Loveland - September 23, 2011

Some 11 years ago the City of Loveland advertised "Lincoln Place" to be the catalyst for bringing shoppers
and new development back to downtown Loveland.  In order to subsidize Lincoln Place, a mixed residential
and retail development, the city council approved a special URA (Urban Renewal Authority) only for that one
city block (AKA Finley's Block) that would divert any additional property taxes raised away from regular
taxing entities and towards the repayment of the bond debt created for the subsidies provided to the developer
of Lincoln Place.  The URA was established for a period of 25 years as the subsidy, at that time, contemplated
constructing a public parking facility as part of the project.

The good news is the development only used approximately $1 million in public debt (public sidewalk
construction) of the bond proceeds as no public parking could be made available.  The URA has projected to
pay-off its public bonds by the middle of 2013.  This means the property taxes generated from the project
now being diverted for bond repayments can no longer be retained by the city once the original debt is
satisfied by 2013.  At that time, the Thompson School District, Larimer County and other taxing districts that
survive on local property taxes will begin receiving the full benefit of the property taxes generated by the
Lincoln Place project.

However, the City of Loveland has other plans for that money and wants to deny both the Thompson School
District and Larimer County any benefit from the project's enhanced property tax collections for another 14
years.  Using a clever URA shell game, the city wants to create new debt for its museum expansion but pay it
back (as the museum generates no revenue) using the Lincoln Place URA proceeds.

Loveland hopes to expand the Loveland Museum across the street from Lincoln Place while also funding yet
another "catalyst" for redeveloping downtown Loveland called the "North Catalyst Project" (AKA Brinkman
Addition).  The city might be able to do this by adding the Loveland Museum and adjacent properties into the
Lincoln Place URA while taking out additional debt to extend the property diversion to the legal maximum of
25 years.  The City of Loveland pays no property taxes thus no revenue can be generated by improvements to
any city owned properties which is contrary to the original purpose of the URA.  By combining the city's
property with a private commercial property (Lincoln Place) the city can have the private property taxes
generated by Lincoln Place repay the city's debt created to expand the museum.

The legality of such a move appears dubious.  LovelandPolitics volunteer staff were unable to find any legal
precedent for what the city proposes.  In addition, taxpayers being asked to pay additional property taxes this
year through a mill levy increase for the schools may be weary of the city's fancy URA shell game costing the
school additional future anticipated revenue.

Background
On August 16, 2011 Loveland's planning staff proposed to Loveland's City Council expanding the Lincoln
Place URA in downtown Loveland for the purpose of creating more debt and denying both Larimer County
and the Thompson School District future tax revenues from the success of the project for the another 14
years.

Senior City Planner, Mike Scholl, described it this way in a memo presented to the Loveland City Council
before the August 16, meeting explaining how the city can fund the North Catalyst Project,

"Specifically, with the proposed amendments, the project could pay for itself through the existing tax
increment and thus minimize any public support through the general fund."

According to Loveland's planning staff, Lincoln Place generates about $150,000 annually in TIF (Tax
Increment Financing) for the very small Urban Renewal District it occupies.  TIF refers to the additional tax
revenue raised as a result of the development that is diverted away from local taxing authorities and into
repayment of bonds used to subsidize the development's increased value.

The Lincoln Place URA was created by Loveland a decade ago and was expected to last the maximum 25
years allowed by law.  This was in anticipation of the City of Loveland also subsidizing the building of a
parking structure using public bond debt also financed using TIF from future Lincoln place tax revenues.  
Instead, the developer planned too few parking spaces for the number of apartments and commercial
businesses thus couldn't offer any public parking as originally intended.  As a result, only the public sidewalks
qualified for public debt while the private parking garage could not be built using public bond debt.

Instead of the larger subsidy anticipated of over $3 million, Lincoln Place received only $1 million from public
bond debt created by the URA for "public access" to the improved sidewalks surrounding the building.  In
addition, the City of Loveland waived $80,000 in Use Taxes for the project along with other permit fees and
taxes.  According to state statute, Loveland can only continue collecting the TIF and diverting property taxes
away from other local entities to pay debt created for the redevelopment within the existing URA.

The original bond debt for Lincoln Place of approximately $1 million is projected to be completely paid-off by
2013 according to current projections.  Once the public debt used to create the "catalyst" project is satisfied
the property taxes diverted away from local taxing interests into the bond payments reverts to the original
taxing entities by law.  Thompson School District and Larimer County are the two largest recipients of local
property taxes and therefore would see the biggest benefit once the debt is satisfied.  The current TIF
generates about $150,000 of property tax revenue currently being diverted to pay the bond debt.

Insider Information
LovelandPolitics has learned city staff was not surprised by council's request in the August meeting to first
"investigate" whether Larimer County or the Thompson School District agree with the decision to extend the
tax diversion by another 14 years thus denying them over $2 million in future revenue.  Council's direction to
staff simply reflected a preference expressed by City Attorney John Duval before the council meeting that the
city find agreement with the other taxing entities before proceeding.

According to one source within city hall, Duval is concerned about legal challenges over the city extending the
time of a URA by creating new debt to fund a project on city owned property unrelated to the original purpose
of the unrelated URA (Lincoln Place).  Absent a challenge by either the school district or county Duval has
expressed his opinion the city can move forward.

Neither entity, Larimer County or Thompson School District, have expressed an opinion on Loveland's
proposal in public.

Next Steps
The Council is considering amending the Lincoln Plan URA as described above to add three blocks for
the "Brinkman Project" including the city's new museum.  The project will construct mixed use residential
and commercial along with the city's museum.  No voter approval is required to proceed only a majority
vote of the Loveland City Council.  In the meantime, the Loveland City Council directed city staff to
meet with the various taxing entities to provide information about the project and determine if a legal
challenge is likely.

Possible School and County Response
Staff at the Thompson School District and Larimer County commented to LovelandPolitics
off-the-record that the city does enjoy the privileged of imposing a special sales tax within any URA.  
They both raised the question internally why Loveland doesn't simply raise its own sales taxes within the
downtown URA to fund a museum expansion instead of dipping into school and county revenue through
cleverly constructed URA shell games.

The challenge for the City of Loveland is the failure of the main downtown URA (where the Brinkman
properties are already located along with the city's museum) to generate any TIF for current projects.  
An increase in sales taxes could also have a chilling effect on the city's ability to draw more retail
shoppers into the downtown area.
LovelandPolitics.com
City Proposes Using County and
School Funds To Expand City Museum

Free Lunch?


"by adding the museum site to the
Finley’s Block URA,
any excess
TIF funds
, can directed to public
improvements at the future
museum project."

Mike Scholl, Senior Planner
City of Loveland

In fact, there is no "excess" property
tax or TIF.  The money (approximately
$2.1 million) Scholl proposes diverting
to a city project that should be funded
from the general fund would be going
instead to support the Thompson
School District and Larimer County.  
Both entities are seeking additional
voter approval to either raise or extend
taxes due to funding shortfalls in their
current year budgets.

"To amend the URA, staff would
need to prepare a blight study and
a major URA amendment to
add the parcels to the Lincoln Place
URA; it may also require a minor
amendment to remove
them from the Downtown URA."

The August 16, 2011 memo to council
proposes removing two parcels from
Loveland's Downtown URA, re-
declaring them blight after years of
being inside a URA and placing them
both into the Lincoln Place URA to
soak-up any "excess" tax revenue that
would have gone to schools and the
county.

Where will the money go?

"Brinkman Partners, in response
to the City’s public RFP, proposed
to build a 70,000 square foot
mixed-use building at a total
development cost of roughly $12
million dollars. Brinkman’s will
need to acquire the City-owned
Sequel building (Old Home State
Bank site), which will require
the repayment of the CEF’s that
were used to purchase the building.
In addition, Brinkman’s are
asked for some additional funding
for public improvements to support
the project."