Loveland -- May 12, 2010
As Colorado regulatory agencies have taken aim at ethics in the real estate industry following a national
housing market meltdown, the Colorado Legislature passed a slew of new laws last year aimed at
predatory lending and dishonest appraisals. However, one recent ethics reform in real estate
development is getting very little public attention in the Colorado town that was its inspiration -
Loveland.
According to the sponsors, Colorado House Bill (HB)1107 was intended to stop Loveland’s abuses of
the Urban Renewal Authority state statute. Loveland's role as the poster child of Urban Renewal
statute abuse has been curiously absent from the pages of the Loveland's daily newspaper the
Loveland Reporter-Herald. Thus, some in Loveland city hall appear to be unaware of either the intent
or consequences of HB 1107.
Councilman Daryle Klassen traded emails (see email text lower right) with staff and one Larimer
County official last week in a seemingly naive attempt to understand how the new law will impact
Loveland. Oddly enough, the Loveland staff response indicates plans by some on council to declare the
97 acres of agricultural land purchased by Loveland along the 402 near I-25 as “Urban Blight” despite
the fact the new law prohibits such continued abuse of the Urban Renewal statute.
County Assessor Points Finger At Loveland
According to Larimer County Assessor Steve Miller, Loveland was both the “inspiration” and “target”
of State House Bill 1107 in an email response to Loveland Councilman Daryle Klassen dated April 15,
2010. Klassen had sent an inquiry to Miller trying to find out whether or not the bill would affect
Loveland. Miller responded;
“Will it affect Loveland? Well, my friend, since Loveland was the inspiration for and the target of
the bill, I imagine it will.”
Loveland became the epicenter of urban renewal abuse in 2004 when it declared hundreds of acres of
agricultural land near the I-25 as “urban blight.” Few people in local or state government believed
Loveland’s legal declaration that open farmland owned by McWhinney Enterprises near the I-25 was “a
menace to the community” as the Urban Renewal law requires before special tax benefits for Urban
Renewal Districts can be exploited. Loveland’s former City Council, some of whose campaigns for
public office were initially financed by McWhinney, made the phony declarations in order to exempt
their campaign contributor, McWhinney's Centerra development, from paying future property taxes for
the next two decades on land in Centerra placed into the foux Urban Renewal District.
While most residents of Loveland are familiar with their city’s agreement to divert sales tax revenues
into the Centerra project, most are not aware that Loveland’s false blight declarations for McWhinney’s
Centerra projects takes some 98.8% of the property taxes otherwise meant for Larimer County,
Thompson School District and other local entities off the tax rolls. Unlike Centerra, Johnstown’s 2534
development on the southeast corner of the I-25/US 34 interchange pays normal property taxes to the
county and schools. See previous LovelandPolitics story on the amount of the property tax rebates
McWhinney’s Centerra receives each year.
HB 1107 - Background (Introduced by State Representative Randy Fischer of Ft. Collins)
Signed by the Colorado Governor on April 14, the new ethics in Urban Renewal law (HB 1107) was the
result of an unusual coalition of local governments, farmers, environmentalists, fiscal policy experts
along with both Republicans and Democrats from the Colorado State Legislature who don’t often agree
on many issues. Read the Farm Bureau opinion editorial on HB1107 printed in the Denver Post.
Loveland stood mostly alone in its original opposition to HB 1107 as Larimer County officials along
with cities like Ft. Collins, Longmont and Sterling backed the reform measure to stop future abuses of
the Urban Renewal program by Loveland and other cities copying Loveland after the phony Centerra
blight designations of 2004 were never challenged in court. Last year, Councilman Hugh McKean
attempted to preserve Loveland's opposition to HB 1107 during a discussion regarding the city's
legislative positions. Councilman Kent Solt articulated his reasons why Loveland not continue to fight
such measures and prevailed in removing opposition to Urban Renewal reform from the city's
Legislative positions.
Colorado's Urban Renewal laws were passed over 25 years ago to provide a means for cities to
improve blighted areas that become a drain on local services. The theory behind Urban Renewal
districts and the funding mechanism called a TIF (Tax Increment Financing) is that older blighted
properties are havens for illegal activities like prostitution and drug use thus stressing local resources
needed to police these dilapidated urban properties.
As intended, a private developer willing to invest money into an undesirable and blighted area to
improve a specific property could receive a public subsidy in the future to assist in financing the
improvements. This is done by returning future tax revenues generated by the improvement to the
project through the TIF tool under the theory that the property is no longer a “menace to the
community” and thus the development has created other financial benefits for the city above and
beyond the normal increase in property taxes resulting from the higher land values.
HB 1107 will now provide counties an ability to contest declarations of farm land as "urban blight"
unless the land meets other general requirements. By removing the cities from ultimate authority to
declare what land qualifies as urban blight, one backer of the legislation explained to LovelandPolitics,
"HB1107 provides adult supervision over the corruption of local officials like Loveland's former
council where the developer McWhinney was really calling the shots to the detriment of the state and
local taxpayers."
TIF Explained
Tax Increment Financing (TIF) is meant to use the increment (post versus pre-renovation value) to help
fund the project. In the case of McWhinney’s Centerra, agricultural land has such a low base value that
the tax rebate becomes not an “increment” on only what they improved of an existing property but
instead the increased value caused by the city’s rezoning of the property and everything built upon the
land accounting for nearly all of its value.
Open farmland, unlike real urban blight, is indeed easier to develop as no existing infrastructure needs
to be removed or rebuilt.
According to an article by the Colorado Environmental Coalition,
“…too often under the URA (Urban Renewal) statute TIF financing has been given to developers
building on pristine agricultural lands, which do not cost more than the average site to develop. In
fact, they often cost less. This has created a system of taxpayer funded subsidies to developers on
sites that should not need assistance. Developers have come to expect the subsidy, putting
municipalities in competition with one another and making TIF a necessary inducement to attract
developers to one community over another. Approximately half of the subsidy is diverted from
school districts and the state government is forced to backfill this money. This backfill cost the
state over $50 million in 2007.”
The rub for Loveland will be the inability of the city to phase the 97 acres acquired near Johnstown into
the Centerra Urban Renewal Authority or to create a new authority without input from the county.
Previously, the city could unilaterally determine what constituted urban blight thus opening the door to
dishonest practices such as pretending that open farmland is urban blight. The new statute introduces
clearly defined checks and balances into the process.
As Colorado regulatory agencies have taken aim at ethics in the real estate industry following a national
housing market meltdown, the Colorado Legislature passed a slew of new laws last year aimed at
predatory lending and dishonest appraisals. However, one recent ethics reform in real estate
development is getting very little public attention in the Colorado town that was its inspiration -
Loveland.
According to the sponsors, Colorado House Bill (HB)1107 was intended to stop Loveland’s abuses of
the Urban Renewal Authority state statute. Loveland's role as the poster child of Urban Renewal
statute abuse has been curiously absent from the pages of the Loveland's daily newspaper the
Loveland Reporter-Herald. Thus, some in Loveland city hall appear to be unaware of either the intent
or consequences of HB 1107.
Councilman Daryle Klassen traded emails (see email text lower right) with staff and one Larimer
County official last week in a seemingly naive attempt to understand how the new law will impact
Loveland. Oddly enough, the Loveland staff response indicates plans by some on council to declare the
97 acres of agricultural land purchased by Loveland along the 402 near I-25 as “Urban Blight” despite
the fact the new law prohibits such continued abuse of the Urban Renewal statute.
County Assessor Points Finger At Loveland
According to Larimer County Assessor Steve Miller, Loveland was both the “inspiration” and “target”
of State House Bill 1107 in an email response to Loveland Councilman Daryle Klassen dated April 15,
2010. Klassen had sent an inquiry to Miller trying to find out whether or not the bill would affect
Loveland. Miller responded;
“Will it affect Loveland? Well, my friend, since Loveland was the inspiration for and the target of
the bill, I imagine it will.”
Loveland became the epicenter of urban renewal abuse in 2004 when it declared hundreds of acres of
agricultural land near the I-25 as “urban blight.” Few people in local or state government believed
Loveland’s legal declaration that open farmland owned by McWhinney Enterprises near the I-25 was “a
menace to the community” as the Urban Renewal law requires before special tax benefits for Urban
Renewal Districts can be exploited. Loveland’s former City Council, some of whose campaigns for
public office were initially financed by McWhinney, made the phony declarations in order to exempt
their campaign contributor, McWhinney's Centerra development, from paying future property taxes for
the next two decades on land in Centerra placed into the foux Urban Renewal District.
While most residents of Loveland are familiar with their city’s agreement to divert sales tax revenues
into the Centerra project, most are not aware that Loveland’s false blight declarations for McWhinney’s
Centerra projects takes some 98.8% of the property taxes otherwise meant for Larimer County,
Thompson School District and other local entities off the tax rolls. Unlike Centerra, Johnstown’s 2534
development on the southeast corner of the I-25/US 34 interchange pays normal property taxes to the
county and schools. See previous LovelandPolitics story on the amount of the property tax rebates
McWhinney’s Centerra receives each year.
HB 1107 - Background (Introduced by State Representative Randy Fischer of Ft. Collins)
Signed by the Colorado Governor on April 14, the new ethics in Urban Renewal law (HB 1107) was the
result of an unusual coalition of local governments, farmers, environmentalists, fiscal policy experts
along with both Republicans and Democrats from the Colorado State Legislature who don’t often agree
on many issues. Read the Farm Bureau opinion editorial on HB1107 printed in the Denver Post.
Loveland stood mostly alone in its original opposition to HB 1107 as Larimer County officials along
with cities like Ft. Collins, Longmont and Sterling backed the reform measure to stop future abuses of
the Urban Renewal program by Loveland and other cities copying Loveland after the phony Centerra
blight designations of 2004 were never challenged in court. Last year, Councilman Hugh McKean
attempted to preserve Loveland's opposition to HB 1107 during a discussion regarding the city's
legislative positions. Councilman Kent Solt articulated his reasons why Loveland not continue to fight
such measures and prevailed in removing opposition to Urban Renewal reform from the city's
Legislative positions.
Colorado's Urban Renewal laws were passed over 25 years ago to provide a means for cities to
improve blighted areas that become a drain on local services. The theory behind Urban Renewal
districts and the funding mechanism called a TIF (Tax Increment Financing) is that older blighted
properties are havens for illegal activities like prostitution and drug use thus stressing local resources
needed to police these dilapidated urban properties.
As intended, a private developer willing to invest money into an undesirable and blighted area to
improve a specific property could receive a public subsidy in the future to assist in financing the
improvements. This is done by returning future tax revenues generated by the improvement to the
project through the TIF tool under the theory that the property is no longer a “menace to the
community” and thus the development has created other financial benefits for the city above and
beyond the normal increase in property taxes resulting from the higher land values.
HB 1107 will now provide counties an ability to contest declarations of farm land as "urban blight"
unless the land meets other general requirements. By removing the cities from ultimate authority to
declare what land qualifies as urban blight, one backer of the legislation explained to LovelandPolitics,
"HB1107 provides adult supervision over the corruption of local officials like Loveland's former
council where the developer McWhinney was really calling the shots to the detriment of the state and
local taxpayers."
TIF Explained
Tax Increment Financing (TIF) is meant to use the increment (post versus pre-renovation value) to help
fund the project. In the case of McWhinney’s Centerra, agricultural land has such a low base value that
the tax rebate becomes not an “increment” on only what they improved of an existing property but
instead the increased value caused by the city’s rezoning of the property and everything built upon the
land accounting for nearly all of its value.
Open farmland, unlike real urban blight, is indeed easier to develop as no existing infrastructure needs
to be removed or rebuilt.
According to an article by the Colorado Environmental Coalition,
“…too often under the URA (Urban Renewal) statute TIF financing has been given to developers
building on pristine agricultural lands, which do not cost more than the average site to develop. In
fact, they often cost less. This has created a system of taxpayer funded subsidies to developers on
sites that should not need assistance. Developers have come to expect the subsidy, putting
municipalities in competition with one another and making TIF a necessary inducement to attract
developers to one community over another. Approximately half of the subsidy is diverted from
school districts and the state government is forced to backfill this money. This backfill cost the
state over $50 million in 2007.”
The rub for Loveland will be the inability of the city to phase the 97 acres acquired near Johnstown into
the Centerra Urban Renewal Authority or to create a new authority without input from the county.
Previously, the city could unilaterally determine what constituted urban blight thus opening the door to
dishonest practices such as pretending that open farmland is urban blight. The new statute introduces
clearly defined checks and balances into the process.
| From: Daryle Klassen [mailto:coloklas@msn.com] Sent: Thursday, April 15, 2010 8:42 AM To: City Council; Don Williams Subject: FW: Follow-up from HB1107 / URA Discussion Hello All! For your information, response from Larimer County Assessor Steve Miller. Regards, Daryle Klassen Date: Thu, 15 Apr 2010 08:48:39 -0600 From: SMiller@larimer.org To: coloklas@msn.com Subject: Re: FW: Follow-up from HB1107 / URA Discussion Good morning, Daryle It may take a bit of time for us (assessors) to figure out the nuances of the bill. Will it affect Loveland? Well, my friend, since Loveland was the inspiration for and the target of the bill, I imagine it will. I'll be in touch. Best regards, Steve > >>> Daryle Klassen 04/14/10 3:18 PM >>> > > Hello Steve! Our Loveland city council held some discussion on HB1107 last night and the potential impacts on Loveland. Would you please comment and add any additional insight you may have back to me, and all of parties listed below, if possible. Also, if additional clearing is needed, please give Rod Wensing (one of Loveland's Assistant City Managers) a call at 962- 2301. Thanks in advance for any help. Regards, Daryle Klassen > > > From: Daryle.Klassen@ci.loveland.co.us > > To: coloklas@msn.com > > CC: TEMPCC@ci.loveland.co.us > > Date: Wed, 14 Apr 2010 15:11:42 -0600 > > Subject: FW: Follow-up from HB1107 / URA Discussion > > > > > > ________________________________________ > > From: Rod Wensing > > Sent: Wednesday, April 14, 2010 12:36 PM > > To: Mayor - Cecil Gutierrez; Ward I - Daryle Klassen; Ward I - Donna Rice; Ward II - Carol Johnson; Ward II - Joan Shaffer; Ward III - Hugh McKean; Ward III - Kent Solt; Ward IV - Cathleen McEwen; Ward IV - Larry Heckel Cc: Don Williams Subject: Follow-up from HB1107 / URA Discussion Greetings all, Below are the information follow-ups requested by Council: Fair Market Value Determination Section 3 of HB1107 says that where agricultural land is included in a proposed urban renewal area under the conditions specified in the Bill, requires the County Assessor to value said ag land at its fair market value for determining the base amount for tax calculations. The Bill also says the manner and methods by which these requirements are to be implemented by County Assessors shall be from the various manuals, appraisal procedures and instructions that is normal and customary for > the Assessor to prepare and publish. Seems to me the Bill was crafted to give a lot of flexibility to the County Assessors as to how they determine the question of “fair market value.” City’s 402 Property Impacts In the Definitions Section of HB1107 “agricultural land” means any one parcel of land or any two or more contiguous parcels of land that, regardless of the uses for which the land has been zoned, has been classified by the County Assessor as ag land for purposes of the levying and collection of property taxes. Based on this definition, I it appears that the current DR zoning on the 402 property may not meet any of the exemptions called out in the Bill when it comes to any future URA creation efforts. However, if a URA creation is contemplated in the future a formal legal opinion will be needed. I stand ready to answer any questions. Thx! Rod |
| New State Law Aimed At Ending Loveland Abuse of Urban Renewal Statutes |
| Loveland Councilman Daryle Klassen |