Basalt sets local precedent for sharing tax revenues with developer
Basalt set a precedent for the Roaring Fork Valley Tuesday when it agreed to share sales tax revenue generated by Willits Town Center to help the developer pay for an expansion.
The governments of the valley have typically lived by the concept that development must pay its own way. In this case, Basalt town staff and a financial consultant said sharing tax revenue makes sense. The council majority agreed.
“It’s good for the town. It protects your interests. It gets the project moving,” said Bruce Kimmel, vice president of Ehlers, a company that specializes in public finance.
Here’s how the tax-sharing plan will work: The town anticipates Willits will generate $45 million in retail sales in 2015, so that will be used as the baseline. The town will collect $1.35 million in sales tax revenue from those sales through its 2 percent general sales tax and 1 percent tax for Parks, Open Space and Trails.
Starting in 2016, the town will keep all sales tax revenue from Willits until its “bucket” is full with $1.35 million, Kimmel said. Sales tax revenue above that level will be split 50-50 between the town and Willits developer, Mariner Real Estate Management.
The sales tax revenue-sharing plan will be in effect for 15 years or until Mariner has collected $5 million that will be applied to development.
The Town Council approved the proposal 4-2 Tuesday night, with Councilmen Bernie Grauer, Rick Stevens, Rob Leavitt and Herschel Ross supporting the maneuver. Mayor Jacque Whitsitt and Councilman Gary Tennenbaum were against it. Mark Kittle wasn’t at the meeting.
The council also endorsed, by the same vote, Mariner’s proposal to create a 1 percent Public Improvement Fee on new businesses and releases within Willits Town Center. That fee is in addition to the sales tax revenue sharing.
The Glenwood Meadows project in Glenwood Springs charges an add-on Public Investment Fee, but the city doesn’t share sales tax revenue with the developer.
Kimmel said use of an add-on Public Improvement Fee is relatively common in Colorado and the U.S. It is more difficult to track in Colorado if other governments share sales tax revenue, he said.
Mariner representatives said they cannot afford to develop the remaining portions of Willits without the extra revenue. It will cost $12 million more to develop the remaining commercial and residential center than it will recoup from commercial rents of those spaces, the company contends.
Kimmel and Basalt Finance Director/Assistant Town Manager Judi Tippetts told the council the tax sharing and 1 percent fee were a strategic investment. Tippetts said Willits Town Center is vital to the town’s coffers. Whole Foods Market opened in August 2012 and spurred surrounding growth. That core of businesses now accounts for 30 percent of Basalt’s total sales tax revenue, she said, and annual revenue from Willits is growing at a robust rate.
Tippetts and Kimmel said allowing Mariner to share taxes and charge the Public Improvement Fee creates a healthier project and, in theory, assures future sales tax growth.
Grauer said Kimmel’s research helped convince him that the proposal was worth approving. There is little risk to the town, he said, because it is guaranteed to reap at least the same amount of sales revenue it collected from Willits in 2015.
Stevens said he didn’t consider the tax-sharing proposal a “subsidy” for the developer. Kimmel said it could be considered a subsidy because the developer will receive public funds.
Leavitt said he had concerns about sharing the tax revenue, but he ultimately approved the plan, thus avoiding a 3-3 deadlock on the board.
Mariner can only use the funds for specific public improvements associated with the project.
Willits Town Center was initially approved for 500,000 square feet, plus affordable housing, by Basalt in 2001. The council voted 4-2 Tuesday night to approve an additional 91,000 square feet of residential and retail space.
The votes on the tax sharing, fee and expansion must all go to a second reading and public hearing on Jan. 12.
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Robert Shapiro was sentenced to the maximum 25 years in prison for running a $1.3 million real estate Ponzi scheme that claimed more than 7,000 victims.