Colorado Tax Increment Financing · PDF fileDenver Los Angeles Oakland Sacramento October 25,...

Denver Los Angeles Oakland Sacramento

October 25, 2016

Colorado Tax Increment Financing Changes

Dan Guimond, Principal, Economic & Planning Systems Brian Duffany, Vice President, Economic & Planning Systems Alan Krcmarik, Executive Fiscal Advisor, City of Loveland Gini Pingenot, Legislative Director, Colorado Counties, Inc.

1 Larimer County TIF Study

Speakers • Dan Guimond – Principal EPS

– Over 30 years consulting experience – Redevelopment and revitalization specialist – Fiscal and economic impact analysis

• Alan Krcmarik, Executive Fiscal Advisor, Loveland – 30 years of experience – Pueblo, Denver, Fort Collins, Loveland, and State of

Colorado

• Brian Duffany, Vice President, EPS – 15 years of consulting experience – Financial and economic analysis – Policy analysis

• Gini Pingenot, Legislative Director, CCI

– Legislative Director for Colorado Counties Incorporated (CCI)

– 15 years with CCI


Agenda

• Colorado TIF History and Evolution

• Larimer County TIF History

• Larimer County TIF Process

• Larimer County TIF Study Findings

• Colorado TIF Perspective – Post HB15-1348


Tax Increment Financing

• Allows the incremental property tax revenue created by new development to be captured to help finance public improvements

• Urban Renewal Authorities – 25 years – Also allows the use of local sales tax revenues

• Downtown Development Authorities – 30 years – Renewal for up to 50 years for 50% of TIF


Tax Increment Financing


Colorado History

• Colorado URA Statute in 1958

• TIF authorized in URAs in 1975

• First TIF was formed by Boulder for Crossroads Mall redevelopment in 1979

• Now 125 URAs and 15 DDAs statewide

Villa Italia Mall, Lakewood, CO

Belmar, Lakewood, CO


Major Development Projects with TIF

• Streets at Southglenn, Centennial • Buckingham Redevelopment, Aurora • Stapleton, Denver • Downtown Denver Pavilions • Lowenstein/Tattered Cover

Redevelopment, Denver • Belmar, Lakewood • Centerra, Loveland • RiverPoint, Sheridan • Foothills Mall, Fort Collins

Foothills Mall, Fort Collins, CO


So what’s the problem?

• The cumulative impact of multiple TIFs on property tax-dependent entities

• Gallagher and TABOR effects

• Voter approved mill levies captured

• No involvement in TIF decisions by other entities

• Populist backlash


Evolution of TIF

• From a narrowly focused tool used in blighted urban cores

• To a broad economic development incentive and infrastructure financing scheme

Vacant row houses, Baltimore, MD

Costco Store, Timnath, CO URA


TALES FROM TWO CITIES


Fort Collins: Downtown Development Authority • One of the early TIF

districts in Colorado • Focus on a historic

downtown – with surrounding area

• Economic Performance was struggling – Foothills Mall (1970s) drawing business

• 60 to 80% of Downtown buildings vacant or underperforming

• Need reinvestment: Old Town, Opera House, Parking Structure

Loveland: Centerra Urban Renewal Authority Project • 2004-2005, one of the

largest tax increment projects in Colorado

• Near I-25 in undeveloped area, about 3,000 acres to chose from, limited to 1,752 acres to develop

• Start with large tracts and build the infrastructure

• Sophisticated financing structure with metro district and URA

• Build regional transportation projects


Big Winner Not yet Large Project Working

Small Carve Out Working


From a camp on the plains


The Fort Collins DDA includes the “camp” and the first businesses in town


Why use tax increment financing? From eyesore to patio brew pub restaurant


The Expanded Fort Collins DDA


More from Alan here


From inadequate transportation to a modern lifestyle center


The original URA plan area – north of HW 34 stretching east and west


The original size was not enough, so the City created a Flex URA – Mill levy allowed to float upward to cover debt service


The Flex gave more acres to work with but set a cap in acres and limited land uses


First 10 years: Performance on track until the Great Recession


Property Tax Performance in 3 TIF Zones • FC Downtown Development Authority

– Base Assessed Value up 5.13% annualized over history – Increment Assessed Value up 4.78% – Total Assessed Value up 7.08%

• Centerra – Base Assessed Value up 11.17% annualized since inception – Increment Assessed Value up 67.23% – Total Assessed Value up 67.41%

• Downtown Loveland URA – Base Assessed Value up 2.1% since 2002 inception – Increment Assessed Value shows a negative IRR – Total shows growth of 2.1%


Other Taxing Entities in City of Loveland

Thompson R2-J School District 38.393 Larimer County 21.882 City 9.564 Thompson Valley Health Service 1.76 Northern Colorado Water 1.000 Conservancy District Larimer County Pest Control 0.142 Loveland GID No. 1 2.684 Centerra Metro Districts 0.000 to 42.600

• How to balance the benefits and risks among participating

entities


LARIMER COUNTY TIF STUDY GROUP


Larimer County TIF Study Group

• County concerned with TIF growth • Before HB 15-1348 • Began with City-County manager discussions • Core (Technical) Study Group

– City/County management and department head staff – Fort Collins, Loveland, Timnath, Larimer County – Special Districts (Health, Library, Mental Health)

• Larger Study Group – Other municipalities – Other special districts

• Ongoing discussions


LARIMER COUNTY TIF STUDY FINDINGS


Study Questions

• How significant is the issue? • What are the fiscal impacts? • Can we calculate the “ROI” on TIF dollars

invested? • What about the ripple effects? • Are there negative impacts? • Are we really “growing the pie” when we use TIF? • How can we objectively evaluate new TIF

projects? • Can we have more transparency in the process? • How can we work together as partners?


TIF Study Scope of Work

• An analysis of the impacts of TIF on the provision

of services to the community

• An indirect impact evaluation framework that

estimates the indirect economic and

socioeconomic impacts of TIF projects

• Recommended policy actions to mitigate the

potential negative impacts of TIF

• Address cumulative impacts


Tax Increment Growth

• 16.6% annual growth • 4.4% of the total AV

33 Larimer County TIF Study Regional TIF Study Update 33

Larimer County Revenue Structure

• 51% property tax

• 19% state and federal grants (earmarked)

• 30% minor cost recovery revenue

• Voter approval needed to raise taxes


Residential vs. Commercial Fiscal Impact Before TIF

• $1.0 million in market value • Commercial revenues needed to serve residential

development


Fiscal Impact Under a TIF

• Gallagher Amendment: 3.6X property tax on same assessed

value


Fiscal Impact Under a TIF

• Gallagher Amendment: 3.6X property tax on same assessed

value

But there is a big ripple effect, right?


Indirect Impacts Theory Reality

• County gets growth in the base • Base doesn’t always grow • Can’t wait 25+ years

• There is a ripple effect to

surrounding development

• Depends on context and project • Impossible to quantify • Project may “cannibalize”

development from other areas

• Development would not have happened

• Depends on the “but for” test • Ordinary infrastructure costs? • Subsidizing land costs?

• Creating “net new” sales tax • County does not have sales tax • Some retail obsolete after 10-15

years

• There is a multiplier effect • Depends on the jobs • Retail: low multiplier • Economic base: higher multiplier


Recommended Principles (Draft)

• Mitigate cumulative impacts with more prudent use:

1. Truly blighted, distressed, outmoded, and non-performing or have infrastructure or physical barriers.

2. Meets the “but for” test. 3. Create new economic base jobs and/or other net new

economic activity at the County level. 4. Create above average wage jobs. 5. Equitable revenue and financing structure whereby the

city’s financial investment in the project is equal or greater than the requested TIF.

6. One City should not have a disproportionate amount of TIF, and the total amount of TIF should be kept to an “acceptable” level. (Cumulative Impacts)


STATEWIDE PERSPECTIVE


County Viewpoint

• TIF is an extraordinarily powerful tool • No representation in TIF decisions • Counties depend on property tax growth to:

– maintain services – support fixed costs, capital projects – respond to unforeseen events

• Commercial is main source of property tax revenue, most TIF projects are commercial

• We can’t wait 30 years – we need the revenue now • Schools, Special Districts, and Junior Colleges


Major Counties Revenue Structure


TIF Process – Prior to HB15-1348

• City creates an Urban Renewal Authority – URA Board of 5-11 members appointed by City Council – City Council can appoint itself the Board

• Define an Urban Renewal Area – Find blight (easy!) – Redevelopment plan – Financing plan (TIF)

• Prepare County Impact Report • Freeze the base and collect TIF revenue


TIF Process – Post HB15-1348

• Adds a county, special district and school representative to the Urban Renewal Board

• Negotiate with other taxing bodies • Mediate if no agreement reached


TIF Process – Urban Renewal Areas

Today: • Inclusion and partnership among local governments • Risks and rewards are shared • Accountability of all elected officials – custodians of tax

dollars


QUESTIONS


Questions and Contacts

• [email protected]




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Colorado Tax Increment Financing · PDF fileDenver Los Angeles Oakland Sacramento October 25,...

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