What’s the diff? Other areas’ opinions of TIF
A look around Colorado reveals differing views on tax increment financing to fund a city’s downtown development authority.
While some have called tax increment financing a win-win situation for everyone, others express reservations.
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. It is touted as providing a source of funding for the development of downtown without causing an increase in taxes.
If passed, the TIF system will take 50 percent of downtown sales tax growth, as well as property tax growth stemming from new construction and improvements within the downtown district, to fund the DDA.
The money can be used for smaller projects within the district, as well as the basis for borrowing on a large scale to build, for example, a parking garage.
The Colorado legislature came up with the system of using DDAs and urban renewal authorities about 20 years ago to help maintain the vitality of downtown areas.
The Grand Junction Downtown Development Authority has been operating a Downtown Development Authority funded with tax increments since 1981. Although there was some concern at first, Mesa County administrator Bob Jasper said the system has turned out positively for the county as a whole.
In fact, even though the term of the DDA in Grand Junction could be extended by five or 10 years, he said he’s not concerned if that happens.
“I think we’re OK,” Jasper said. “I don’t know that we took a position one way or another,” he said of the proposed extension.
If the term of the DDA is extended, however, it likely will require an intergovernmental agreement that would allow the county some wiggle room on how funds could be split, he said.
Just because Mesa County officials don’t appear concerned, Mesa County taxpayers could still be affected.
“We’re still under Tabor (tax laws), so in our case it doesn’t affect the county’s general fund. So it’s the taxpayers in the whole county that are paying for the downtown development,” Jasper said, explaining that county taxpayers, in effect, wind up paying some because taxes lost to the DDA have to come from somewhere.
“Which isn’t necessarily so bad,” he added. “So many people view the TIFs as the downtown people paying, but really it’s the whole county.”
Boulder attorney Paul Benedetti, who has been involved in DDA and TIF litigation since 1980 and has held seminars on the topic for county assessors, said there are still a lot of misconceptions about the system out there.
“That (tax) increment doesn’t go up as much as people think it does,” he said. “What I’ve found is a lot of people don’t know how it works.”
Colorado is actually more conservative than other states in how it allocates TIF dollars, and Benedetti said base property values rise significantly with a DDA in place.
“That base does get some benefit from the project,” he said.
When the formation of a Downtown Development Authority was put up for election in Steamboat Springs a few years ago, it was shot down.
Routt County Commissioner Dan Ellison said during the DDA campaign he heard many of the same grievances that are now being brought up by Garfield County officials.
“It would have affected many of the other tax districts that received property taxes in town. The DDA would have essentially taken tax dollars away, and those people had no opportunity to vote on it,” Ellison said of county residents.
Many people saw that property values were skyrocketing anyway, so they questioned what difference a DDA would make.
Garfield County Commissioner John Martin made a similar point, saying base property values will not rise from DDA improvements, but rather just from increases in the market as a whole.
Martin also claimed the DDA will garner some of the gains from the new increases in already-existing, nonimproved properties when they are reassessed.
He agreed that the base value of properties in the DDA district would go up at a “cost-of-living-type rate,” but said the majority of base increases would flow directly into DDA coffers.
“It would keep everything at a status quo – districts will be frozen in time for 25 years,” he said of tax districts such as Garfield County and Colorado Mountain College. “It’s taking money from one district, making them scrounge for money, and giving it to someone else.”
Jesse Smith, assistant county manager for Garfield County, said the TIF system is not as simple as it’s been explained to the City Council. He is frustrated that the DDA will get money from already-planned projects, yet there’s nothing the county can do.
“This is taxation without representation, and we could have a tea party at the confluence of the Roaring Fork and Colorado Rivers,” Smith said.
He feels the DDA will get a disproportionate share of tax revenues even if it doesn’t lift a finger.
Also, Smith asserts, the county stands to lose big money if Glenwood Meadows is annexed into the DDA.
“The real wildcard in this that nobody will comment on is Wulfsohn,” he said. “If they pull that into the district, and I couldn’t imagine them not pulling it in, the tax base would more than double the tax base of the DDA. One hundred percent would go toward the DDA because it’s all new construction.”
DDA director Bill Evans has said the DDA is leery about trying to annex Glenwood Meadows.
“I think that’s going to be really, really controversial to get Meadows,” he said.
Smith said the most alarming prospect for the county, however, is down the line. He said if other cities and towns jump on the DDA bandwagon, the county could face serious financial trouble.
“What really scares me is that once Glenwood does this, you’ll see a domino effect,” he said of Carbondale, New Castle, Silt and Rifle. “Then you’ll have horrendous effects on the county.”
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