LOVELAND — Loveland City Council on Tuesday is poised to enact language for two citizen-initiated measures for the November ballot. While the two issues may seem to have little to do with each other at first glance—requiring voter approval for urban renewal and a food tax repeal—they both were prompted as push-back against the city council granting taxpayer subsidies for private development.
But the council also appears ready to fight back with an “emergency” ballot measure essentially tying a sales tax hike to the food tax repeal, added after it became official that proponents of the ballot measures were successful in gathering the signatures required to force the votes.
Food taxes and developer subsidies
For months, a group of Loveland residents have tried to stop the Centerra South project, which includes a new multi-use urban renewal project that will be located just south of the existing Centerra development at the northeast corner of the intersection of US Hwy 34 and Interstate 25 in Loveland, a city of about 80,000 people, 50 miles north of Denver.
Loveland City Council agreed to subsidize the project using tax increment financing (TIF) as the funding mechanism, which amounts to forgoing collection of 1.75 percent of its overall 3 percent city sales taxes on anything sold within the development for a 25-year period to offset the infrastructure costs required by the development.
One of the two ballot measures would remove the 3 percent sales tax currently being collected on food. That is important because the anchor retailer for the new development is Whole Foods, which would provide the bulk of taxes to the developer in the way of grocery taxes.
Without that revenue, the developer may not have the taxpayer subsidy for infrastructure to fully support the development.
According to Delynn Coldiron, the city clerk for Loveland, the food tax measure needed 3,126 valid signatures. She said her office checked 4,313 signature lines, of which 1,158 were rejected and 3,155 were valid. She said 32 more complete petition sections were not checked because the group had met sufficiency.
The second measure would require voter approval for future urban renewal projects. That measure also required 3,126 valid signatures; 4,480 signature lines were checked, 1,281 were rejected and 3,199 were valid. Two complete petition sections were not checked because the group had met sufficiency.
The city pushes back
“An amendment to the Home Rule Charter of the City of Loveland, about City sales taxes and in connection therewith beginning January 1, 2024, imposing an additional sales tax of 0.57% and prohibiting the imposition of any tax or fee on the retail sale of human food for home consumption,” the council’s agenda reads.
According to the agenda, Loveland city staff was “asked to prepare a contingent budget for 2024 in the event that the City is impacted by a significant reduction to its sales tax.”
According to the document, the elimination of the food tax (if the ballot measure is successful) would result in “estimated 16.10 percent reduction in sales tax revenue lasting indefinitely; estimated to be $10.5M for 2024.”
“The process of preparing for this reduction of revenue has brought light to the fact that the City’s ability to provide public safety, infrastructure, programs, and other government services would be significantly degraded,” the Loveland staff document reads.
Loveland City Council will have two options:
Option A: The sales tax increase under Option A is dependent on the passage of the food tax initiative. Should the food tax initiative fail, this Option A would not take effect. Therefore, the City sales tax rate would remain at its current 3.00% rate.
Option B: The sales tax increase under Option B is proposed in conjunction with the exclusion of sales tax on food for home consumption. In the event this Option B and the food tax initiative passed, the measure with the most votes would likely prevail.
An ongoing urban renewal fight
The Centerra South project was the impetus behind a bill this past legislative session — Senate Bill 23-273, which would have effectively killed the taxpayer-subsidized development based on changes to a 2010 bill that prohibited the inclusion of farmland in URAs.
URAs were originally designed to convert “blighted” (or rundown) properties into new development to stimulate the economy and improve the property and financed with TIF, which 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 values. 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.
Supporters said that over the years, the inclusion of agricultural land into URAs became a concern for many, which led to the passage of the 2010 effort. They say the developers, Chad and Troy McWhinney used a loophole to bypass the 2010 bill and SB 273 would close that loophole.
They nearly won. Despite the bill passing in both the House and the Senate, Gov. Jared Polis vetoed the effort amid tremendous pressure from developers, Loveland City Council, and the Republican caucuses from both the House and the Senate.
The city has estimated that the loss of 3 percent sales tax on food amounts to $9 million a year of current revenue, or 9 percent of the city’s budget overall.
“It’s a punitive measure this group is trying to do because we passed the South Centerra Piece,” said Loveland City Councilman and Loveland Urban Renewal Authority Chairman Dana Foley in a previous article.
“How do you cut $9 million from your general fund?” Foley said previously. “You have a choice. That big of a (loss) will cut services and personnel from the city. There is just no way around that.”
Supporters of the measure counter that if the city can afford to give up 1.75 percent of all sales taxes for a developer subsidy, then the city can afford to give up 3 percent just on food.
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