Loveland's Independent News Source
Loveland, October 16, 2014

Loveland’s former City Manager, Don Williams, is reported to have jokingly told Loveland
council members on numerous occasions that
“what downtown needs is a couple of
funerals and some matches”
before revitalization can succeed.

William's indelicate joke speaks to an ongoing dispute between senior city staff and some
elderly property owners who have been at odds for years over the value of properties they
own and whose vision for revitalization will prevail.  While Williams retired in 2010, his
chief enforcer, Greg George, remains as the city’s Director of Developmental Services.  The
funerals Williams joked were necessary before downtown could be successfully re-
developed, according to those present, have yet to occur and thankfully nobody has taken a
match to the historic properties in question either.

Instead of hiring the mafia to accelerate William’s vision for downtown development, staff
has been progressing slowly on a less dramatic solution by migrating the oversight,
appropriations and general decision making authority away from the elected Loveland City
Council and into a private organization that can operate largely away from the publics view
in negotiating deals and dispersing public funds.  The plan is not only to limit the influence
and control of the general public over future projects but also downtown property owners
who have been seen by some city officials as obstacles to progress.

As one city staffer regularly complains,
"the city is a bad buyer because everything we do
is in public view and influenced by council politics."
 On the other hand, longtime activists
and contributors to the downtown revitalisation program worry that the current direction
will concentrate too much power into too few hands regardless of how credible the current
participants are today.  

Loveland Downtown Partnership (LDP)

In early 2014 city staff convened a favored group of downtown advocates to organize a
private organization to be funded using mostly public money along with limited private
monies.  The name of the group is the Loveland Downtown Partnership (LDP) and scheme
briefed to Loveland's City Council last August during a council study session.  Last Tuesday,
Loveland's City Council directed staff to negotiate a
"contract for services" with LDP to
enable the city to begin flowing $500,000 to the group annually as contemplated in the
city's proposed 2015 budget.

As proposed by staff, the LDP will become the city’s,

“one-stop shop for all downtown related real estate projects, beautification, leadership
and events.”  

Not surprisingly, Loveland economic development staffer Mike Scholl is rumored to be
pining for LDP's Executive Director's position behind closed doors.

Harry Devereaux, President & CEO of Home State Bank, will chair the LDP board which
Mindy McCloughan, President and CEO of Loveland's Chamber of Commerce, M.
Douglas Rutledge
of KL&A Architects, Debbie Davis of Guaranty Bank & Trust plus trustee
for the Elk's Lodge,
Dan Johnson, Former Thompson R2-J School District Superintendent,
Jim Cox who chairs Loveland’s Historic Preservation Society and finally Heather Lelchook
from AIMS Community College.

The group is looking to control approximately 50% of the $1 million of annual sales tax
revenue generated from Loveland’s downtown area.  They also plan on
“rolling-in” grants
and subsidies currently administered directly by the city for other sundry downtown
projects.  However, the redirected sales taxes are really just the seed money necessary to
hire staff and create momentum to create a larger and more reliable source of revenue for
the downtown redevelopment group.

In parallel, the city plans on forming an official
Downtown Development Authority (DDA) as
the umbrella funding organization to support LDP in the future using property taxes and
other potential revenue sources to be approved by voters.  Approximately 60% of the city's
initial appropriation of $500,000 will go directly towards funding the LDP's over-head
(office and staff) while approximately $200,000 will be used to fund projects until the DDA
funding kicks-in a year later.

When asked by Councilman John Fogle if the 10 year budget request (total of $5 million
which needs to be appropriated annually) is perpetual or will PDL become self-sustaining
at some point, McCloughan responded,
"you eat an elephant one bite at a time" indicating
the financial requirements of LDP will be quite large.

The formation of the umbrella DDA funding organization relies primarily on two public
votes.  The first comes before residents and landowners downtown on February 10, 2015
to authorize the formation of the DDA and restart the 25 year clock for "TIF" (Tax
Increment Financing) of the meager $30,000 currently being collected by the city's failed
Urban Renewal Authority (URA) for downtown begun over a decade ago.  The second vote
comes in November of 2015, with the ballot question of whether to add a mill Levy of 5
Mills to the property tax burden on parcels included in the DDA boundary.

LDP & The Citizen's United Case

If voters approve the later revenue streams, the newly formed LDP will be receiving the
new TIF (tax increment financing), 5 mills of property taxes and approximately 50% of the
sales tax revenue from downtown (council approved) via the DDA which collects the funds
and provides them to LDP.  One might ask why the city needs to complicate the picture
with multiple layers of organization?

An important element of the larger objective is to move deals behind closed doors using the
legal structure of LDP.  Instead of forming a 501(c)3 type non-profit organization, which is
obligated to disclose how and where money is spent, the group is looking to take advantage
of a more controversial type of structure.

As presented last Tuesday by Ft. Collins attorney Lucia A. Liley, LDP is being organized as a
501(c)4 which makes its transactions private and leaves open the possibility for the group
to lobby and become involved in politics which are prohibited activities for charitable
organizations.  Liley did tell Loveland's City Council LDP's by-laws prevent it from
participating in local elections and also assured the council strict "board conflict of
interest" policies will also be in place to safeguard the public funds the group is spending.

In 2010 the U.S. Supreme Court ‘s
“Citizens United” case struck down part of the McCain-
Feingold Act (also known as '
campaign finance reform') which prohibited 501(C)4's and
other similar groups from broadcasting electioneering communications and generally
using candidate names in advertisements before an election.  Loveland's Downtown
Partnership could have incorporated as a charity or 501(c)3 but some on the inside argue a
501 (c)3 would preclude the types of deals they are contemplating.  Unlike recent
downtown developments like the Rialto Bridge and ArtSpace, staff are hoping to swing
redevelopment deals where participants, their contributions and compensation are not
open for public scrutiny and debate.  By washing the city's money first through an
independent DDA and than through LDP the transaction can be very discreet opening the
door to more creative financing.

Fort Collins: A Model DDA

Advocates for establishing the DDA in Loveland and LDP point to Ft. Collins as a model of
successful collaboration between government and business in renovating successfully an
older downtown.  However, the Ft. Collins model doesn't appear to be what Loveland city
staff are seeking to implement.

Ft. Collin's DDA established in 1981 is not a "pass-through" organization operated to flow
funding to another semi-private organization.   Last year, the Ft. Collins DDA spent 30% of
its $10 million annual budget on debt service and $7 million on programs.    On the revenue
side, only 7% of their budget came from a mill levy while 26% came from TIF revenues
(Tax Increment Financing).   As Ft. Collins' DDA increased property values through quality
projects over the past two decades thus boosting its TIF revenues, Loveland's downtown
TIF through urban renewal programs has largely failed to generate expected returns.

Downtown Ft. Collins Business Association ("DBA"), is a non-profit corporation
operating as a 501(c)6 membership organization which coordinates closely with the DDA
and is perhaps the "model" some in Loveland are looking to emulate for the private
organization.  However, unlike Loveland's proposed LDP,  DBA is self-funded and not
perpetually dependent on city revenue or DDA mill levy funds for its operations.  As a large
member organization, it is more inclusive and popularly supported by downtown
Private Group to Control Downtown
Redevelopment Funds
Ability to engage in
Not allowed
Some allowed
Not allowed
Political Advocacy
Board Obligation
motives only
Pecuniary &
political motives
Political only
501(c) 3 versus 501(c) 4

A non-profit hoping to raise private contributions
will normally file with the IRS as a 501(c)3
otherwise known as a "charitable" organization
because donors may claim a tax deduction for
their donations.

A 501(c)4 designation does not afford donors the
ability to deduct their donations but does allow
the group to engage in lobbying and political
advertising not allowed by 501(c)3's.  In addition,
a 501(c)4 has greater abilities to keep
expenditures and employees confidential.

Below is a matrix to explain some differences
between a charitable organization or 501(c)3, a
non-profit social welfare organization or 501(c)4
and 527 committee designated for the sole
purpose of engaging in political activities.