In June, a south suburban Denver fire district filed suit against the urban renewal authority (URA) in Parker, Colorado over the diversion of property taxes to subsidize redevelopment projects. Also in June, news broke that the URA in Arvada, Colorado in the north metro Denver area sold a 9-acre parcel of land to a developer for $30. The land is valued at around $9 million.
These are recent examples, but the abuse of urban renewal authority, including condemnation and tax diversion, has been going on for decades. Colorado’s urban renewal law was intended to address, among other things, “slum and blighted areas” in municipalities that “contributes substantially to the spread of disease and crime,” and that constitute a “serious and growing menace” to the public health, safety, morals and welfare.
But the kind of threats from people living in sub-standard housing amidst squalid conditions the law was aimed at is basically non-existent in Colorado today. Rather than declare victory and end urban renewal, the legislature has instead allowed the definition of “slum and blight” to be creatively expanded, along with the use of Tax Increment Financing (TIF) as a form of corporate favoritism.
Urban renewal is now a way for politicians and planners to give public subsidies to private interests for preferred economic development projects.
TIF is the diversion of tax revenues to subsidize a government-desired development on a specific site. All the current property and sales taxes continue to go to agencies that normally collect such taxes, but any new taxes collected—the incremental taxes—go to subsidize the new development. This is true even if the increase in taxes is due to inflation or developments that would have taken place without the subsidy. The diverted tax dollars are siphoned off from other local governments such as counties, school districts and special districts.
State taxpayers are expected to “backfill” the lost schools revenue, which was $43 million in 2014.
A 2005 study of urban renewal areas in Denver found that TIF-funded projects create service needs they don’t pay for, forcing other taxpayers to cover the shortfall. A few years ago a north suburban Denver fire district lost so much of its revenue to TIF that it had to ask voters for a tax increase to make up the difference. Voters said yes because they wanted fire protection, but effectively they were supporting subsidies to developers.
The legislature in 2014 enacted a modest reform, requiring new URAs to negotiate revenue agreements with taxing entities impacted by TIF. This is cold comfort to those losing tax dollars to existing URAs (thus the fire district lawsuit).
But while state lawmakers tinker at the edges, voters and taxpayers are rejecting both URAs and TIF when the opportunity arises.
In early 2015, voters in Littleton, Colorado in south metro Denver overwhelmingly passed a citizen-led ballot measure requiring voter approval for any urban renewal plan that utilizes TIF.
Opponents argued that if a URA couldn’t hand out TIF packages as they saw fit, no one would be willing to develop in Littleton. Yet more than a year after passage, city staff reported that the planning and development department is “swamped.” In 2016, city council took the hint from voters and repealed three of the city’s four existing urban renewal plans.
Later in 2015, the city council in the mountain resort town of Steamboat Springs, Colorado “blighted” its vibrant, tourist-destination downtown as a first step to form a downtown URA and use TIF for redevelopment projects. Local school board members protested that Steamboat’s existing TIF-funded ski mountain URA (hardly a focal point of disease and crime) already diverts over $400,000 per year in local property taxes from the district.
In addition, Steamboat citizens began a petition drive modeled after the Littleton measure.
City council acquiesced and killed the plan they had only months before approved.
Also in 2015 in west metro Denver, Wheat Ridge, Colorado voters passed a measure stripping their URA board of TIF, cost sharing and revenue sharing discretion, as well as requiring voter approval for any TIF over $2.5 million. The proponents were quite open that the impetus for the measure was a TIF-subsidy for a proposed Walmart.
In 2010, voters in the northern Colorado city of Estes Park overwhelmingly (61-39) abolished that city’s URA. The same year voters in Castle Pines, Colorado in the south metro Denver area rejected the notion that the town is “blighted,” voting to dissolve its URA.
Ideally, the legislature would simply repeal Colorado’s badly outdated urban renewal statute, along with existing TIF authority. This is what California did in 2010, when the abuse of TIF through redevelopment authorities (RDAs) became an unsustainable burden on schools and other programs. A good intermediate step would be to implement a state-wide vote on TIF requirement.
In the meantime, Coloradans will need to continue taking back control over their local governments, and their hard-earned tax dollars, one urban renewal authority at a time.
Mike Krause is director of the Local Colorado Project at the Independence Institute, a free market think tank in Denver.