Towny Anderson: Sales tax and community character

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The recent City Council debate about requiring big box retail in the proposed Steamboat 700 annexation, coupled with our current precipitous decline in sales tax revenues, once again has brought the sales tax discussion to the fore. Is it time to revisit the conclusions and recommendations of the Tax Policy Advisory Board, presented to City Council on Feb. 1, 2005?

The basis for the TPAB's recommendation against "any change to the City's tax structure at this time" was that during a 10-year period, sales tax revenue growth outperformed property tax revenue growth. Although this may have been true then, now, facing an uncertain future, did we frame the analysis correctly? Were the assumptions correct? Did we ask the right questions?

A sales tax-supported government never sees a commercial development it doesn't like. It has no choice. If it wants to keep up with services, improve services or add new services, it must embrace retail growth, even if it puts government at odds with its citizen-driven community plans and surveys. It must stop leakage; it must increase not only local and visitor sales but also regional sales. In short, it must become a regional commercial center and it must grow, grow, grow its retail base.

There is no surer way to do this than to entice a big box or two, and through incremental change and cumulative impact, a sales tax-based community wakes up one morning realizing it has become Generica, USA. The best it can do is pretty up the facades and demand concessions to mitigate impacts on its community character. A devil's bargain and a great community vision, eh? We can, if we choose, realign our tax base and free ourselves to define a different future.

In a community where second homes comprise nearly 50 percent of the housing stock, city and county residents and visitors unwittingly subsidize second-home owners, of whom more than 50 percent are here no more than six weeks a year. What if we replaced half of the annual sales tax revenue with a property tax? What if a property tax rebate program for local commercial property owners relieved their current lopsided burden imposed by the Gallagher Amendment? What if the property tax revenues were dedicated to essential services? The second-home owners would pay their fair share of local services, the commercial property owners would not be unduly burdened, and the city would liberate itself to make choices that were better aligned with citizen aspirations as expressed in community plans and surveys.

When we participate in drafting community visions and plans, when we volunteer with community nonprofits and recreation programs, when we bemoan the loss of Boggs Hardware, we are expressing our "citizen selves." The citizen self supports the local independents because it knows that local business owners support the community. Their daily receipts don't get wired to Bentonville, Ark., at the end of every business day.

But when we bypass Boggs Hardware for a regional or national store, when we drive to Silverthorne or Denver to buy blue jeans or cheaper underwear, when we seek the lowest price no matter where it can be found, we are expressing our "consumer selves." Schizophrenically and unintentionally, we are undermining everything our "citizen selves" are striving to build and maintain.

Our tax policy reinforces the consumer self. If we adopted a property tax to reduce our dependence on the sales tax, we could nurture our citizen self, the self that desires to preserve Steamboat's small-town character. We liberate ourselves from the "need" to capture more sales dollars, we balance our consumer selves with the good of the whole community, and we break the linkage between the sales tax and the inexorable march toward Generica, USA.

Towny Anderson is a member of the Community Alliance of the Yampa Valley

Comments

Moose 5 years, 8 months ago

Sorry Scott. As I said, this discussion is enlightening! Thanks for response.

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Fred Duckels 5 years, 8 months ago

Towny, This is an excellent solution to curb runaway growth and allow us to be a special place. John Quinn has been suggesting this possibility, and I think the time is right for a discussion.

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Scott Ford 5 years, 8 months ago

If a city property tax is the answer have it applied on the same basis as the property tax collected for the school district, library, county, etc. Why would the application of a City property tax be different?

The creative and complex approach being proposed is an effort to shift responsibility to someone else "let's figure out a way to get someone else to pay." In this case that someone else is the second home owners. To me this seems intellectually dishonest. It could work if and only if ALL the entities that collected property taxes in Steamboat Springs followed the same rules.

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smart65 5 years, 8 months ago

Great idea if you include doing away with sales tax on food.

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Steve Lewis 5 years, 8 months ago

Scott, I get the opposite from Towny's article that you have.

His is an attempt to take better control of our destiny, precisely by taking more responsility - paying for it ourselves!

The Gallagher Amendment means that today commercial property owners pay 4x the property tax rate that residential property owners pay. This ratio has been steadily increasing.

In saying Towny's attempt to level commercial and residential contribution to our future is intellectually dishonest, I take it you are supportive of this Gallagher proportioning of 4 to 1 in taxes paid. Why?

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1999 5 years, 8 months ago

scott,

i respectfully disagree.

the concept is more about we the people taking resonsibilty and diversifying our tax income.

by soley relying on sales tax we create a situation for more reatail sales and thus stores.

so as now, when sales tax revenues are down we start scambling and thats when regetable decisions can be made. people freak out and get scared then say things like "oh lets just get rid of all of the afordable housing measures we painstakingly adapted becasue we are in tough times. gee...the realators and developers can not afford it."

i'd hate to see a scenerio like that in regards to big box.

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Scott Ford 5 years, 8 months ago

I am very familiar with the Gallagher Amendment. The impact locally on commercial assessed property is currently about 4 to 1. As residential continues to grow it could eventually be 5 to 1 or higher. Being in favor of it or not being in favor of this state constitutional amendment does not matter it is what it is. Trying to get a creative and complex way to sidestep the impact of the amendment is at the core of my objection. If the city uses this creative approach to minimize the impact on commercial property why shouldn't the School District use the same approach? How about the college? The county, Horizons, the Library, the cemetery district? Where does it stop?

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bubba 5 years, 8 months ago

If a property tax replaced a sales tax, especially that on food, then this would make sense, in terms of 'smoothing' income to the city.

I suspect that what would happen, though, is that the city will propose levying a property tax, in the interest of smoothing income, and the part about reducing sales tax would be watered down, so it would really just be an additional tax. I might be negative, but I doubt there would be a measurable reduction in my other taxes if the property taxes got raised.

As an aside, could someone remind me what the logic is on having sales tax on food, but not on lift tickets? I'm not one of those 'make someone else pay for it' people, but if I am paying into the coffer when I buy a bag of flour, it seems strange that the luxury expenses aren't taxed at the same rate.

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Scott Ford 5 years, 8 months ago

What is this world coming to? Steve, Towny and I disagree. Towny agreed with Rob Douglas last week. Now I see Fred, I think agreeing with Towny. WOW the planet Mercury must be in retrograde. Or, this is what makes living here interesting if not a lot of fun. We all have our opinions.

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Steve Lewis 5 years, 8 months ago

Scott, If Towny's Gallagher rebate is not possible, and it probably isn't, there will be too many opponents to pass a property tax in my opinion. Without that Gallagher rebate, I would likely oppose this idea myself.

In case y'all haven't noticed, the assessor's pencil has gotten pretty sharp this last decade. If Mercury gets any closer, I'm considering registering Republican. Hello Fred!

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Scott Wedel 5 years, 8 months ago

The fundamental assumption that property tax is stable is going to proven false. Another article in the paper says how a house with $110K of upgrades and a $100K price decrease was able to be sold in just 38 days. I know of a house in SB that sold for $900K a couple years ago that has had at least $50K spent on it that is now for sale for $600K. A little house in OC, the type that had been selling for almost $200K, originally "priced to sell" at $189K, just sold for $100K.

When assessor revalues properties based upon late 2008 and 2009 prices then governments charging a mill levy are going to see a cut no less severe than those relying upon sales tax.

And if the Gallagher was so unfair then why hasn't it been repealed? Maybe because normal people don't want to increase what they pay in property taxes so that businesses can pay less.

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Scott Wedel 5 years, 8 months ago

Property tax is typically suggested as a stable alternative to the volatile sales tax.

And this 50% second home owners is based upon assuming that everyone whose property tax notice is sent to an out of valley address is a second home owner. I personally know of several in that category that are not second homes. Some has joint ownership among family and while one of the family members lives there, the way they financed the property resulted in the distant person looking like the primary owner. And that had more to do with who was guaranteeing the loan as compared to whom was paying.

And apparently many rental properties would be classified as second homes.

The idea that 50% are second homes is probably false.

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Martha D Young 5 years, 8 months ago

City revenue based upon sales taxes indicates, to me, an assumption that we are paying, through our local purchases, and those of our visitors, for our own government and other services. The city provides water, sewage, fire, ambulance, recreation, police, and infrastructure to residents of the city, whether they live here or not. The point of having a property tax support base is to include among the payers the absentee land- and home-owners. Those folks benefit from all of the services listed above, but aren't here very often (if at all) paying sales taxes on local purchases.

Similarly to TABOR , the Gallagher Amendment restricts sources of income for our city. If businesses have to pay higher property taxes, the burden of higher costs is passed on to the consumer, who will, in turn, shop elsewhere (Silverthorne, Craig, on the Internet). The result is lower sales tax revenue for the city.

Towny's proposal is not hypocritical and does not place unfair taxation on absentee land- and home-owners. Sales tax relief removes an outsized burden from local residents and shifts more of the burden to people who benefit from city services but don't pay their fair share.

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Fred Duckels 5 years, 8 months ago

Towny aptly pictured the result of following the sales tax trail. If we are to separate SB from the pack, this bad habit has to go. We can banter figures about, but the decision is what do we want our town to look like fifty years hence. When I was young I liked to go to Denver and enjoy the break. Today Denver is full of malls, and I only need to walk through one to see what the town has to offer. Across the nation this is the case and It is not exciting to see the repitition. Our niche must match the beauty of our surroundings and avoid what everyone has in abundance.

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Moose 5 years, 8 months ago

Thanks to all of you for a very enlightening discussion. Probably the best I have ever followed. Thanks to Towny Anderson for getting it all started. I have been involved before in discussions about whether or not second homeowners are carrying their fair share. I question Towny's assumption that they are not. I am with Scott in that they are paying the same property tax as full-time residents but not using the services. That seems like a plus. What am I missing? Towny is correct that we need to continually reassess our assumptions.

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Scott Wedel 5 years, 8 months ago

Marthalee, Water and sewer are separate budgets that are paid by the customers and not by taxes. People not here do not use city recreation facilities and are less likely to call the police. So the second home owners are not being greatly subsidized. And when here they are probably bigger spenders than locals so they catch up via paying sales taxes.

Seems to me there are two constants in local tax policy: 1) Maximize revenue. If the city sales tax encourages them to bring in retailers then presumably property tax will result in growth policies. 2) Have it paid by visitors and tourists and not by locals. I think the current data on how much of property fits into that category is very incomplete and that good data should be collected before making a major change in tax policy. It would be terrible if afterwards it was determined that shifting from sales to property tax reduced taxes for nonlocals and shifted most of the tax burden to locals.

And it is hard for me to feel sorry about a lack of tax income to a City that when flush with cash tends to enter into horrendous deals. The Iron Horse purchase was as a bad of a deal as possible (what was being purchased did not match the goals of the purchase and the price and terms were also terrible - can't refinance to current lows rates). $460K a year down that rat hole.

And before that it was remodeling the local airport terminal served by a single plane operated by a single airline in financial troubles that went bankrupt and stopped serving the airport and after a while they again paid to have it remodeled to lease to Smartwool also at a loss of millions.

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TWill 5 years, 8 months ago

What is so wrong with "Big Box"? Of course this town needs to preserve its character and promote what sets it apart from other resort towns, but is having access to reasonably priced goods (without driving hundreds of miles round trip) such a terrible thing to this community?

What about the jobs that could be created? Do you think those "big box" stores import 100% of their labor? Its not just entry level, floor sweeping positions that would be available either. There are going to be more management-level, and other career oriented opportunities available to our citizens from these larger, national franchises than there would from the local, start-up, Mom & Pop operations that much more prone to failure. Would the offering of long-term, stabile jobs with benefit packages (that can only be offered by established companies) be so detrimental to the primary residents of our community?

Don't get me wrong. I'm not proposing we turn Steamboat 700 into Park Meadows, or any other shopping mall complex that could be in Anywhere, USA. But would the strategically (and tastefully) planned implementation of one of these so called "big box" stores really be the downfall of our geographically-isolated, mountain community? I don't think so.

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Scott Wedel 5 years, 8 months ago

I hate it when someone agrees with me by misquoting me. I did not say that second home owners are paying their share via the property tax. There is no city property tax so they are clearly not paying their share of city services via property taxes.

I said that water and sewer is not paid via taxes, but by users. So second home owners are paying their fair share of water/sewer.

I said that second home owners probably pay more in sales taxes during the time they are here than locals.

When they are not here then they are currently not paying for police or fire services, but they are probably using them less than locals.

And if the goal continues to be to have nonlocals pay as big of a share of taxes as legally allowed then we do not currently have the data to show that property tax does a better job of that than a sales tax.

The value of verified, not assumed, second homes needs to be determined and compared to the value of locals homes. And then we can determine if a property tax is a better way of getting money from nonlocals.

The fairest solution would be a modest sales tax and a modest property tax, but that would run the risk of increasing the share of taxes paid by locals and government budgets become very wasteful when they have plenty of money.

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