City Council Study Session with LIFT Board On Urban Renewal – 26 April 2016

City Council Study Session – Joint Meeting with So Suburban Board and second Joint Meeting with LIFT (Littleton’s Urban Renewal Board)

26 April 2016


Joint Meeting with South Suburban Board

I am not going to cover this portion of the meeting. My guess is Don Bruns, who knows this field as well as anyone, will provide a report. I will post it on the Blog when and if it becomes available.

Joint Meeting with LIFT

Corey Hoffman, LIFT and the City’s counsel on urban renewal, said his goal was to provide information on what urban renewal is. He said he has seen more passion on both sides of the issue in the past 18 months in Littleton than he has ever seen anywhere. Urban renewal is not one size fits all. From the beginning, it is a council policy decision and the plans are implemented by LIFT.

He said terminology is important and defined increment as revenue, that by law, belongs to the authority and is not revenue of the other taxing entities. (Remember this – it is important.)

A project is an entire plan area – it is the undertakings and activities in a project area. There can be separate undertakings in a plan area. (This is also important to remember – Mr. Hoffman defined projects very differently when the plans were being approved.)

Gap financing is one way to use tax increment financing (TIF) but it is not the only way. There is a misconception that urban renewal is there to line the developer’s pockets.

He clarified the plan areas and the increments in use in each area.

Columbine Square                Approved 2/2015    Sales and Property TIF approved

North Broadway                    Approved 12/2014  Sales and Property TIF approved

Littleton Blvd                         Approved 12/2014  Sales and Property TIF approved

Santa Fe Area                        Approved 12/2014  Property tax TIF approved but only in Area 1 (Ensor Property) (This is not an accurate statement. Checking with the County Assessor the increment is being collected and diverted from the entire Santa Fe Urban Renewal Area. The plan was written to only TIF the one area but the law does not allow for the calling out of one area. The law views the plan as the project area and the TIF is for the plan.)  

Resolution 2014-88 – This is a resolution passed by city council (prior to Doug Clark’s term on council) that stated the council would not approve any urban renewal development project without the full approval and support of all the taxing entities. The resolution is not part of the urban renewal plans but council said they would get the buy-in from the taxing entities before moving forward with development projects so this is an important part of urban renewal. (This is another very important point that will be explored by Clark later.)

And then there are also the cooperation agreements with the taxing entities. Clark asked Hoffman to read the resolution statement – “The city council hereby directs city staff to include all impacted taxing entities in the financial discussions for any development project, which may utilize tax increment financing through the city’s urban renewal authority, to ensure that no urban renewal project moves forward without the full support and approval of all impacted taxing entities.”

Clark said, no urban renewal projects move forward – and you just described an urban renewal project the same as a plan…

Hoffman – and I think this was done …it is not a defined term in this resolution, in my opinion; it doesn’t use the term “project” as defined in the statute. This predates the adoption of the urban renewal plans.

Clark said this came up at the approval of the first urban renewal plan and Jerry Valdes and Peggy asked about the difference between a project and a plan and you (Hoffman)described this hierarchy of a plan is above a project. Hoffman said the plan is for a project– that’s exactly what I said. Clark said Hoffman now had a definition that is different than the one he used before and the city attorney insisted that there were no projects and we still don’t have the approval of Arapahoe County and they are certainly an impacted taxing entity. (Clark was disputing Hoffman’s characterization of Res. 88 pertaining to “urban renewal development projects” and not to urban renewal projects. The reason this was important to Clark, in my opinion, is because, at the time Res. 88 was approved, citizens challenged the council telling council that they did not have the full support and approval of Arapahoe County therefore they could not approve the UR plans. We were told that Res. 88 was for projects and not plans so council was in compliance with their Resolution. City manager, Michael Penny, indicated he would be negotiating TIF with each and every project that came up in an UR area. Now we are told that the plans are projects. No wonder lawyers get a bad name!)

Hoffman said there are cooperation agreements with Littleton Public Schools (LPS), South Suburban (SS) and Urban Drainage and still no agreement with Arapahoe County. (The Intergovernmental Agreements (IGAs) with LPS and SS are for projects and not plans so I did not see that they were relevant. But, since the rules of the game have changed and a plan is now a project…no wonder this is so difficult to understand. Words have meanings but the meaning change depending on what they need to mean today as opposed to a year and a half ago! Urban Drainage never did agree to the IGA. Instead they sent a letter consenting to the inclusion of the ag land only. There was no IGA established with the city either.)

Clark said he thought there was just an agreement on the inclusion of the ag land. So we only have the consent for LPS and SS.

Hoffman said he understood there was an ordinance to abolish all four plans but you have the ability to look at each plan individually and can constrain them more if you want. You have more options than just to abolish the plans.

Debbie Brinkman asked Hoffman to identify something that urban renewal could be used for. Hoffman said capital projects that would allow a developer to then use their money for their project (in other words the taxpayers pay for the infrastructure so the developer does not have to), it could be used for landscaping, traffic signals, money to incentivize developers to use a higher standard for building, underground utilities, ADA compliance, façade improvements, assistance to small businesses, help a home based business transition to Main Street. (Public tax dollars taken from the schools, parks, county, city and urban drainage to pay for these types of improvements)

Brinkman asked if it could be used for affordable housing and Hoffman said it would be pushing the envelope but you could assist with the infrastructure preparation and those types of things.

Phil Cernanec said he has heard from the citizens that traffic concerns, the aging community areas and street maintenance are the top priorities. Areas of top concern are Columbine Square, Littleton Blvd, and North Broadway. He thought using TIF would free up other money to be used elsewhere in the city. (True, but why should the schools and parks give up their revenues to pay for capital projects that Littleton taxpayers pay to have done with the payment of our property taxes?)

Hoffman went on the explain that there would be no use of eminent domain and the plans said any use of eminent domain, friendly or unfriendly, would be decided by council. Many taxing entities think that development will occur and urban renewal is used to take the better properties and use tax revenue to develop them and this has service impacts on the other taxing entities. In Littleton, you have a separate UR board that lacks accountability.

Brinkman asked about what looks different about UR today than years ago. Hoffman said UR is not subject to TABOR. LIFT has the authority to issue bonds without a vote of the citizens. HB-1348 (passed in 2015) makes it very difficult to get bonds – this is a new phenomenon. That doesn’t impact the ability to do a capital project or a reimbursement.

Ryan Tool (LIFT board member) said the primary tool of UR is financing and if they can’t issue bonds all they have for revenue are the taxes from TIF.

Hoffman asked what the desires of the policy makers (council) with regard to the use of urban renewal. Do you want to focus on public improvements or incentivize certain types of building standards? There needs to be a back and forth between LIFT and the policy makers.

Bill Hopping asked the LIFT board if they ever got any direction from council on how to use the TIF money. Justin Hay, Chair of LIFT, said no and he thought that the conversation tonight is a great opportunity to learn what council is concern about and what the community is concerned about.

Hopping said if LIFT could put in the public infrastructure for a development that the community would desire at Columbine Square. That would make development easier. (Cheaper for the developer if TIF is used to pay for expenses he would otherwise be responsible for providing) If we removed the infrastructure costs then we could impose more stringent design guidelines. (You don’t have to pay for their infrastructure to impost more stringent guidelines)

Hoffman said there is no requirement that there has to be a “gap” in the financing of a project. (Gap financing has been discussed at length at LIFT meetings – the idea is that a developer wants to develop but just can’t make the numbers work. Perhaps the property is contaminated and the clean up is so costly that no one will develop without public assistance. The extra money is takes to make the project work is referred to as the “gap financing”.   The example of a contaminated piece of property is an example of true blight and a prime target for urban renewal.)

Bruce Beckman asked Hoffman how the tax increment is supposed to be handled.

Hoffman said the base is set and the money above the base is increment that goes to the “special fund” for the specific undertakings. The increment has to be approved by city council as to how to allocate the sales tax increment. The property tax increment comes from the County and goes to the special fund. We are temporarily giving back the increment to the taxing entities. (Going back to the beginning of the meeting when Hoffman said that increment is money that belongs to the authority and not the taxing entity. He has just changed his position on the sales tax increment. For whatever reason he is now saying that the sales tax increment has to be approved by the city council as to how to allocate. The decision was already made when the plans were approved for the use of sales tax increment for 25 years. Pretty cool to have an attorney with two different opinions on increment depending who he is representing at that moment in time.)

Valdes said council was told that the taxing entities would not be affected and then we were told that the money was going to be returned. He asked Hoffman if his opinions were the opinions of the majority or the minority of the state.

Hoffman said it was a difficult issue. What is increment? It is revenue that goes to the urban renewal authority – it was never LPS’s money in the first place. There’s always an opportunity to shareback the increment.

Valdes said when the plans were approved by council the increment started. King Soopers was not operating at that time then they opened in 2015. Does that mean the base was low and whatever is coming in over the low base goes to LIFT?

Hoffman said the sales tax increment doesn’t kick in until after the sales tax incentive agreement is completed. (Really? I am not certain where this opinion came from – the sales tax agreement with King Soopers isn’t worth the paper it is written on because it is a violation of TABOR. TABOR says that any multi-year financial obligation has to be approved by the taxpayers or the money has to be place in an irrevocable account for the future payments. Council did neither. They have to appropriate the sales tax shareback each year from the general fund. The law makes no provisions for the increment other than the fact that it shall be deposited into the special fund account of LIFT upon the collection and allocation.)

Clark said Hoffman had just started the meeting saying that increment belongs to the urban renewal authority and not the taxing entity. The sales tax would be the same as the property tax and they both should be deposited into the special fund for LIFT for 3 of the 4 plans producing increment. King Soopers has a shareback agreement with the city but it is also in the No. Broadway UR area and the sales tax increment should be going to LIFT. Clark asked if there were written agreements between LPS, SS, and Urban Drainage for the return of the money?

Hoffman said LIFT wrote them letters. Clark said, so there are no agreements – how do you shareback without an agreement? Did their boards approve the letter of consent? Hoffman said he did not know. (I have asked a school board member and two SS board members and all three said there was no approval of the letters of consent.)

Beckman asked for the LIFT board members to introduce themselves.

Hay said he was very glad to be on the council’s agenda. LIFT has been very active and is now better poised. There have been numerous interactions with the community and they have set up a really good framework for opportunities.

Gary Thompson is a PE (Civil Engineer). He has been on the LIFT board for years and he has been dismayed at the decline in some of the areas in the community.

Craig O’Rourke has been a resident of Littleton for 8 years.

Kyle Schlachter has been a resident for 9 years, is in the wine industry and lives adjacent to an UR area.

Ryan Tool has been in Littleton since 1996, is a real estate consultant and has been involved in the development side of urban renewal. He is optimistic that UR is the right way to go but they haven’t had a meaningful undertaking. They need to do a better job educating the real estate communities of the UR opportunities.

Beckman asked Hoffman how 300 impacts the four existing UR areas? Hoffman said if the plans are not substantially modified 300 does not apply. (A substantial modification of an UR plan is a modification that impacts the land area, land use, or the timing of TIF. If a substantial modification is made it has to go through the public process. A modification does not.)

Clark said when the Santa Fe plan was modified after the approval of 300 it required ratification by the voters per 300. Yet the council did not go to the voters for ratification. Hoffman said it wasn’t a substantial modification to which Clark told him 300 does not use the term “substantial modification” but any modification. (Our choice of words in 300 was very deliberate – we understood the difference between a modification and a substantial modification. The law also allows the council to determine what modification is substantial and what modification is not. We did not want to rely on council to make that determination so we said any modification. Little good it does though when council decides to ignore the Charter and the voters.)

Clark told LIFT that the increment belonged to them. If a property owner protests his assessment and money has to be refunded back to the property owner what will LIFT do if they have returned all the increment? Hay said their first obligation is to have a project and get some revenue – they need to pay the city back the loan that was made to them.

Tool said only 81% of the increment was being returned and told Clark his point was an important one.

Peggy Cole said it has been 1.5 years and if it is so attractive why aren’t there any projects in the pipeline?

Hay said there’s a perception because of 300 as well as miscommunication as to what urban renewal looks like in Littleton. It has been miscommunicated to developers and real estate community along the front-range. Our board wants to put forth a marketing effort. There is a risk factor for developers. We need to get past these hurdles. He has heard on the street it is not the right time in Littleton.

Cole said she would be asking for an audit of LIFT so everyone can be clear about what has happened with LIFT’s money. (At the last LIFT board meeting it was reported that there had been unauthorized withdrawals of money from the LIFT account at Wells Fargo. Wells Fargo has accepted responsibility and is making them whole. At the same meeting LIFT voted to waive their annual audit.)

Valdes asked if the Open Meetings Law applied to LIFT. He was told yes. Valdes cautioned them about using email to make decisions. Hoffman defended their practice – they needed to make a $900 decision and he advised the executive director to email individual members to get their approval; there was not an electronic meeting. The decision was ratified in their next meeting.

Beckman asked what happened to the blight studies if the plans were repealed? Did they exist on their own? Hoffman said if the plans are repealed the blight findings would also be repealed.

Hopping asked what tools can be used if UR goes away? How do we replace a declining area? Hoffman told him that was a question for his city attorney. Under the case law and statutory law of urban renewal, what urban renewal provides is a statutory mechanism that reconciles with the constitution and allows a type of public body to provide aid to private entities. There is a constitutional provision, Article 11 of the Colorado Constitution that limits a municipality’s ability, under certain circumstances, to provide aid to private corporations; private entities, UR is a way to, under Colorado law that it is authorized. There’s a case called Byrne vs. DURA I think that specifically the Supreme Court addresses how to reconcile the Colorado Constitution and UR. Cities and towns don’t have the same liberty. That’s why, for example, your city attorney will be very concerned about indemnity provisions because an indemnity provision is essentially giving a …. Is a violation of Article 11 Section 2 for the same reason. So there may be ways and there are ways, for example, general fund sales tax shareback subject to annual appropriation. There are still tools in the toolbox that are available on a multi year basis.

Hopping said that UR is they aren’t as powerful as powerful as UR – Hoffman said it is a revenue stream that is available to an URA and not available to the municipality.

Hopping posed a question to Tool – in the big picture of development how rare is urban renewal – how often is it used? We have been criticized because it hasn’t been used.

Tool said it takes awhile unless it is developed for a specific project and a narrowly defined area. It takes awhile for developers to understand. It is not uncommon for a URA to go for years without specific undertakings. One of our tasks is to do a better job of reaching out because we are an evolution of the Riverfront Authority and has been dormant for years. Littleton is perceived as being built out.

Brinkman said none of us got into this knowing what urban renewal was. We have been on a three-year journey learning about urban renewal. The community has been through the same journey with us. This needs to be given thoughtful consideration. She apologized to LIFT for a motion and a vote about the abolishment of LIFT and UR and that was not fair. She thanked the members for fighting back. (I couldn’t help but think of the time that Brinkman made a motion to abolish BIAAC shortly after she was elected for her first term. The motion was passed and BIAAC was gone – the members had no warning. The motion stood in spite of the protests of some on BIAAC. It was OK then for her to abolish a long-standing committee without consulting them. Times change!)

Cernanec repeated his refrain about traffic, aging community areas, and street maintenance. We need solutions and he did not want to take anything off the table that might solve those issues. We jumped too quickly at a solution. (A very interesting statement from a man running for county commissioner just a month ago who stated that the timing just wasn’t right for urban renewal in Littleton. What’s changed? He is no longer a candidate – didn’t make the cut to be on the ballot.)

Schlachter said let’s figure out a way we can work this and save it to use when appropriate.

Beckman reminded everyone that there would be a breakfast meeting with planning board on May 5th to discuss Complan and priorities.

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