Advice to TIF doubters: Have a little faith
Administrators who have worked with tax increment financing call the funding system a “win-win” situation for everyone.
But those representing other taxing entities that stand to lose money to the system have expressed concern.
The system of tax increment financing, or TIF, will be considered by the Glenwood Springs City Council Thursday as the funding source for the city’s Downtown Development Authority, so there’s not much time left for debate.
DDA directors Bruce Hill, of Grand Junction, and Chuck Stearns, of Mount Crested Butte, have both been involved in their local DDAs and both gave the TIF system a glowing review, assuring naysayers that after all is said and done, the system will benefit everyone.
On Thursday, City Council will specifically consider establishing a “base year” for the tax increment financing for Glenwood Springs’ Downtown Development Authority.
In itself, the establishment of a base year for the TIF shouldn’t be complicated, but the mechanism has drawn criticism from other taxing entities – especially Garfield County and Colorado Mountain College – that worry it will cost them tax dollars.
The resolution that City Council will consider Thursday would establish the time period of March 1, 2001, through Feb. 28, 2002, as the DDA’s base year.
The property and sales taxes collected during that time would become the base value, or set the floor, for the TIF.
If the TIF is approved, then the DDA will receive the increase in property tax from new construction and half of any rise in sales taxes from within the DDA’s boundaries. This money would be allocated to the DDA to pay for projects, such as a parking garage, to improve the downtown core.
The Colorado legislature came up with the system of using DDAs and urban renewal authorities about 20 years ago to help retain the vitality of downtown areas, said Jock Jacober, Glenwood Springs’ DDA board chairman and the owner of Black Diamond Studios on Cooper Avenue.
Concerns could be
Hill, the interim director and chairman of the board for Grand Junction’s DDA, explained that while the other taxing entities’ concerns are legitimate, it’s not as bad as they think.
“Through the TIF funding, they will lose some revenue from their base,” Hill said. “But one of the misconceptions is that the base stays the same.”
By base, Hill was talking of the base value of downtown properties as a whole. But the system is very fluid, he said. Other taxing entities will enjoy a rise in base property values and therefore a rise in their own revenues.
Hill used a $100,000 downtown property as an example. If a property owner next door was encouraged by the DDA to make $250,000 in improvements and the DDA and city made infrastructure and aesthetic improvements to the surrounding area, the $100,000 property could soon be worth $150,000. The added $50,000 goes back to the base value, which increases tax revenues for all taxing entities.
“It’s really in my mind a win-win situation,” he said. “The (DDA) only gets new construction and the base still continues to grow.”
Also, at the end of the TIF’s life, which for Glenwood Springs would be in 25 years, all property taxes and sales taxes that went toward the DDA would revert back to their original tax entities. And if all goes as planned, the entire area will be worth a lot more by then.
“I can see their concerns, but on the other hand, the property values will go up,” Hill said.
In the years since Grand Junction voters approved the formation of a DDA in 1977 and set the base year for their TIF in 1981, more than $4 million TIF dollars have been spent in the downtown area.
“The other thing about TIF dollars is they’re not the only dollars that will make improvements,” he said, pointing to related city-funded projects and DDA-private partnerships.
are where it’s at
The town of Mount Crested Butte, a ski town located about three miles east and 500 feet higher than Crested Butte in Gunnison County, adopted a DDA and the accompanying TIF system more recently. Mount Crested Butte, like Glenwood Springs, encountered some resistance to the funding system.
But in the four years since the system has been in place, town manager and DDA director Chuck Stearns said, he has heard few complaints.
“You’ll get a snide remark every now and then,” Stearns said. “But most of them have backed off. I think they realize everybody wins in the long run.”
So far, Stearns said, the DDA in Mount Crested Butte has been considerably successful. Including this year’s collections, the TIF system will have generated $1 million.
Most of the revenue is from property taxes. Because of declining skier days, sales tax revenues have been on a downward slide for four years, Stearns said.
The Mount Crested Butte DDA receives about 22 percent of the sales tax increment, so money generated for the DDA from sales tax peaked in 1998 at $40,000 and this year it will come to just $6,828.
“Really the action is in property tax increment in most places,” Stearns said.
Stearns said the Mount Crested Butte DDA tries to do a couple of small projects each year to stay visible. It also took out a $1.44 million, eight-year loan to buy a one-acre parcel of land for a community center. The primary goal is to save money and eventually float a $25 million bond to build a community center with an ice skating rink and further development the base village.
“We can do that as soon as the money comes up. The voters have already approved it,” Stearns said.
Jacober explained the impetus for creating a DDA in Glenwood Springs.
“A number of years ago, the state Legislature said something has to be done about sprawl and degrading downtowns in the state,” he said.
Subdivisions outside city limits were rampant, and downtown areas had started to die out, similar to what’s happening here.
“It was easier and cheaper to build outside the city than inside,” he said.
The legislation creating DDAs was enacted “in order to level the playing field and allow towns to survive and mitigate impacts,” Jacober said.
“A DDA is a special governing institution, but it’s totally responsible to elected officials and to the public.”
Also, while the DDA is still a new concept to most people in Glenwood Springs, there is plenty of precedent in other places, he said.
“In Colorado it started 20 years ago,” Jacober said. “Those who got into it at the beginning have reaped huge benefits.”
When working properly, a DDA can serve as a resource for downtown property and business owners and help with hands-on development and planning. It can serve as an advocate in the city for development downtown, and offer technical assistance to the landowners.
Glenwood Springs DDA director Bill Evans echoed Jacober in his optimism.
“Those who have been in it have prospered enormously,” he said.
“It’s not new in Colorado, it’s not new in the U.S. and we haven’t invented anything.”
“Special districts create problems that have to be mitigated,” Evans said, pointing out that there are 90 CMC employees and 250 Garfield County employees who work downtown, where there is a substantial lack of parking.
“It should be considered an investment in the community,” he said, noting that impacts from Garfield County and CMC would be addressed as well.
According to calculations presented by Evans, in 2006, it is estimated the money Garfield County would lose to the DDA will be just a fraction of 1 percent of the county’s total estimated budget for that year.
“If you view it as an investment, their first year doesn’t even pay for a parking space,” Evans said. “We believe that investing will strengthen the base value to such a percent that it will be minuscule.
“The DDA is such a powerful tool for downtowns. It changes the life of a downtown.
“They never see that that’s the investment,” he said of Garfield County officials. “I think the county is being typically narrow-minded.
“What’s good for the town is good for the county,” Evans added. “They seem to see no interdependence whatsoever.”
Jacober and Evans also pointed out that the legality of a DDA has been questioned in court several times and each time it has been upheld.
“Our city council does not have to be afraid they’re doing anything illegal,” Jacober said.
City Council will consider establishing the base year at the regular meeting at 6:30 p.m. Thursday at City Hall.
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