Tax board weighs Steamboat property tax
Advisory group considers replacing food tax, keeping revenue flat
Friday, June 17, 2011
Steamboat Springs — The city’s Tax Policy Advisory Board spent a little more than an hour Wednesday discussing the pros and cons of a proposal to recommend that the Steamboat Springs City Council seek voter approval to swap the 4 percent city sales tax on food and utilities for a citywide property tax that would generate a corresponding amount of tax revenue.
Board member and former City Manager Paul Hughes said his plan would exchange a regressive sales tax for a more progressive property tax with the goal of being as revenue-neutral as possible — that is, the city’s overall tax revenues would not increase.
Hughes expects a gain for most full-time residents by spreading the overall tax burden to bring in vacation-home owners. He cites a 2008 study to show that over time, an increasing share of the city’s sales tax revenue comes from full-time residents, with second-home owners accounting for only 6 percent of local spending.
Hughes proposes to afford an additional measure of protection to small businesses and homes of moderate value by including a temporary tax credit on the first $100,000 of actual value on all non-exempt real property.
Above all, Hughes said, the measure would shift a portion of the local tax burden onto second-home owners, whom he says currently do not pay the bill for city services.
“It’s an issue of fairness, not of going after where the money is,” Hughes said.
“The fact is that current full-time residents of whatever income level have been subsidizing second homes and businesses in paying for city services and programs. Second homes account for about 48 percent of all residential units and about 62 percent of all residential assessed value,” according to the city survey cited in Hughes’ proposal.
“Second-home owners pay a pittance towards their city services, and they should be asked to pay their fair share,” he wrote in his proposal.
Board member Jennifer Schubert-Akin, the owner of an accounting firm, said she disagrees with Hughes’ plan for a variety of reasons.
“First, the Gallagher Amendment (to the state constitution) means a property tax would put an undue burden on businesses” that drive employment and payroll, she said. “Second, it would increase the cost of owning a home, and I just don’t see raising the cost of housing right now. (City Finance Director) Deb Hinsvark told us that sales tax on food and utilities are the stable source of sales tax in the city, so we would have to replace our most stable source of revenue.”
James “Jake” Henry said he would not support the measure because of the impact it would have on small businesses, which he said he knows from personal experience are heavily taxed in Steamboat.
Banker Adam Beaupre said he would support the proposal because he doesn’t think the modest increase in the tax burden would tip the scale of profitability for local businesses and observed that it’s the primary Steamboat residents who are truly shouldering the burden for city services such as snow plowing.
Several plans on the table
The property tax proposal is one of a number that have been discussed over seven months by the 10-member board since the City Council asked the group to assess the city’s current tax structure and reach conclusions about whether changes are needed. The establishment of the group rose from October budget discussions, when City Council President Pro Tem Jon Quinn said the city’s current sources for funding capital projects were inadequate.
Steamboat Springs is one of just six municipalities in Colorado that does not have some form of property tax, Hughes said. Instead, it relies on a 4 percent sales tax (of a total 8.4 percent, including state tax) and grants.
Other forms of tax the board has discussed include parking fees, a tax or fee on timeshares used as vacation rentals, charging for bus service, and a tax on admission to entertainment venues, including ski lift tickets.
Of the 11 members on the board, seven gave preliminary stances on Hughes’ proposal.
Lining up behind him on the plan were Beaupre, Bud Romberg, Co-Chairman Jack Dysart and Bert Cohen (by email). Registering their disapproval were Bob Larson, Schubert-Akin and Henry. Laurie Good said she was sitting on the fence, and Co-Chairman Ken Solomon said he would wait for a formal vote to give his position. Other members were not present.
— To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com
Comments
Scott Wedel 1 year, 11 months ago
While there is some theoretical benefit of changing the city's tax structure, I think any such change will be crushed in the ballot box because virtually no one believes that the city wouldn't soon try to reinstate the sales tax or further increase property taxes. The only limit on City spending is the sales tax and the difficulty of increasing it any further. When the City has $50K to spend on promoting Bike Town USA Initiative then it cannot claim to be critically short of revenues.
Nor is the current situation really that unfair. Sure a sales tax is regressive, but a sales tax is also pretty effective at collecting money from tourists. Locals pay about half of the sales tax collected by the City.
More important, the cost of ownership is considered by the buyer of a second home. So adding a property tax increases cost of ownership which would push down property values. Not a very smart idea in a weak real estate market. The local real estate market is not driven by the local job market because there are so few jobs that pay for local houses. Even a large percentage of full time residents bought their house based upon income or assets acquired elsewhere. And second home owners are likely to spend money when here so they are not avoiding all local taxes.
So a change to a property tax could also be viewed as cutting sales tax from short term tourists and increasing taxes for second home owners. In terms of economic growth and encouraging investment, we are probably better off encouraging second home owners over short term tourists. The tourist that enjoys SB can become a second home owner and possibly move their business here.
It is also ridiculous to claim that anyone could design revenue neutral plan to cut sales tax and increase property taxes because any such calculation has to make huge assumptions about tourism and spending levels vs the direction of the local real estate market. I give about a 99.99% chance that any such plan in practice will increase their tax revenues.
scott selby 1 year, 11 months ago
Quoting a report from 2008 before the decline in property valuations does not make sense. What would the impact be on tax revenue in light of today's valuations? Additional property taxes for local businesses also does not make any sense due to our high rate of unemployment.
It would be nice if the following statement was a little better defined " by including a temporary tax credit on the first $100,000 of actual value on all non-exempt real property". So, after the "temporary tax credit.....then we are going to really stick it to business owners?
It seems to me that the city should focus on enforcing current laws on the books related to rentals etc or explore options along those lines. Taxing lift tickets as mentioned in the article makes no sense. If this was done what would the impact be on skier days. Would Ski Corp continue to sponsor as much in town as they do or would they assume the city should use the sales tax they are generating for events like Winter Carnival etc? Charging for the bus makes no sense in that it would discourage ridership, increase traffic and parking issues and be a burden on working individuals who use the bus for work.
If the goal is to "stick it to the second homeowners" in the name of being fair...then come up with some city use fee or something. Don't punish local business. Not to mention lose all of your grocery tax revenue on people from OC, Stagecoach, etc who would get to enjoy Steamboat's amenities for free (I say that being one of them)
pitpoodle 1 year, 11 months ago
"Not a very smart idea in a weak real estate market" How about, it's just plain dumb?
You don't punish local businesses so that short term tourists can have a tax break. I can't believe anyone would even think about promoting such a bad idea.
Who in hell thinks of stupid stuff like this?
Revenue income is not the problem. Spending and taxing is the problem.
scott selby 1 year, 11 months ago
I also fins it amazing that they have been looking into this since last October and this is the best they have come up with.....a three year old report....probably based upon data from previous years and ideas like "Hey, what if we did this?" Matbe they had looked into the impacts/pros and cons of each idea, but for some reason decided not to share them with the paper? If the desire is to fund capital projects that 2nd homeowners should share in the burden of paying for, focus on that, not a blanket tax because you have a pre-recession report that you want to put to use.
steamboatsprings 1 year, 11 months ago
Wow, they just don't get it. What did they do for 10 months?
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