Loveland - July 12, 2011
On June 16, 2011 the Centerra Metro District board (McWhinney's quasi-government entity that receives diverted property and sales
taxes in Loveland) approved Centerra's 2010 audit.
[Friday July 15, update - the Centerra 2010 Audit was received by LovelandPolitics today and links are now to the right of this story]
Centerra controls various Metro Districts in Loveland that were created to borrow money through public bonds to finance McWhinney
owned real estate in East Loveland usually named "Centerra." Loveland signed a Master Financing Agreement (MFA) with McWhinney
in 2004 that enabled the diversion of more than $600 million in future city sales and property taxes over 25 years to finance the building
of Centerra. The "play now - pay later" approach to development has accumulated for Loveland's quasi-government of Centerra
Metro Districts over $112 million in public bond debt. The repayment of that debt means the county, schools and in this case city don't
get the full benefit of taxes raised by the development since much of it is being diverted into repayment of the public bonds for 25 years.
A main source of tax revenue for McWhinney's Centerra Metro District is the Loveland Urban Renewal Authority also called LURA
(in California called Redevelopment Agencies or RDA's) which borrows heavily from financial models now under attack by the State of
California as the reason for their growing debt, failing schools and inability to balance state and city budgets. California's Governor and
legislature took aim during budget battles at these districts for lack of transparency, illegal fund transfers and general mismanagement of
public tax dollars.
California State Controller, John Chaing, issued the results of a five-week review of 18 RDA's in California from over 400 in the state
earlier this year. According to Chaing, “For a government activity which consumes more than $5.5 billion of public resources
annually, we should be troubled that there are no objective performance measures demonstrating that taxpayers are receiving
optimal return for each invested dollar.”
Loveland's Centerra Metro District is operated entirely from McWhinney's private offices by McWhinney employees with little to no
oversight by the City of Loveland. Year to year Centerra audits are difficult to track as the methods used for naming funds and
accounting for transactions change along with definitions for accounts. What is different in Loveland from California is members of
Loveland's City Council are still complacent and refer to the Centerra funds as "private" money and seem to be unaware of the fact that
the over $100 million of debt McWhinney created by Centerra is not private debt but indeed public debt. Diverting both property and
sales taxes to pay back that debt is hardly a private matter since it starves local entities outside the city of much needed tax revenue.
Late last month California Governor Jerry Brown signed as part of a $23 billion budget-balancing deal two laws that put California's 425
RDA's into limbo. Either the RDA's begin paying property taxes not already committed to bond debt repayments back to the State of
California for schools and local emergency services or face a certain dissolution by the State of California. If successful, the measures
will raise $2.05 billion for the State of California from previously diverted property taxes while closing rogue local taxing authorities that
refuse to cooperate.
Longer Term Consequence of Diverting Taxes
Growth without the public revenues to sustain the public services it requires can have devastating impacts in the long run for any
community as they try to squeeze needed revenue from a diminishing number of remaining taxpayers as the tax exempt areas of the city
grow larger. Northern Colorado is now just beginning to see the impacts of not just the Centerra Metro District LURA diverting
property taxes away from local services but a number of other projects funded under what is called Urban Renewal Authorities under
Colorado law established to assist cities in renovating dilapidated building in blighted areas of their community. Larimer County,
Thompson School District and the City of Loveland all have growing costs for providing current service levels that revenue sources are
inadequate to cover as these special urban renewal districts grow.
Under Colorado Urban Renewal laws, local officials are given the authority to designate which areas of their city are "blighted" and
qualify those properties for what is called Tax Increment Financing (TIF's). In theory, dilapidated buildings in high crime areas of a city
are a drain on public resources so any redevelopment of those properties benefits the community financially. Ideally, a developer willing
to improve such properties may use future tax revenues generated from the improvements (incrementally) for repaying the debt
generated by the redevelopment. In other words, a dilapidated building worth $1 million that is redeveloped may now have a value of
$1.3 million. The TIF allows the developer to keep back for debt repayment and other uses only the additional property taxes collected
on the 30% higher value while the property taxes are still paid on the base value ($5 million) to support local services.
Over the past decade Loveland abused its discretion under the law by declaring productive agricultural lands (many just annexed into the
city) as "urban blight." In addition, Loveland is the only city in the country we know of to have abdicated its governmental authority to a
developer (McWhinney) to make the determination of which properties qualify for the blight designation in Loveland's so called "flex"
URA plan. This has resulted in identical adjacent properties just south of Highway 34 in Loveland being declared blight if owned by
McWhinney but not if owned by anyone else who doesn't enjoy McWhinney's influence in city hall.
Once developed, these properties have a value many times greater than undeveloped agricultural land thus generating TIF's allowing for a
rebate of 98% of the property taxes collected on these developments in Larimer County. Colorado's Legislature did restrict the
designation of agricultural land as blight in recent years as a direct result of the abuses by Loveland and McWhinney of the Urban
Renewal laws but for Loveland taxpayers this was the equivalent of closing the barn doors once the horses were gone. In addition to
receiving back 98% of property taxes on many properties (thus starving Larimer County and local schools of needed revenue) Centerra
also receives the equivalent of 40% of Loveland city sales taxes (called improvement fees) that would otherwise would be collected in
Centerra by the City of Loveland to support emergency services and other critical city services.
California Debacle - McWhinney Development In Jeopardy
Garden Grove, California like the City of Loveland "partnered" with McWhinney Enterprises in an attempt to finance an indoor
and outdoor water park along with a 600 room hotel on Harbor Blvd. near Disneyland using RDA's funded by future property
tax diversions. The 11.5 acre resort is expected to start construction this year and would be open for business by 2013.
According to Chet Yoshizaki, Garden Grove Economic Development Director “You can’t argue with a track record as
successful as McWhinney’s." Apparently unaware of the bank foreclosure on The Promenade Shops in Loveland last year or
the failed Grand Station in Loveland, Garden Grove was ferociously defending its agreement with McWhinney until the State of
California passed its recent budget putting all new RDA's in a legal limbo.
International WEST, another McWhinney hotel development in Garden Grove already completed is reported by that city to be
unable to pay the funds required by California's new law (ABx1 26) requiring some property tax revenue from the development
go towards supporting local schools and essential government services. Garden Grove along with the California League of Cities
will be challenging the new law in court in hopes of stopping another new law (ABx1 27) from terminating the redevelopment
agency if such funds required in ABx1 26 for local services are not paid. The Conservative California newspaper, Orange
County Register, published an editorial supporting the two measures.
RDA's especially under attack by the State of Claifornia are those being used to finance luxury resorts and golf courses with
diverted future property taxes while schools are being closed for lack of funds. Garden Grove's City Council is furious with the
decision by the California Governor to force RDA's to help balance the state's budget which the Mayor of Garden Grove calls
"illegal." Especially damaging to local revenue are the phony blight designations like those in Centerra where 98% of future
property taxes are diverted away from local services into a quasi-public entity controlled by the developer.
California Governor Jerry Brown targeted the over $5 billion in annual revenue diverted by McWhinney's Garden Grove
redevelopment and other RDA's in California away from schools in order to balance the state's budget. The legal ramifications of
such a move have yet to be calculated as an association representing the state's some 425 RDA's has already initiated litigation
against the state along with many cities.
Like Garden Grove, the City of Loveland appears committed to defending McWhinney's business model of diverting local taxes to
subsidize commercial developments and continuing the diversion of future potential city tax revenues for 25 years. Last year Loveland's
city staff dismissed suggestions they look into reforming the McWhinney's MFA with the city as a means to recapture lost revenue to
the city while seeking public input into fixing Loveland's now projected chronic $3.5 million budget deficit. Loveland's Centerra has long
used its "manager" Richard Shannon to lobby local officials on behalf of Centerra. This practice is among the types of allegations of
abuse being levied against California's RDA's by the State's Controller's Office.
The City of Hercules, California inappropriately charged $9,600 of its lobbyist’s expenses to an RDA according to Chaing's report.
While collecting a salary from Centerra's Metro District which is funded by redevelopment dollars, Rich Shannon regularly met with
Loveland and County officials to lobby for McWhinney projects however no inquiry has been made by the City of Loveland or other
governmental authority.
Local Ramifications of LURA's In Colorado
While revenue generated by Metro Districts like Centerra receive significant press in Northern Colorado, local media appear
reluctant to research the full financial picture for local governments when reporting on these urban renewal authorities. Therefore,
the public is largely unaware of the role phony blight designations have in removing more and more developing properties from
future property tax roles as a city grows.
In the private sector increases in total sales is normally positive news provided the overall cost of business doesn't go up. Thus
one would conclude the some $15 million generated by Centerra for the City of Loveland every year in sales taxes has a positive
impact for city finances. However, look at what is called in business the "cost of sale" for each dollar of sales generated and a
very different financial picture emerges. If the "cost of sales" exceeds the revenue than the aggregate effect of the additional sales
to the city is indeed a loss. Loveland's projected growing budget deficit is the result of more residents, shoppers and businesses
simply paying less taxes to do business in the city while those in older parts of Loveland are expected to pay the rising costs of
providing local services to a growing population.
Larimer County, The Thompson School District and the City of Loveland all share the common problem of seeing tax revenues
not rise commensurate with expenses, in part, due to larger amounts of tax dollars being diverted to Urban Renewal Authorities
like the one in Centerra. While they share a common problem, each has created its own remedy for 2011.
Larimer County confronted its own projected 2011 budget deficit directly by planning for cuts from between 3% to 6%
depending on the criticality of the governmental service in question. Once planning for between 40 to 60 lay-offs by 2012,
Larimer County property values have stabilized at 2009 levels in 2011 thus allowing for more revenue than thought before for
2011. Nonetheless, the county is struggling to accommodate growth in Urban Renewal areas by pairing back on service levels
across the county. Unfortunately, services like removing dead animals from county roads or incarcerating criminals for the
duration of their sentences have become more rare as the county looses potential revenue to fake Urban Renewal like Centerra.
The Thompson School District is looking to make-up for projected deficits in property tax collections by seeking a Mill Levy
increase on the ballot this November. See July 1, article in The Coloradoan Less revenue from the state and insufficient local
property taxes have combined to create a $10 million deficit according to school officials. While McWhinney has sought positive
publicity for the some $80 million it promised to provide local schools it hardly makes-up for the total loss to schools in property
taxes over the 25 year life of McWhinney's Centerra Metro Districts. Fake blight designations used to recover any potential
property taxes the developments would have paid means large new developments are simply kept off the tax roles for the useful
life of those buildings.
The Loveland City Council tackled its projected budget deficits beginning in 2011 by reducing city services while spiking certain
fees paid by residents for water and other services. Not a word was mentioned in re-opening the 2004 MFA with McWhinney
to reconsider the distribution of taxes between the City of Loveland and Centerra.
When the City of Loveland finally releases a copy of the 2010 Centerra audit we will post a copy on this webpage.
Please feel free to post on comments on the LovelandPolitics BLOG.
On June 16, 2011 the Centerra Metro District board (McWhinney's quasi-government entity that receives diverted property and sales
taxes in Loveland) approved Centerra's 2010 audit.
[Friday July 15, update - the Centerra 2010 Audit was received by LovelandPolitics today and links are now to the right of this story]
Centerra controls various Metro Districts in Loveland that were created to borrow money through public bonds to finance McWhinney
owned real estate in East Loveland usually named "Centerra." Loveland signed a Master Financing Agreement (MFA) with McWhinney
in 2004 that enabled the diversion of more than $600 million in future city sales and property taxes over 25 years to finance the building
of Centerra. The "play now - pay later" approach to development has accumulated for Loveland's quasi-government of Centerra
Metro Districts over $112 million in public bond debt. The repayment of that debt means the county, schools and in this case city don't
get the full benefit of taxes raised by the development since much of it is being diverted into repayment of the public bonds for 25 years.
A main source of tax revenue for McWhinney's Centerra Metro District is the Loveland Urban Renewal Authority also called LURA
(in California called Redevelopment Agencies or RDA's) which borrows heavily from financial models now under attack by the State of
California as the reason for their growing debt, failing schools and inability to balance state and city budgets. California's Governor and
legislature took aim during budget battles at these districts for lack of transparency, illegal fund transfers and general mismanagement of
public tax dollars.
California State Controller, John Chaing, issued the results of a five-week review of 18 RDA's in California from over 400 in the state
earlier this year. According to Chaing, “For a government activity which consumes more than $5.5 billion of public resources
annually, we should be troubled that there are no objective performance measures demonstrating that taxpayers are receiving
optimal return for each invested dollar.”
Loveland's Centerra Metro District is operated entirely from McWhinney's private offices by McWhinney employees with little to no
oversight by the City of Loveland. Year to year Centerra audits are difficult to track as the methods used for naming funds and
accounting for transactions change along with definitions for accounts. What is different in Loveland from California is members of
Loveland's City Council are still complacent and refer to the Centerra funds as "private" money and seem to be unaware of the fact that
the over $100 million of debt McWhinney created by Centerra is not private debt but indeed public debt. Diverting both property and
sales taxes to pay back that debt is hardly a private matter since it starves local entities outside the city of much needed tax revenue.
Late last month California Governor Jerry Brown signed as part of a $23 billion budget-balancing deal two laws that put California's 425
RDA's into limbo. Either the RDA's begin paying property taxes not already committed to bond debt repayments back to the State of
California for schools and local emergency services or face a certain dissolution by the State of California. If successful, the measures
will raise $2.05 billion for the State of California from previously diverted property taxes while closing rogue local taxing authorities that
refuse to cooperate.
Longer Term Consequence of Diverting Taxes
Growth without the public revenues to sustain the public services it requires can have devastating impacts in the long run for any
community as they try to squeeze needed revenue from a diminishing number of remaining taxpayers as the tax exempt areas of the city
grow larger. Northern Colorado is now just beginning to see the impacts of not just the Centerra Metro District LURA diverting
property taxes away from local services but a number of other projects funded under what is called Urban Renewal Authorities under
Colorado law established to assist cities in renovating dilapidated building in blighted areas of their community. Larimer County,
Thompson School District and the City of Loveland all have growing costs for providing current service levels that revenue sources are
inadequate to cover as these special urban renewal districts grow.
Under Colorado Urban Renewal laws, local officials are given the authority to designate which areas of their city are "blighted" and
qualify those properties for what is called Tax Increment Financing (TIF's). In theory, dilapidated buildings in high crime areas of a city
are a drain on public resources so any redevelopment of those properties benefits the community financially. Ideally, a developer willing
to improve such properties may use future tax revenues generated from the improvements (incrementally) for repaying the debt
generated by the redevelopment. In other words, a dilapidated building worth $1 million that is redeveloped may now have a value of
$1.3 million. The TIF allows the developer to keep back for debt repayment and other uses only the additional property taxes collected
on the 30% higher value while the property taxes are still paid on the base value ($5 million) to support local services.
Over the past decade Loveland abused its discretion under the law by declaring productive agricultural lands (many just annexed into the
city) as "urban blight." In addition, Loveland is the only city in the country we know of to have abdicated its governmental authority to a
developer (McWhinney) to make the determination of which properties qualify for the blight designation in Loveland's so called "flex"
URA plan. This has resulted in identical adjacent properties just south of Highway 34 in Loveland being declared blight if owned by
McWhinney but not if owned by anyone else who doesn't enjoy McWhinney's influence in city hall.
Once developed, these properties have a value many times greater than undeveloped agricultural land thus generating TIF's allowing for a
rebate of 98% of the property taxes collected on these developments in Larimer County. Colorado's Legislature did restrict the
designation of agricultural land as blight in recent years as a direct result of the abuses by Loveland and McWhinney of the Urban
Renewal laws but for Loveland taxpayers this was the equivalent of closing the barn doors once the horses were gone. In addition to
receiving back 98% of property taxes on many properties (thus starving Larimer County and local schools of needed revenue) Centerra
also receives the equivalent of 40% of Loveland city sales taxes (called improvement fees) that would otherwise would be collected in
Centerra by the City of Loveland to support emergency services and other critical city services.
California Debacle - McWhinney Development In Jeopardy
Garden Grove, California like the City of Loveland "partnered" with McWhinney Enterprises in an attempt to finance an indoor
and outdoor water park along with a 600 room hotel on Harbor Blvd. near Disneyland using RDA's funded by future property
tax diversions. The 11.5 acre resort is expected to start construction this year and would be open for business by 2013.
According to Chet Yoshizaki, Garden Grove Economic Development Director “You can’t argue with a track record as
successful as McWhinney’s." Apparently unaware of the bank foreclosure on The Promenade Shops in Loveland last year or
the failed Grand Station in Loveland, Garden Grove was ferociously defending its agreement with McWhinney until the State of
California passed its recent budget putting all new RDA's in a legal limbo.
International WEST, another McWhinney hotel development in Garden Grove already completed is reported by that city to be
unable to pay the funds required by California's new law (ABx1 26) requiring some property tax revenue from the development
go towards supporting local schools and essential government services. Garden Grove along with the California League of Cities
will be challenging the new law in court in hopes of stopping another new law (ABx1 27) from terminating the redevelopment
agency if such funds required in ABx1 26 for local services are not paid. The Conservative California newspaper, Orange
County Register, published an editorial supporting the two measures.
RDA's especially under attack by the State of Claifornia are those being used to finance luxury resorts and golf courses with
diverted future property taxes while schools are being closed for lack of funds. Garden Grove's City Council is furious with the
decision by the California Governor to force RDA's to help balance the state's budget which the Mayor of Garden Grove calls
"illegal." Especially damaging to local revenue are the phony blight designations like those in Centerra where 98% of future
property taxes are diverted away from local services into a quasi-public entity controlled by the developer.
California Governor Jerry Brown targeted the over $5 billion in annual revenue diverted by McWhinney's Garden Grove
redevelopment and other RDA's in California away from schools in order to balance the state's budget. The legal ramifications of
such a move have yet to be calculated as an association representing the state's some 425 RDA's has already initiated litigation
against the state along with many cities.
Like Garden Grove, the City of Loveland appears committed to defending McWhinney's business model of diverting local taxes to
subsidize commercial developments and continuing the diversion of future potential city tax revenues for 25 years. Last year Loveland's
city staff dismissed suggestions they look into reforming the McWhinney's MFA with the city as a means to recapture lost revenue to
the city while seeking public input into fixing Loveland's now projected chronic $3.5 million budget deficit. Loveland's Centerra has long
used its "manager" Richard Shannon to lobby local officials on behalf of Centerra. This practice is among the types of allegations of
abuse being levied against California's RDA's by the State's Controller's Office.
The City of Hercules, California inappropriately charged $9,600 of its lobbyist’s expenses to an RDA according to Chaing's report.
While collecting a salary from Centerra's Metro District which is funded by redevelopment dollars, Rich Shannon regularly met with
Loveland and County officials to lobby for McWhinney projects however no inquiry has been made by the City of Loveland or other
governmental authority.
Local Ramifications of LURA's In Colorado
While revenue generated by Metro Districts like Centerra receive significant press in Northern Colorado, local media appear
reluctant to research the full financial picture for local governments when reporting on these urban renewal authorities. Therefore,
the public is largely unaware of the role phony blight designations have in removing more and more developing properties from
future property tax roles as a city grows.
In the private sector increases in total sales is normally positive news provided the overall cost of business doesn't go up. Thus
one would conclude the some $15 million generated by Centerra for the City of Loveland every year in sales taxes has a positive
impact for city finances. However, look at what is called in business the "cost of sale" for each dollar of sales generated and a
very different financial picture emerges. If the "cost of sales" exceeds the revenue than the aggregate effect of the additional sales
to the city is indeed a loss. Loveland's projected growing budget deficit is the result of more residents, shoppers and businesses
simply paying less taxes to do business in the city while those in older parts of Loveland are expected to pay the rising costs of
providing local services to a growing population.
Larimer County, The Thompson School District and the City of Loveland all share the common problem of seeing tax revenues
not rise commensurate with expenses, in part, due to larger amounts of tax dollars being diverted to Urban Renewal Authorities
like the one in Centerra. While they share a common problem, each has created its own remedy for 2011.
Larimer County confronted its own projected 2011 budget deficit directly by planning for cuts from between 3% to 6%
depending on the criticality of the governmental service in question. Once planning for between 40 to 60 lay-offs by 2012,
Larimer County property values have stabilized at 2009 levels in 2011 thus allowing for more revenue than thought before for
2011. Nonetheless, the county is struggling to accommodate growth in Urban Renewal areas by pairing back on service levels
across the county. Unfortunately, services like removing dead animals from county roads or incarcerating criminals for the
duration of their sentences have become more rare as the county looses potential revenue to fake Urban Renewal like Centerra.
The Thompson School District is looking to make-up for projected deficits in property tax collections by seeking a Mill Levy
increase on the ballot this November. See July 1, article in The Coloradoan Less revenue from the state and insufficient local
property taxes have combined to create a $10 million deficit according to school officials. While McWhinney has sought positive
publicity for the some $80 million it promised to provide local schools it hardly makes-up for the total loss to schools in property
taxes over the 25 year life of McWhinney's Centerra Metro Districts. Fake blight designations used to recover any potential
property taxes the developments would have paid means large new developments are simply kept off the tax roles for the useful
life of those buildings.
The Loveland City Council tackled its projected budget deficits beginning in 2011 by reducing city services while spiking certain
fees paid by residents for water and other services. Not a word was mentioned in re-opening the 2004 MFA with McWhinney
to reconsider the distribution of taxes between the City of Loveland and Centerra.
When the City of Loveland finally releases a copy of the 2010 Centerra audit we will post a copy on this webpage.
Please feel free to post on comments on the LovelandPolitics BLOG.
| California Takes Property Taxes Back From Redevelopment Agencies McWhinney's Garden Grove Development in Jeopardy |
LovelandPolitics.com
| Loveland's Deficit Problem California's Governor and Legislature take aim at 425 Redevelopment Agencies (RDA's) in California to balance the state budget. A cursory review of 18 RDA's by the California State Controller found widespread problems and abuse of tax dollars not properly accounted for by cities. Loveland residents have asked the Loveland City Council to seek ways for Centerra to pay its way but councilors instead are balancing budget shortfalls by reducing services and spiking fees on Loveland residents. Financial Suggestions |
| Centerra Metropolitan District Audited Financial Statements 2010 Centerra Public Improvement Collection Corporation Financial Statements Dec. 31, 2010 Centerra Metropolitan District No. 1 PIF Revenue Account Statement of Cash Receipts and Disbursements December 31, 2010 |