TODAY’S LESSON: Understanding the Downtown Development Authority in Grand Junction & how it works
WHAT IS A STATUTORY AUTHORITY?
According to Downtown Development Authority Executive Director Harry Weiss, “A statutory authority is a legal entity created under enabling legislation that sets out the purposes of the entity and the activities it is authorized to undertake — in our case, downtown development. Other examples include an airport authority or a parking authority.”
Editor’s note: In light of the Downtown Development Authority (DDA) partially funding the Avalon Theatre upgrade to the tune of $3 million, it became evident there’s confusion throughout the community as to how the DDA funding mechanism really works. And rightfully so! This is complicated stuff.
This week, we’ll discuss how the DDA funds its capital projects. Pick up the Free Press next week to learn about the BID (Business Improvement District), another legal entity that overlaps with the DDA but pursues separate activities and missions under the Downtown Partnership umbrella.
To most Grand Junction residents, understanding how Grand Junction’s Downtown Development Authority (DDA) is funded and operates is no easy task. It has multiple funding mechanisms, its own board and budget, and a close connection to the Grand Junction City Council. It funds capital projects through “TIF” (tax increment financing), and it works hard to create a strong vision for Downtown Grand Junction’s future, complete with multi-use development to create a healthy business district.
“(The Downtown Development Authority) is a creature of state law,” DDA Executive Director Harry Weiss said, and by definition it’s a tax-exempt governmental entity. It’s a statutory authority, and its board of directors is made of property owners, business owners, business lessees and residents of the authority district.
That nine-member board is appointed by city council, and includes one council member, currently Mayor Pro Tem Marty Chazen. There are currently two four-year vacancies for the DDA board with one board member eligible for a second-term renewal. City council also reviews and approves the DDA yearly budgets, though the DDA generates its own budget and what projects it wants to do.
“We do it in consultation with lots of people,” Weiss said. “They (council) provide a level of oversight.”
HOW IT WORKS
Grand Junction and Fort Collins both started Downtown Development Authorities in 1981.
“They were the firsts in the state,” Weiss said, though there was talk about forming such an authority in Grand Junction as early as the late 1970s.
The DDA is also a taxing district — “We’re like the library district or the mosquito control district,” Weiss said — and it has a 5-mill levy on downtown properties within the district. That provides the DDA’s operations fund, and it generates on average $300,000 yearly. It also funds non-capital programs like Art on the Corner.
That said, there are a lot of city-owned properties and churches within the downtown district that don’t pay into the pot. And folks must voluntarily come into the district and agree to pay the 5 mills.
How are DDA capital projects — like the Avalon Theatre upgrade or the recently completed Main Street Uplift — funded?
That comes from TIF, Weiss explained. “TIF actually means tax increment financing, of which there are two parts; There is the tax increment and then there’s the financing.”
The increment is the amount by which the property tax base has grown over a period of years, and there’s a base measurement in place to track that growth.
“Currently, 30 percent of property taxes levied on downtown properties is diverted to the DDA for capital projects,” Weiss said. “It’s not an additional tax. We just get a little bit of everybody else’s mill levy on properties we serve.”
And here’s the kicker — the DDA can’t spend its capital funds directly on any project.
“All that money gets diverted into an escrow fund,” Weiss said. “To use that money, we have to borrow against it and use the tax increment revenues to pay it off.”
Thus, when the DDA funds big capital projects like the Main Street Uplift or the Avalon Theatre revamp, it borrows money to use up front and it pays it off over time.
“DDA projects its tax increment revenues will be a little shy of $2 million this year, but half of that is already allocated to debt service for the bond we issued in December,” Weiss said. “So we should have about $1 million by year’s end. The revenues are collected over the course of the year and don’t become available all at once.”
LESS FUNDING MEANS SMALLER PROJECTS
Tax increment revenue for DDA capital projects dropped significantly when the DDA was recently extended for an additional 20-year term.
In the DDA’s first 30 years of operation, it received 100 percent the tax-increment revenues, Weiss said. Now that the DDA has entered into a 20-year extension, it’s only guaranteed 50 percent unless a sister taxing district agrees to contribute more (which the school district does, for instance).
“Our revenues have been cut substantially, 55-60 percent of what they once were,” Weiss said. “It’s a reason we must be more strategic” with costly capital projects going forward. “Big-ticket projects like the Avalon will likely be less common in the future.”
Weiss noted that with less funds available going forward, the DDA will be shifting away from long-term debt ($4-$5 million projects) and using short-term debt to fund smaller projects ($500,000 to $1 million).
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