General purposes local governments in Colorado are financed with sales taxes, property taxes and head taxes on employees (as well as various users fees and state and federal grants). Local governments can set their own sales tax rates and even their own definitions of taxable sales (although few use the power to deviate far from the state's definition).
Local governments also have a veto power on almost all land use decisions. They exercise it in advance, by being restrictive in how they zone property so that any innovative use must seek permission for a zoning change from the local government. Local governments can also encourage some kinds of development by zoning property permissively. Local governments can also provide financial incentives like tax breaks or promised municipal services to developers, sometimes in a manner that also binds school districts with property in the locality, despite the fact that school districts have no binding say in the development process.
Sales taxes are imposed on retail sales only, and allow a locality to tax non-residents who shop in the locality. Non-agricultural, for profit businesses pay 3.45 times the property tax rate of residential property owners, under Colorado's Gallagher Amendment, which fixed the percentage of property taxes paid by businesses and residential uses in the aggregate statewide, which has steadily increased the business tax rate relative to residential rates over time. Agricultural property uses receive particularly favorable property tax rates.
In real life, planning departments weigh the cost of providing services to new development against the taxes they will generate. Retail development is most sought after, then other kinds of business development, then residential use favoring high end development which pays more taxes (and developments with HOAs which use fewer municipal services) over affordable housing. Only agricultural uses generate less tax revenue than affordable housing, but their low requirements for services makes affordable housing a difficult thing for a planner to justify permitting even then. Any new residential use spreads excess business tax revenues (net of services need for those businesses) thinner across the residents of the locality.
The result: Every locality chases Wal-Marts, new malls, and big box stores. Business development is usually welcome. Affordable housing, if it can be built at all, usually is zoned to be built at the agricultural fringe of the city, a long way from work places. Creating bedroom communities is financial suicide for a municipality. Creating office parks and malls and complexes of big box stores make taxes lower for everyone in the community. So new malls are built every year, even when the market already has enough retail space, at the expense of older commercial development, creating "dead malls". Cities like Glendale and Greenwood Village, which lots of business development and few residents can afford to keep taxes low. Cities like Centennial, with lots of suburban housing developments, struggle to raise taxes to pay for the services that they need. Cities like Grand Junction which dominate the local retail tax base can fund themselves almost entirely with sales taxes. Cities and counties with weak tax bases have to impose high property taxes to provide the services their residents need. Fast growing areas don't get new revenues to match the needs of local school districts to build new schools.
Also, the sales and property tax base as a whole suffers. Colorado, with its population centers mostly far from its borders, and with Cheyenne the only out of state city near a border, has a captive audience that can't simply drive across a state line to avoid sales taxes. But, businesses can keep taxes down and gain a competitive advantage by locating in unincorporated areas near population centers -- benefiting from their residents without paying sales taxes, and by locating in localities with few residents, but lots of businesses, and hence low property taxes.
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