Glendale 180 Entertainment District Moves Ahead Based on 10-Person Vote

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Update: The results of the election are in, and Glendale now has a downtown development authority. 

According to city clerk Sherry Frame, the measure to create one passed 7-3. Only twelve people were qualified to vote in the election. Those twelve people own property, lease space or live within the the DDA boundary (see map below). Of the twelve eligible voters, it appears that only ten cast ballots.

Continue for our previous coverage.

Original post, 11:37 a.m. July 30: On August 4, a small but important election will take place in Glendale, a tiny city with big ideas. A total of twelve people who own property or lease space within a few blocks along Cherry Creek will vote on whether to create a “downtown development authority” (DDA) for the purpose of funding Glendale 180, a proposed $175 million dining and entertainment district that the city would like to build in that area. The vote could have an impact on both the future of Glendale 180 and the viability of a new state law that aims to level the playing field between cities, counties and school districts when it comes to paying for urban-renewal projects.

Why? To explain it, you have to understand the background. And you have to understand Glendale, a 369-acre city ruled by a gregarious, cigar-smoking mayor named Mike Dunafon, who is married to Debbie Matthews, the owner of Shotgun Willie’s strip club.

It was an attempt to curtail the club’s business in the late 1990s that propeled Dunafon into politics. After helping to oust Glendale’s anti-stripper politicians, Dunafon got involved with the city’s strategic-planning initiative. He and other city leaders came up with an idea to bolster Glendale’s reputation as a social hub by building a riverfront entertainment district. Over the past fifteen years, the group has taken several steps toward that goal. The city bought property in the area, and it decommissioned the wastewater-treatment plant, which sat smack-dab in the middle of the would-be riverwalk site. In 2004, the city formed the Glendale Urban Renewal Authority (GURA), an entity that has the power to fund redevelopment projects in order to get rid of blight using what’s known as tax increment financing (TIF).

Urban renewal is a tough concept to explain. It was designed as a way to improve run-down areas that developers would normally stay away from because they need so much work. Whether it’s used that way or cities abuse it is hotly debated.

But here’s an example of how it works: Say there’s a run-down property — an abandoned factory — that generates $50,000 in property-tax revenue for the city. A developer buys it in order to turn it into a mix of fancy condos and boutique shops, a use that the city likes better. But because the property is in such rough shape, the project will be costly, and the developer can’t raise all of the money to do it on his own. So he asks the city’s urban-renewal authority for help.

First, the authority commissions a study to figure out if the property is “blighted” as defined in state law. There are eleven blight conditions listed in the law, including unsafe buildings, unsanitary conditions and environmental contamination. Four of the conditions must exist for the authority to designate the old factory site an “urban-renewal area.”

After examining the developer’s budget shortfall, the urban-renewal authority can agree to contribute money — let’s say $3 million in this example — to help clean up the contamination and fix the unsafe buildings. The authority issues $3 million in bonds, and gives that money to the developer. The developer then uses it to help turn the old factory into fancy condos and shops. As a result, the value of the property increases, as do the taxes. Instead of paying $50,000 per year in property taxes to the city, the developer is now paying $250,000 in property taxes.

This is where TIF comes in. It allows the city’s urban-renewal authority to collect that increase in tax revenue — $200,000 in this scenario — for up to 25 years and use it to help pay back the $3 million bond. So essentially, a portion of the developer’s property taxes are being rebated to fund the project. The same can be done with sales taxes from the project’s retail shops.

In 2013, Glendale’s GURA, which is overseen by the city council, created an urban-renewal area for a 42-acre chunk of land bordered by Colorado Boulevard and Cherry Street, Virginia Avenue and Cherry Creek Drive. The purpose was to use TIF to help turn that land, which they deemed blighted, into a $400 million riverwalk complete with a man-made canal, electric riverboats, a 4,000-seat outdoor amphitheater and dozens of restaurants and bars.

The project has since been scaled back, partly because the city didn’t win a bid for major tourist-attraction TIF funding under a new state law called the Regional Tourism Act. This April, city leaders unveiled the latest incarnation of the riverwalk, dubbed Glendale 180. The canal, the riverboats and the amphitheater have been nixed. Instead, plans call for a 22-acre development within that 42-acre site to include 25 bars and restaurants, a boutique hotel, a cinema, dance clubs and retail shops. Like a miniature Las Vegas just off Colorado Boulevard, leaders envision that Glendale 180 will have a “common consumption area” that allows patrons to carry to-go cups of alcohol from bar to bar. "We've designed a place for maximum happiness," David Glover, the architect for the project, said back in April.

But not everyone is experiencing maximum happiness. A family that owns land within the proposed project area was furious to learn that GURA was considering using eminent domain to acquire land for Glendale 180. State law allows urban-renewal authorities to use eminent domain if five blight conditions are found to exist in an area. A study done in 2013 found that ten of the eleven possible conditions exist in the riverwalk area.

Nasrin Kholghy and her siblings own 5.4 acres there, including the land underneath their shop, Authentic Persian and Oriental Rugs, at 550 South Colorado Boulevard. They bought the land in 2006 and had been working with Glendale for years to come up with a redevelopment plan that fit the city’s vision. The family says the city told them not to worry about the blight study, that it was simply a way to get financing for the riverwalk project.

But when the family members heard that GURA might use eminent domain, they began to worry that the city would force them to sell their land. So they rallied their supporters, who packed a city council meeting in May. In the end, the council voted to allow eminent domain in general — not necessarily for the Kholghy property. But the decision caused a stir nonetheless. Dunafon and the council got an earful — and a lot of bad press. One of the rug shop’s longtime customers, Victoria Beck, called Dunafon a hypocrite, quoting from the Twitter account where he often espouses his views on liberty. “You said, 'Democracy should be more than two wolves and a sheep voting on what to have for dinner,'" she said. "I would like to suggest that’s exactly what two or more wolves are doing here, looking at the Kholghys as if they’re sheep for dinner.”

On July 21, the city announced that it had offered to buy the family’s land for fair market value — $11 million, according to the family. The city also noted that GURA had not used eminent domain after all and “has no intention to do so in conjunction with this project.”

But the family doesn’t want to sell. On July 28, it announced that it had rejected the city’s offer. The family wants to develop its land, but Kholghy is skeptical of the city’s assurances. Even if GURA doesn’t take her family’s land through condemnation for Glendale 180, she says, could the city decide to take the land for another project later? “No developer in their right mind will come and start something if they can be condemned,” she says.

The Kholghys are also upset that the city left their land out of the proposed downtown development authority (DDA). The size of the proposed DDA is 16.6 acres, and it encompasses all of the 22 acres set aside for Glendale 180 minus the Kholghy property.

A DDA is similar to an urban-renewal authority. Like a URA, it can use TIF to help pay for redevelopment projects. But it doesn’t need to declare the land blighted first. The way a DDA is set up is also different. The property owners, tenants and residents who live within the proposed DDA boundaries must vote to create it, and it must be located within a city’s “central business district.” Most important, DDAs do not have the power of eminent domain.

Because of that, URAs are seen as more powerful. Katherine Correll, the executive director of Downtown Colorado Inc., a nonprofit that provides assistance to commercial districts, explains the difference like this: “A URA gives flexibility to bring investment in when it’s hopeless. A DDA can do that, but it tends to be used when things are a little brighter.”

There’s also another major difference, and it’s a controversial one. Earlier this year, lawmakers passed a bill that changes the way URAs are governed and the way they use TIF revenue. The bill allows counties, school districts and any other “special districts” that receive tax revenue, such as fire or library districts, to have a say in how that TIF money is spent.

The goal is to ensure that counties, school districts and the like don’t get the short end of the stick when it comes to urban renewal, supporters say. To use the earlier example of the fancy condos, what happens when a bunch of families move in and want to send their kids to the local school? If that school doesn’t have room, the school district must now find money to build a new school — and it must do so without the increased property-tax revenues, which are all going to repay the cost of building the project, thanks to TIF.

The bill aims to share that tax revenue among the entities that will be affected by the project. It requires the URA to negotiate with them to determine what percentage of the TIF money will be rebated to help pay for the project, instead of assuming that all of it will. The counties were in favor of the bill, but urban-renewal proponents warned that it may cause problems. Governor John Hickenlooper acknowledged that when he signed the bill into law in May.

The bill was a last-minute compromise, and Hickenlooper wrote in a statement that it “could be interpreted to contain ambiguities.” The main issue is a clause that says that if changes are made to an existing urban-renewal project, the parties must renegotiate how the TIF money is split. But exactly what types of changes would trigger a renegotiation are unclear. Some are worried that even slight modifications could throw a project’s funding into flux.

“There’s so much confusion,” says land-use attorney Malcolm Murray. “There’s probably going to need to be some litigation to straighten out what these provisions mean.” Hickenlooper vowed to work with lawmakers next year to shore up the law.

But Carolynne White, an attorney who is representing GURA, says the confusion is already having a negative impact on projects. Even though the new law doesn’t go into effect until January 1, she says banks and lenders are hesitant to provide financing for urban-renewal projects, now that the amount of TIF money that a project receives could change. “Actual deals have fallen through,” she says. “The reason they’ve fallen through is a fear of the unknown.”

Glendale 180, she says, is “a very ambitious project, and it requires a massive investment in public infrastructure,” which city leaders plan to pay for using TIF. “It needs every nickel of TIF we can project to make it financially feasible.”

Mike Gross, the city’s project representative for Glendale 180, says the city is pursuing the formation of a DDA “out of an abundance of caution.” “I just don’t think anybody knows what’s going to happen with this new law,” he says. “It may have a chilling effect on the financing.”

Given that, Gross adds, “it makes sense for us to form the DDA and...have that in place.” If Glendale sees urban-renewal projects in other municipalities falling apart because of the new law, it would have the option of financing Glendale 180 through a DDA instead of a URA, he explains.

DDAs are not subject to the new law, which means that their TIF money is more secure. It also means that DDAs don’t have to let the counties or school districts have a say in how much of that increased tax revenue gets reinvested into urban-renewal projects. “If they do a DDA, they don’t have to let Arapahoe County have a seat at the table,” says Mike Krause of the libertarian Independence Institute, which is opposed to TIF funding in general. “That’s really clever.”

But to Chip Taylor, the executive director of Colorado Counties, Inc., which pushed for the new law, it’s potentially troubling. URAs are more common than DDAs, which is why the bill targeted them, he says. “We’re going to get pressure to look at DDAs if people start using the DDA tool to avoid the cooperation that [the new law] calls for,” he says.

Gross says that Glendale’s decision to pursue the formation of a DDA has to do with the uncertainty of the new law, not an unwillingness to share. The 5.4 acres owned by the Kholghy family was left out of the proposed DDA, he says, because family members have made it clear that they don’t want to be part of the project. “We thought, why include their property in it, have an election and, theoretically, they vote against it and the rest of the people vote for it, and now they’re in a district they don’t want to be in?” he says.

If they change their mind, Gross says, it would be easy to add their property to the DDA later. “If they request to be in,” he says, “then we all know they want to be in.”

But Kholghy suspects there’s another reason they were left out: If they had been included, she figures, between her family members and their tenants, they would have had enough votes to block the formation of the DDA if they’d wanted to. By leaving the family out, the election includes only twelve voters. According to Glendale City Clerk Sherry Frame, three of them are people who registered to vote using the address of the Staybridge Suites, a hotel within the proposed DDA, and chances are they’re not living there anymore. So that leaves nine voters, including a representative of the city, which owns property in the area.

The ballots have already been mailed. Frame says she plans to tally the results August 4.

How long it will be before it’s possible to wander from bar to bar on the banks of Cherry Creek with a frosty margarita in your hand remains to be seen.

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