Urban renewal in Colorado, a decades-old strategy used by dozens of communities to replace or rejuvenate aging or derelict shopping malls and neighborhoods, has been under fire.

Earlier this year, Littleton passed a first-of-its-kind ballot measure in the state dramatically curtailing the power of its urban renewal authority. Wheat Ridge voters will decide on a similar measure in November.

Fears about eminent domain, which can be used under urban renewal law to push redevelopment forward, have been at the heart of two other high-profile disputes.

In Northglenn, the city vote d last week to condemn the beleaguered Huron Center strip mall. A longtime Persian carpet store in Glendale has been fighting off potential eminent domain as the city readies plans for Glendale 180, a $175 million dining and entertainment complex on the banks of Cherry Creek.

Disputes over urban renewal are not relegated to big cities. Last month, Steamboat Springs’ City Council rejected a $7 million urban renewal plan for the ski resort city’s downtown after a group of citizens threatened to take the issue to the voters.

“Urban renewal law is being stretched beyond its original boundaries and its original purpose,” said Mike Krause, director of local Colorado projects for the libertarian-leaning Independence Institute. “What started off as a great idea has become abused over time.”

The result, Krause said, is that local governments end up picking winners and losers based on which developers receive tax incentives. Should a project go south, he said, millions of dollars of taxpayer money is put at risk.

Throw in the power to designate an area blighted — making it ripe for condemnation — and the door is open to governmental abuse, he said.

Red flags raised

The issue has raised enough red flags that this year the state legislature passed a bill — later signed into law — that gives more control to counties, and to school and fire districts, over the allocation of new tax revenues generated by redevelopment.

Polly Lawrence, R-Douglas County, said she co-sponsored House Bill 1348 because she’s concerned the state’s urban renewal law is not always used properly.

“It seems like some of the projects are much larger and not as targeted as they used to be,” Lawrence said. “In some areas, it’s more of a tax collection tool than an urban redevelopment tool.”

Urban renewal proponents, including Lakewood Mayor Bob Murphy, say detractors oversimplify the issue by automatically labeling a deal between government and the private sector as a “developer subsidy.” But in many cases, the areas being targeted for revitalization have been subject to decades of neglect or are badly contaminated and would never on their face attract private-sector investment.

“Unless this (urban renewal) tool is used, you would not see the reinvestment back into these areas,” said Kevin Bommer, deputy director of the Colorado Municipal League.

Tax increment financing

Central to Colorado’s urban renewal law is tax increment financing, wherein additional tax revenues from future development at a site are used to pay for the installation of roads and utilities at the outset.

A city’s urban renewal authority often will issue bonds to raise the initial capital and pay back bondholders using the future tax revenues, usually over a period of 25 years.

Tax increment financing, or TIF, serves as the underpinning for dozens of renewal projects throughout the state, including the $310 million Streets at SouthGlenn project in Centennial and the $105 million Denver Pavilions project on the 16th Street Mall.

Golden’s urban renewal authority last month paid off the last two loans of a 25-year TIF that brought new bridges over Clear Creek at Ford Street and Washington Avenue and turned the old Hesteds department store — vacant for decades — into the mixed-use Gateway Station project.

The financing mechanism has been used in more modest efforts in small communities, too.

In La Junta, nearly $2 million in TIF money has been spent since 2011 on making improvements to downtown, including new paint and windows for storefronts and new curbs, gutters and sidewalks.

Rick Klein, La Junta’s city manager, said the ability to raise money through TIF is crucial for the 7,000-strong farming community 68 miles east of Pueblo.

“Urban renewal sparked the development that otherwise we wouldn’t be able to do,” he said. “We have great buy-in because businesses see the tremendous good that comes out of the money.”

There are now urban renewal authorities in 49 municipalities in Colorado.

Urban renewal advocates often point to Belmar — the $850 million new-urbanism neighborhood that rose out of the ashes of the former Villa Italia Mall in Lakewood — as a shining example of an urban renewal project done right.

Murphy said urban renewal took an outdated mall with an abysmal 60 percent vacancy rate and morphed it into a vibrant urban landscape that serves as home to more than 2,000 residents and generates approximately $200 million a year in retail sales.

Before urban renewal incentives were put on the table a little more than a decade ago, Murphy said there was little interest among developers to take on such a problem-plagued site.

“We tried everything we could over there until the voters allowed us to use urban renewal,” he said. “Once we had those tools, the phone started ringing.”

Murphy said the public improvements at Belmar were financed by $120 million in bonds issued by the private sector and $40 million fronted by the developer. No taxpayer money was put at risk, he said.

Bruce Baker, a Westminster councilman, said city government should not be in the business of imposing its vision of what is desirable on a redevelopment site. The councilman has sharply criticized his colleagues on the council for their decision last month to issue $40 million in certificates of participation to fund the infrastructure for the city’s future downtown project.

Baker said it puts city assets, including parks and the recreation center, in potential jeopardy because they are used as collateral in the deal. If the downtown project fails or is abandoned by developers, he said, taxpayers ultimately would be left holding the bag.

“It’s basically a development tool to give public money to developers to build,” Baker said. “All this use of urban renewal has done is increase the profit margin and made developers expect this from every city.”

Westminster Mayor Herb Atchison vigorously disagrees with Baker, saying the city has put up collateral in the form of public amenities before and never had a problem. Westminster, he said, is in strong fiscal condition and will be able to pay back bondholders in even the worst-case scenario.

In the meantime, he said, the benefit to the city of a well-planned downtown district on a strategically located piece of ground — the 105-acre site was once home to the Westminster Mall — is immeasurable.

But urban renewal reformers have made headway with their argument that TIF deals can deprive other taxing districts, such as schools and fire protection, of future revenues.

Spirit of resistance

Aside from the bill that emerged from the legislature this year, California lawmakers in 2011 put an end to urban renewal agencies there. The move in the Golden State was part of an effort to reclaim tax revenues that were being diverted to redevelopment efforts.

That spirit of resistance has most recently bled down to Wheat Ridge. Debbie Sarcone, of the citizens group Keep Wheat Ridge Local, helped launch a petition for a ballot measure asking voters to strip decision-making power from the city’s urban renewal authority.

The initiative was validated by the city last week, and if it passes in November, TIF packages in excess of $2.5 million would have to go to a vote of the people.

The campaign was driven in large part by a $6.2 million TIF deal the city awarded to the developer of a planned Walmart-anchored site at West 38th Avenue and Wadsworth Boulevard. Sarcone said a deal of that magnitude needs public input, and ultimately, public approval.

“We’re not against development. We’re not against urban renewal. We’re not against TIF,” she said. “We want these checks and balances. We want accountability.”

John Batey, urban renewal authority committee chairman for Downtown Colorado Inc., said the checks and balances of urban renewal decision-making are baked into what is a deliberately transparent process. TIF packages, he said, can be structured to minimize or eliminate risks to the taxpayer and eminent domain can be taken off the table, as it was in Littleton before the March ballot measure passed.

Or in Fort Lupton, where the city has pledged to avoid eminent domain as it revitalizes 14 blocks of Denver Avenue with urban renewal funds.

“It’s just a threat to people,” Fort Lupton City Administrator Claud Hanes said. “If we’re going to acquire property, it will be on a market basis.”

The danger of a community putting up too many roadblocks to urban renewal, Batey said, is that developers simply will bypass it.

“It is much cheaper for a developer to find a raw piece of land at the edge of town,” he said. “That leads to a situation where the edge of cities keep sprawling and sprawling and the inner cores of cities keep crumbling.”

And that is bad news for places such as Littleton and Wheat Ridge, which have reached a mature stage in their municipal life cycles, Batey said.

“The truly tragic part of this is that they are the inner-ring suburbs of Denver,” he said. “Those are the communities that need urban renewal most.”

John Aguilar: 303-954-1695, jaguilar@denverpost.com or twitter.com/abuvthefold

Five largest urban renewal

Authorities by population

The five largest

1. Denver 649,495

2. Colorado Springs 439,886

3. Aurora 345,803

4. Fort Collins 152,061

5. Lakewood 147,214

The five smallest

45. Silverthorne 4,021

46. Florence 3,847

47. Rangely 2,433

48. Timnath 1,543

49. Dillon 920

Sources: Colorado Municipal League, U.S. Census Bureau