Page 10
— Retail Properties Quarterly — August 2016
BRIGHTON, COLORADO
UNPRECEDENTEDGROWTH.
UNLIMITEDOPPORTUNITIES.
ACCELERATING
BUSINESS.
W
hile the adage “the only thing
constant is change” remains
true about life, commercial
real estate developers and
investors crave certainty to
make good business decisions. As a
result, the increasing political turbu-
lence and uncertainty at the local and
state levels of government in 2016 is
challenging the real estate industry in a
number of ways.
n
Municipal turbulence.
At the munici-
pal level, several cities along the Front
Range recently replaced their city
managers and planning directors and
have significant political and personal
fractures on boards and councils, cre-
ating uncertainly regarding projects
seeking municipal approval. New lead-
ership may have different priorities,
code interpretations and development
philosophies that may not sync with
projects in the pipeline.
Additionally, there is increasing politi-
cal pushback against urban renewal,
metro districts, public-private partner-
ships and other forms of public financ-
ing critical to the development of large-
scale real estate projects.The passage
of Question 300 inWheat Ridge and
Littleton is the most glaring examples
of municipal impairment of public
financing tools.
Additionally, new code mandates and
fees chill new development already
challenged from rising construction
costs, skyrocketing property taxes
and tenants fearing the end of our
economic cycle. Proposed initiatives
such as Energize Denver and Denver’s
Affordable Housing Fund each include
significant fees and mandates that will
impair not only future development but
also impact nearly every commercial
building and landlord in Denver.
The unintended consequences of
these well-inten-
tioned initiatives
are higher rents or
property costs for
small businesses
and family landlords.
It’s not surprising the
biggest cheerleaders
for these initiatives
are consultants
who will financially
benefit from their
implementation and
city staff with commendable inten-
tions but little experience owning or
managing real estate. It’s imperative
the real estate community educate and
advocate on these important municipal
issues to strike a balance between our
environmental stewardship and afford-
able housing challenges and protecting
small businesses and future growth.
n
State challenges.
On the state level,
we have lawsuits pending, ballot initia-
tives filed and legislative action or inac-
tion that creates uncertainty in building
and financing projects.
n
Construction defects reform.
Minimal
owner-occupied attached housing has
been constructed in Colorado for years
due to our state construction defects
statute, which has a low threshold for
homeowner associations to sue build-
ers and developers for defects, real or
imaginary. Most U.S. housing markets
have 20 to 25 percent of building per-
mits for condos/townhouses, while
Colorado has less than 5 percent, which
is good for trial lawyers wanting to stir
up HOAs, but bad for entry-level home-
buyers looking for attainable housing.
Proponents of construction defects
reform have worked diligently for years,
particularly during the 2015 and 2016
legislative sessions, to bring forward
legislation to minimize construction
defects lawsuits
that would stabilize
or lower insurance
rates and spur new
condo and town-
home development.
Despite bipartisan
support for reform
in the House and
Senate, the Legis-
lature has failed to
take action.To their
credit, some local
governments have
adopted ordinances to address this
problem but most people agree this is
an issue that should be addressed on
the state level in order to revive confi-
dence and certainty in condo develop-
ment.
n
Urban renewal legislation.
Nearly
every year since 2000, the Legislature
has considered amending the urban
renewal statute, which was instrumen-
tal in creating important developments
such as the 16th Street Mall, Stapleton,
Lowry, Belmar and theTwin Peaks Mall.
Legislative uncertainly has kept urban
renewal authorities and developers
walking on eggshells for years, wonder-
ing when a bill would pass and how
bad it would be.
That question was answered during
the 2015 session when the House and
Senate passed H.B. 15-1348, the Urban
Redevelopment Fairness Act, which
requires urban renewal authorities to
go through mediation with other taxing
entities if the entities cannot come to
an agreement on sharing tax increment
revenues. Because this bill was heav-
ily amended and passed through both
chambers in the final days of the 2015
session, the final bill that went into
effect Jan. 1 was a mess.
The governor signed the bill accom-
panied by a letter recognizing the
bill was imperfect and promising
to appoint a committee to review
the “technical” issues with the bill.
This committee met and, ultimately,
presented a bill for the 2016 session
that clarified many provisions of H.B.
15-1348 but left outstanding the issue of
applicability. It is not clear if the media-
tion requirements in H.B. 15-1348 apply
to projects that were approved prior to
Jan.1, if financing has not yet begun on
the project.This creates enough uncer-
tainty that bond lawyers cannot give
an unqualified legal opinion concern-
ing the revenue stream for the bonds
of affected projects, which is holding
up significant development projects
important to our community.
n
Ballot initiatives.
Colorado has one
of the easiest processes in the country
for putting a “citizen-” (translation: spe-
cial interest group) initiated measure on
the ballot. As a result, it is not uncom-
mon for us to have as many initiatives
on the ballot as we do candidates.
The 2016 ballot will be no exception
with more than 150 ballot initiatives
filed.While most of these have been
withdrawn, there are still a number for
which signatures are being gathered as
of this writing. Some of these, if adopt-
ed by the electorate, could be enor-
mously detrimental to the commercial
real estate industry, so please monitor
them closely this fall.
In closing, we plead with govern-
ment leaders – elected and staff – to
take a more thoughtful and predict-
able approach to governance in these
increasingly turbulent times and take
into consideration the many unin-
tended consequences that come with
well-intentioned legislation, code
updates, fee expansions and personnel
changes.
s
Tyler Carlson
Principal,
Evergreen, Denver
Erin Goff
General counsel,
Axiom Strategies
Inc., Denver
Legislature
