The driving force behind the Steamboat Springs City Council's decision last year to implement impact fees was the notion that growth does not pay for itself and that current residents should not be asked to subsidize growth with their tax dollars.
A city-funded consultant's study showed that city revenues had not kept pace with population growth during the 1990s and recommended impact fees as the solution. Last fall, the City Council followed the consultant's advice and adopted an impact fee on all new development.
We opposed impact fees for several reasons. Foremost in our opinion, is that the city never justified the fees.
The city's revenue shortfalls are not a result of growth but of the city's tax structure, which is almost solely reliant upon sales taxes and building use fees. The city has acknowledged as much by considering targeted property taxes as more stable sources of revenue.
There are other issues with impact fees. Because households have roughly the same impact on city services, impact fees are assessed equally no matter the home size. That means a person who builds a $1 million home and a person who builds a $300,000 home pay the same amount in impact fees, roughly $4,500. The practical result is that impact fees discourage the construction of moderately sized affordable homes, arguably this community's greatest need.
Impact fees are an ill-conceived, anti-growth tax strategy that unfairly penalizes newcomers and longtime residents whose only realistic home ownership option is new construction. And when it comes to meeting the city's revenue needs, impact fees are a drop in the bucket that hardly seem worth the associated headaches. The fees generate an estimated $275,000 per year or less than 1.5 percent of the city's overall budget of $20.5 million.
In our opinion, impact fees should be eliminated altogether with a replacement coming only when the city has a firm tax strategy in place to address its needs in aggregate. Unfortunately, the current City Council has made it clear that impact fees are here to stay unless the community can come up with a different way to generate $275,000.
That's where Referendum 2B on the Nov. 5 ballot comes into play. If approved, the referendum would replace impact fees with an excise tax. If the referendum fails, impact fees remain as they are.
The excise tax, as designed, is preferable to impact fees. The tax would commence Jan. 1 and require that all new development be assessed a 1.2-percent tax on the estimated cost of construction. Those who build larger, more expensive homes would pay more than those who build smaller homes.
The tax addresses affordable housing by exempting the first $150,000 on housing construction of $250,000 or less for residents employed in Routt County.
The excise tax is designed to raise about the same amount in revenues as impact fees. But the excise tax is more flexible in how those revenues can be used, though they would primarily be dedicated to capital improvements, infrastructure needs and major repairs.
In our estimation, the excise tax is nothing more than a Band Aid approach to the city's larger revenue issues. But the tax is a better option than impact fees, and voters should approve Referendum 2B.