Urban Renewal Authority may be good fit for city; Long-term planning needed in process By Steve Block, Staff writer, TTi • July 16, 2013 Trinidad had an Urban Renewal Authority (URA) in the recent past, and though it’s been dormant for many years, it still exists. The question of whether or not to reconstitute the URA was asked of City Planner Louis Fineberg in a Friday interview, who said the idea has both merits and potential problems. Fineberg said the URA could be a viable option as the city works to revitalize its downtown core and push for greater economic development. Urban renewal is primarily the act of revitalizing a failing urban area in order to restore economic vitality and improve the safety of the area, although the urban renewal statute is flexible and can be used for development, as well as redevelopment. Understanding that redeveloping urban areas is much harder and more expensive than new development, Colorado has empowered local authorities with certain tools, including eminent domain and tax increment financing, to encourage urban renewal activities. All 50 states have some form of urban renewal law, according to the website renewdenver.org. Fineberg said Trinidad had a URA in the past, which did some work here, but then disbanded while still owning some local property. The property had to be disposed of, so the URA was reconstituted for that purpose in the early 1990s, but never really functioned beyond that single purpose. The URA still exists under city authority, with its board having the same membership as the city council. Fineberg talked about what the city could do with tax increment financing, using its URA as a tool for that purpose. He said tax increment financing is a way of using future tax revenue to do improvements in the short term. “What you do when you start a URA is you have a base tax rate,” Fineberg said. “As you make investment in the city, the theory is that the value of the land in the city will increase. The difference between what it is today and what it will be tomorrow, after you invest in the city, is called the increment. Now in a URA, that increment is devoted to certain expenditures in the district, the idea being that as those taxes increase, you’re going to take that increment and you’re going to reinvest it into the city.” Fineberg said the city could either capture the increment and invest it in the city, or use the increment as collateral against a bond issue. “You could float a bond issue and pay off the bond with the increment,” he said. “It’s a way of investing by floating a bond that will make improvements, that will then increase the property value that will provide you the revenue to pay the bond off.” Fineberg said that what you’re doing with tax increment financing is creating the conditions under which a URA can exist and thrive. He used the example of the proposed “La Puerta de Colorado” development just off downtown near the Commercial street overpass on I-25. “Theoretically, and I’m not saying this is how it would unfold, we can do an Urban Renewal Authority in the city and we can create an Urban Renewable District that includes the downtown and the area they’re talking about developing as La Puerta de Colorado,” he said. “Now as the developer makes investments in that land, the property value increases. Right now, it’s vacant land. After it’s improved, it will be improved land with uses on it and in theory, it’s going to be worth more when it’s developed than when it’s undeveloped.” Fineberg said that if the URA were recreated, the tax value of the newly-developed land would increase and the tax increment created could be used to fund reinvestment in the downtown area. He said it’s a way of targeting increased property tax revenue to certain areas. He said the same idea could be used for sales tax revenue, or a combination of both sales and property tax revenue increases. Fineberg said he had sent a memo to councils about the potential of a URA, and said they have discussed the idea. He the recent Downtown Assessment the city received from officials of Downtown Colorado, Inc. also mentioned the possible value of a URA for Trinidad. Fineberg said several Colorado cities have had great success with their own URAs. He said the idea could become controversial because it involves taking increased tax revenues and devoting them to a particular part of the city, to the possible detriment of other areas of the city, for example the schools. “There are some issues there. It’s not a black or white thing,” he said. “It’s possible you could do a revenue sharing process, where the schools take a piece of that. But we’re in a position right now where we’ve got to foster economic development, and if we don’t reinvest in the heart of our city, in the Corazon, the schools will be losing money in the long run, because the tax base will be decreasing, and that’s already happening. So we have to reinvest in ourselves. In the long term it’s a win-win. In short term, some entities may not be getting a portion of any potential tax increase.” Fineberg said it’s a proven development tool. He said some of the money could be devoted to improving building facades to make the downtown area more attractive. Other possible uses could include loans or grants to businesses to improve their infrastructure, or to make streetscape improvements or for other purposes. “Typically, what people do is they float a bond,” he said. “That gives you a substantial amount of capital up front, that you can invest in the downtown and make it conducive to doing business, upgrading infrastructure, and that will facilitate private investment in the city which will raise property values, and you can use those raised property values to pay off the bond.” Fineberg was asked if, in his professional position with the city, he thought a URA was a good idea. He said he thought it was, and explained why. “We’ve got to do something. Doing nothing is not an option,” he said. “Doing nothing is not an option unless you want to see the city collapse around you. URAs are very complex and we would be wise to seek counsel in establishing it. It requires a establishing a plan for moving forward, and making sure you have all your ‘i’s’ dotted and all your ‘t’s’ crossed would require counsel in establishing this, an expert in the field of establishing URAs.” He said he’s discussed URAs with other professionals in the field. He said that because nonprofit and government entities aren’t taxed, a city can increase the tax increment by transferring properties to nonprofit and government entities. “That’s one benefit to, say, the city taking over the Opera House or an abandoned building, because if there’s a developer interested in coming in and fixing that up and you know there’s going to be an investment in it, if the city has it today you’re at zero, and when it’s sold back to the private sector it has greater value, so you’ve got a big increment there that can be used to further investment in the downtown,” he said. “This is just one of the reasons why it’s wise to seek counsel before doing this.” Fineberg acknowledged that the city would have to put money into an old building to make it more attractive to potential investors. He said that would need to be done in the context of a larger development agreement. “The city takes it today and gets investment. If there’s an agreement that someone would put investment in, and then it would transfer back,” he said. “There are a lot of legal nuances. You want to be careful not to do anything illegal. There are lots of these nuances that you really want to be sure that you’ve got someone with legal experience in URAs.” Fineberg said he has some experience with URAs, but not enough to declare himself an expert. He said he understands that URAs can be a very valuable planning tool than can provide the critical funding a city needs to make improvements. He said the city’s capital improvement funding depends on sales tax revenues, and those sales tax revenues have been declining. He said that could make a URA an attractive option for the city. “As those go down, you have less and less money to spend on capital improvements, and you can see that it becomes a vicious cycle,” he said. “The less money you have to invest in your city, the less you’re going to be able to attract the business that we need to increase sales taxes. Urban Renewal provides that dedicated funding source. I think, initially, there has to be the will to do it. I think if city council were interested in having a URA, we would need to retain a professional to help us with that process. What, exactly, do we need to do first, second and third? We need to develop an action plan. URAs, since they involve taxes, might have to go to the voters, but I’m not completely familiar with that. It’s a process, and it would probably take a year or so to start the process, to get to the point where you can implement it. URAs can only be in place for a certain amount of time, and I believe it’s 25 years. They end, which is why you have to do them very strategically. Think of it this way. If the city had been thinking of a URA when Wal-Mart went in, we could have included them in a URA that also included the downtown. With Wal-Mart, you’ve got a tremendous amount of sales tax generated. If we could have captured that increment and devoted it to the downtown, we would have had a nice, dedicated funding source for making improvements to the downtown. That wasn’t considered back in that time, so it’s development income that I believe we lost out on, but knowing that some new developments may come here, it may make sense to do that. That’s a way that a development like La Puerta de Colorado can really, tangibly, benefit the downtown. In addition to getting people to come off the highway, there would be a funding source to make improvements to the downtown.” Fineberg said the developer would benefit by creating a downtown that is conducive to investment. He said the developer would still be paying the same taxes, but it would be a question of where that tax revenue should go.
Posted on: Tue, 16 Jul 2013 14:43:52 +0000
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