Loveland's Independent News Source
Johnstown: Better
Location For Loveland
Jobs Than Centerra?
Loveland - May 17, 2012

Local politicians want to take credit for bringing jobs to Loveland.  In recent years, millions of dollars have been spent in
efforts to attract businesses that employ people in certain industries to Loveland.  Often the competition is just across the
street in the area of north Johnstown called 25/34 (southeast corner of I/25 and Highway 34 interchange).

While the annexation wars between Loveland and Johnstown appear to be at a cease-fire, economic development wars are as
hot as ever as private developers from both sides of the firing line continue their fierce competition while sometimes calling
upon their respective city governments to help.  McWhinney in Loveland’s Centerra and Chrisland in Johnstown’s 25/34
development struggle against one another to attract high-tech light manufacturing and white collar employers into their
respective developments across the street from one another on Highway 34 east of I-25.

In recent years, the City of Loveland has been more aggressive in trying to “win” these competitions.  Before moving into
Centerra, Agrium was given hundreds of thousands of dollars in waived CEF's (Capital Expansion Fees) by Loveland to select
Centerra over a pad next door in Johnstown for their new building.  Earlier this month, Loveland councilors granted sweeping
changes in Centerra’s Millennium plan approval process under a similar premise to “fast-track” a company moving from west
Loveland that could have landed in north Johnstown instead of Centerra.  The question is whether such incentives luring these
employers away from 25/34 and into Centerra makes financial sense for the City of Loveland.

False Premise: It Is Always Better to Have the Jobs in Loveland

The problem with these competitions is Loveland may indeed be better off financially if these employers locate in northern
Johnstown instead of McWhinney's Centerra.  The idea appears counter-intuitive at first but Loveland may not be able to
afford too many large developments or employers at Centerra that fail to pay for the governmental services they require.  This
is due to the fact Larimer County and other general governmental service providers (like Loveland Fire Authority) directly
benefit from development in north Johnstown while similar developments in Centerra stretch the already limited resources of
service districts by contributing almost nothing financially.

Many local services rely on what are called "service districts" that impose a Mill Levy on property owners commensurate with
the value of their property.  If the owner of a vacant lot develops a $10 million office building on that lot than property taxes
(thus service district Mill Levies) will increase commensurate with the increased value and higher density use of the property.   
Higher density means more people and structures thus more governmental service is necessary to serve the area which is
supposed to be off-set by the increased property tax collections.

Common to both Centerra and north Johnstown are Mill Levies that support services both areas share across the highly
political and competitive city boundaries.  Thompson R2-J School District (education k-12), Thompson Valley Health Service
District (Ambulance), the Northern Colorado Conservation District (water), Larimer County, and even the county's Pest
Control District are all local government entities that rely heavily on property taxes for funding.

North Johnstown is even included in Loveland's Fire Authority which depends, in part, on funding from a Mill Levy collected
only outside city limits therefore not collected in Loveland.  Given the recent failure of the mail-in ballot to increase that Mill
Levy, Loveland's Fire Authority will only see a significant increase in new revenue when major development occurs in
Johnstown and not Centerra.

Loveland's Fire Authority has been unable to keep pace with the developments in Centerra thus relies on a fire station in
Windsor to respond to any large structure fire in the area of the Embassy Suites Hotel.  The City of Loveland recently released
a request for proposals to enlarge Fire Station #6 in anticipation of McWhinney's plan to build a multi-story office building east
of The Promenade Shops at Centerra.  Unfortunately, that new building will not generate the funds to even cover the increased
staffing of Fire Station #6 not to mention the station upgrades and equipment upgrades.

By The Numbers

An important difference between the two is Centerra has an Urban Renewal Authority (URA) that allows approximately 98%
of all the property taxes collected each year within those areas of Centerra to be diverted to McWhinney's Metro Districts
instead of going to support the services listed above.  This is because the City of Loveland declared hundreds of acres of open
farmland blight (once purchased by McWhinney) allowing for TIF (Tax Increment Financing) of public bonds by diverting
property taxes.  

In addition, Loveland approved a Flex URA allowing McWhinney to annually swap that designation on various parcels.
previous story on Flex URA September 2008.

As an example, a $10 million office building constructed in Loveland's Centerra would generate less than $5,000 of property
taxes to be divided by all the services listed above according to the Mill Levy amounts.  If the same building is constructed in
north Johnstown's 25/34 development (across the street) than over $340,000 in property taxes would flow towards all the
services listed above each year.  Thompson Valley EMS could receive $5,000 annually in property taxes should the building be
constructed in north Johnstown but only $100 per year if the same building is constructed within Centerra's URA.  Regardless
of where the building is located on either side of the Loveland, Johnstown city boundaries, Thompson Valley EMS provides
the same level of service to both locations so their cost is the same.

Depending on which side of the highway a company locates could make an important political difference for Loveland's Mayor
and City Council who want to claim credit for bringing new jobs to Loveland while justifying their economic development
budget; but no difference to the average employee who commutes the same distance to either location.  Since both north
Johnstown and east Centerra are an equal distance from residential areas of Loveland the "jobs" available for Loveland
residents is the same.  Much of the "competition" between the two cities is driven by political agendas and not by any
economic necessity.  On the contrary, Loveland's City Council is arguably putting into jeopardy the health of local services by
recruiting even more companies to locate in the URA areas of Centerrra.

The more companies that locate into Centerra's URA protected areas the greater financial strain on local governments and
emergency services that will not be receiving the revenue necessary to offset the additional cost.  The only short-term solution
for any service is to lower the level of service to all residents to accommodate growth within the service area or raise fees or
Mill Levies.

Last Refuge - Residual Benefit

Loveland's Director of Economic Development, Betsey Hale, argues that while the city may not have any tax on light
manufacturing, these companies do generate revenue indirectly over a period of time by patronizing local businesses.  In a
report to Loveland's City Council last march, Hale stated, "When considering an incentive agreement, an economic impact
model is used to determine an indirect impact from employees."  What Hale failed to report to council is the CSU Professor
who assists in the report is paid, in part, by McWhinney and fails to mention a company locating across the street from
Centerra will have the same general economic impact on local retail businesses as one locating in Centerra.

Loveland's Economic Development program apparently does not discriminate between areas of the city (those that generate
property taxes and those don't) for local services.  While Loveland's former city manager focused his efforts on attracting
retail for the obvious benefit of increasing sales taxes, the current city leadership appears agnostic to the relative economic or
revenue impacts of the companies they are offering incentives to locate in Centerra instead of north Johnstown.
Betsey Hale
Director of Economic
City of Loveland
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