Excise tax proponents know debate is coming

Money would go toward affordable housing

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— Rob Dick believes the problem with the supply of affordable housing in Steamboat and Routt County has less to do with the cost of building a home than it does with the cost of the building lot.

Dick is the director of the Regional Affordable Living Foundation (RALF). His board is urging Steamboat Springs City Council to place a question before the voters in the Nov. 7 election to create an excise tax on new construction.

"The local wage will pay for a house," Dick said. "But it won't pay for the land. To me, the whole thing comes down to the cost of land. We have an affordable land problem."

It's by no means certain that City Council will place the question on the fall ballot. But city government has initiated some of the steps that must be taken before the excise tax could be put to the voters.

The City Council voted 6-0 on July 11 to direct city staff to begin drafting language for a ballot question. And on July 18, council ratified an existing agreement with Routt County that would allow it to join the county election this fall (the city only has regular elections in odd-numbered years). Before the question, which hasn't been formulated, goes to the ballot, an enabling ordinance would have to pass two readings in public hearings.

The tax would be applied on a per-square-foot basis and revenues would be dedicated to purchasing land for affordable housing projects. The city would collect the excise tax and keep it in a separate fund. City Council would decide how the money is spent, acting on recommendations by RALF.

Dick said he fully anticipates there will be a great deal of discussion about the possible ballot language and the dollar amounts of the tax being proposed by RALF.

Steve Cavanagh, a local building contractor and former chairman of the affordable housing committee, said he was surprised to learn RALF was pushing for the excise tax. He said what he thought he had been hearing in public meetings was a preference for a "head tax," or property tax. He objected to the concept of funding affordable housing with a tax on new construction only.

"It's not consistent with what I heard in the meeetings," Cavanagh said. "I think it's unfair to burden the newcomer with problems we have been creating for years. And it's unfair to burden new industries with the labor issues of existing industries."

An important aspect of RALF's proposal is a parallel request that the Routt County commissioners invoke an impact fee on new construction. State law does not permit a county excise tax on new construction. Dick believes the commissioners will find it in the county's best interest to have an equivalent tax so the city excise tax doesn't drive a disproportionate share of construction into the county, in order to avoid the tax.

County Commissioner Nancy Stahoviak said last week she does not believe the commissioners will consider imposing impact fees until the city excise tax is already in place. She said the county would not have to put the question of impact fees to the voters.

Curt Weiss, one of the largest landlords in town, has spoken out against the public sector's involvement in affordable housing issues over the years. Weiss said this week he agrees with Dick that there needs to be a source of low-cost building lots and starter homes. But he doesn't think imposing a new tax on construction, and in particular on commercial construction, is the right course.

"If the city's going to keep piling stuff on us, it's not going to work," Weiss said. "It's just basic economics."

Weiss said the proposed excise tax was a big topic of discussion among Rotarians at their weekly meeting.

"There were 20 people at Rotary who were talking about it," Weiss said. "There's a whole bunch of us that don't think it's right, but are afraid to speak out."

Weiss pointed out that in Colorado, the Gallagher Amendment dictates that commercial property bear a disproportionate share of the property tax burden. He said there's an increasing feeling among business people that they are being subjected to taxation without representation. The Gallagher Amendment requires that businesses pick up 55 percent of the property tax burden in the state and residential property owners come up with the rest.

If it all came to pass and the voters approved it, Dick believes the excise tax, combined with a commensurate county impact fee, could generate more than $1 million in 2001 to purchase land for affordable housing. He arrived at those projections using statistics on the annual valuation of construction in the city and county over the last 10 years, and estimating how many square feet those numbers represent.

Karen Beauvais is a local real estate broker and a member of RALF's board of directors. She believes that excise tax would serve as a stimulus to the construction industry and not a deterrent. By allowing working-class families to build homes on affordable building lots, Beauvais said the excise tax would help contractors and carpenters remain fully employed. Construction activity will continue to benefit all ectors of the economy, she said.

Weiss rejected that argument, saying Steamboat's prosperity is based upon relatively low interest rates.

"We are a little island out here that's prospering because of low interest and the prosperity of the national economy," Weiss said. Further, he believes the shortage of employees here isn't due to the lack of entry level housing, but because unemployment is so low both nationally and elsewhere in Colorado.

"It's going to be very controversial," Beauvais said of the proposed excise tax. "It needs to be explained to people at meetings, in the news media and one on one. We're not trying to be Robin Hoods here; that's not the case."

Beauvais agreed with Dick's conclusion that it is the price of land that is driving the cost of housing. Building lots in Silver Spur Estates west of Steamboat currently cost about $70,000, she said. Using an industry rule of thumb, you can multiply the $70,000 by four and come up with a projected cost of a home, then add the $70,000 back in, Beauvais said. That kind of housing isn't affordable to local families, she said.

The city's formal definition of affordable housing is a dwelling unit for which an individual or family with an income equal to 120 percent of the median household income in Routt County (about $54,000) pays no more than 30 percent of their monthly income.

In order to fit that definition, Beauvais said, the community needs to find lots that sell for $25,000. A single-family building lot in Steamboat might cost $105,000 if you could find one, she added.

Beauvais said she thinks the excise taxes being proposed by RALF are a small amount of money when compared to the total cost of building a home amortized over the long run. And if they aren't put in place, it will become increasingly difficult to house working people here, Beauvais predicted.

"I showed properties downtown this week that were priced from $500,000 to $900,000. They are occupied by working class people. When they sell, how are you going to replace those working class people?"

Beauvais said she knows there are middle class families in Steamboat who would be asked to subsidize affordable housing for others, if they desire to sell their current home and trade up to a larger home.

"It's almost a giving back," Beauvais said. "Is it right? You have to look at it with an open, benevolent heart."

If people can't take that outlook, Beauvais said, Steamboat will begin to change. She observed that permanent residents who own homes here are aging. As teachers, day-care workers, firefighters, policemen, city and county employees and lift operators gradually sell their homes and begin to move away, it will be harder to offer housing to their replacements, she said.

"Absolutely not," was Beauvais' reply when asked if an excise tax that generated $1 million a year would generate excess funds for affordable housing over the course of a decade. In reality, she said, RALF and the city needed more than $1 million a year to meet the need, but they can leverage those revenues with outside grants.

"You'd be overwhelmed by what you can't buy for a million dollars," Beauvais said.

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