Opinion: Does a Downtown Development Authority make sense for Boulder?

The Boulder City Council is considering forming a Downtown Development Authority (DDA). This entity would be run by downtown property owners and have the power to use tax-increment financing (TIF) to fund improvements in downtown. The theory is that the DDA’s improvements would increase property and/or sales tax from this area, so it should be able to collect this increment to finance public improvements. The DDA’s board would make the decisions within the limits of Boulder’s zoning and other regulations, and state law.

DDA’s are potentially useful in areas where there is a lot of development potential and attendant public infrastructure needs. But that is not the case in Boulder, where our downtown is mostly built out, and whose business success is more a function of the quality of the experience of residents, tourists and employees who come there but live outside of this area.

A significant concern is that what the downtown property owners want may not be what the rest of Boulder wants. Yet these property owners are who elect the board of the DDA. The rest of us have essentially no say.

The details of how TIF would work are also significant. Basically, TIF allocates to the DDA the increase in taxes above their base level when the DDA was formed. For property tax, the increment is first calculated from the original appraised value when the DDA was formed; then this appraised base is adjusted up ongoingly to account for inflation and the general increase in property values.

The base for the sales tax increment is fixed upon formation of the DDA. However, in Boulder, much of our sales taxes are dedicated by citizen vote to specific uses. Therefore, the incremental increase of these dedicated taxes will not go to the DDA, no matter how much more might be collected.

The city’s 3.86% total sales tax is split into these dedicated funds:

The Parks and Recreation Fund (0.25%) maintains pools, recreation centers and city parks. The Community, Culture, Resilience and Safety (CCRS) Tax (0.30%) pays for big building projects like parks and bridges. The Arts, Culture, and Heritage Fund (0.08%) pays for local arts programs, museums and historical projects. The Open Space Fund (0.77%) buys and protects open space land around the city. (Boulder was the first U.S. city to create such a tax.) And the Transportation Fund (0.73%) pays for street repairs, bike lanes and bus programs.

So, all that could be diverted for TIF is the incremental increase in the non-dedicated General Fund share (1.43%). The General Fund pays for our basic needs like police, fire departments and general city staff. That includes the money to deal with homeless people, uncollected trash, etc., all of which reduce people’s enthusiasm to visiting downtown. Also, diverting any of this money will cut into the funding available to be used to pay for all the building maintenance and replacement that the council is finally addressing.

An additional issue is parking. It’s hard enough to park downtown, which further disincentivizes going there. Any additional development, especially the proposed conversion of the only remaining surface public parking lot into a hotel, will make parking even more difficult, and further diminish people’s enthusiasm. This will minimize the tax revenue benefits that otherwise might occur.

Given all the above, it doesn’t make sense to me to pursue forming a DDA. The council can already spend any revenue increases that might occur, so financially there is no benefit to creating a DDA. The council can already get advice from the DMC (Downtown Management Commission), which is the board of CAGID (Central Area General Improvement District). Other informed citizens can be involved as necessary. All the DDA would do is make things more complex with no significantly better outcome, other than for a few property owners who might benefit themselves by getting to build more and congest the area further.

As to the more global budget issues, the council needs to not only ask citizens what they want in terms of services, buildings and infrastructure, but how much in taxes they’re willing to pay, what their priorities are, and what levels of efficient/cost-effective solutions are acceptable to solve existing problems. Build a new rec center, or replace the pool’s boiler? Spend millions on wildfire mitigation to make neighborhoods safer, or densify and make risks bigger and evacuations more difficult? Spend more millions for communications staff, or instead focus on fixing the city website? Be forced to pay our own money to underground powerlines, or require Xcel to pay for this itself? Etc.