On May 13, 2026, the Colorado General Assembly has passed House Bill 26-1065 (“HB26-1065”), a new part 4 added to article 46 of title 24, entitled the “Transit Investment Area Act.” The bill creates a new financing mechanism for local governments, groups of contiguous local governments, certain transit agencies. Eligible transit agencies include local or regional transit districts, or a regional transportation authority that provides public transit. Under the bill, these entities may undertake transit investment projects and use a portion of future state sales tax increment revenue generated within approved areas to finance public improvements near transit and rail stations. The tax increment financing (TIF) mechanism established in the bill is similar to urban renewal, but instead of relying on local property tax increment, the bill authorizes the use of a portion of state sales tax increment generated within the investment zone.
While HB26-1065 establishes a significant new financing tool to incentivize residential density and improve infrastructure near transit-oriented communities, opportunities to participate are limited. The Colorado Economic Development Commission (the “Commission”) may approve the use of state sales tax increment revenue for up to thirty years, but may approve no more than three transit investment projects per calendar year, no more than six projects total, and may dedicate no more than $75 million in any fiscal year to approved projects. Although the legislative policy discussion emphasizes Front Range transit hubs, the bill’s legislative declaration states that the financing option is intended to be available to communities throughout the state and the application process includes consideration of geographic diversity.
Key Features of the Bill
Beginning in 2027, a local government, either alone or in partnership with a transit agency that has jurisdiction within a proposed transit investment area, may apply to the Colorado Office of Economic Development & International Trade (“OEDIT”) and the Commission for approval of a transit investment project that is located within the Transit and Housing Investment Zone that OEDIT is required to publish by October 30, 2026.
The bill prescribes extensive application requirements, including a detailed economic analysis to be performed by an independent third-party analyst selected through OEDIT’s solicitation process to evaluate the maximum annual state sales tax increment available for pledge to a transit investment project. Final sales tax increment amounts are determined by the Commission. Applications must also include maps, project scope and phasing, operations and maintenance plans, and capital reserve plans.
To be eligible to receive TIF, applicants must either: create a new Transit Investment Authority in the application process whose membership and eligibility is prescribed in the bill, or designate an existing eligible financing entity, such as a county revitalization authority, metropolitan district, or urban renewal authority, to receive and disburse the state sales tax increment revenue. The bill expands the authority of a county revitalization authority established last year in HB24-1172 and codified at §§ 30-31-101 et seq., C.R.S. and authorizes urban renewal authorities to receive state TIF without a substantial modification to urban renewal plans.
The bill also amends § 39-22-5701, C.R.S. to create a new affordable housing tax credit for qualified low and middle-income housing projects located in transit and housing investment zones as designated in the OEDIT-prepared map. The credit may be allocated to owners of qualified developments, including governmental or quasi-governmental owners, and may be claimed by qualified taxpayers with a direct or indirect ownership interest in the development. As amended, the bill allows $8,333,333 in credits to be awarded each calendar year from 2027 through 2033.
Powers and Limitations
A Financing Entity may issue general obligation and revenue bonds, receive and expend state sales tax increment revenues, enter into contracts, acquire property, and take other actions necessary to implement an approved project. However, it may not exercise eminent domain or impose taxes, and its use of TIF revenues is limited to the transit and infrastructure purposes authorized by the bill and approved through the state application process.
Why It Matters for Local Governments and Transit Agencies
For local governments and transit agencies, HB26-1065 creates a potentially important new revenue streams for transit-adjacent infrastructure. The bill may help communities finance public improvements that are often necessary to make housing and mixed-use development feasible near transit centers, particularly where infrastructure costs otherwise make projects difficult to deliver.
Local governments, transit agencies, developers, and public finance stakeholders should begin evaluating whether planned transit-adjacent infrastructure or housing projects may qualify for the new program once OEDIT publishes the Transit and Housing Investment Zone map.
For questions about HB26-1065 or its potential impact on local governments, transit agencies, or development projects, please contact Kirsten Crawford at kcrawford@kaplankirsch.com.