The Empty Promise and Untold Cost of Urban Renewal in Colorado

The Empty Promise and Untold Cost of Urban Renewal in Colorado by Bruce Baker with Mike Krause November 2015 - Finished lot at the North Wash- ington Street Corridor Urban IP-6-2016 | August 2016 Renewal Area, Thornton, Colo- rado. Photo by Bruce Baker. 727 East 16th Avenue | Denver, Colorado 80203 www.IndependenceInstitute.org | 303-279-6536 | 303-279-4176 fax Table of Contents Executive Summary . 2 Introduction . 3 Eliminating “Slum and Blight” . 4 Empty Promises. 4 The “But For” Argument ...............................................6 URAs Spur Follow-On Economic Development .............................7 Untold Cost of URAs/TIF . 10 Special Districts Pay: ..................................................11 Counties Pay: .......................................................11 Schools and the State of Colorado Pay: ...................................12 Everyone Pays: ......................................................13 A Government Planned Future, the Westminster Example . 16 Westminster’s “New Downtown” ........................................16 Citizen Pushback on TIF/URA . 19 The Littleton Example: ................................................19 The Wheat Ridge Example: ............................................20 The Windsor Example: ................................................20 The Steamboat Springs Example: .......................................20 The Estes Park Example: ..............................................21 Recent Legislative Efforts on URA/TIF . 21 Conclusion . 22 Policy Recommendations . 22 Repeal TIF Authority Altogether: .......................................22 Means Test URAs and TIF: ...........................................22 Include Both Property and Sales Taxes Equitably: . .22 Tables . 23 Urban Renewal Legislative Declaration . 28 Endnotes . 28 1 Executive Summary This paper examines the empty promises • TIF incentives justified with “but for” and untold costs of Urban Renewal Areas arguments have merely raised the (URAs) and the use of Tax Increment expectation and demand by developers Financing (TIF) in URAs in Colorado. for public subsidies. The paper will show that: • The unfairness in the present system is revealed by the fact that 1/2 of the • Urban renewal authority and discretion state backfill education dollars go to is being routinely abused, in direct Denver, which teaches 1/10th of the violation of the legislative intent of the state’s students. law. • URAs and TIF have been • URAs/TIF has failed to bring commandeered by governments to economic benefits commensurate with advance the pet projects of connected the costs. insiders and social planners. • The value that URAs give in • Clear abuses are occurring and generating economic development is that state resources are being overstated. disproportionately given to the richest • URAs have been unable to override the municipalities in the state. profound effect of the general business • The legislature should end this cycle. routinely abused practice altogether. • URAs have been unable to ignite economic development in the URA or in adjacent areas. What is a TIF? Tax Increment Financing is a mechanism whereby Tax collections for 2015 were $6,039,397. Next the increase in taxes collected on and at a specific site, subtract the collections that existed before the URA caused by the re-invention of that site, may be used to was formed, which is $0 (a vacant field did not collect repay bonds that fronted the costs for the re-invention any sales tax). The tax increment is $6,039,397 of the site. The money raised by the bonds may finance projects such as assembling properties, Another example is the property tax increment at the building roads, replacing water and sewer systems and Target store at 144th Ave and Huron in Westminster. other infrastructure, replatting the site, legal costs, etc. The 2012 property taxes are $396,903. Because In theory, the costs of re-inventing the site will be paid the parcel of land was split off from a larger tax by the new residents/owners of the site and amortized parcel that existed before the URA was formed, the over 25 years. The success of the theory depends calculated tax was estimated to be $8,400. The tax on the re-invented site requiring the same or fewer increment on the Target store is $388,503 (the total government services than the old site required. site increment is steadily increasing and moving beyond $6 million per year). An example is the calculation of the sales tax increment at the Orchard Mall at I-25 and 144th Ave Both of these revenue sources were pledged to in Westminster. repay the approximately $70 million in bonds that re-invented the North Huron Urban Renewal Area. 2 LET’S MAKE AN URBAN RENEWAL Introduction AUTHORITY Robert K. Merton in his 1936 article “The the reasons for granting sweeping power (URA) Unanticipated Consequences of Purposive to URAs is because there exist “slum Social Action” delineates reasons why and blighted areas” in municipalities 1. Registered electors social planning does not always yield the that constitute a “serious and growing petition the results the makers of the policies had menace” to the public health, safety, governing body in mind.1 A failure to yield the planned morals, and welfare. That, unaddressed, (town or city council). results is exactly what has happened with these areas would contribute substantially 2. The governing Colorado’s Urban Renewal Areas (URAs) to “the spread of disease and crime.” body holds a public and their current financing mechanism, That municipalities must not continue to hearing. Tax Increment Financing (TIF). be endangered by areas which are “the 3. The governing body focal centers of disease” and “promote passes a resolution The challenge in Colorado is to convince juvenile delinquency,” and which consume that finds: lawmakers that we have been fooled into an “excessive proportion” of government a: Slum and blighted believing that URAs are defeating an revenues. If urban renewal areas do not conditions exist in ongoing menace to the people of Colorado meet the legislative intent of the URA the defined area. and that the significant costs of these laws, municipalities are misusing the b: The governing programs have been fairly shared. power granted to them by the Legislature. body must take (For the complete text of the legislative action to address It is important to remember that declaration, see appendix A). the slum and the citizens grant awesome power to blight in the government. American society is the The concern of municipalities for all interest public beneficiary of a culture which fully believes areas in their towns is necessary and health, safety, and endorses that lawful power comes should be expected, but URAs are not morals and from the consent of the governed. For the only tools municipalities have at their welfare. the few that break the law, enforcement disposal. There are many tools available c: It is in the public is applied in measured amounts. Not to address the problem of struggling interest to form only is enforcement applied in measured areas; be they commercial, residential, a URA and use amounts, but the necessity of law has a or public. Besides General Improvement the State granted direct correlation to the amount of power Districts, Metropolitan Districts, Business powers to combat given to the government. For example, the Improvement Districts (BIDs), and city the slum and government, with clear and convincing sponsored incentives and partnerships, blight. reasons, has the power to immediately there are Downtown Development Areas 4. Appoint a URA confine a person that could spread drug- (DDAs), as cited in CRS 31-25-801. This board (which could resistant tuberculosis to the public. When range of tools available to municipalities include members of contrasted with a person that will not shows the government arsenal of measured the governing body control the weeds on his property, it will be responses. The difference in the amount themselves). years before the government can exercise of power made available by Colorado 5. File the appropriate any power to force that person to do between URAs and BIDs shows the same, paperwork with the anything. There are very few incidents thoughtful distribution of power in relation Department of Local where government must exercise the to the threat of the problem as shown Affairs. maximum force of their power. between contagious diseases to weeds. 6. The authority can The enormous power of URAs presents then designate urban Remembering this range of government a seductive temptation to municipalities renewal areas as power is vital in any discussion regarding when compared to the weaker, more-work- desired. Urban Renewal law. The Legislative on-their-part alternatives. Declaration in Colorado’s Urban Renewal law (CRS 31-25-102) is very clear that 3 Because it is so easy for municipalities to TIF is a diversion or reassignment of use legislative discretion, and so difficult tax revenues to repay bonds that are for any other government to challenge, issued to subsidize a government desired municipalities can declare nearly any area development on a specific site. The money 2 as “blighted”. Municipalities have been that funds TIF, the increment, is the Municipalities lulled into seeing URAs as an ordinary difference between the taxes collected before are using a tool exercise of their power. Municipalities development on a specific URA site the are using a tool meant only for serious taxes collected after development. meant only

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