Loveland - May 22, 2008
Colorado House District 51 Representative Don Marostica was quoted recently in
local media bragging about his “favorite” piece of legislation he passed this year –
HB08 1395. The Bill is being promoted by Marostica and McWhinney's Rocky
Scott as saving state schools millions of dollars.
Simply stated, the bill exempts Marostica and other commercial property owners
from paying local property taxes when leasing to any state “political subdivision” or
institutions of learning. Nothing in the bill requires the commercial property owner
to pass the savings along to the tenant.
According to an independent State of Colorado analysis, the bill will reduce
property valuations by an estimated $44 million in time by removing properties from
the tax roles that other local schools and governments currently rely on for
revenue. Therefore, the state will need to backfill some $193,000 estimated loss
to schools in the first year. By the second year the estimated loss will exceed
$300,000 and grow each consecutive year as new leases are signed.
Apparently, the local media failed to read the bill or any analysis of it before
reporting that millions will be saved by institutions of higher learning leasing private
property. Below are the conclusions by a nonpartisan fiscal analysis of the bill.
Colorado Legislative Fiscal staff member, Todd Herreid, reported the following in
his official state analysis of the bill available here. Below is a summary of the
conclusions from that report.
1. The bill takes away revenue from local governments and puts it in the pockets
of commercial land owners.
2. The bill provides ZERO tax savings to schools as the benefit goes directly to the
property owner and not the government institution. Whether or not State Schools
will benefit depends on how future lease agreements are negotiated but not
guaranteed.
3. The only revenue to the State of Colorado general fund projected by the fiscal
analysis is the increased income taxes commercial property owners will pay due to
their increased profits from the bill. The loss to the state is estimated at $193,000
the first fiscal year and grows to over $300,000 in the second year. Subtracting
the $9,000 gain from expected future income tax increases the $193,000 loss
results in a net loss of approximately $184,000 for the State of Colorado in the
2009-2010 fiscal year. Each subsequent year the loss will grow as more
commercial properties sign new leases and become eligible for the exemption.
Please feel free to share your opinion on the blog.
Colorado House District 51 Representative Don Marostica was quoted recently in
local media bragging about his “favorite” piece of legislation he passed this year –
HB08 1395. The Bill is being promoted by Marostica and McWhinney's Rocky
Scott as saving state schools millions of dollars.
Simply stated, the bill exempts Marostica and other commercial property owners
from paying local property taxes when leasing to any state “political subdivision” or
institutions of learning. Nothing in the bill requires the commercial property owner
to pass the savings along to the tenant.
According to an independent State of Colorado analysis, the bill will reduce
property valuations by an estimated $44 million in time by removing properties from
the tax roles that other local schools and governments currently rely on for
revenue. Therefore, the state will need to backfill some $193,000 estimated loss
to schools in the first year. By the second year the estimated loss will exceed
$300,000 and grow each consecutive year as new leases are signed.
Apparently, the local media failed to read the bill or any analysis of it before
reporting that millions will be saved by institutions of higher learning leasing private
property. Below are the conclusions by a nonpartisan fiscal analysis of the bill.
Colorado Legislative Fiscal staff member, Todd Herreid, reported the following in
his official state analysis of the bill available here. Below is a summary of the
conclusions from that report.
1. The bill takes away revenue from local governments and puts it in the pockets
of commercial land owners.
2. The bill provides ZERO tax savings to schools as the benefit goes directly to the
property owner and not the government institution. Whether or not State Schools
will benefit depends on how future lease agreements are negotiated but not
guaranteed.
3. The only revenue to the State of Colorado general fund projected by the fiscal
analysis is the increased income taxes commercial property owners will pay due to
their increased profits from the bill. The loss to the state is estimated at $193,000
the first fiscal year and grows to over $300,000 in the second year. Subtracting
the $9,000 gain from expected future income tax increases the $193,000 loss
results in a net loss of approximately $184,000 for the State of Colorado in the
2009-2010 fiscal year. Each subsequent year the loss will grow as more
commercial properties sign new leases and become eligible for the exemption.
Please feel free to share your opinion on the blog.
LovelandPolitics.com
| Marostica's Commercial Property Owner Tax Loophole Passes State Legislature - Local Media Reports Misinformation About the Bill |
| Loveland Reporter-Herald 5/10/08 "Marostica, R-Loveland, sees his greatest accomplishment this session as getting a bill passed that will save state government about $2.34 million a year." |
| The Coloradoan's Loveland Connection "Loveland’s Rep. Don Marostica gave a little recognition Monday to the person who initiated his “favorite” bill which Marostica sponsored in the State Legislature this past session –— House Bill 1395." "Marostica told a group at the Northern Colorado Legislative Alliance that Rocky Scott, McWhinney’s business development expert and president of Centerra development, brought the idea to his attention." "Marostica said the scenario will lead to $2.37 million adjustment that the state essentially was paying itself this year." |
| HB 1395 Named "McWhinney Bail Out" By Concerned Loveland Resident A Loveland resident contacted LovelandPolitics to inquire as to whether the Metro District operated by McWhinney with locally collected tax revenue under the authority of the City of Loveland MFA (Master Financing Agreement) is eligible under the bill as a "political subdivision" which automatically exempts the landlord from paying property taxes on property leased to qualified entities starting in 2009. LovelandPolitics is currently researching this issue and cannot provide a definitive answer at this time. Below is the concern as expressed by Loveland residents who see the tax waiver bill as a bail-out of McWhinney from current cash flow problems reported by former McWhinney employees. By having the Metro District lease empty land (like Grand Station) for vehicle storage - the McWhinneys could avoid paying any local property taxes on the land. We are researching the question but have no information at this time. Another effort by McWhinney to lure special schools and Junior Colleges into Centerra away from Loveland and other city centers will be assisted by this bill that focuses on new leases. The inclusion of lease options and pay-as-you-go construction lease/purchase agreements may provide McWhinney creative financing options in attracting Colleges away from older properties they now lease in downtowns of Loveland, Ft. Collins and Greeley. |
| State of Colorado Fiscal Analysis of HB08 1395: Regarding Impact On Local Governments “Local governments will lose property tax revenue because of the bill's provision to provide an exemption for real property that is rented or leased to state or local governments.” Will State Schools Benefit ? “Since rent is driven by market conditions and property taxes are a portion of the expenses charged to a tenant, a reduction in taxes may allow an owner to maintain the same rent and recapture a higher portion of operating expenses or increase its profit margin.” “Consequently, the size of the property tax savings realized by state government is unknown and will depend upon leasing provisions and the rates negotiated by the state.” |