Tax-cut plan already impacting city budget

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— The latest tax proposal from Douglas Bruce hasn't even gone to the voters yet, and City Manager Paul Hughes says it's making the city budget process a challenge.
Hughes said late last week that Initiative 205, authored by Bruce, has the potential to wipe out more than $500,000 in franchise fees in its first year.
"This could have a disastrous effect on our revenues beginning next year," Hughes said.
Bruce was not available for comment Friday afternoon.
The fees Hughes is talking about are collected from utilities like Yampa Valley Electric Association, AT&T Cable and Greeley Gas. The city collects a similar fee, called an occupancy charge, from U S West. The city usually finalizes its budget in October, but Hughes said Initiative 205 will make it difficult for him to prepare a realistic budget for City Council's consideration until after the Nov. 7 election.
"This is another example of good intentions gone berserk," Hughes said.
Bruce is well known for having authored the Taxpayer's Bill of Rights in 1992. He told the Steamboat Pilot in June that his newest ballot initiative is meant to gradually shift the tax burden from taxpayers at the local level to the state. It would reduce some state and local taxes in increments of up to $25 on each bill. But Hughes said the $25 increment would wipe out some franchise fees in a very short time.
City Councilman Bud Romberg agreed, and said the wording of the initiative is particularly significant for franchise fees which are collected monthly by utilities like Yampa Valley Electric Association.
The franchise fee YVEA collects for the city is 4 percent, of which 1 percent is set aside to retroactively bury existing power lines. So, consumers pay $4 in franchise fees for every $100 worth of electricity they use in their homes. If a local household paid its highest electric bill in January and used $200 worth of electricity, its franchise fee of $8 wouldn't come close to $25, so Initiative 205 would essentially wipe out that monthly collection of franchise fees.
Hughes calculated that someone would have to have a monthly electric bill of $625 before they would pay any franchise fee to the city, if Initiative 205 were approved by voters. That threshold would increase to $1,250 in the second year under Initiative 205, Romberg said.
"The (initiative) is so onerous, I don't know where the money would come from," Romberg said. "There's got to be money to run local government. This would take it all."
In his interview with the Pilot, Bruce said that the fears of local government are unfounded because the the initiative calls for state government to replace the monies gradually being shifted away from local government. But Hughes and Romberg say they can find no language in the initiative that requires the state Legislature to reimburse those lost revenues. Romberg said the only local governments assured of having their revenues protected by the state are public school districts.
Romberg said the implications of Bruce's "Tax Cut 2000" also are a threat to small taxing entities like the East Routt Library District and the Steamboat Springs Cemetery District. That's because they levy a fraction of a mill of property tax, generating small property tax bills for each property owner. The $25 tax relief the first year, growing to $50 the second year and $75 the third, could quickly eliminate the budgets of those small taxing districts, Romberg said.
But Bruce insists the state would backfill or replace those lost revenues.
"They aren't going to be hurt at all. They came up with the same rubbish eight years ago, saying that schools will close, roads will crumble and there will be total disaster," Bruce told the Pilot. "To think that I would write something that would wipe out those districts overnight is incredible."

To reach Tom Ross call 871-4210 or e-mail tomross@amigo.net

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