City Council backs transfer tax

Plan would offer developers variety of compliance methods

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— A plan outlined by the Steamboat Springs City Council on Tuesday would offer developers a variety of ways to comply with the city's affordable housing ordinance.

Instead of building deed-restricted affordable units, one option for developers would be to voluntarily impose a real estate transfer tax on first and subsequent sales of units within their projects - a mechanism that city officials acknowledged presents legal uncertainties.

Developers also would be allowed to make a payment to the city in lieu of building units. Under the city's existing inclusionary zoning policy, paying a fee in lieu is allowed only for projects at the base of Steamboat Ski Area and for fractional units. A combination of a payment and transfer tax also would be allowed.

Existing compliance methods - building units or dedicating land - would remain on the books, but council also agreed to remove a penalty that increases affordable housing requirements 25 percent when units are built off-site or land is dedicated off-site. Council also agreed to developers' request that payments be collected when their projects sell and close, rather than earlier in the process when they are issued a building permit.

"What I'd really like to see is just adding additional options for compliance," Councilwoman Cari Hermacinski said.

Local lender Jeff Chapman, of Homebuyers Mortgage, supported council's revisions to the affordable housing ordinance and said adding flexibility would be a sage move at a time of enormous economic uncertainty. Mark Scully, of Green Court Partners, developers of downtown projects such as River Walk and Howelsen Place, said there is an even simpler reason for amending the ordinance.

"They don't want them," Scully said about the deed-restricted units in Howelsen Place. "Flexibility goes right at that issue."

No action was taken at Tuesday's work session City Council meeting, but the first reading of an ordinance amending the city's affordable housing policies will be crafted based on council members' direction Tuesday.

The specifics of the plan - such as what formula the city will use to calculate payment in lieu and the size of a real estate transfer tax - are not determined.

Real estate transfer taxes are illegal in Colorado unless they were in existence before the tax was outlawed or are negotiated as part of an annexation. Supporters of such a tax to meet affordable housing requirements - including the local development community - say it is valid if offered voluntarily by a developer. City Attorney Tony Lettunich told council members that the question has not been tested in Colorado courts, and he said he is unsure whether a court would find a real estate transfer tax truly voluntary if it was included as an option within a mandatory ordinance.

"I can't say it would be bulletproof," Lettunich said.

Steve Aigner, community organizer for the Community Alliance of the Yampa Valley, said the group's members are "generally suspicious of the voluntary transfer fee" and advocated that it only be considered in combination with a payment.

"If you have a payment in lieu and a portion of the funds already accruing, you would not be high and dry if it is challenged," he said.

Most council members, however, were less concerned about a legal challenge. Hermacinski noted that the people most likely to challenge a voluntary real estate transfer tax - developers - are the ones proposing it. If such a tax were ruled unconstitutional, the city no longer would be allowed to collect on units it previously was approved for and would have to remit revenues collected in the previous four years plus 10 percent interest and attorney fees for the plaintiff.

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