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 |