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Many high-profile projects in Colorado have gotten help from tax increment financing

By: Megan Schrader
December 15, 2013 Updated: December 16, 2013 at 4:58 am
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DENVER — City for Champions — four dreams of Colorado Springs civic leaders — could become reality through heavy use of development incentives known as tax increment financing.

The $250 million plan to build an Olympic museum, an indoor arena, a sports medicine clinic and an Air Force Academy visitor's center would get off-the-ground with $145.5 million in bonds or loans that would be paid back with interest using a variety of tax increment financing sources.

According to a list of potential funding sources presented to the Colorado Economic Development Commission, the tax increment financing could come from both sales and property taxes collected by the state, the county and the city.

Proponents of tax increment financing (TIF) say it's a vital tool for redevelopment in Colorado. Without TIF, they say, high-profile projects such as the Denver Pavilions - a shopping center on the 16th Street Mall financed with TIF in 1992 - would never have occurred.

Opponents say the money isn't simply manna from heaven. It is tax revenue that ordinarily would have gone into city, county and school district coffers but instead is promised over 30 years to pay for various elements of a redevelopment project.

What is TIF?

TIF uses a portion of the additional sales tax or all of the new property tax generated by a development. That tax increment - or net new tax revenue - goes to the urban renewal authority established by municipalities to oversee TIF projects. The money is used to pay off bonds or reimburses the developer or developers of projects that must serve a public good such as improving public infrastructure, the remediation of pollution, or clearance of blighted properties.

TIF was authorized by lawmakers in Colorado in the late 1950s but it wasn't until the 1980s that municipalities across the state began using TIF as an incentive for projects in blighted areas that were deemed too expensive to develop without financial help.

The idea was, if sprawl is a result of cheap land and lower development costs in suburbs, TIF would be a way for developers to build in urban settings while turning a competitive profit. At first, TIF was limited to local sales tax and property tax revenue streams.

In 2009, lawmakers passed the Regional Tourism Act allowing the Economic Development Commission to use tax increment financing as an incentive for large-scale tourism projects.

City for Champions would possibly use all three: state, county and city tax increment financing.

The city applied in September for tourism act funds, and will find out Monday whether the Economic Development Commission will award it a percentage of newly generated state sales taxes. That money could pay the principal and interest of a $47.5 million bond for construction costs, according to documents filed with the commission.

In its application, the city recommended a regional tourism zone, and is requesting 13 percent of the increased sales tax revenue in that zone over 30 years, which it estimates would be $921.2 million. That would mean the city would get about $120.5 million.

Not everyone agrees with those numbers however, and it will be up to the commission, if it approves the deal, to set a percentage that would be returned to the urban renewal authority.

If state incentives are approved, the next step would be for the Colorado Springs City Council and the El Paso County Board of Commissioners to approve similar tax increment financing for local sales tax and property taxes. It is unknown how much that TIF would be worth, but a document showing preliminary funding sources indicated the local tax increment financing could purchase $98 million in bonds.

City's use of TIF

The Colorado Springs Urban Renewal Authority was established by City Council in 1970. The authority is led by a nine-member board of directors appointed by the mayor.

The board can approve or deny new urban renewal areas eligible for TIF, but a vote of the City Council is necessary to seal the deal.

TIF dollars go directly to the authority, which either takes out bonds to pay for the public improvement projects associated with redevelopment or reimburses developers for those costs.

In Colorado Springs, TIF has been used to help developers of University Village Colorado on North Nevada Avenue, the redevelopment of the recently opened Ivywild School by Bristol Brewing Company, the housing development around the historic Lowell School on South Nevada Avenue and the 117-home Gold Hill Mesa mixed use subdivision where a former gold processing plant was located, among other projects.

Those projects receive either a portion of the new sales tax or all of the new property tax generated by their development over several years.

The funds are earmarked specifically for public projects such as transportation or storm water improvements, said Jim Rees with the Colorado Springs Urban Renewal Authority.

An impact study done in September 2012 credited three active TIF projects with generating 1,675 new jobs, 1,250 temporary construction jobs and $1.8 million in local sales tax revenue not captured by TIF.

"Without tax increment financing, these projects wouldn't have occurred," Rees said.

In the calendar year of 2012, budget documents for the Urban Renewal Authority show those same three projects - Lowell, North Nevada and Gold Hill Mesa - generated about $1.5 million in property taxes that went directly to the authority to pay back bonds or reimburse developers. Of that, $16,000 was paid to Colorado Springs School District 11 to offset the impact of the TIF at Gold Hill Mesa.

Additionally, North Nevada generated $2.4 million in local sales tax revenue that went to the authority and was used to pay back bonds. In 2012, the authority was unable to make payments on one of the North Nevada bonds because revenues didn't meet projections. That default has had little impact on the authority as the bonds weren't leveraged against anything and investors were banking on the promise of TIF revenue.

Two of the areas targeted in the City for Champions proposal have been designated urban renewal areas by the City Council.

The North Nevada Avenue urban renewal area is where the University of Colorado at Colorado Springs plans to build a sports medicine clinic using RTA funding. A full 2 percent of the municipal sales tax generated in the North Nevada urban renewal area is paid to the urban renewal authority for improvements in that area.

An Olympic museum and indoor sports arena are planned on a swath of land identified as the Southwest Downtown urban renewal area. City Council approved that TIF zone in 2001, finding significant blight on 100 acres to warrant the use of TIF for redevelopment.

In 2012, that zone generated $11 in property tax increment for the authority because no significant development has taken place.

But Rees said because the 30-year clock is already half-expired, City Council would need to approve new plans to use TIF for the City for Champions projects.


Contact Megan Schrader

Twitter: @CapitolSchrader




The Colorado Economic Development Commission will vote Monday on tax increment funding for Colorado Springs’ City for Champions proposal. Recommendations will be presented at 9 a.m., and the board discussion is expected to begin about 9:30 a.m., with the vote following. Follow reporter Megan Schrader on Twitter @Capitol
Schrader and on Monday morning for the latest updates.

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