November 25, 2014

Colorado Court of Appeals: Calculation of Tax Increment Financing for Suspended Portions of Urban Renewal Project Not Addressed by Statute

The Colorado Court of Appeals issued its opinion in Northglenn Urban Renewal Authority v. Reyes, Adams County Assessor on Thursday, February 28, 2013.

Summary Judgment—Tax Increment Financing—Urban Renewal Plan.

In this case involving the financing of an urban renewal plan, plaintiff Northglenn Urban Renewal Authority (NURA) appealed the trial court’s summary judgment in favor of defendants Gil Reyes, in his official capacity as Adams County Assessor (Assessor), and the Board of County Commissioners of the County of Adams (BOCC). The judgment was affirmed in part and reversed in part, and the case was remanded with directions.

In 1992, Northglenn City Council (City Council) approved an urban renewal plan created by NURA for the redevelopment of blighted areas. The plan included tax increment financing (TIF). In 2004, the City Council by resolution substantially amended the urban renewal plan, adding several new tracts of property to the Northglenn Urban Renewal Area. No significant activity occurred on most of this new property from 2005 to 2009. In 2009, the City Council resolved to suspend the TIF for those properties within the renewal area without active urban renewal projects.

In 2009, the assessor calculated the TIF revenue by removing the suspended property from the total assessed value but including the suspended property in the base value. The assessor also concluded that the TIF period for all properties would expire in 2017, twenty-five years after the effective date of the original plan.

NURA disagreed with the method used to calculate the TIF following the TIF suspension. It sought mandamus relief and a declaratory judgment that the assessor improperly calculated the base value of the property in the urban renewal area, and improperly shortened the duration of the applicable TIF period for the additional properties. The trial court denied mandamus relief because the dispute involved the manner in which TIF revenues were calculated, not the assessor’s refusal to act. The Court of Appeals did not address this issue but turned only to the declaratory judgment claims.

The Court agreed with NURA that the assessor erred in the calculation of TIF following the suspension. The parties agreed that the statute does not address the TIF calculation of the renewal area when TIF is suspended for a portion of the property. Likewise, the assessor’s manuals and appraisal procedures have no provisions that address this. The Court therefore tried to interpret the statute in accordance with legislative intent and objectives (commending this issue to the legislature to address it at some future date).

Specifically, the Court agreed that the assessor should have removed the value of the suspended properties from the total assessed value and from the base value, not just from the total assessed value. The assessor’s method impeded the goals of addressing and financing renewal of blighted areas.

NURA then argued that the twenty-five-year period did not increase the TIF provision in the renewal plan for those properties added after the effective date of the plan. The Court disagreed. The Court found that the plain language of CRS § 31-25-107(9)(a)(I) creates a reference date based on the effective date of adoption of a TIF provision. Although the City Council could have altered the dates when it added the new properties, it included them in the original urban renewal area and subjected them to the original plan . Therefore, they were bound by the original twenty-five-year period. The part of the trial court’s summary judgment regarding the assessor’s calculation of TIF was reversed, and the part regarding the twenty-five year TIF expiration was affirmed.

Summary and full case available here.

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