Did You Know? Retail Sales Taxes are on the Rise for Urban Renewal Areas

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The Urban Renewal (UR) law provides an opportunity, by state statute, to rid the community of slum and blight that retards the sound economic growth of an area.  When the UR Plan provides for the use of any increase in sales tax to be used to help defray the cost of an urban renewal project, a sales tax “base” for the area has to be determined.  The law stipulates that there is a “look back” period of the previous 12 months  – whatever was collected in that time period becomes the base for all future year collections, and in our plans that is for 25 years.  Any increase in sales tax will be compared to the base and anything above the base will be diverted to LIFT, our UR Authority.

Typically, municipalities do not include sales tax increment to fund Urban Renewal projects for a couple of reasons.  First, it diverts needed sales tax revenue out of the General Fund to the UR authority.  Secondly, it is a difficult calculation to make.  (Imagine you have sales tax on your Comcast bill, other telephone providers, sales tax on a car that you buy but purchased elsewhere…..  You can see that it is a tricky thing to establish.)

Because Urban Renewal is used to rid a community of slum and blight there is generally a dip in sales and property taxes for the first few years while redevelopment is occurring.  And slum and blighted areas, by statute, constitutes an economic liability to the community so it makes sense that new tax dollars would not be present for a few years.  But, as someone from the Institute of Justice told us as they were driven around Littleton to see our slum and blight, Littleton has the best looking slum and blight they had ever seen!

There’s nothing like numbers to prove a point so here you go.

  • Columbine Square UR Plan Area – Sales tax collection was up $19,500 for 2015.  That represents an additional $650,000 in retails sales and a 7% increase over the look-back period.
  • Littleton Blvd UR Plan Area – Sales tax collection was up $71,581 for 2015.  That represents an additional $2,386,033 in retail sales and a 13.6% increase over the look-back period.
  • North Broadway UR Plan Area – Sales tax collection was up $22,959 for 2015.  That represents an additional $765,300 in retail sales and a 2.5% increase over the look-back period.  But this calculation is being challenged.  The city did not follow the law that states anything collected over the base is increment and is to be deposited into the special fund of the UR authority.  The city decided they could use the increment to pay King Soopers their tax share-back amount that was negotiated in a separate agreement.  Acting city attorney will be issuing a second opinion and we expect to see this number increase.

As you can see, Littleton is thriving, even in our “slum and blighted” areas.  With the increases that we are seeing in the Urban Renewal areas, perhaps we should leave well enough alone!  We don’t need to fix what is not broken.

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