South Routt eyes sales tax

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Last year, South Routt Superintendent Steve Jones followed with interest state lawmaker Keith King's attempt to outlaw Steamboat Springs' half-cent sales tax for education.

His interest piqued again recently when he heard the Education Fund Board was looking for ways to distance itself from the Steamboat Springs School District, the state-funded public school system that is the primary beneficiary of the unique city sales tax that generates about $2 million each year.

After years of slashing his Oak Creek-based school district's budget because of shrinking revenues and declining student enrollment, Jones saw the development as an opportunity for the Fund Board to accomplish its goal of loosening its ties to the district while also securing a much-needed additional revenue stream for the cash-strapped South Routt School District.

Now, Jones and members of the South Routt School Board are seeking a portion of the tax revenue they say unfairly and exclusively benefits students who attend Steamboat Springs' public schools while ignoring the county students and communities that contribute significantly to Steamboat's economy.

But their efforts are likely to be met with resistance from the Fund Board, the nonprofit citizen group that uses the tax revenues to fund programs and projects for the Steamboat Springs School District.

At Thursday's South Routt School Board meeting, board members agreed to try to set up a dialogue with the Fund Board. Jones even proposed a revenue-sharing system whereby the Hayden and South Routt school districts could, starting next year, receive 5 percent of the revenue generated by the sales tax. The amount of money dedicated to those districts could increase by 5 percent each year for three years until the Hayden and South Routt school districts shared 20 percent of the annual sales tax revenue, Jones said.

"Let's see if we can at least get them to put it on the table and vote on it," Jones told South Routt School Board members. "If we can eventually get 20 percent between the two districts, that's a pretty big chunk of money. It could really help us."

On Friday, Jones said his proposal would allow the Fund Board to gradually transition away from its established system of allocating tax revenue to the Steamboat Springs School District. But he also said an analysis of how much the South Routt community annually spends on sales tax in Steamboat could provide a more accurate picture of what percentage of the revenue should be shared with his school district.

Whether any city sales tax revenue should or could be shared with other Routt County school districts is the fundamental question facing Fund Board members.

A city tax

The Steamboat Springs Education Fund was established in 1993 through an intergovernmental agreement between the city of Steamboat and the Steamboat Springs School District. The fund is governed by the Fund Board, a nonprofit group composed of volunteers and several members of the Steamboat Springs School Board. Half-cent sales tax proceeds collected by the city are deposited into the fund.

The creation of the fund came at a time when Steamboat's schools were the victim of massive budget cuts, brought on largely by changes in the way the state funded its public schools.

With class sizes approaching 30 students, and the district behind the curve in the booming technology era, former Steamboat Springs School Board member Millie Beall and other concerned community members began discussing ways to create an additional source of revenue for local schools.

Beall previously had founded the Routt County Education Foundation, which used the relatively small amounts of money it could collect through grants and other fund-raisers to benefit all three county school districts. But the limited money wasn't enough to address the serious educational needs of local schools, she said.

"We were looking at a county tax," Beall said. "We wanted to do a Routt County ballot issue."

That idea was quickly nixed when county commissioners told them Routt County had maximized what it could assess its residents, Beall said.

The conversation next focused on what could be done at the city level. Beall and others found a willing participant in the city, provided that an increased sales tax was something the voters would approve. A city sales tax, however, couldn't be used to benefit the South Routt and Hayden districts.

"We didn't feel you could tax people in Steamboat Springs and have them pay for education throughout the county," Beall said. "It was a city sales tax, and that's where we felt it needed to be spent."

Creating the Steamboat Springs Education Fund and its governing Fund Board provided the mechanism by which the tax revenue could be collected and allocated to the school district. Working with local attorneys, the city and school district drafted a ballot initiative, city ordinance and intergovernmental agreement. When city voters approved the tax increase in November 1993, the Steamboat Springs Education Fund was born.

The 1993 campaign emphasized the need to decrease class sizes and purchase technology for the school district, and that's primarily how the money was spent in the years after the 1993 election. Voters extended the life of the tax in 1996 and again in 1999. The tax expires in 2009.

Money generated by the tax almost has doubled since 1993, with annual revenue now exceeding $2 million. The district has used the revenue to decrease class sizes, purchase technology, temporarily fund a pay-for-performance program for district employees, expand the Steamboat Springs Middle School and fund a variety of other education-related projects.

Why not share?

While Steamboat's public schools enjoyed their new source of revenue, members of the South Routt community stewed about the tax, which they say benefits Steamboat students but ignores their own.

With many, if not most, of the county's rural residents shopping and spending their money in Steamboat, some of the revenue from the half-cent sales tax should be distributed to the county's other public school districts, South Routt School Board members argue.

"It's been an issue for a while," South Routt School Board member Bill Babcock said. "You hear it all the time -- 'Why don't we get some of that money?' I think we owe it to them to do something about it."

The board members are looking at the language of the ballot initiatives, intergovernmental agreement and city ordinance to determine whether there's a legal argument for receiving some of the tax revenue.

The ballot language on all three election initiatives stated that the tax revenue would be spent for "educational purposes." It does not specify or even mention the Steamboat Springs School District, and the intergovernmental agreement does not specify that all tax revenue should be spent on the Steamboat Springs School District. Some speculate that the reason for the vague language was concern about the legality of the sales tax. In an effort for equity, state law prohibits school districts from collecting sales tax as an additional source of revenue. The equity issue was Rep. King's stated reason for attempting to outlaw Steamboat's half-cent sales tax for education early last year.

Jones interprets the ballot language to mean that voters simply approved a tax increase that would be used for educational purposes, not exclusively for the Steamboat Springs School District.

"I think the voters voted for it to be used for educational purposes," Jones said. "I would think the majority of those voters would be fine sharing that with some of the other students in the county."

For many others, it always has been obvious that the sales tax was specifically for Steamboat Springs School District schools. Only city residents could vote on the tax, and the manner in which the revenue would be spent specifically addressed the needs of Steamboat schools.

"I don't think the Steamboat Springs voters intended for this money to be distributed outside of the city or even outside the school system," veteran Fund Board member Jerry Kozatch said.

Nonetheless, for the past six years, the Fund Board has paid a grants writer to work and secure money for all three Routt County school districts. To date, the grants writer has generated more than $2 million for the Hayden and South Routt school districts.

Jones said much of that money might have been received by the district without the help of a Fund Board-sponsored grants writer.

Even if the Fund Board was to share additional tax revenue with other districts, that mandate needs to come from the voters who approved the tax, not the volunteer members of the Fund Board, Kozatch and other Fund Board members said. Fund Board members also said sharing the revenue with other districts would require a major overhaul of the detailed and time-intensive process they use to allocate tax proceeds.

In the meantime, members of the South Routt School District appear determined to push the issue.

If the Fund Board isn't open to discussing sharing some of the tax revenue with neighboring districts, the South Routt School District could pursue other options, Jones said.

"I'm not positive there couldn't be some legal challenge made to that fund if it's spent exclusively on the (Steamboat Springs) School District," he said, adding that he'd prefer to work collaboratively with the Fund Board.

"Let them hear what some of our needs are," Jones said. "Let us be part of the process."

-- To reach Brent Boyer call 871-4234

or e-mail bboyer@steamboatpilot.com

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