Northglenn – About a decade ago, city officials scored a coup when they persuaded Jordon Perlmutter to redevelop aging Northglenn Mall into a big-box center that refilled city tax coffers.
Now, the north metro city of 35,000 is bracing for a 10 percent dip in sales-tax revenue at the site, now called Northglenn Marketplace. That’s because Perlmutter’s company is opening a bigger center, Larkridge, barely 8 miles north, in neighboring Thornton.
The first phase of the Larkridge retail project at Interstate 25 and Colorado 7 opens next month.
Because Northglenn, like most Colorado municipalities, depends on sales-tax revenue for much of its budget, Larkridge and other projects planned for the northern corridor represent a big threat to Northglenn’s budget – and its ability to provide city services.
The race by municipalities to host new shopping centers underscores Colorado cities’ reliance on sales-tax revenues, as well as the fierce competition among the cities. Many large retail projects are being built with public financing, and cities often seek to “out-incent” each other to bring in their projects.
Northglenn Marketplace’s decline could be exacerbated in coming years as nearby Westminster and Broomfield each open planned retail centers along the fast-growing northern I-25 corridor. The corridor is expected to host much of the region’s population growth in the coming years, but the number of projects in the works also raises the possibility that the area could be headed for retail overbuilding.
Adding to its concerns, the city learned this month that Northglenn Marketplace will lose a major tenant in February when Mervyns pulls out of the market.
Now, Northglenn is pinning its hopes on another project, which would bring a movie theater, restaurants and shops to a spot at 120th Avenue and I-25.
“We’re faced with the reality that the north metro area is going to be one of the fastest- growing areas,” Northglenn Mayor Kathleen Novak said. “Instead of being left out, we want to turn that growth to our advantage.”
Nearly half of Northglenn’s 2004 budget came from sales taxes, and the Northglenn Marketplace at 104th and I-25 contributes a significant amount of the total.
“Ten percent is a good chunk to lose. That is why we are so aggressively pursuing new retail at 120th and I-25,” Novak said.
Colorado’s funding structure for municipalities encourages cities to clamor for retail development because each city directly collects its own taxes and, for the most part, does not rely on municipal income taxes.
“Our cities and towns in Colorado rely much more heavily on locally collected sales taxes than do municipalities in other states,” said Sam Mamet, associate director of the Colorado Municipal League.
A study by the group revealed that for every dollar of property tax brought in by a city, about $4 of sales-tax revenues are collected.
“Colorado cities rely quite a bit on sales tax. That gives us a great deal of flexibility, but one of the things that it certainly leads to is the issue of competition for retail sales tax,” Mamet said.
The competition for retail projects is so intense, Novak said, that it’s not uncommon for city leaders to think they’ve landed a retailer only to see it commit to the city down the road. She cited a deal with Applebee’s a few years ago that the city lost to neighboring Thornton.
“They got a better offer to go across the street,” she said.
Lately, the competition to bring new retail to the region has intensified. The first phase of Perlmutter’s 2 million-square- foot Larkridge project opens next month, and neighboring Westminster broke ground Wednesday on its own project at I-25 and 144th Avenue.
Broomfield is pursuing the Northlands, a 1.1 million-square- foot project by Alberta Development Partners at the northwest corner of Interstate 25 and Colorado 7.
Each city supports its development effort with significant public financing. For Larkridge, Thornton approved up to $23 million in subsidies for improvements surrounding the site. At the Orchard Town Center, Westminster has sold more than $85 million in bonds and “certificates of participation” – a form of lease revenue bond – to help pay for public improvements to serve the project. Broomfield’s Urban Renewal Authority will provide $26.4 million in tax-increment financing to pay for road and other infrastructure improvements for Northlands.
“Communities get involved because there are retail sales dollars involved,” said Jeff Romine, a research economist at the Leeds School of Business at the University of Colorado at Boulder. “They need those dollars to support essential services. The competition is rational and real.”
For its part, Northglenn has assembled the land for its planned retail project and will lease the property to the developers for $1 a year – a move the mayor justified as allowing the city to retain control of the site for the long run.
The city has selected developers Opus Northwest and Goldberg Properties to construct the project’s restaurant and retail portion. Construction on a 16- screen Century Theatres is expected to begin early next month.
While its project is smaller than those planned by cities to the north, landlocked Northglenn is counting on it to increase tax revenues as the Northglenn Marketplace begins what Novak predicts will be an eventual downturn.
But the city isn’t giving up on Northglenn Marketplace. Officials are floating ways to encourage more people to visit the development. Among them is a plan to host a farmer’s market on the site, Novak said.
Perlmutter, however, said he is confident that the site will recover from the Mervyns pullout and the competition from Larkridge. He said there could be a slight drop in business when Larkridge opens, but it should bounce back.
Perlmutter’s company still receives sales-tax rebates from the development.
“I think, overall, we’re not going to find that we’re overdeveloped in commercial because we’ll continue to build in phases as the needs are there,” he said.
Staff writer Kristi Arellano can be reached at 303-820-1902 or karellano@denverpost.com.
