Steamboat City Council moves to slow down downtown urban renewal funding talks

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— Faced with some concerns from fellow elected officials and a long list of questions of its own, the Steamboat Springs City Council on Tuesday night hit pause on a proposal to use tax increment financing to fund downtown improvements.

More on URA, TIF and BID

Urban renewal authority

This is the body that oversees redevelopment projects within an area that has been deemed "blighted" or in need of public improvement.

In Steamboat Springs, the Steamboat Springs City Council acts as the URA, and the project areas are at the base of Steamboat Ski Area and in the downtown corridor.

Blighted sounds like a really strong word more suited for a ghetto or abandoned street corner, but things like disconnected sidewalks and poor lighting can help an area to earn that blighted designation.

It is common for URAs to form advisory committees to help them prioritize projects within a project area.

At the base of the ski area, the Urban Renewal Authority Advisory Committee, or URAAC, makes these funding recommendations.

The URA has final approval of the annual budget in a project area.

The URA chooses one of several funding mechanisms to make these projects a reality.

Tax increment financing

Abbreviated TIF, this is a funding mechanism for public improvement projects like sidewalks, lighting and other infrastructure. It works by diverting future property and sales tax gains from any new development in a project area toward public improvement projects.

This funding mechanism only captures tax revenue from future development, not the properties and businesses that already exist when a TIF is put in place.

For example, if a TIF is put in place in downtown Steamboat, any new restaurant that pops up would continue to generate sales tax, but a portion of it could be directed to public improvement projects in the downtown area instead of going straight to the city's general fund.

It is not a new tax, it is a redirection of some future tax revenue.

The use of a TIF does not require an election and can be approved by a vote of a city council.

Business improvement district

Abbreviated BID, this is a defined area in a city where stakeholders and property owners can choose to tax themselves to generate revenue to fund things like regular maintenance, trash collection and marketing throughout the entire district.

This is how those maintenance workers and trash collectors you see at Cherry Creek North and on the 16th Street Mall in Denver are funded.

A funded BID cannot pay for things like major infrastructure improvements and the construction of sidewalks, however.

There currently is a BID in place in downtown Steamboat, but it is not funded.

A previous attempt to fund it with a property tax failed by just a handful of votes.

Downtown stakeholders will be asked in the fall to vote on whether they would like to pay more in property tax to fund their BID.

"This is a huge deal," council member Kenny Reisman said. "I'm not desiring to move at a snail's pace. At the same time, I think it will be a very challenging item to approve if it's rushed."

The city is proposing to capture some future sales and property tax growth from new development in the downtown corridor and use it on improvement projects like new sidewalks and better lighting.

The idea would be to invite and promote new private development downtown by improving the public infrastructure there.

Using the tax tool, the city could do improvements now and pay for them later with tax revenue from new development in the area, similar to the way the promenade at the base of Steamboat Ski Area was accomplished in recent years.

City staff told the council it is projected that sales tax revenue will grow more rapidly in the area with the use of the redevelopment tool than without it.

But where some see great potential, others see some harm.

The tax tool does have an impact on other taxing entities in the area.

A consultant working for the city has estimated the use of a TIF downtown could divert $1 million worth of property tax increment from new development in the project area away from the county and the school district during the next 25 years.

City staff stressed the use of a TIF would not cut any money out of the existing tax base for these entities and is projected to help grow that base in the coming years.

Council's move to slow down the talks came after Routt County Commissioner Tim Corrigan and Steamboat Springs School Board Vice President Joey Andrew raised some concerns about the use of a TIF downtown.

Corrigan suggested the impact of the tax proposal on the county and other entities may be underestimated because there is the probability that far more commercial development, and thus an infusion of new property taxes, could occur in the project area than the city's consultant is estimating.

The study for Steamboat's proposed TIF cites a potential for 25,000 square feet of additional commercial property in the downtown corridor, a number city staff labeled as conservative.

Corrigan cited a number of developable sites ranging from a former gas station site on Lincoln Avenue to the city's current ambulance barn on Yampa Street that he said together provide a potential of 235,000-square-feet worth of new development.

He said he thought that a large percentage of these sites likely would be developed in the coming years without the use of tax increment financing.

Proponents of the tax tool say its use helps to spur some private development that would have otherwise not occurred had it not been for improvements in the area.

But critics counter that the development may be likely to occur regardless, and the use of a TIF causes other taxing entities like counties to see some of their property tax revenue from that new development diverted away from them.

Corrigan also asked the council to find a way to hold harmless in a TIF the use of local mill levies that support such things as Horizions Specialized Services and the museum districts in Routt County.

Andrew said the School Board had not had a chance to discuss the tax proposal and its impact on the school district.

He asked for a chance to bring those concerns back to the council.

City staff set out Tuesday night to gauge how much future sales tax growth from new development the City Council would be comfortable dedicating to improvement projects downtown.

In addition to the concerns raised by the county and a member of the School Board, a number of other factors prevented council from starting to choose a specific percentage.

Some council members were frustrated that they were not presented with the results of a 43-page blight study conducted in the downtown area until Tuesday afternoon.

The study and the blight designation are necessary for a city to move forward with the use of tax increment financing in an improvement area.

Before considering using a TIF downtown, council members Sonja Macys and Reisman thought it was important for the council to first discuss the blight study.

"I encourage us as a council to understand the universe of tools to finance and fund downtown improvements and ask whether or not this is the most appropriate tool," Macys said.

The council ultimately directed city staff to come back with a number of things including their analysis of the blight study, more detail about how the proposed urban renewal area was defined and some different tax revenue projections based on the prospect of different levels of future development in the area.

To reach Scott Franz, call 970-871-4210, email scottfranz@SteamboatToday.com or follow him on Twitter @ScottFranz10

Comments

Scott Wedel 4 months, 2 weeks ago

"A funded BID cannot pay for things like major infrastructure improvements and the construction of sidewalks, however."

And our city government is legally correct, but entirely deceptive like a pathological liar.

A business improvement cannot fund infrastructure improvements. What they don't say is that is why there are General Improvement Districts (GID). Apparently, the problem with a GID is that it would force wealthy property owners with expensive properties to pay for the improvements for their properties instead of being able to take tax money otherwise headed to schools, libraries and so on.

From a Denver County/City document on their various districts:

General Improvement Districts (also called Municipal Public Improvement Districts) are authorized by Sections 31-25-601 through 31-25-633 of the Colorado Revised Statutes. GID’s are initiated by petition of a majority of registered electors of a city who own real property in the proposed district. While GID’s have been used to construct public improvements in established neighborhoods and to build and operate parking districts, they have primarily been used to build public infrastructure on raw land intended for commercial or residential development.

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Scott Wedel 4 months, 2 weeks ago

Good governance part of the meeting was when Scott Ford objected to the City Manager sending another "work product" memo which our city government considers to be a secret communication that the city council must hold a vote to release to the public.

And that got bizarre when city manager said that the work product memo was to protect the city council from appearing "silly" for some proofreading mistakes in some planning document.

So the city government is resorting to secret communications to prevent the public from learning of potentially embarrassing mistakes by the city council!

Which is one reason that I could never serve in government. If I was on the city council then I would have lost my mind swearing that there is no way that I am participating in a coverup of our mistakes. And I would have resigned.

That was held during part of the meeting of discussion between the city council members so the public seeing this train wreck happening is forced to sit silently.

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Scott Wedel 4 months, 2 weeks ago

As for URA/TIF, our city council seems so accustomed to wealth that they struggle to comprehend what is truly blight. The reason that some properties are vacant or have an older building on Yampa St is not because of blight. Blight is when things are so run down that no property owners are investing because there are no potential tenants willing to pay more for a better building. A reasonable case could be made that downtown Oak Creek and downtown Yampa have blight.

A classical way to define blight is whether investors would accept the offer of being given a property for $1 if they were required to build a high quality building on it. If the answer is no then it implies the current economic value of the property is less than zero and thus it requires a subsidy such as an URA to trigger business investment.

A subsidy does nothing to promote development when the property is already valuable. The reason a lot is vacant on Yampa St is because the property owner is waiting for a better deal or has personal reasons for not wanting to develop now. The presence of a subsidy just increases the value of the vacant lots and thus increases the owner's asking price.

In contrast, an added property tax from a GID would promote development because the tax increases the annual costs of owning the property and the resulting development should be more valuable due to the GID's funding of improvements.

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