Wednesday, October 13, 2010
Editorial Board, August through December 2010
- Scott Stanford, general manager
- Brent Boyer, editor
- Blythe Terrell, city editor
- Tom Ross, reporter
- Rich Lowe, community representative
- Sue Birch, community representative
Contact the editorial board at 970-871-4221 or email@example.com. Would you like to be a member of the board? Fill out a letter of interest now.
The city of Steamboat Springs is revisiting the question of whether the city needs a property tax to create a more stable revenue stream.
The city has had to tighten its belt considerably as a result of shrinking sales tax revenues. It’s been most painful for employees, who have gone through a two-year work force reduction that has included hiring freezes, furloughs and pay cuts. The most recent action was the laying off Monday of seven city employees.
On top of that, city officials said that plummeting building- and use-tax revenues spell trouble for the capital improvement program, which could deplete its reserves by 2012.
To address possible changes to the tax structure, the city plans to put together a tax policy advisory board. Any new tax would require voter approval.
The City Council appointed a Tax Policy Advisory Board in April 2004, led by Co-Chairmen Jack Dysart and Ken Solomon and tasked with examining the tax structure to see whether changes were needed. That was a far different time, it’s true, but it’s unclear whether a new board would add value to the conclusions of the 2004 board. We encourage the city to carefully review that board’s report, issued in 2005, because much of it still could be useful.
The 12-member citizen committee recommended in 2005 that the city keep its tax structure unchanged. According to its report, “Assessment of the City’s past financial results and current financial position indicates no immediate need for the City either to restructure in any major way its tax structure or to increase its tax rates to generate additional revenues (with a caveat that grants and gifts have proven to be an important means to finance infrastructure and should continue to be aggressively but judiciously pursued).”
This recommendation was made at a time of steadily increasing sales tax revenues, and the board noted in its report that it thought those collections were likely to continue to increase. The past two years have shown otherwise. The city has had to reduce the size of its staff in order to meet its budget, just as businesses have had to contract to meet decreased demand. Although the cuts are painful, they are necessary.
The same is true in households across Steamboat, and it’s likely that any tax increase would be a tough sell in this economy. We don’t want residents and the city to waste their time on a ballot question that has zero chance of passing. However, the issue of the rapidly dwindling capital improvements money is very real.
“The current method by which we fund our CIP improvements is just not sustainable,” Councilman Jon Quinn said last week.
The 2004 Tax Policy Advisory Board, aiming to guide the city’s consideration of future tax policy, did provide additional recommendations regarding prioritization and potential funding sources specifically for capital improvements. If there was a need for capital items, the board recommended grants, contributions from user/affected groups, debt financing or a dedicated property tax in conjunction with debt financing.
According to the report, “It was a consensus of the TPAB that a property tax, in conjunction with debt financing, would only be appropriate to fund major infrastructure or amenities that benefit a broad segment of the community.”
The board also raised issues that would be potential stumbling blocks for a property tax ballot initiative, particularly the Gallagher restrictions that affect businesses. From the report:
“Due to TABOR and Gallagher restrictions and the way property tax is assessed, the impact of property tax falls disproportionately on local businesses. While property tax is a relatively stable and predictable source of revenue, growth in property tax revenue is no more assured than growth in sales taxes. As a result the TPAB concluded there is no current benefit to making a switch to a property tax based system.”
It’s also likely that any attempt at a property tax would result in backlash from an already stressed business community.
As the city considers whether to appoint a new board to review the current reality, it’s important to remember that the previous board was established in April 2004 and met weekly through January 2005. Let’s make sure we have a definite need for a policy discussion before we ask for a similar commitment from residents. If the council does create a board, that panel should examine the previous report to determine what needs to be reviewed and what doesn’t.
The conclusions from the 2004 advisory board don’t eliminate the need for Steamboat to revive the property tax conversation. But as a community, we need to make sure this is the right time to have a property tax conversation and whether there’s a chance of it passing if it appears on the ballot. If it isn’t the right time and an initiative is unlikely to pass, the city must determine exactly what is going to happen if it can’t fund capital improvements and examine any available alternatives to taxation.