Thanks to a joint effort by Kutak Rock’s Denver public finance and litigation attorneys, Colorado urban renewal authorities will be able to keep and use property tax increment revenues for redevelopment projects to the full extent intended by the State legislature in adopting the State’s Urban Renewal Law.

Following hard-fought litigation and an adverse outcome in the Arapahoe County District Court, Kutak Rock litigation partner Tom Snyder successfully argued an appeal by the Aurora Urban Renewal Authority (AURA) in the Colorado Court of Appeals. In an extensive and well-reasoned opinion, the Court of Appeals held that the State Property Tax Administrator’s office had erred when rewriting its Assessor’s Reference Library (ARL) regulations, resulting in a substantial diversion of property tax increment revenue away from urban renewal authorities and into the pockets of overlapping taxing entities.

Tax Increment Financing

Colorado urban renewal authorities are authorized to receive both sales tax and property tax increment revenues in urban renewal areas, and to apply them to redevelopment projects. Tax increment revenues include the incremental increases in sales or property tax revenues above the levels (the “base”) collected in the year before an urban renewal area is established.

Colorado law requires the State Property Tax Administrator to write regulations (contained in the ARL) for the calculation of the property tax base and increment by County Assessors. When the Assessors apply the ARL, they have been required to allocate property valuation increases due to “indirect benefits” of redevelopment activities to the base. This reduces the increment and therefore reduces the revenue available to urban renewal authorities. In some cases these reductions are severe and can effectively impair or prevent the successful financing of urban renewal projects. AURA filed its litigation to challenge the application of the ARL by the Arapahoe County Assessor.

Arguments and Outcome

A Kutak Rock litigation/public finance team, consisting of litigators Tom Snyder and Tom Isler and public finance attorney Dan Lynch, along with the Aurora City Attorney’s Office, represented AURA in the litigation. Mr. Snyder argued the appeal along with counsel for a property owner and several special districts with projects in an AURA urban renewal area. The Property Tax Administrator was represented by the Colorado Attorney General’s Office and the County Assessor was represented by the Arapahoe County Attorney’s Office. Amicus curiae briefs were filed by numerous affected parties.

In AURA’s brief and in oral argument Mr. Snyder was able to persuasively articulate the link between the detailed factual record developed in the District Court proceeding, the serious defects in the ARL and the resulting harm to urban renewal efforts in Colorado. The Court of Appeals agreed, holding that the allocation to the base of property valuation increases due to “indirect benefits” of redevelopment activities was inconsistent with the Urban Renewal Law.

“We’ve taken down a major obstacle to using property tax increments in urban renewal,” said Mr. Lynch. He added, “we believe that we are the only bond counsel practice in Colorado with this kind of litigation capacity backing our legal positions and the interests of our public finance clients.”

Next Steps

As of this date it is unknown what further court proceedings, if any, will be had in the AURA litigation. Unless the defendants seek review by the Colorado Supreme Court, the Court of Appeals opinion will stand and the ARL regulation will need to be rewritten in a way that results in better compliance with the Urban Renewal Law and leads to many more successful urban redevelopment projects in Colorado.