Urban renewal is the act of revitalizing a failing urban area in order to restore economic vitality and improve the safety of the area. The urban renewal statute can be used for development, as well as redevelopment. Understanding that redeveloping urban areas is much harder and more expensive than new development, Colorado has empowered local authorities with certain tools, including tax increment financing, to encourage urban renewal activities. All 50 states have some form of urban renewal law.
Urban renewal is critical to the success of local communities and the long-term prosperity of citizens living in urban areas. Without urban renewal, there would be no incentive for developers to tackle the challenges associated with redevelopment. In turn, blighted urban areas could see increased crime and safety problems, while continued growth on the fringes of communities could add to the problem of urban sprawl. Thanks to urban renewal, DURA has been able to save older parts of town and make significant improvements to communities in Denver.
Blight is the legal term given to a piece of property when four of the 11 criteria outlined in the Colorado statute are met. These criteria range from dilapidated buildings to land title problems, and collectively the property must be considered to be a threat to the health, safety, peace or welfare of a community.
Tax Increment Financing (TIF) is a tool of urban renewal that allows an urban renewal authority to leverage future increased sales and property taxes to help finance urban renewal projects. TIF funds can be generated using sales and/or property taxes in the redevelopment area. When an urban renewal plan is adopted, a tax base for that area is established and the existing taxing agencies (counties, metropolitan districts, schools, etc.) continue to receive that tax base during the urban renewal period. As redevelopment happens, any of the incremental taxes collected above that base amount are invested in the redevelopment itself, through infrastructure, environmental remediation, or other amenities for the public good.
When an urban renewal project is being planned, the local authority performs an analysis to determine how much additional property and/or sales tax is likely to be generated once the project is complete. The projected tax revenue increase, called a tax increment, can then be used to either finance bonds or reimburse developers for some of their project financing.
DURA’s involvement is needed because there are unique challenges in areas that have been determined to be blighted. Previously developed sites can be burdened with contamination from years of neglect or through prior uses, making redevelopment costly. Many of these sites have deteriorated, negatively impacting the surrounding neighborhoods and making the location less than desirable for new businesses. With such problems plaguing a site, there is little appeal for private developers to redevelop the site, and it can sit untended indefinitely. The tools provided to DURA through urban renewal support and encourage redevelopment of such sites, making the community safer and more productive, and generating new permanent tax revenues for schools and other special districts in the area.
In Colorado, urban renewal authorities like DURA have the ability to acquire private property through eminent domain (also called condemnation) if necessary to achieve a public purpose. DURA may only use eminent domain to acquire property in an area that has been declared blighted. State law spells out 11 factors of blight, and requires that at least five of those factors must be present if eminent domain is to be used by an urban renewal authority. Eminent domain is only used as a last resort by DURA.
Eminent domain is used in rare and exceptional circumstances where it is necessary to acquire private property to accomplish a public purpose. In most cases, an agreement is reached with the affected private land owner for the purchase of the property. In cases where eminent domain must be used, DURA is required by law to pay the land owner fair market value for the property and, if applicable, to provide relocation assistance to a qualifying property owner.