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Page 2B — COLORADO REAL ESTATE JOURNAL — July 1-July 14, 2015
L E G I S L AT I V E
C olorado’s 70th legisla-
tive session experi-
enced a real déjà vu
from last session. There was
enormous effort for construc-
tion defects reform in order
to encourage the construction
of condominiums. In addi-
tion, there was a continued
fight over regulation of urban
renewal redevelopment and
the use of tax increment
financing to fund those proj-
ects.
In the end, construction
defects reform failed to pass,
despite having sufficient votes
for passage on the House floor.
Conversely, a flurry of late
amendments and negotiations
resulted in the passage of a
questionable urban renewal
bill.
Senate Bill 15-177 sought to
change Colorado’s Common
Interest Ownership Act to:
increase the required notice to
unit owners about the potential
cost and impact of construction
defect litigation; prevent the
removal of arbitration provi-
sions from a community’s gov-
erning documents; and allow
a majority vote of unit owners
vs. a few board members to
bring a claim. The bill’s goal
was to encourage the construc-
tion of condominiums, which
has severely lagged behind all
other product types. Reform
is necessary as condominiums
represent 3 percent of new
housing starts compared to
nearly 23 percent in 2007.
The sponsors of the bill
included senators on both sides
of the aisle, and the prospects
appeared favorable. The bill
passed the Senate, however, the
speaker of the House voiced
strong opposition to the bill
and the bill was assigned to a
“kill committee.” The bill failed
in that committee, despite
broad support from diverse
housing groups including
affordable housing advocates.
The broad coalition of sup-
porters intends to continue
the effort in order to achieve
attainable and balanced hous-
ing choices.
It should be noted that after
the session the Colorado Court
of Appeals issued a decision
that fulfills one aspect of the
bill. The decision confirmed
that an arbitration provision
for construction defect claims
cannot be “amended away” by
a homeowners association if
that provision prohibits amend-
ments without the developer-
declarant’s consent.
Last year the urban renewal
redevelopment process was the
subject of House Bill 14-1375,
the “Urban Redevelopment
Fairness Act,” which was
vetoed by the governor. The
bill included
requirements
that: 1) at
least one
member of
each urban
renewal
board be
appointed by
the board of
county com-
missioners of
the county
in which the
urban renew-
al authority
is located; 2)
the URA
refund, on a
pro-rata basis, any money left
over in the TIF fund once the
financing of the project is com-
plete; and 3) the URA collect
and deposit into the TIF fund
the same percentage of the
underlying municipality’s sales
tax increment as it collects
property tax increment, unless
all of the taxing entities agree
otherwise.
The primary concern with
this bill was that these new
requirements would complicate
an already complicated process
and would dissuade redevelop-
ment. The veto last year includ-
ed a statement that a suitable
compromise was needed to
“establish an equitable method
for widening the tax base that
supports tax increment financ-
ing and increase the role and
participation of counties and
affected local governments in
the urban renewal process,
all while maintaining the flex-
ibility to develop projects that
are focused on addressing the
particular needs of a given
community.”
This session two compet-
ing bills were introduced to
respond to the governor’s veto:
Senate Bill 15-135 and House
Bill 15-1348. Senate Bill 15-135
met the governor’s request to
increase the role of affected
local governments in the urban
renewal process, as well as fairly
distribute remaining increment
funds pro rata following repay-
ment of bonds and obligations.
Unfortunately, other stakehold-
ers rejected this effort at com-
promise and simply reintro-
duced the same bill from 2014
as House Bill 15-1348.
Significant amendments were
made to HB 15-1348 within
the last days of the session, but
the bill passed. HB 15-1348
includes items 1) and 2) above
but also requires the URA
board include a representa-
tive of special districts and a
representative of school dis-
tricts located within the urban
renewal area. Most importantly,
it provides an unclear dispute
resolution process when the
parties disagree about whether
tax increments should be
shared to offset the impacts
of urban renewal projects.
Additionally, there is significant
uncertainty regarding the bill’s
application to existing projects.
The bill applies to urban
renewal plans created after Jan.
1, 2016, but also to any plan
amendments or modifications
adopted after that date for any
addition, extension or duration
of an urban renewal project,
or alteration in the boundaries
of an urban renewal area. Any
change in mill levy or the sales
tax component of any existing
plan is also subject to the bill,
except where the change is
made in connection with refi-
nancing the outstanding bond
indebtedness.
The concern is how the
bill can be interpreted and
applied to existing projects,
which could impact the rev-
enue stream for payment of
outstanding tax bonds. The
bill was signed by the governor
May 29, along with a signing
statement calling for legislative
fixes to the known problems
with the bill. NAIOP will work
diligently with other stakehold-
ers during the interim to fully
identify these problems and
determine how to address
them during the 2016 legisla-
tive session.
Tim Reilly
Chair, NAIOP
Colorado
Legislative Affairs
Committee
Reilly is a director
at Fairfield and
Woods in Denver.