DENVER — A bipartisan bill introduced Monday in the Colorado State Senate would close a loophole stemming from a 2010 law that was designed to limit the use of agricultural land in urban renewal authority (URA) projects.
Senate Bill 23-273 is a two-page change to one condition for including agricultural land into an urban renewal area that simply says ag land can be included only if it is part of an existing URA, created prior to June 1, 2010, and that the land stays a part of that existing URA.
URAs were originally designed to convert blighted (or rundown) properties into new development to stimulate the economy and improve the property. They are financed using something known as Tax Increment Financing (TIF).
TIFs work by freezing the current level of tax revenue being collected within an area to create a base. Once a plan is in effect, any revenue generated over that base goes to the developer to fund improvements such as water, sewer and roads in predetermined areas.
These freezes affect all taxing entities within the URA, such as counties, cities, schools, and special taxing districts (fire, libraries, water, etc.) so that there is no “growth” in revenue from increased property valuations, which can easily cause issues for the districts as their responsibilities for a growing community increase, but their revenue does not.
In many cases that leads to other taxes needing to be increased, such as mill levy overrides for school and fire districts or sales taxes for cities and counties.
Closing a loophole
However, over the years, the inclusion of agricultural land into URAs became a concern for many. So, in 2010 the legislature passed a bill limiting the inclusion of agricultural land within the boundaries of any URA created after June 1, 2010
It restricted the use of ag land in URAs to any property where one of the following was true: Land that was complicated by the presence or potential of a hazardous substance, pollutant, or contaminant, met certain percentage requirements already containing urban development, was surrounded completely by municipal boundaries for at least three years, and all taxing entities inside the boundary agreed to give up the taxes to their district.
One final option to include ag land is the basis of the new bill, which is co-sponsored by former Thompson School District Board of Education Vice President Sen. Janice Marchman, D-Loveland and former Logan County Commissioner Sen. Byron Pelton, R-Sterling.
Under the 2010 bill, ag land included within a URA prior to June, 1 2010 could remain included. However, according to people close to the Marchman/Pelton bill, that final option has been abused, with developers removing sections of ag land from one URA and putting them into a new URA, restarting the time the developer has to develop the land using the taxpayer-subsidized TIFs.
In Loveland for example, developers are proposing a 148-acre retail and residential development near their existing Centerra community south of U.S. Hwy. 34. The ag land the new development would use is currently part of a 2004 URA.
That URA expires in 2029, however, and developers cannot develop the new project in time under the old URA, so they want to remove the 148-acre parcel and create a new URA, which would require the taxing authorities to give up 100 percent of future property tax revenues for another 25-years.
That would impact the City of Loveland, Thompson School District, Larimer County, Thompson Valley Health Services District and Northern Colorado Water Conservation District, potentially amounting to hundreds of millions in lost revenue for those districts.
Taxing districts pay the price
Although the state currently backfills the lost revenue to school districts, there is no guarantee that will continue, said Nancy Rumfelt, a Thompson School District Board of Education director.
“What happens at some point when the state literally doesn’t have the ability to backfill,” said Rumfelt, who was speaking on behalf of herself and not her school board. “And that backfill makes all of the state of Colorado residents pay for a developer’s idea. Everybody’s paying for it. Not just the people who live in that area.”
The state does not backfill the losses for the other taxing districts.
Rumfelt, who in the past has more often than not been on opposing sides of Marchman, supports this bill and will testify in favor of it. She said there are numerous acres in the old URA that will also be pulled out and put into new URAs if this bill does not pass.
She said TIFs use taxpayer money to fund a portion of a private development, allowing developers to free up their own capitol to invest elsewhere, and it is not right to put the burden on the backs of taxpayers in her opinion.
“The actual intent for TIFs and URAs was to get rid of blight and slum,” Rumfelt said. “It wasn’t to provide another finance mechanism for a developer. For me, if an idea is so good, then why does it need the force of government to come in and use taxpayer money to fund it.”
The updated language will close that loophole simply by clarifying that agricultural land may only be used under the prior URA rule if it was part of a URA before 2010 and remains in that existing URA.
Under this new bill, the new development in Loveland would not qualify as a URA as the land does not meet any of the other exceptions under the 2010 law. They would still be able to develop the project, but they would not be able to do so with the government-subsidized program.
Pelton said he got on the bill with Marchman because as a county commissioner he knows how much URAs cost local governments, especially already strapped school districts. He said developers cannot continue to work the loophole by taking a part of one URA and converting it into a new URA.
“If they want to continue the project, then they can do it outside the URA,” Pelton said. “They need to work with the taxing districts and work out an inter-governmental agreement with them before they take away that money. It’s getting very difficult for counties and especially school districts to provide the services that we have to provide if those taxes keep going away.”
Complete Colorado will continue to follow the bill through the process.
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