Thompson Schools, Larimer County should not pay for Centerra South

Citizens pay property taxes to get services from Larimer County, like sheriff protection, county roads, landfill, snow plowing, and mental health care. People in cities pay additional taxes for similar services. Much of property taxes goes to the school district. “Everyone pays their fair share,” as the saying goes, at least in principle.

The Fair Share Principle is widely accepted as being the total dollars paid in property tax, levied at the same rate on everyone. There is enough room for disputes about the “fairness” of how property tax revenues are really spent by the taxing entities without tampering with this principle. Yet, tampering is exactly what the state of Colorado allows with its Urban Renewal Law.

Fifty years ago, the state enacted an Urban Renewal Law because it viewed slums and “urban blight” as an existential threat to its cities. The law gives cities extraordinary powers to eradicate the threat, such as eminent domain and giving private developers financial “incentives” to rehabilitate blight.

These financial incentives are government-backed loans which, in a complicated arrangement, give developers all the money needed to improve rundown properties. The loan’s debt service (interest and principal) is met by using all the property taxes paid on the improvements for up to 25 years — not just the taxes paid to the city but also those paid to the county and school district. Neither county nor school district nor taxpayers have any say in the scheme. Eliminating blight, the state concluded, is way more important than the Fair Share Principle.

However, there’s a fly in the ointment: Real urban blight is non-existent in Colorado; it may not have existed even when the law was passed. Yet, this law is still on the books. And it is being abused — not as a tool of urban redevelopment but of primary development, with counties and schools forced to subsidize city-backed projects. A common abuse has been to use urban renewal incentives to develop farmland lying inside the city limits. An undeveloped rural landscape does not have the same need for extraordinary tax diversions than redevelopment of rotting urban landscapes. Yet for a long while some cities, including Loveland, schemed with developers to get them anyway.

This is exactly what is happening with the proposed Centerra South project. Shaking out most of the extraneous matters which cloud the issue, calculations show that with present mill levies, the developer of this quarter-section of farmland expects all the future property taxes paid, by its future residents and businesses, on just the interest on its project debt.

The expected 25-year losses for each government entity:

• Thompson Schools: $34.6 million.

• Larimer County: $34.0 million.

• State of Colorado: $32.5 million.

• City of Loveland: $14.4 million.

• Total tax revenue lost: $115.5 million.

But in 2010, the state Legislature outlawed all use of agricultural land for obtaining urban renewal subsidies, since it has nothing “urban” to be “renewed.” Yet, Centerra South is now poised to develop farmland. How can that be?

Because there’s a loophole: If the school district and county willingly allow farmland to be developed as urban renewal, they are also willing away rightful tax revenue for 25 years.

Legislators probably didn’t imagine that any school board or county commissioner would go along with this, given the budgetary consequences, but Centerra South’s developer fully expects they will. Meanwhile Thompson and Larimer’s elected officials have been giving it serious consideration, because approval, once given, would be irrevocable, with fiscal consequences lasting a generation.

Approval is especially risky for Thompson, since the state’s current contribution of $32.5 million is based on involuntary impacts on per-pupil funding. When the Legislature recognizes that an additional impact of $34.6M was voluntary (by approving the farmland be used to get extraordinary subsidies), it might refuse backfilling any of that loss, if nothing else than as a deterrent to other districts.

Having either board just say “no” to including farmland in the Centerra South urban renewal area would save the entire $115.5 million for everyone — and it preserves the Fair Share Principle. A project that is economically sound wouldn’t need the extraordinary taxpayer subsidies anyway.

Citizens can contact their elected officials to do the right thing.

Linda Rosa and Larry Sarner are Loveland residents.