Archive | January, 2012

ABC’s of Urban Renewal

12 Jan

An Abbreviated Guide to Helping You Understand
the Basics of Urban Renewal in Colorado

According to National Public Radio’s (NPR) website, “The 2012 session is likely to be a tough one … rife with partisan politics.” Unfortunately, and unlike many issues that will be discussed by the legislature this year, urban renewal is one of those rare topics that cross party lines. It seems to evoke emotions in both Democrats and Republicans, and experience has shown that at the root of these emotions is either misinformation or a lack of information.

In an effort to educate the Colorado citizenry and its leaders about what is fact versus fiction when it comes to urban renewal, Downtown Colorado, Inc., together with the Colorado Municipal League and Ricker Cunningham, are going to publish a series of articles on this topic, featuring questions and answers; testimonials from both citizens and community leaders with first-hand knowledge of urban renewal projects; case studies; and, legislative updates.

This, the first of these articles, is intended to provide you with a foundation of understanding about urban renewal through a series of questions and answers often raised during the urban renewal planning process We welcome any comments you might have on this series – possible topics, perspectives or testimonials.

What is urban renewal?
Urban renewal is a statutory tool used by municipalities to make improvements within a designated area of the community. The Denver Urban Renewal Authority’s website describes it as a “tool used to assist in the redevelopment of blighted property and help foster sound growth and development.” With establishment of an urban renewal area by the local governing body, new tax revenues (Tax Increment Financing – TIF) resulting from and created by future taxable improvements may be reinvested in the area for purposes of public benefit.

What is Tax Increment Financing (TIF)?
Tax Increment Financing (TIF) is a unique mechanism that enables an urban renewal authority to use the net new tax revenues generated by projects within a designated urban renewal area to help finance future improvements. TIF is a new source of tax revenue, not an additional tax, that would not be available but for new investment.

What can TIF be used to finance?
TIF, the new tax revenue that results from property investment and reinvestment in the urban renewal area may only be used for improvements that have a public benefit and that support stated redevelopment efforts, such as: site clearance; construction of streets, utilities, parks; removal of hazardous materials or conditions; site acquisition; and construction of public facilities.

Can TIF always be used to finance a project?
No, TIF may only be used within an urban renewal area where “blighting conditions” exist and for projects that meet stated public objectives. Most urban renewal authorities require that applicants for TIF revenues provide documentation that the proposed improvements are financially infeasible without assistance by the urban renewal authority.

If an area is described as “blighted” what does that mean?
The legal term “blight” describes a wide array of urban problems, which can range from physical deterioration of buildings and the environment, to health, social and economic problems in a particular area. While considered to be an offensive term by some, it is actually a condition defined by law. See below.

According to Colorado State Statute (CRS 31-25-103) (2), a “blighted area” is defined as follows: “Blighted area” means an area that, in its present condition and use and, by reason of the presence of at least four of the following factors, substantially impairs or arrests the sound growth of the municipality, retards the provision of housing accommodations, or constitutes an economic or social liability, and is a menace to the public health, safety, morals, or welfare; …

(a) Slum, deteriorated, or deteriorating structures;
(b) Predominance of defective or inadequate street layout;
(c) Faulty lot layout in relation to size, adequacy, accessibility, or usefulness;
(d) Unsanitary or unsafe conditions;
(e) Deterioration of site or other improvements;
(f) Unusual topography or inadequate public improvements or utilities;
(g) Defective or unusual conditions of title rendering the title non-marketable;
(h) The existence of conditions that endanger life or property by fire or other causes;
(i) Buildings that are unsafe or unhealthy for persons to live or work in because of building code violations, dilapidation, deterioration, defective design, physical construction, or faulty or inadequate facilities;
(j) Environmental contamination of buildings or property;
(k.5) The existence of health, safety, or welfare factors requiring high levels of municipal services or substantial physical underutilization or vacancy of sites, buildings, or other improvements;
(l) If there is no objection of such property owner or owners and the tenant or tenants of such owner or owners, if and, to the inclusion of such property in an urban renewal area, “blighted area” also means an area that, in its present condition and use and, by reason of the presence of any one of the factors specified in paragraphs (a) to (k.5) of this subsection (2), substantially impairs or arrests the sound growth of the municipality, retards the provision of housing accommodations, or constitutes an economic or social liability, and is a menace to the public health, safety, morals or welfare. For purposes of this paragraph (1), the fact that an owner of an interest in such property does not object to the inclusion of such property in the urban renewal area does not mean that the owner has waived any rights of such owner in connection with laws governing condemnation.  

Source:  Colorado Revised Statute 31-25-103(2).

What is a Conditions Survey (Blight Study) and why do one?
A conditions survey (or blight study) is an independent investigation into whether any or all of the factors listed above are present within the boundaries of the proposed urban renewal area. An area may only be designated as an urban renewal (or redevelopment) area after the following:

  • Independent blight study or conditions survey has been prepared and presented first, to the municipality’s urban renewal authority, and second, to its Council;
  • Stakeholders have been contacted; and
  • City Council or Board of Commissioners accepts the findings of the conditions survey and adopts (by resolution or ordinance) the urban renewal plan.

What is the process for establishing an urban renewal area and advancing an urban renewal plan?  Generally —

  1. Determine Survey Area Boundaries
  2. Verify Presence and Location of Blighting Factors
  3. Prepare Conditions Survey
  4. Present Conditions Survey Findings to Urban Renewal Entity and Council for Acceptance
  5. Identify Market Opportunities Within Area and Quantify Timing
  6. Together with Stakeholders – Define Future Role of Area in Community
  7. Prepare Urban Renewal Plan
  8. Complete Financial Analysis (Tax Increment Finance – TIF)
  9. Complete Impact Analysis (as per statute) and Share With Impacted Taxing Bodies
  10. Present Urban Renewal Plan to Urban Renewal Entity and Council for Adoption
  11. Issue Request for Projects
  12. and/or Implement Plan

How many individual urban renewal areas can a community establish?
There is no limit to the number of individual urban renewal areas a community may establish within its municipal boundaries, however, the statute requires that the boundaries of each area be defined “as narrowly as possible.”

Note:  In 2010 and 2011, Ricker│Cunningham conducted a statewide survey of urban renewal authorities. The results of that survey may be obtained by contacting either Anne Ricker at 303.458.5800 or anne@rickercunningham.com or by visiting the DCI website. An update to that survey is currently underway. If you receive a request to complete the 2011 / 2012 survey, we encourage you to do so in a timely manner so that the results may be used during the current legislative session.

Anne Ricker is a principal at Ricker Cunningham, a real estate advisory firm that works with municipalities, governments, advocacy organizations and investors to enhance communities through economically sound projects. Paul Benedetti, Esq., and Mark Radtke, Colorado Municipal League, also contributed to this article.

What’s Happening with Urban Renewal Legislation in Colorado?

12 Jan

Anne Ricker, Ricker Cunningham, Discusses Why Urban Renewal Law in Colorado Is Under the Microscope Again

It’s January in Colorado and that means the legislature is back in session and the urban renewal law is, once again, under the microscope. As of the date of this article, two possible pieces of legislation are being considered. The first is designed to require urban renewal authorities to complete uniform financial reports. Fortunately, many urban renewal authorities already have internal standardized systems of reporting and many others have expressed intent to do so. The second piece of legislation is related to the state’s current statutory mandate to fund pupils at an equal level and the corresponding “backfill” of school budgets in accordance with a statutory funding formula. .

A March 2010 article by Raymond Johnson, a graduate student at CU-Boulder studying mathematics, describes the Colorado school finance formula established by the 1994 School Finance Act. The formula determined a base funding amount (per pupil) and funding factors (extra money for cost of living, personnel costs, district size, at-risk students and online students) that together define ‘Total Program’ funding. “In addition to Total Program funding, some schools get state ‘categorical’ funding, which provides extra money for six categories: small attendance centers, English language proficiency, gifted and talented, special education, transportation, and vocational education.” 

So what does this have to do with urban renewal?  Article X, Section 2 of the Colorado Constitution requires the State to establish and maintain a thorough and uniform free public school system throughout the state. The School Finance Act establishes a per-pupil funding obligation for each school district based on the number of district students on October 1 of each year. Local property taxes are counted first and the state’s share makes up the difference. Historically, local property taxes made up the majority of funding. However, since property taxes have decreased and will continue to do so largely because of the impact of the constitutional Gallagher Amendment, the state’s share to “fill” needed in the amount mandated for equal pupil funding has steadily increased. If local property taxes contribute more revenue, the state share falls, and, conversely, if local property taxes fall, the state share rises.

When an urban renewal area is established within a community, a portion of future revenues may be used to pay for improvements that provide a public benefit (i.e., parks, roads, parking structures, life safety facilities, and utilities). While not negatively impacting property values (in fact, in the vast majority of cases positively increasing property values), the capture of future property tax revenues within an urban renewal area has been cited as a contributing factor to the level of state back-fill required in some school districts despite the fact that without the commitment of public funds, the increase in tax revenue would not exist. The second piece of legislation would eliminate the state’s back-fill of school districts without offering them another source of revenue. Although not clear how, it seems the state may force school districts to count increases in TIF funds that are not received by the school district as part of the local share and reduce the state share by the same amount. While not citing urban renewal in the bill, the net effect would be to pit school districts against urban renewal authorities and any other entity they deem to be a threat to future budgets.

Anne Ricker is a principal at Ricker Cunningham, a real estate advisory firm that works with municipalities, governments, advocacy organizations and investors to enhance communities through economically sound projects. Paul Benedetti, Esq., and Mark Radtke, Colorado Municipal League, also contributed to this article.