TIF puts unfair tax burden on other CMC communities
In April, Colorado Mountain College and Garfield County filed a lawsuit against the city of Glenwood Springs. The suit objects to the amount of tax support that implementation of a tax increment financing (TIF) mechanism approved by the city to fund its Downtown Development Authority would take from the college.The college wants to be a good corporate citizen and believes the DDA is a positive initiative to bring about improvements we support for downtown Glenwood. We wholeheartedly sought to settle this suit. However, after unsuccessful efforts to negotiate a cap on the amount of tax revenue that would be reallocated from the college, the CMC Board of Trustees recently voted to pursue the suit. The board voiced a concern about the estimated $3.7 million to $10 million the TIF will take from CMC and the unfair burden it will put on the college’s taxpayers outside of Glenwood’s Downtown Development Area.We would like to explain to our students and taxpayers the reasons behind the suit. In a nutshell, tax increment financing uses a state statute to reallocate to the DDA some of the taxes from properties within downtown that would otherwise go to CMC and other taxing entities, such as Garfield County.Based on the County Assessor’s estimates, the DDA will receive more than $55 million in property tax revenue over the next 25 years. Given the projects on the horizon and the track record of property value increases, this estimate is conservative. It does not include the Glenwood Meadows development, which, if annexed to the DDA, could triple the DDA’s tax revenue to more than $150 million.The college objects to an unrestricted TIF because:-The amount of tax money that will be taken from CMC will prevent us from increasing educational services to accommodate growth in the community or, in the alternative, it will force us to seek a tax increase to make up for the loss;-The reallocation of CMC tax revenue will shift the burden of paying for Glenwood city improvements within the downtown to our taxpayers all throughout the college’s six-county district;-The economic conditions required for the formation of the DDA and imposition of a TIF (e.g., a blighted downtown) do not exist in Glenwood Springs, and;-The boundary of the downtown development area was drawn by the DDA to reach well beyond the traditional downtown area to vacant land where new development is ongoing or planned.By way of background, a community may form an urban renewal DDA to combat existing blight and eliminate slums. Denver’s LoDo district is a good example. Similarly, a downtown development DDA may be formed to halt or prevent the deterioration of property values and the growth of blight within the downtown. Both urban renewal authorities and downtown development authorities may be funded by a TIF mechanism, which reallocates certain tax revenue from taxing entities within the designated area to the newly created DDA.The DDA receives all property tax monies generated as a result of new development and future increase in value of the new development. With respect to urban renewal authorities, the Colorado Supreme Court has held this reallocation to be constitutional.The Court reasoned that, because of the existing blight, new development (and thus new taxes) would not occur but for the intervention and development promotion activities of the urban renewal area. On the other hand, there has been no court guidance regarding the legality of funding DDA activities with a TIF, particularly where, as in Glenwood Springs, the economy is vibrant and property values are continually increasing.Glenwood Springs has been blessed with consistently rising property values for several years. During the last two years alone, property values went up over 30 percent. There is also an abundance of both ongoing and planned development throughout the city.Although, under the state statute in question, DDAs should be drawn around that area in a municipality that traditionally has been the central business district, Glenwood Springs has drawn the DDA boundaries to include vacant land along Highway 6&24 in the direction of West Glenwood.Within this expanded area, the Land Rover dealership was just completed and the Glenwood Caverns hotel and tramway were just approved. The Hotel Colorado has a major expansion and remodel in the planning and approval process. These projects alone could add $10 million to the assessed property value within the downtown development area, and the DDA will realize all of the property tax revenue generated by these projects for the next 25 years.The DDA has touted the TIF as a miracle because it doesn’t raise taxes. Unfortunately, the money is coming out of the pockets of the other taxing entities and their taxpayers. Based on the conservative $55 million estimate above, the DDA will cost CMC $3.7 million, Re-1 School District $32.7 million, Garfield County $12.8 million, and the city of Glenwood Springs’ general fund $5.5 million.Re-1 has not received voter approval to exempt itself from TABOR limitations (de-Bruced), and taxpayers may have noticed that while the assessed value of their property increased, the Re-1 mill levy has decreased so that the increase in taxes remains within TABOR limits. However, as a result of the reallocation of Re-1 tax revenue to the DDA, the mill levy will not decrease by as much as it otherwise would have, and taxpayers throughout the Re-1 district will find themselves paying higher taxes to Re-1 in order to indirectly fund the DDA.Although the loss of revenue is of great concern to CMC, our objections are primarily about fundamental fairness. CMC has de-Bruced, and in doing so it obtained voter approval to retain all tax revenues generated by its 3.997 mill levy for educational purposes.Because of the TIF, CMC will either be forced to freeze the level of educational services in spite of growth in the community, or seek voter approval to increase its tax rate to continue to provide the level of service it promised to its voters. As new construction takes place in the DDA, the new property taxes will go to the DDA, not to CMC, Re-1 or the county.However, the new construction will result in more demand for CMC courses, more students in public schools, and more traffic on county roads, and everyone else must then subsidize those services because the property taxes will not go to the entities providing the services. Multiply this by the revenues that would come from Glenwood Meadows Development, which the city has asked for the right to annex, and one begins to realize the stress this will put on other taxpayers.If the city of Glenwood Springs desires to build a parking garage, move the wastewater treatment plant, or otherwise improve the downtown, it should look to taxes that are paid by the residents, businesses, and visitors to downtown Glenwood rather than taking from the taxing entities that serve regions beyond downtown. Restricting taxes to only those impacted would be a more equitable solution than charging everyone in the more than 40 communities that CMC serves.CMC remains committed to serving the residents of all of its communities throughout western Colorado. We hope to promote a public dialogue of this issue, and we welcome your comments.Robert Spuhler is vice-president of CMC.
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