, and not all the districts use the same proportion of “new” sales and property taxes.
Sometimes sales tax generates more revenue than property tax, which is why Amonick said the city could lose money on TIF projects if it has to pledge 100 percent of its sales tax revenue in order to pledge 100 percent of property tax revenue toward repaying redevelopment costs.
Carrie Makarewicz, an assistant professor at University of Colorado Denver’s College of Architecture and Planning, said that because sales tax is a less stable source of revenue than property tax, the measure could make it harder for Colorado cities that are already cash-strapped due to TABOR, to borrow for
development.
Incentives like use tax rebates and tax increment financing have been central to large-scale Aurora projects like Gardens on Havana and Cornerstar, which is why
Hogan said he’s worried the law will affect future development at the recently razed Fan Fare building at Havana Street and East Fourth Avenue.
Not only could the new potential law hamstring cities and make funding packages unworkable, at the very least the measure is so complicated that it could slow projects to the point that developers aren’t interested as local governments squabble over tax assignments.
“And all the while, the developer, will be sitting there, burning money waiting for an answer,” Hogan said.
Arapahoe County Commissioner Bill Holen said, however, that TIF districts have a large impact on counties and have been used too loosely by cities. The bill also requires that county governments get a seat on municipal urban renewal authority boards.
Holen said Aurora’s Fitzsimons Urban Renewal district, the mostly vacant land just south of the sprawling Anschutz Medical campus, is an example where TIF has been used by the city for years without the desired result.
The area, which was declared blighted by the Aurora Urban Renewal Authority in 2001, has not seen any development for over a decade except for a few shops, a 153-room hotel, and an office building with a parking garage that is part of the first phase of Fitzsimons Village. Last fall, Aurora City Council approved a measure that will reset the 25-year TIF clock for specific developments in the area, including a Hyatt hotel and an attached $25 million conference center set to open up across from the campus next year.
Mark Witkiewicz, senior vice president for Corporex, the developer for Fitzsimons Village and the hotel and conference center, said progress on the site has been slow because of the economic downturn that started in 2008, not because of anything the city did.
“It was a difficult time in United States economy for any kind of development,” he said. The pending law would not prevent Corporex from moving forward on the hotel and conference center set to break ground later this summer because the measure would take effect in January 2015 and only apply to new or substantially modified projects.
“We are significantly advanced on our project … We’re breaking ground sometime in July,” Witkiewicz said.
Carolyn White, a land use and public policy attorney who opposes the bill, said it’s hard to understand how the measure will apply to TIF projects that propose residential and office space with no expected sales tax revenues. “The way this bill is written isn’t consistent with how urban renewal really works,” she said.
Sen. Linda Newell, D-Aurora, said she voted in favor of the measure because it allows counties to have better representation in TIF discussions, but admitted the bill moved hastily through the legislature. She said she would have liked the measure to include a study of how well it is working.
“We might need to have a cleanup bill next year,” she said.
Easy solution. Stop using TIFs. They are evil.