Fund Board faced with taxing issue

School district begins debate on renewing the half-cent sales tax for education

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Where the money goes

Capital

Artificial turf field

Two middle school additions

Purchase of Padgett property adjacent to Soda Creek

Buses

Technology

Computers

Pay for staff for technology support

AV equipment

SMART Boards

Cameras

Microscopes

Educational Excellence

Pays for 14 teachers to support small class size

Gifted and Talented program

English Language Learners program (or English as a Second Language program)

Articulated foreign language program

— The elimination of the millions of dollars the half-cent sales tax generates would make Dale Mellor's job much easier, but the Steamboat Springs School District director of finance hopes that day never comes.

"What would happen if this district didn't have the half-cent sales tax?" Mellor asked. "It would be devastating."

On Monday, a majority of the Steamboat Springs School Board and Education Fund Board members met for a roundtable discussion of many issues, most notably seeking to renew the half-cent sales tax in November.

The half-cent sales tax is set to expire Dec. 31, 2009.

"Everything would be on the table," Superintendent Donna Howell said of cuts that would have to be made if the tax is not renewed.

The half-cent sales tax dates back to the early 1990s when the Steamboat school district was growing while the state was substantially cutting funding of public schools.

In 1991, the Parent Budget Review Committee was formed to help the district figure out how to cut $700,000 from its budget.

"Out of that came the conclusion that we can't fund technology and the growth we were seeing at the time when our budgets were being cut like that," said Jim Gill, a former School Board member and Fund Board president.

A group of people, including Gill, formed Just Good Cents and created the idea of the half-cent sales tax, which was an innovative way to gather money through a sales tax paid by both locals and tourists.

A half-cent on top of every dollar spent on any taxable item in the city would go to education.

Community members, or taxpayers, would serve on two commissions - Growth and Technology. The commissions would review staff and community requests for funding.

The Growth Commission would focus on reducing class sizes and purchasing land to accommodate current and projected student growth. The Technology Commission would fund labs, computers and telecommunications, among other technology-related needs.

Luxury items

The requested items for funding were supposed to be beyond the scope of the district's budget.

In 1993, the half-cent sales tax passed with 59.3 percent of the vote.

In the first three years, the half-cent sales tax generated approximately $1.2 million annually. A 501(c) 3 corporation called the Steamboat Springs Education Fund was created. The board received recommendations from the Growth and Technology commissions on how to use money from the half-cent sales tax.

Funding for approved items was then given to the Steamboat Springs School Board as a gift. For legal reasons, the Fund Board, as it has become called, had to - and still has to - remain separate from the School Board because a school district cannot legally supplement its budget through its own sales tax.

Steamboat voters renewed the half-cent sales tax in 1996 with 62.9 percent of the vote and again in 1999 with 56 percent of the vote.

"The reason I believe the community has supported it is No. 1, we spent the money the way we said we would. There was no bait and switch," Gill said. "No. 2, they were citizen commissions. We put ads in the paper and citizens signed up. They wanted a good education for the kids."

But Gill said he never envisioned the half-cent sales tax would generate the amount of money - approximately $22 million - it has in about 13 years. Actually, Gill said he and the other creators of the concept thought the tax would last four years, so the commissions had four years to enhance the district as much as possible in tough financial times.

"I think (the tax) has been great for education and great for our kids," Gill said. "It's been a wonderful mechanism, and it's been unique."

Current process

The Fund Board was restructured in 2001. The Capital Commission to help fund large-scale capital projects was created and the Growth Commission was renamed Educational Excellence because growth had subsided and Steamboat wasn't projected to have a boom in student population.

The number of School Board members who sat on the Fund Board was scaled back from four to two, but the number of community members increased, which has increased the number of volunteers the Fund Board relies on for its success.

The half-cent sales tax revenues have gone from $1.2 million in its first year to $2.5 million during the 2005-06 school year. The 2006-07 sales tax dollars are projected to be $2.6 million.

The half-cent sales tax numbers have gone up with the exception of 2001 through 2003 when tourism was down after Sept. 11.

Fund Board accountant Paul Strong estimates slightly more than 50 percent of the total money generated from the sales tax is paid for by tourists, although Strong has heard the percentage of money tourists contribute is as high as 70 percent.

Breaking it down

Steamboat has an 8.4 percent city sales tax, which means a $10 item costs $10.84 with tax. Of the $10.84, 10 cents goes to Routt County, 29 cents goes to the state and 45 cents goes to the city of Steamboat Springs. Five cents of the 45 cents the city collects goes to the Fund Board.

If the half-cent sales tax isn't renewed, that same item would cost $10.79 with tax.

"There is no legal limit to what the city can charge," said Strong, who also serves on the Steamboat Springs City Council. "But what is the tax appetite of voters? People think we are close to the limit."

Those who found a way to use the tourism industry to generate money for local schools should be applauded for their innovation and creativity, said Howell, who came to the district in summer of 2003.

Howell said the loss of the sales tax could have a dramatic impact on the district.

"When we budget, we factor it in because we know we are going to get it," Howell said.

Piece of the pie

The district's reliance on the half-cent sales tax for funding could prove costly.

"All of a sudden, that fund has become a larger percentage of that district budget than we anticipated," Gill said. "Sales tax has gone up at a faster rate than the state has increased state funding."

An estimated $700,000 was gifted to the district to fund small class size this school year, which consistently is the Fund Board's top priority and remains the single largest recipient of Fund Board dollars, said Educational Excellence chairman Paul Sachs.

The $700,000 is being used to pay for approximately 14 teachers, Mellor said.

Eighty-six percent of the district's $18.3 million budget this year already is being spent on salaries and benefits, Mellor added, so the Fund Board gifts are being put to use in important areas such as technology and curriculum.

Reducing the rate

Mellor read comments recently that several Fund Board members think it might be time to lower the amount of sales tax to a third- or quarter-cent on the dollar.

"I think we should look at something less," Fund Board member Mike Loomis said. "We need to look at the size of the fund."

Gill, who no longer sits on the Fund Board, agrees.

"I think that people will find it increasingly difficult to spend that sum of money on truly educational needs," Gill said. "The school district represents a community need. Is that need unlimited in terms of its funding? The answer is probably no."

But Mellor argues the percentage of the school district's budget that comes from Fund Board gifts hasn't increased dramatically through the years.

Fund Board gifts represented 10 percent of the district's budget in the mid-90s. Fund Board gifts of $2.2 million represent 12 percent of the district's $18.3 million budget this year.

The percentage of half-cent sales tax dollars the district uses in its operating budget has remained between 8 and 15 percent since 1993, Mellor said.

"It's not becoming a bigger and bigger part of the budget," he said. "The dollar amount gets bigger, but so does our general budget. As a percentage, it's not getting bigger."

Other questions

How much the Fund Board asks for is just one question to pose in the coming months.

Another question centers on how many additional years the Fund Board will ask voters to renew the sales tax.

The consensus Monday was eight years.

Gill wishes he would have known the half-cent sales tax was going to last at least 16 years because "hindsight is 20/20," and the Fund Board may have done things differently since 1993.

"The first taxing authority was only for four years, so our focus at that time was four years," Gill said. When the tax was renewed in 1999 to add an additional eight years to the expiration date of 2001, Gill remembers telling the Fund Board, "We have more fund life in front of us than behind us. Let's be smart. Let's take a longer perspective."

Hayden and South Routt

Another question is whether to include Hayden and South Routt in the sales tax discussion, a topic that has been brought up because South Routt and Hayden residents spend money in Steamboat.

Gill said Hayden and South Routt declined to be included when asked originally in 1993.

Whether to include Hayden and South Routt "is probably one of the most important questions on the poll," said Fund Board member Harry Lambart. "I'm concerned once we open that door, I just don't know how you would control it."

The Fund Board has set up a committee to meet and discuss the aforementioned questions and a community survey likely will occur in the coming months. Strong said the City Council needs to have two readings on any ordinance before including it on a ballot, so the city ultimately will decide whether to put the half-cent sales tax issue on the ballot.

"It has to be on the (City Council) agenda by early August," Strong said. "But you need to be presenting early on. You hate to go there in August."

- To reach Melinda Mawdsley, call 871-4208 or e-mail mmawdsley@steamboatpilot.com

Comments

steamvent 7 years, 11 months ago

Wait, one of the creators of this sales tax education fund now says it is likely generating more money than can be spent? Maybe we should all listen to that assessment. This tax points out two obvious issues ... NEVER pass a tax that does not have a sunset and when any entity is benefited by the public trough, it will develop a growing appetite ... can you say Tax and Spend?

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