The questions and answers below were prepared by the Colorado Municipal League (CML) and are reproduced here with permission.
Urban renewal is primarily the act of revitalizing a failing urban area in order to restore economic vitality and improve the safety of the area, although the urban renewal statute is flexible and can be used for development, as well as redevelopment. Understanding that redeveloping urban areas is much harder and more expensive than new development, Colorado has empowered local authorities with certain tools, including eminent domain and tax increment financing, to encourage urban renewal activities. All 50 states have some form of urban renewal law.
Urban renewal is critical to the success of local communities and the long-term prosperity of citizens living in urban areas. Without urban renewal, there would be no incentive for developers to tackle the challenges associated with redevelopment, and our deteriorating downtown areas would be subject to increased crime and safety problems, while continued growth on the fringes of communities would add to the problem of urban sprawl. But thanks to the urban renewal, cities and towns across the state have been able to save older parts of town and make significant improvements to their communities.
Eminent domain is a tool of urban renewal that gives local governing bodies, including urban renewal authorities, the right to assemble private property for the purpose of accomplishing a necessary public benefit project. The law of eminent (condemnation) may only be used to benefit the public and requires that the private property owner be justly compensated for their property, meaning that he or she must be paid fair market price for the property.
Eminent domain is used in rare and exceptional cases to make difficult projects work. In most cases, the local authority is able to reach an out-of-court settlement with the private land owner. In cases where eminent domain is used, the local authority is required by law to pay the land owner fair market value for the property and almost always also provides relocation packages to the property owner.
Blight is the legal term given to a piece of property when four of the 11 criteria outlined in the statute are met. These factors range from dilapidated buildings, to land title problems, and collectively must be considered to be a threat to the health, safety, peace or welfare of a community, in order for a finding of "blight" to be made.
Tax Increment Financing or TIF is another tool of urban renewal that allows a local authority to leverage sales and property taxes to help finance projects such as infrastructure development or environmental clean up.
When an urban renewal project is being planned, the local authority performs an economic analysis to determine how much additional property and/or sales tax should be generated once the project is complete. The projected tax revenue increase, called a tax increment, can then be used to either finance bonds or reimburse developers for some of their project financing.
A city can only take property for urban renewal once the property has been declared blighted - and property can only be blighted if it meets four out of 11 criteria - and only for the purposes of creating a public good. Contrary to popular belief, a local authority cannot take property away only to generate more tax revenue.
Most people enter into a settlement agreement with the local authorities in which they agree on a package of financial benefits and, in many cases, the land owners end up better off than they were before. Even those people who go through eminent domain come out with at least fair market value for their property and generous relocation packages.
Redeveloping land is considerably more difficult than developing new property. Previously developed sites often lack necessary infrastructure, access and improvements to make them useable. Additionally these sites are often burdened with contamination from years of neglect or through prior uses. With such problems plaguing the sites, there is no demand for the property and the market fails to support it. The tools provided to local authorities through urban renewal are the only way to support the redevelopment of such sites.
The Denver Urban Renewal Authority (DURA) offers language translation by utilizing Google's free translation service. While it's common to find some imperfections in these translations, the service provides easy access to translation in several different languages at no expense. If you have any specific questions or would like to speak with someone in Spanish, please contact DURA at 303-534-3872.