Urban renewal authority reform bill advances in state Legislature
April 25, 2014
Steamboat Springs — A bill that aims to give counties more say about how cities in Colorado redirect tax dollars to redevelopment projects is advancing in the state Legislature.
The Colorado House of Representatives late Friday afternoon gave initial approval to the bill after a long debate about how cities across the state are using urban renewal authorities and tax increment financing to restore blighted areas.
"The goal here is not to shut down economic activity here in Colorado. It's to bring more fairness to the process between cities and counties," bill sponsor Brian DelGrosso, R-Loveland, said before the vote.
Cities and counties long have sparred about cities' use of urban renewal authorities to redirect property tax growth in a redevelopment area toward improvement projects.
Some counties see this redirection of property taxes as a siphoning off of tax dollars they and other taxing entities such as school districts think they otherwise would be getting.
But cities see the urban renewal authority as an important tool to redevelop areas they think wouldn't be successfully improved by private development.
The city of Steamboat Springs in recent years used an URA and tax increment financing to build the promenade and other improvements at the base of the ski area.
Other cities have used them to build such things as malls and other commercial projects.
Legislators on Friday offered a variety of opinions about the process, with some saying URAs were especially hurting school districts and others saying URAs were an important part of economic development.
"We are taking money out of these schools to subsidize these malls and other projects to no benefit to any of us," House Speaker Mark Ferrandino said.
Other legislators said placing more restrictions on URAs would "stifle economic development."
DelGrosso's bill marks one of the most significant proposed changes to the tax tool in recent years.
The legislation specifically would give counties the power to appoint one URA board member.
It also would require municipalities to contribute as much of a proportion of their sales tax revenue to a project as they do property tax if a deal cannot be reached with their county.
Some legislators said the latter requirement would go a step too far.
"Percent for percent is not the right answer," Rep. Jovan Melton said. "We need to find what the right balance (between sales and property tax) would be."
A proposed amendment would have removed the sales tax requirement from the bill and ordered a study about the impact of URAs.
However, a majority of lawmakers rejected the amendment, saying they thought another study would just kick the issue down the road and squander an opportunity for reform.
"We have studied this issue to death," Rep. Dickey Lee Hullinghorst said. "There have been many bills to try and address what are some very serious issues in regards to tax increment financing. The major reason this has been a problem is you have one jurisdiction actually being able to take the future taxes of another jurisdiction and apply them to a development project. That's what the story has been with the cities since the 1980s. This process has been abused since then."
Hullinghorst, D-Boulder, said the proposal to do a study would be a stall.
If the bill becomes law, the changes wouldn't go into effect until January 2015.
The legislation comes as the city of Steamboat continues to look into the prospect of a new downtown URA.
The two major changes from DelGrosso's bill likely wouldn't have affected this city's first URA at the base area.
That's because Steamboat committed the same percentage of its municipal sales tax in the redevelopment area as they did property tax.
The sales tax collected in recent years in the base area URA has not exceeded the baseline that was established when the URA was formed, and therefore has not been contributing to the redevelopment projects.
DelGrosso talked to the Steamboat Today earlier this month about his bill.
He said he was motivated to pursue the legislation because his home county and some of its municipalities were grappling with the issue.
"I'm not trying to shut the system down. I'm not trying to stop it in any way," DelGrosso said. "The counties feel like this process is lopsided a lot toward the cities. I don't fault the cities, that's the way this system is set up."
DelGrosso said he has "tried to create a bill that respects the counties and some of their concerns but still allows cities to have control over the process."
"Cities are still holding most of the cards," DelGrosso said.