Residents likely will have a lot to decide in November. Last week, the City Council gave initial approval to placing three taxes on the ballot:
A 5 mill property tax to raise about $1.9 million per year for fire safety.
A 2.8 mill property tax to raise $1.1 million for operation of the Howelsen Hill complex.
And an excise tax that would charge 1 percent of valuation on new development. That tax, if approved, would replace the current impact fee assessed on new development.
Using current assessments, the new property taxes would cost residents with a home worth $300,000 more than $200 per year in new taxes. The city has not had a property tax in 20 years, instead relying almost solely on sales taxes, which work well when the economy is healthy and tourism is strong. But when the economy starts slipping, as it has in the past year, a sales tax can become an inconsistent and unreliable source of revenue.
Currently, the city is hoping to finish the year with sales tax revenues similar to last year's $13.8 million. Use taxes, the city's other primary source of revenue, are well below last year. Even prior to this year, sales and use taxes were only providing enough funding to keep pace with maintenance and operations. The city has no capital fund to speak of, though the council has made it a goal to save 15 percent of revenues for a capital fund in the coming years.
The city likely can't reach that goal without either making significant cuts in its existing budget or finding an additional source of revenue. That's where the proposed property taxes come in. They would give the city an estimated $3 million per year. And property taxes are attractive because they draw heavily from second homeowners, who account for half of the homes in the city. While such homeowners are in the city for only part of the year, their homes receive some city services such as fire and police protection year-round.
Overall, it makes sense for the city to seek these tax initiatives, but challenges are ahead in getting the proposals approved. First, there simply may be too many tax items on the ballot. As it stands, the city plans to ask three questions. The county will also seek a property tax increase to pay for an $18 million judicial facility the state is pressuring the county to build. Getting Steamboat voters to approve all four tax measures is a longshot. Instead, such an overload could create a backlash in which none of the measures is successful. To prevent such an occurrence, the City Council should consider removing the lowest priority item the property tax for Howelsen Hill when it finalizes the ballot next month.
A big challenge for the city will be selling the taxes to commercial property owners, who will be assessed at three times the rate of residential property owners. And all property owners will want to know if the proposed taxes are one-time issues or the first steps in transitioning the city from a reliance on sales taxes to a reliance on property taxes.
The city has some work to do to make its case to the voters and a little more than three months to do it.