Steamboat Springs The overturning of a controversial ordinance at this week's Steamboat Springs City Council meeting hinged on late-breaking changes of heart by two councilmen.
Councilman Jon Quinn voted in favor of the ordinance on first reading two weeks ago and expressed continued support late last week. Councilman Walter Magill, who missed the first vote, said Saturday that he intended to vote in favor of the ordinance on its second and final reading. Both changed their minds, and the ordinance, which would have prevented city accountants from reconciling building use-tax deposits on building permits issued prior to March 10, narrowly failed on a 4-3 vote Tuesday night.
Reconciliations have been a provision of the Steamboat Springs Municipal Code since 1991 but never have been enforced. With the addition of a use-tax auditor to its staff this year, the city's Finance Department hoped to reconcile all open permits issued since 2005. Tuesday's ordinance was in response to concerns - expressed most loudly by members of the local building trades - that it was unfair to begin enforcing the policy retroactively before March 10, the date the city first sent a letter to open permit holders signaling its intentions.
"I thought about it quite a lot over the weekend," Quinn said Wednesday. "My original stance was based on what I thought was the fairest way to approach it. In terms of fairness, I believe it is still not fair for us to do what we did. But in order for us to right this wrong, we would have had to do an even greater injustice."
Quinn said his original stance was based on his likening the situation to his own business, Northwest Data Services, and his belief that it would be unfair for the city to begin collecting a "keyboard tax" on computers he sold during the past three years.
"It's really not that simple with use tax because you have a transaction that is ongoing until you get a (certificate of occupancy)," Quinn said. "There's no reason any builder worth his salt wouldn't have the documentation."
Magill reasoned similarly. He said that he voted against the ordinance even though he thinks retroactively enforcing the long-standing, but ignored, policy is unfair to builders.
"However, it's the council's job and the city manager's job to collect the taxes that are on the books," Magill said. "There's a lot of large projects that are open right now. I'd like to see the city collect the use tax it's owed."
First in 17 years
City staffers strongly opposed the ordinance and estimated it would mean waving goodbye to about $4.6 million. Quinn noted that estimate is only for use-tax deposits that haven't been reconciled in the past three years.
"The bigger tragedy is, this has not been done properly for years," Quinn said. "If you really think about the number the city missed out on, it's probably phenomenal."
At Tuesday's meeting, Assistant Finance Director Bob Litzau said he has known about the uncollected revenue for a decade and said it was brought to the attention of previous finance directors and city managers.
"I have been trying to implement a system of auditing use-tax deposits for 10 years," Litzau said. "Why it was not carried forward, I cannot answer."
Prior to Tuesday's vote, Councilwoman Cari Hermacinski noted that, regardless of the outcome, the current council would be the first in 17 years to provide the resources to enforce the building use-tax code. Councilman Steve Ivancie noted Wednesday that the new use-tax auditor position was added in a 2008 budget crafted by former City Manager Alan Lanning and approved by the previous City Council.
Local contractors Ed MacArthur, of Native Excavating, and John Shively, of Shively Construction, expressed disappointment with Tuesday's outcome. Shively, who also is president of the Yampa Valley Construction Trades Association, said he doesn't think council members understand it is impossible for contractors to look at lump-sum contracts with subcontractors and know how much they spent on building materials.
"We can tell you that now, because we've got our system set up to do that," Shively said, "but we didn't three years ago."
Kim Weber, revenue supervisor for the city, said there is a mechanism in place for those who don't know how much they paid for building materials. In that case, use tax is assessed at 4.5 percent on 50 percent of the final cost of construction. Shively said that's not always a fair formula, and he cited the example of $500,000 excavation job that may have involved only $40,000 worth of materials.
Also on Tuesday, the developers of 360 Village failed in their bid to extend the urban growth boundary when both the City Council and the Routt County Board of Commissioners denied their application.
The UGB is a provision of the Steamboat Springs Area Community Plan that delineates land appropriate and not appropriate for urban development. It is a precursor to annexation. The proposal for development of 350 acres west of Steamboat includes 240 acres outside the UGB.
The development team urged elected officials to set their policy hesitations aside and consider the greater needs of the community, such as affordable housing. But policy incompatibilities, such as the presence of 1,000 acres of undeveloped land within the existing UGB, won out.