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.