Counties in Colorado may soon have a new way to take advantage of tax increment financing (“TIF”). Currently, there are only two ways to leverage TIF in Colorado: establishment of an urban renewal authority (“URA”) or establishment of a downtown development authority (“DDA”). Both URAs and DDAs are governmental entities that can only be created by municipalities, and they are authorized to implement primarily municipal tools. House Bill 24-1172, sponsored by Reps. Rick Taggart (R) and Shannon Bird (D) and Sens. Barbara Kirkmeyer (R) and Kyle Mullica (D), proposes to bring the power of TIF to counties by creating a process for counties to establish a County Revitalization Authority (“CRA”) that can, among other things, leverage TIF and private financing to address underutilized or deteriorating areas within counties that could benefit from strategic economic investment. On March 11, 2024, the House passed the bill on its third reading.
REVITALIZATION PROCESS AND TIF
If HB 24-1172 becomes law in its current form, a CRA could be created after a petition is filed by 25 registered electors of a county, or a resolution is adopted by the board of county commissioners stating that there is a need for the CRA in the county, followed by a public hearing before the board of county commissioners. The CRA could then implement a county revitalization plan adopted by the board of county commissioners at a public hearing, which could authorize the CRA to collect TIF or exercise other powers such as eminent domain within the area established by the county revitalization plan.
TIF can be a powerful tool for revitalization and redevelopment because it provides a financing mechanism that leverages the anticipated future increase in property value resulting from redevelopment efforts, while embodying the concept that growth can finance itself. The premise behind TIF is that revitalization activities will lead to higher property values and, consequently, higher property taxes. HB 24-1172 would enable CRAs to utilize TIF to finance growth by borrowing against the anticipated rise in property values due to private development. Over a 30-year period following the approval of a county revitalization plan, this tax increment—the difference generated by the increase in property values—could fund county revitalization projects. Taxes derived from the value of the property prior to the adoption of a county revitalization plan, or the “base,” would continue to benefit the original taxing entities that levy a mill levy in the county revitalization plan area, ensuring they receive the revenue they would have received without the adoption of the county revitalization plan. Thus, for 30 years, CRAs would have the unique opportunity to use the additional revenue generated by their efforts to support county revitalization projects, while the taxing entities would still get their expected share.
County revitalization plans and revitalization efforts are intended to target “urban-level development,” which means an area predominated by permanent structures or above-ground or at-grade infrastructure. At the time of the adoption of a county revitalization plan, at least one-half of the area defined in the plan must contain urban-level development. County revitalization plans may not contain any area that is already located within an urban renewal area, but could include areas within incorporated municipalities, with the consent of the governing body of the municipality.
COMPARISON WITH URBAN RENEWAL
Overall, this bill bears many similarities to the existing Urban Renewal Law, C.R.S. § 31-25-101, et seq., which governs URAs. However, there are some key differences. Below is a comparison of some of the key differences and similarities between the Urban Renewal Law and HB 24-1172:
- Purpose. The purpose of a CRA would be to revitalize areas in the county to prevent detrimental impact on community welfare and overall county development. By contrast, the purpose of urban renewal is to prevent and remedy “slum areas” and “blighted areas,” which are terms specially defined in the Urban Renewal Law.
- Opportunity Factors vs. Blight. Before a CRA could undertake a county revitalization project pursuant to a county revitalization plan, the board of county commissioners must make a finding that the county revitalization plan would “actualize” certain “opportunity factors,” such as investment in critical infrastructure, improvement of mobility, development of affordable housing and economic opportunities, expansion of access to healthy food systems and other services, improvement of circulation patterns, remediation of contaminated soils or water, and others. By contrast, before a URA can undertake an urban renewal project, the governing body must make a finding that certain factors of blight exist within a proposed urban renewal area, such as deteriorating structures, defective street layout, unsanitary or unsafe conditions, unusual topography, and environmental contamination, among others.
- Taxing Bodies Must Opt In. A taxing body must petition to join the CRA before tax increment from the taxing body could be shared with the CRA, creating a true opt-in structure for taxing entities. By contrast, a URA must negotiate with taxing bodies for sharing of tax increment under an urban renewal plan, and if such negotiations do not result in an agreement, the URA may initiate binding mediation with the taxing bodies.
- Commission. The CRA would consist of three to eight commissioners, or the board of county commissioners may designate itself as the commission. In either case, if at least one taxing entity elects to join the CRA, one CRA commissioner must be selected by agreement of the special districts that have joined the CRA. By contrast, a URA consists of 13 commissioners, 10 of which are appointed by the mayor and three of which are appointed by the applicable county, special districts and school districts, or the governing body may designate itself as the commission of the URA, with an additional three seats for the appointees by the county, special districts and school districts and, if there is an even number of commissioners, a commissioner appointed by the mayor.
- School Districts. School districts may not opt in to the CRA and share tax increment. By contrast, URAs can collect tax increment from school districts that levy a mill levy within established urban renewal areas if the school district has agreed to sharing incremental revenues.
- Maximum TIF Period. The collection of TIF under a county revitalization plan could be authorized for a maximum of 30 years, whereas collection of TIF under an urban renewal plan can only be authorized for a maximum of 25 years.
- Eminent Domain. As with urban renewal, the bill grants eminent domain authority to CRAs and embeds significant process related to its exercise directly in the statute.
RELATION TO MUNICIPALITIES
One of the concerns raised by municipalities in response to HB 24-1172 is that a county could interfere with a municipality’s future growth plans or create unmitigated impacts on municipal services by using CRAs to develop urban-level development next to the boundaries of the municipality. In order to mitigate this risk, municipalities have been successful in negotiating the following modifications to the bill:
- Before adoption of a county revitalization plan, the county planning commission must review and provide recommendations as to the proposed plan’s interaction with applicable municipal plans.
- Before the board of county commissioners adopts a county revitalization plan, it must make findings that the county revitalization plan considers applicable municipal plans for the development of unincorporated territory to be included in the plan, that the adoption of the plan will not create an undue burden on any municipality that provides services or that owns, controls or maintains any infrastructure of facilities that are impacted by the adoption of the plan, and that the plan does not include any property that is subject to a pending annexation agreement, or for which annexation proceedings have been commenced within the past three years.
- If property subject to a county revitalization plan is subsequently annexed into a municipality, the county revitalization plan is no longer controlling with respect to terms regarding land area, land use, design, building requirements, timing or procedure applicable to the property that are inconsistent with the laws of the annexing municipality.
- At least 30 days prior to a public hearing on a proposed county revitalization plan, the CRA must submit a county revitalization impact report along with the proposed plan to every municipality within one mile of the proposed county revitalization area, which impact report must include:
- An estimate of the impact of the proposed county revitalization project on existing municipal services and infrastructure;
- An estimate of the cost and extent of additional municipal infrastructure and services that are anticipated to be needed to serve the proposed project, and the benefit of the proposed project to existing municipal infrastructure;
- A statement regarding ways in which the CRA or county will finance additional municipal infrastructure required to serve the proposed project; and
- Any other estimated impacts.
- Notice of any public hearing on a proposed county revitalization plan must be provided to every municipality within 3 miles of the CRA.
- The bill specifies that no municipality is required to provide or expand infrastructure or facilities to serve a county revitalization project.
As with any new process created by legislation, a few sections of the bill are unclear as to how they would operate. For example, because the bill allows an even number of commissioners, it also specifies that one commissioner shall be designated to cast the deciding vote. Presumably, however, that commissioner would have already voted in the normal course, so does one commissioner have the right to vote twice? The bill also states that an authority commissioner files a certificate with the division of local government and then “constitutes the county revitalization authority.” It is unlikely that the intent is for a single commissioner to constitute the body corporate and politic constituting the authority. Additionally, the bill states that a county revitalization plan “shall not be affected by the annexation of any property in the county revitalization area,” but also states that upon annexation of property in the county revitalization area, a county revitalization plan is no longer controlling with respect to certain terms, such as those regarding land use and building requirements, that are inconsistent with laws of the annexing municipality.
If passed, HB 24-1172 represents a transformative step to equip counties with TIF through the establishment of CRAs, adding a tool to the toolbox for catalyzing desirable investment and development in challenged unincorporated areas.
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