Our View: The property tax question
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 editor@steamboatpilot.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.
Comments
Jon Quinn 2 years, 7 months ago
It is my hope to do nothing more than stimulate a conversation about this issue. I realize that there is little appetite to discuss additional taxes or fees in the current economic climate. I realize there is a need and desire to "right size" government. But you cannot have a meaningful discussion about expenditures, or what are the core functions of government, without also considering what are the encumbrances.
There was an enormous amount of work put into the 2005 TPAB study and report, and I am not going to tell you I have ideas that were not discussed there. But who amongst us would dare stand behind the economic outlook and forecasting tools of 2005 given the water that has passed under the bridge since then? How many of you correctly predicted what would transpire over the last 5 years?
We have a different reality in front of us now. Both Jack and Ken agreed they would serve on a new TPAB. I believe that both would tell you today that we certainly do not need to start from scratch, but that enough has changed in the last 5 years that the conclusions and recommendations of that study deserve another look.
It will not do any harm to ask the questions. I would not condone spending a dime on outside so called “expert” opinions. This is just an opportunity for our community to discuss the issue, and as the Pilot correctly pointed out, nothing happens with tax policy without a vote of the people.
Scott Wedel 2 years, 7 months ago
But why question the tax structure? 2005 was not that long ago and while they did not predict the boom and subsequent bust, neither could a new study predict the next 5 years. The 2005 study was able to predict the need to build up reserves when volatile sales tax revenues increased and the City completely ignored that advice.
How about creating a study group that analyzes City debt and debt guarantees and considers the pattern of one city council creating troublesome obligations for the city for years to come. Mistakes like the expensive air terminal building at Bob Adams field, Iron Horse and so on. Who knows, maybe base area redevelopment loan guarantees will also become a mess and we have NEVER had any advisory group make recommendations requiring discretionary projects approved by a city council paid via debt.
Or maybe a study group to analyze city government to perform a cost benefit analysis on all government functions? We've also never had that advisory group.
In politics, you do not ask a question unless you want to change that policy. A city councilman is not some obscure academic. An advisory board is used to study what is considered to be the most important complicated issue.
sledneck 2 years, 7 months ago
Yeah, an advisory board. That will help. WHAT are you people smokin???????????????????????????????????????????????
ybul 2 years, 7 months ago
Sorry, Jon, but there were many people that foresaw the boom and bust. It goes to the cyclical nature of the debt cycle that has existed in western civilization for hundreds of years. Look up the Kondratiev wave and how this economic cycle typically spans two generations.
I suggest you ponder on the origin of Mort-Gage (look up its latin origin) and then determine wether it would simply be better to ask for an increase of .2% increase in the sales tax rate to help fund future infrastructure needs and pay as we go not going further into debt. The massive debt burden the city has loaded itself with will cause greater cuts, as debt service payments can not be cut and come off of the top of the budget.
pitpoodle 2 years, 7 months ago
No SB property tax. Families and businesses in SB must live within their means and the City should too. After the SB 700 fiasco and Iron Horse mismanagement, how about just leaving us alone for awhile.
Scott Wedel 2 years, 7 months ago
Advisory boards don't solve anything on their own. Advisory boards are a tool for politicians to allow other people to propose and research ideas in order to gauge the public reaction before saying anything about the controversial topic.
The only reason to propose another one for taxes is to get political cover on raising taxes because the sort of person interested in serving that would be selected would be expected to give the desired results on the need for more revenues.
My point about maybe forming an advisory board on debt or cost benefit analysis is that those advisory board would probably recommend smaller government doing less which is n conflict with most of the city council. Which is why no one is proposing those sorts of advisory boards.
sledneck 2 years, 7 months ago
"Leave us alone" should be a slogan or something. That little 3 word phrase says it all. Thats what real Libertarians want. No more; no less. Probably wishful thinking from todays busy-bodies.
I doubt an advisory board would reach that conclusion, Scott.(to recommend smaller govt...) Because advisory boards tend to be made up of little "would-be Napoleons" and the power they might wield is too much temptation for them to cast away.
Steve Lewis 2 years, 7 months ago
Jon, I appreciate the editorial's respect for the 2005 report. I was an alternate to that committee and a bystander then, but in my years since, including 3 on the City PC, I haven't enjoyed smarter company. We were blessed with a CFO who served us a layman's feast of the budget numbers and their trends. The report is solid.
But also I appreciate your post above, Jon. Good on you. Responsibility, when taken, can be Steamboat's greatest hour, and you seem able embrace a poll that runs against you, a blog that runs against you, and a dated report which runs against you. I encourage you to "stay the course" of your post above.
You seem to be the only one of us engaged with the fiscal chore ahead.
Let's have some coffee.
ybul 2 years, 7 months ago
Steve,
The fiscal chore ahead is going to need the community to focus on reinventing itself in some respects. The Yuan is probably undergoing the beginning stages of freeing itself from its peg. This will lead to massive price increases in the US and probably a decline in tourism dollars from US citizens.
We best be thinking about how to transition to a more sustainable economy and one less dependent upon ever increasing dollars for second homes and vacations. I think we best be looking towards how to reestablish some other forms of wealth creative forces in the valley as opposed to the extractive business' that exist in tourism and second homes (as a house has traditionally been simply considered shelter and will be moving back towards that thought pattern).
Scott Wedel 2 years, 7 months ago
I think the bigger issue is that this is a high amenity city government funded significantly by tourism. It is such a high amenity city government that when revenues were increasing at nearly 10% that there were no calls to reduce tax rates or such, but instead it was spent on additional amenities such as the intended benefits of owning the Iron Horse.
Thus, there is the reasonable question of whether there is any level on revenues that would not be spent by city government. And thus, there is great concern that adopting city property taxes would quickly become yet another revenue stream to be spent by city government.
The city has yet to make the case that very popular amenities have to be cut. That the capital improvement budget is headed towards zero suggests the need to cut other parts of the budget to free up funds. And the city certainly needs to review it's budgeting process that allows one city council to create problems for future councils by approving things like expensive debt for Iron Horse and possibly base area redevelopment bonds.
pitpoodle 2 years, 7 months ago
You are right on, Scott.
Requires free registration
Posting comments requires a free account and verification.
Or login with:
OpenID