by Karen Cuthbertson
Now that the Organ Grinder has come down, you may be wondering if things are going to finally change at Alameda Square. The site was designated as "blighted" by the Denver Urban Renewal Authority (DURA) back in 1991. This means that?—for a designated period of 25 years?—DURA can provide an interested developer with some special tools to help ensure a successful redevelopment. One of the tools at DURA's disposal is called "Tax
Increment Financing" (TIF).
So what is TIF?
I think the easiest way to explain TIF is with an analogy. Let's say the businesses at a blighted site produce $1.00 in sales tax revenue per year. Joe Developer has a proposed redevelopment that he believes would produce $10.00 in sales tax revenue per year. Joe's proposal involves buying the property from the current owner(s), bulldozing the site, and building new widget stores, glad-rag shops, and a couple of eat-a-bunch restaurants. Market and financial studies prove his numbers feasible.
So, Joe gets DURA's approval for the redevelopment and he buys the property. (There's an entire sub-process here of paying all the relocation costs for any existing tenants, but that's another article.) Anyway, Joe invests mega-bucks to raze the site, put in required water reclamation, lighting, landscaping, etc., etc., and constructs the new buildings. After the new businesses open, DURA collects the sales taxes ($10.00 in the 1st year).
DURA pays the City $1.00 (the amount the old businesses generated). Also out of that $10.00 comes $3.00 to repay the cost of moving the blighted site's tenants to swanky new digs and reimbursing them for lost income during any "down time." Joe gets to use the remaining $6.00 for the designated number of years (lets say it's 25) to offset his initial construction costs and for continued site maintenance/improvements. After 25 years, DURA stops collecting the sales tax revenue, and all $10.00 goes to the City.
In this analogy, Joe Developer kept $6.00 of the new sales tax revenue for 25 years to off-set his redevelopment costs. What amount of revenue a developer keeps and the length of time DURA remains involved varies from project-to-project, but the theory is the same.
Alameda Square was designated as blighted in 1991, with a 25-year TIF. The TIF expires in 2016 with no way for it to be extended. There are only 12 years left for a developer to take advantage of this redevelopment tool?—a tool used to lure deeppocketed developers to invest their capital in ?“worn out?” areas of our city and jumpstart the revitalization of the surrounding community with their redevelopment project.
If you know a Joe Developer, would you send him our way, please?