Steamboat's Tax Policy Advisory Board won’t try for November ballot

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— The citizens Tax Policy Advisory Board won’t make a recommendation to the Steamboat Springs City Council in time to place a referendum on the November ballot.

Board members voted 10-1 late Wednesday afternoon to reject a plan by former City Manager Paul Hughes that would have effectively eliminated the city’s 4 percent sales tax on food in exchange for a new property tax intended to spread the overall burden more equably to include second-home owners.

The intent was for the shift in taxes to be revenue-neutral — it would not have increased the overall tax burden.

Hughes, who could not attend Wednesday’s meeting because of an illness, cast the lone “yes” vote in absentia.

“We never felt a deadline,” board member Ed Miklus said. “The process has become a learning experience, and we want to do it right.”

Even if the tax advisory board had been intent on getting a referendum on the ballot this fall, time is already growing short. The deadline for certifying ballot language to the county clerk is Sept. 2, and the City Council has just one meeting scheduled in August.

Looking for a new balance

Steamboat Springs is one of only a handful of municipalities in Colorado that does not have a property tax.

Board members have been exploring ways to diversify the city’s sales-tax-dependent revenue picture. They were deliberate Wednesday in saying the vote should not be taken as an outright rejection of a city property tax. Instead, they say they want to fully explore a new proposal from Jack Dysart that could soften the blow of a new property tax for commercial property owners. They are required by the state constitution to shoulder a disproportionate share of Colorado’s overall property tax burden.

Just two weeks ago, a straw poll seemed to show that Hughes’ proposal would have sufficient support to move on as a formal recommendation to the City Council. However, Dysart’s proposal, which was circulated among some, but not all of the board members Tuesday afternoon, intrigued some previous supporters of Hughes’ proposal.

Dysart and Adam Beaupre, both of whom seemed to support the Hughes plan in early July, are suggesting a plan that would collect the full amount of property tax from commercial owners and then rebate 50 percent of that amount back to them.

Many advisory board members agree that the Gallagher Amendment to Colorado’s constitution is punitive to commercial property owners, who must pay 55 percent of the overall tax burden, regardless of how rapidly the residential tax valuation of the state has grown. The result is that commercial owners, whose assessment ratio is fixed at 29 percent, feel a greater sting from any new taxes.

Dysart also advanced the notion of substituting the elimination of taxes on food in the Hughes plan with forgiveness of taxes on utilities in exchange for a new property tax. He reasons that utility taxes are among the most stable in the city’s portfolio and eliminating them would focus relief more directly on local residents and property owners.

City Finance Director Deb Hinsvark told the board that “absolutely” the idea of offering a tax rebate to soften the blow of Gallagher is feasible, but not without some complications.

“The tax lawyers I talked to said, ‘Good idea, nobody else is doing it, but you might expect a court suit if you’re the first to do it,’” Hinsvark said.

Dysart estimated that shifting a portion of the tax burden away from utilities and onto property tax would translate into an equivalent levy of about $1.8 million. However, his proposal does not recommend how much revenue the city should seek to raise through a property tax in exchange for elimination of the tax on utilities.

Hinsvark strongly hinted that she’d like to see that amount of money devoted to the city’s $2 million share of the firefighting bill it foots with the Steamboat Springs Rural Fire Protection District.

“I’d like to see people getting used to paying for fire protection with a property tax,” Hinsvark said. “The fire department protects your property. It makes no sense to pay for fire protection with sales tax. Absolutely none.”

To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com

Comments

Scott Wedel 3 years, 5 months ago

Their proposals to be the first in the state to find a scheme to collect a property tax that effectively evades the Gallagher Amendment 55-45 ratio requirement would be an open invitation for a lawsuit. It would seem to be an awful case for the city to fight: Q: What is the purpose of this scheme? A: To allow commercial properties to pay less than 55% of the property taxes as required by the Gallagher Amendment to the State Constitution.

Case over. More legal fees for SB.

The worst part of this whole issue is that sales tax has worked for SB. Sales tax dropped sharply when there were few tourists so we cut spending. Now sales tax has already stabilized and as some tourists come back, the city has more money than expected to spend on services.

If city was on property taxes then they'd be looking at cuts based upon the recent downward property assessments affecting the budgets for the next two years. And now we are already half way through the sales period for the next round of property valuations that are generally seeing declining property values so the local property tax budgets that are 3 are 4 years out can already expect further budget cuts.

So in terms of government budgeting, SB is going to come out in far better shape than the rest because they are not reliant upon property taxes.

Routt County is going to also come out well because they lowered (banked) their mill levy to not increase revenues when property values when up so quickly. So they can maintain stable revenues by increasing their mill levy now that values declined. But every other taxing district in the county took full advantage of the increase in property values to increase their revenues and now they have to deal with declining revenues for several years.

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Steve Lewis 3 years, 5 months ago

Thank you TPAB, for that vote. Until Gallagher is repealed or modified, new property taxes are just too unreasonable for businesses. There is no legal way around it - good points Scott.

Again I have to complain about this coverage - 2 Pilot articles and an editorial on this proposed switch from sales to property taxes, all failing to give readers a useful, quantitative understanding of the two choices.

The "greater sting" (per Gallagher) that commercial paid recently is well documented 400% of the tax payment for similar residential valuation, but Tom Ross opts to leave the reader guessing if the sting is 125%?

Gallagher's harsh burden on businesses is the reason I'll oppose a new property tax. But surely they also understand that TABOR has a (property tax only) revenue ratchet that follows you down to your lowest revenue year and then limits you to that plus inflation. Oblivious to revenue swings, population growth and demand spikes for services, over time that ratchet effectively starves local government. I'm surprised that the City Finance Director wants to bring the TABOR ratchet to Steamboat Springs.

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