Economic Development Incentives for Colorado Municipalities
| Jurisdiction | Colorado,United States |
| Citation | Vol. 02 No. 1990 Pg. 239 |
| Pages | 239 |
| Publication year | 1990 |
1990, February, Pg. 239. Economic Development Incentives for Colorado Municipalities
Many Colorado communities suffer from stagnant economies and shrinking public revenues. In an era of disappearing federal grants and divisive taxpayer revolts, these communities often face the difficult task of covering local revenue shortfalls. To weather this rough economic climate, many municipalities try to increase tax revenues through incentive programs designed to encourage local business expansion or development. This article provides a brief review of several incentive programs ranging from the traditional to the innovative.
Under CRS §§ 31-25-101 to 115, municipalities may establish urban renewal authorities ("Authority") for rehabilitating blighted areas. Once established, an Authority exercises a variety of powers designed to eliminate blight in the designated urban renewal area.(fn1) However, CRS § 31-25-107 forbids the Authority to undertake an urban renewal project unless the municipal governing body approves the project by resolution. These urban renewal projects regularly encounter unsuccessful legal challenges because individual property owners object to being included within a designated "blighted" area.(fn2)
Tax increment financing ("TIF") often occurs as part of an urban renewal project, but may arise in other development programs. Typically, TIF programs finance rehabilitation or revitalization projects through the issuance of municipal bonds. The bond proceeds provide the economic capital to construct improvements on deteriorated properties.
Once the properties receive these improvements, their assessed valuations increase and the municipality receives more property taxes for the properties. The increase in property taxes is then used to retire the bonds. Colorado law also expressly authorizes the use of incremental increases in sales taxes from improved properties, if so designated, to satisfy bond obligations.(fn3) Courts have widely upheld TIF programs against a variety of legal challenges.(fn4)
Under Article XX § 1 of the Colorado Constitution, home rule municipalities may condemn and purchase property for any public purpose. Governmental entities generally have wide latitude in determining what constitutes a public purpose.(fn5) Thus, a municipality can use its eminent domain powers to encourage economic development.
City of Duluth v. State(fn6) provides an example of how a municipality may use its eminent domain powers to encourage development. The City of Duluth wanted to revitalize a seventy-two-acre area that contained several abandoned and tax-forfeited properties, as well as an unused but operational food processing plant that covered one-fourth of the area. Because an abandoned but operational electricity generating plant already existed nearby, the area provided an ideal site for a paper mill.
Once Duluth located an interested paper company, the city used its eminent domain powers to acquire title to the entire tract, intending to transfer title to the paper company. However, the owners of the food processing plant objected to the plan and appealed the condemnation of their eighteen acres.(fn7) The Supreme Court of Minnesota upheld the condemnation as serving the...
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