The Steamboat Springs City Council took an important step last week when it voted to create a tax policy review committee. Now comes the hard part -- forming the committee and undertaking an intense review of the city's tax structure.
The creation of such a committee is preferable to the city's efforts to implement a property tax each of the past two years. Those tax proposals were shot down in part because there wasn't any sense that the taxes sought were part of a long-term strategy. Rather, the city's proposals seemed to be nothing more than a move to raise more revenues for capital projects that lacked taxpayer support.
Now, in the words of City Council President Paul Strong, the city is ready to let "residents tell government what they need."
The council decided that the tax policy group should be made up of nine members, with at least five but no more than seven coming from within the city limits. The other members will come from the county. The makeup seems appropriate.
The group will be expected to give a recommendation to the council by June, meaning the committee has a lot to do in a short period of time.
The case for reviewing the city's tax structure is strong. Steamboat relies almost solely on sales taxes and is one of only nine municipalities in Colorado without a property tax.
When this tax structure was established more than two decades ago, the thought process made sense -- a steady stream of visitors would shoulder the tax burden for the city's permanent residents. But while the city has doubled in population since that time, the number of visitors has not.
Sales taxes are susceptible to the whims of the economy. After soaring throughout the 1990s, the city's sales tax receipts have been flat or decreased the past two years. Revenues rose only 0.4 percent last year and remained behind 2001 revenues.
It's too easy to say a new property tax alone will solve the problem. A property tax is a more stable source of revenue than sales tax, but the Gallagher Amendment makes such a tax unpalatable to commercial businesses, which pay three times the rate residential properties pay.
Against that backdrop, here are some questions the tax committee must weigh before it can make a recommendation:
n What level of new tax is politically viable given the community's general aversion to any and all new taxes?
n Should the city consider a revenue neutral approach, offering sales tax relief that effectively offsets the implementation of a new property tax with the opportunity for revenue growth in the future?
n Can and should the city remove its most regressive tax, the sales tax on groceries?
n Are there other sources of revenue -- taxes on lodging, transportation or entertainment, for example -- that should be considered to fund specific amenities?
n Are tax proposals being considered by other entities, and what impact would those proposals have on any recommendations the tax committee might make?
n The City Council has decided that the committee should not consider the expenditure side of the equation, but is it realistic to develop an effective tax strategy without considering expenditures?
There is no guarantee the city's tax policy committee will be successful. But give the city credit for doing what it should have done when its property tax proposal failed in 2002 -- asking the community to help find a tax structure that meets the needs of taxpayers as well as city government.