The city began reconciling building-use taxes in 2008 after an ordinance that would have prevented the practice was defeated. The process previously was allowed under the Steamboat Springs municipal code but never enforced. The developers of the $128.7 million One Steamboat Place have requested a refund on an estimated $2.9 million in building-use taxes.

Photo by John F. Russell

The city began reconciling building-use taxes in 2008 after an ordinance that would have prevented the practice was defeated. The process previously was allowed under the Steamboat Springs municipal code but never enforced. The developers of the $128.7 million One Steamboat Place have requested a refund on an estimated $2.9 million in building-use taxes.

Steamboat ordinance brings in fraction of 2008 building-use tax estimate

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The city began reconciling building-use taxes in 2008 after an ordinance that would have prevented the practice was defeated. The process previously was allowed under the Steamboat Springs municipal code but never enforced. The developers of the $128.7 million One Steamboat Place have requested a refund on an estimated $2.9 million in building-use taxes.

— A 2008 estimate of outstanding building-use taxes owed by developers to the city of Steamboat Springs was inflated.

The city reported in 2008 that it was owed $4.6 million that could be recouped through a reconciliation, or audit, process that was part of its municipal code for 17 years but never enforced.

Since then, the city has collected $676,393 in building-use taxes as a result of the process. Building-use taxes are the equivalent of sales tax on building materials. Contractors are required to estimate those taxes at the time they receive a building permit. The city has the ability, by ordinance, to confirm actual expense on building materials and adjust the final amount of the tax.

Kim Weber, the city’s budget and tax manager, said an estimate for the remaining amount of outstanding building-use taxes couldn’t be provided because each project is so different.

“There’s a difference in commercial versus resident, high end versus low end,” she said. “There’s so many different variables that there’s no way to estimate. … An estimate should not have been done at that time.”

The 2008 estimate created a stir as the economic recession began and municipalities across the country were bracing for deep cuts. The same was true in Steamboat.

At the time, the city said a provision adopted in 1991 as part of its municipal code to permit reconciliations never was enforced. The practice that required developers to estimate the tax amount based on the valuation of their project when a permit was issued didn’t change and remained operating as it had since the city started collecting building-use taxes in 1974.

But with the addition of a new staff member, the city sought to recoup the building-use taxes for open permits issued since 2005. Developers said they were fine with the change moving forward but objected to the reconciliations for open building permits issued previously.

Current City Manager Jon Roberts and Finance Director Deb Hinsvark had not assumed their roles with the city when the building-use tax issue first surfaced in 2008.

The original reaction from the Steamboat Springs City Council was mixed about whether to change a longstanding practice or start collecting back taxes owed to Steamboat. Council members in September 2008 defeated an ordinance, by a 4-3 vote, that would have prevented city staff from reconciling open building permits issued in the three years prior.

“We were told it would generate a lot of money for the city, that we’d go back and find this pot of gold,” said City Council member Walter Magill, who opposed the 2008 ordinance. “I didn’t think it was going to, and I think the process has shown it didn’t.”

Instead, Magill said he’s heard good reports from developers and thinks it was a fair process, a good example of the government working with people.

Weber said the city has assessed $886,667 and refunded $210,274 in building-use taxes to date. She said that net figure of more than $676,000 could change.

Weber said the developers of the $128.7 million One Steamboat Place have requested a refund on an estimated $2.9 million in building-use taxes. Weber said the One Steamboat Place reconciliation, the city’s largest project audit to date, isn’t complete but likely would require a refund.

“It’s a large refund request,” she said, but wouldn’t disclose the amount because the reconciliation wasn’t finished. “At first glance, there’s probably a refund due but not what they requested.”

Weber said the reconciliation process requires developers to estimate how much to pay in building-use taxes. It’s 50 percent of the project’s valuation for materials, a number multiplied by 4.5 percent. The other half is estimated as labor costs.

The Routt County Regional Building Department determines valuations that vary based on square-footage, construction and occupancy type, Chief Building Official Carl Dunham said. After construction is complete, the reconciliation process starts when a developer requests a certificate of occupancy.

Weber said a refund could be issued if the project’s scope was reduced during construction or if the cost of materials was less than half the project’s cost.

Fox Construction owner Tom Fox, who has been building in the Yampa Valley for three decades, said the reconciliation process has worked well for developers and the city.

He said it ensures that developers pay their fair share.

“We as contractors don’t want to deprive the city of sales tax revenue. If the city gets deprived of taxes, we all as citizens get deprived of taxes,” Fox said about revenue that pays for city services. “We all lose out.”

Not all developers view the process in the same light.

Homebuilder David Josfan, who has been building locally for 16 years, said the reconciliation process has just made building more difficult. He suggested the city waive the building-use taxes to entice some contractors to start building again.

“It just got a lot more cumbersome and expensive at a time when the economy needs all the help it can get, especially the construction industry, which has been almost nonexistent the last couple of years,” Josfan said.

City Council member Jon Quinn, who opposed the 2008 ordinance that would have prohibited city staff from conducting reconciliations for permits issued since 2005, said he thought it’s been a fair process.

Quinn said it allowed developers to get a refund if their costs came in at less than the estimate or the city to recoup what it was owed.

“There had been an outcry because there was a perception the development community was getting away with something,” he said. “I think what we’re seeing is that wasn’t the case before and the process before yielded the same results. Even if the process doesn’t yield more money or less money, at least we know everyone has paid their way.”

To reach Jack Weinstein, call 970-871-4203 or email jweinstein@SteamboatToday.com

Comments

Steve Lewis 2 years, 10 months ago

This lesser amount collected does not change the fact that the 2008 choice by council was the right choice. Without that vote, the perception of dues not paid would have remained... and would be the correct perception!

Thanks to that vote, everyone has paid their way. We all have thinner wallets since 2008. This was hard money to cough up in a turned economy, so appreciation is due to those paying in.

My reading of this says the retroactive audit netted $617,000. That will be useful money. No?

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exduffer 2 years, 10 months ago

When a government views $600,000 + as not being a pot of gold, there is something very wrong with their perceptions.

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Rob Douglas 2 years, 10 months ago

Hopefully, the Pilot will update this story with the final number that is refunded to One Steamboat Place. That number could significantly reduce the $676,000 (net) collected to date. Indeed, it could reduce it to a figure that when, accounting for city staff time, the city will have expended/refunded more dollars than it takes in from the retroactive audits.

Bottom line: The upwards of $5 Million that proponents of the retroactive reconciliations claimed would materialize did not. And, after all of the retroactive reconciliations are completed, the city may be out dollars instead of collecting the bogus (and anyone with a brain knew it was bogus) $5MM that was alleged contractors owed.

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Scott Wedel 2 years, 10 months ago

Well, the whole point of this program was to calculate final actual numbers for a tax that is collected based upon initial estimates. It never made any sense to not recalculate upon project completion. And hence that part wasn't controversial, the controversial part was that it could go back years and need records that might have no longer been available.

It was distressing that government was so poorly informed on the actual situation that it was owed a tenth of their initial estimates.

The final numbers for One Steamboat are irrelevant to the program because even without the program then One Steamboat would have come back and asked for a refund because they overpaid due to the original estimates. The article mistakenly implied that without the 2008 change that the developer could not have applied for refunds due to initially overpaying.

The relevance for the program was to catch developers that had been able to generate a low estimate and avoided paying taxes when the actual had been much higher.

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Fred Duckels 2 years, 10 months ago

In the meantime the developers and cointractors took an undeserved hit for their suspected villanous ways. Do you think an apology is in order from the grandstanders?

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Rob Douglas 2 years, 10 months ago

Come on Fred, get with the program my friend. Private sector job and revenue generators = Bad! Statists who smear private sector job and revenue creators while demanding government confiscate and redistribute those jobs and the revenue to the social engineering demands of the statists = Good! Got it?

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Scott Wedel 2 years, 10 months ago

At the very least, the finance dept should be asked why their initial estimates were so far off from the actual numbers. Were the original numbers doctored to make it look like there was a severe problem? Not clear to me how the original numbers vs actual could be so far off without fraud or incompetence.

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sledneck 2 years, 10 months ago

As Lewi says, it's "useful money". What never fails to ammuse me, however, is the perpetual failure to recognize that the money was just as "usefull", if not more so, before the city got hold of it.

I find it ammusing that so many people seem to forget that before government's can "use" money they first have to TAKE money from someone. There is no "stimilating" Peter's economy until you first rob (or "de-stimulate") Paul's. And government has never, I mean NEVER-EVER showm me that it can spend Pauls hard earned money smarter than he.

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sledneck 2 years, 10 months ago

In other words, Lewi and his gang call money "useful" when government gets it and when it's in private hands it's called "greed".

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Steve Lewis 2 years, 10 months ago

Its amusing to read myself re-invented this way and that, to suit the arguments of others. Sigh.

Scott W., thanks for attending the real questions. You are exactly right. These taxes were due. One Steamboat Place would be after that refund either way (as would anyone expecting a refund). The real issue was auditing back to check for underpayments due to estimates that proved too low.

And you are right that the article leaves one to guess what this reporter means by "the city has collected $676,393 in building-use taxes as a result of the process". Certainly the principle of collecting use taxes due is not defended in this article.

100 contractors estimate their use tax. 7, through no fault of their own, have underestimated. Maybe the owner upgraded appliances. But I disagree with the position that this underpayment be left as is. 93 got it right. The 7 should be held to the standards met by the 93.

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Steve Lewis 2 years, 10 months ago

Sled, I think I've agreed with you elsewhere, but I'll re-up my belief that the private sector is easily more efficient than the public sector.

What I respect more than you, is the difference in mission. The public sector handles safety and welfare issues for all its constituients. The private sector has an infinitely simpler mission - profit for its owner.

The meaning of "useful money", revenues, to Jon Quinn as he weighs a city budget, is no more or less respectable than his view of revenues to his business. I agree govt, thorugh debt, had grown fat. But this far into this recession, state and local governments are contracted to the point of of disability in meeting their basic obligations. That we also disagree about those obligations is a given. I'll apologize for the public sector's inefficiency.

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Scott Wedel 2 years, 10 months ago

Steve, Well, this article is a mess because it poorly described that this is about accurately determine the amount instead of relying upon the initial estimate, it incorrectly implied that the ordinance affected One Steamboat getting a refund for overpaying due to a high initial estimate, and completely failed to follow up on the headline or initial paragraph.

So yes, estimate was nearly 10 times higher than actual. And why was that? Oops, reporter forgot to ask that question.

As for finding yourself re-invented - I think you set yourself up with your "useful' comment. You didn't use "fair" or "accurate", but "useful" as if money in the City's hands was more useful than when in developer's hands.

From my time working in tech, I was exposed to a management philosophy of constant improved efficiency which was primarily the thought that you will learn how to do the same responsibilities with 20% less money each money. That 10% of budget is for tech and training to meet those productivity gains. You could use tech to improve automation, could analyze your responsibilities and find low priority items that took lots of time and work towards eliminating those and so on.

There is no inherent reason government could not be operate in a similar philosophy instead of the standard mode that government needs to continually grow to handle this or that new issue. And rarely does government look at what has changed and so this or that could be reduced or eliminated, or look towards efficiency gains to reduce employee costs except when there is a lack of revenues. And hence, during times like this it can be counterproductive to give government additional revenues.

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Scott Wedel 2 years, 10 months ago

And if SB is currently "contracted to the point of of disability in meeting their basic obligations" then what other city ever met their basic obligations? SB still has so much spending money that anyone that complains that SB government needs more money to meet basic obligations is completely out of touch with the rest of the world.

Cut Steamboat's budget in half and then you'll see budgeting priorities like other cities.

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sledneck 2 years, 10 months ago

Lewi, We agree that the private sector is easily more efficient. For my part the comparison is like saddle-horse vs airplane.

I do want to rebut some of what you said above.

The private sector does not, in my opinion, have the simple mission. It has, by far the most complicated. The market makes millions of decisions every second of every day. Then, it instantly reacts to the results of those decisions by continuously correcting its course, adjusting price, adjusting supply, improving supply-chains, shortening communication lag, improving its products, shrinking its waste and inventing new products that are les and less costly (as a percentage of ones paycheck) all the time.

And, if it fails to keep up the pace, even for a moment, it is properly overtaken by competition.

Contrarily, gubbamint has no competition. It does not fear being overtaken. Consequently it does not innovate very quickly. It is inefficient, cumbersome, wasteful and regularly takes decisions which would bankrupt private sector businesses that did likewise.

Another point of contention is the notion that governments "HAD" grown fat but NOW are "contracted to the point of inability to meet basic obligations". If you extend the Constitutions meaning from Federal down through State and Local you can not even come close to making the ridiculous claim that many of these things are "basic obligations" of government. And, as you probably agree, THAT is the origin of most of our disagrrments. The philosophical difference between man being autonomous and responsible for his own destiny vs government being the ranch owner running his herd as he sees fit while us cows depend on him from cradle to grave.

Frankly, I find the notion insulting.

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Steve Lewis 2 years, 10 months ago

That notion is insulting to me as well.

Sled, the list of complex actions you see the private sector doing are ALL guided by one metric: does it improve profit? Sure the market makes a zillions decisions, but every decision in that market understands improving revenue relative to costs is the goal. Aside from the collateral damage, like the pollution it inflicts on the commons, it is a great organizing principle.

In the public sector there are a hundred different goals: reducing hunger, caring for the ill, stopping crime, building infrastructure, research, education... Some are products similar to the private sector, but success has varied meanings and rewards are stifled. The terrain also has a hundred politicians tinkering with it. An ugly process. But Americans spent decades of installing and modifying these goals.

Your notion of the extremes suggests we might choose one or the other. Or that weak or strong is a matter of one's politics. Its just not that simple.

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Scott Wedel 2 years, 10 months ago

Private sector is not inherently that much more efficient than the public sector when doing well defined jobs (as compared to where public sector is really awful which is allocating capital to new businesses).

For instance, snow removal in SB is done from a pretty tight budget and they generate a lot of complaints if they do a poor job. I am consistently impressed watching them at work since even as a math major with experience in graph theory and such, I honestly cannot see how they could do it more efficiently. If snow removal was done by a private contractor then the contractor's need for a profit would probably result in higher costs.

But unlike the private sector, the public sector lacks the influence of competition and so poorly management or inefficient operations are not corrected by market forces of compete successfully or die. (Note that private sector companies have barriers to entry and such and so depending upon the business, a business can often survive any number of serious mistakes. Look at Microsoft Vista, Zune, windows phones at how a company can make expensive mistakes and continue on).

The one great discipline upon the public sector is recession and falling tax revenues. Then suddenly the true priorities of government is exposed (bye bye historical building preservation bureaucrat) and suddenly SB City can operate 4 days a week.

So anyway, where is the followup on how the original estimate was so far off? Was it doctored to give the impression there was an urgent problem of contractors providing lowball project estimates to scam the use tax? Or was it blatant incompetence looking at estimated cost vs sales price that failed to realize developer was making money on the project?

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sledneck 2 years, 10 months ago

It does not matter what the motivation is. Proffit or not the private sector does it better and cheaper.

I do not view "reducing hunger, caring for thee ill,... research and education" as the domain of government. Nowhere are those things enumerated in the Constitution.

As for it being " not that simple", thats untrue. It is exactly that simple. The Constitution is quite simply. The reason so many find it objectionable is not that it's complicated, but that it forbids man from using gubbamint to live at the expense of his fellow man. A lot of lazy people and bleeding-hearts don't like that principle but there is nothing complicated about it.

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Steve Lewis 2 years, 10 months ago

Sled, The level of respect you have for private and disgust you have for public is absurd.

"the private sector does it better and cheaper". Cheaper is too often because of costs externalized onto the commons.

And is this "better" ? :

"BP at fault for 21 of 35 factors in Gulf spill, panel finds." 35 corners cut to boost the bottom line.

"The explosion, 11 deaths, and spill "were the result of poor risk management, last-minute changes to plans, failure to observe and respond to critical indicators, inadequate well control response, and insufficient emergency bridge response training by companies and individuals responsible for drilling at the Macondo well and for the operation of the Deepwater Horizon" drilling rig, the report stated.

Of particular note was the cement seal put in place the day before the explosion in the Gulf of Mexico."

http://www.msnbc.msn.com/id/44514842/...

Routt County is in for more bad news re: fracking. But at "10 feet a year", according to the Gas rep, it will take some time to arrive.

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sledneck 2 years, 10 months ago

The cost to the commons?

Who do you think is paying for the financial market collapse?

Who is paying for the bail-outs to all the big banks? And don't say that's private businesses fault. They chose to run the risk but it was GUBBAMINT who chose to bail them out. They should have been allowed to fail.

Who is paying for Fannie and Fredie?

Who is paying for the inflated price of everything they buy because uncle Ben keeps printing money?

Who is paying for the endless wars so the military industry can keep printing money?

The commons are being screwed, not just by big corporations as you suggest, Lewi, but by government too. And the cost of the BP incident, both economicly and environmentally, probably pales in comparison to what the commons would pay for a gallon of gas if Uncle Scam was the sole provider. After all, Exxon makes about a dime off a gallon and our retarded uncle gets about half a dollar, no???

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Steve Lewis 2 years, 10 months ago

Sled, I'll repeat, your notion of the extremes suggests we might choose one or the other. Its not that simple.

Rather than acknowledging a role of the private sector in your listed problems, you only see government. You will not look beyond that red button. You prefer we go through a collapse of global financial system rather than a bailout? So describe the aftermath of your vision.

Neither are you a steady friend of corporations, saying they are screwing the commons. Please describe how we fix that without growing government.

You are for the individual. Lori Jazwick wrote a constructive letter about stewardship of land by landowners and you were compelled to say she was going too far telling you what to do with your land.

The dots are connected. You just don't want them to be.

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sledneck 2 years, 10 months ago

Yes, I totally prefer the collapse. To me, it's about as much a threat as the ice-age or global warming. Real wealth would remain. The rest was fiat anyway.

Let's take GM. Should it be bailed out or allowed to go bankrupt?

It was bailed out. Bond-holders, who are supposed to be first in line at any bankruptcy, were SCREWED by uncle scam in favor of the unions (which had as much to do with the company's crappy business model as management, no?) Now the company is back in the black but its share price is still in the toilet and since the government incentives for purchasing cars has stopped and the UAW is still an albatross around GM's neck the future of GM is anything but certain.

What if it had bankrupted? Thousands of UAW workers would be out of work? Thousands of small-business suppliers would be out of business? An american industry would have been lost? Huge factories full of parts and assembly lines would have sat and rusted? NOPE! Honda, Toyota, Ford or someone else would have bought the inventories, assembly plants and factories for pennies on the dollar. They would have re-negotiated a more reasonable contract with the UAW. Dittos for their small-business suppliers/ sub-contractors. They would have ramped up production (or down) to whatever level the world market was/ is demanding and life would go on. Thats all that would have happened. And that scenario could have played out across the globe until the dust settled.

Why is that so unfair? It's what happened to me and millions of other Americans. We had to downsize, sell equipment for pennies on the dollar, take huge pay cuts and work harder. And on top of our being left to fend for ourselves we were also forced to bail out crooks woh should have been allowed to fail. In that sense, your pitty for the common man is correct.

Why not apply the same rules for GM, Bank of America, and all the rest? Let 'em fail. Nothing is "too big to fail". After all, look at government. It's the biggest thing going and it's a colossal failure.

Yes, I am for the individual. Individual rights, individual responsibility and individual property. Of course there are some aspects that are inextricably linked. But just as I want to minimize that linkage (perhaps to a fault) you want to maximize it by connecting all prosperity to a government that can give us no such thing.

How can a government stimulate an economy or bail out a business until it first takes an equal amount of wealth from someone else? And does not that act of de-stimulating or un-bailing out the other poor bastard have an EQUALLY NEGATIVE effect, thereby cancelling out the intended positive outcome???

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heboprotagonist 2 years, 10 months ago

Zombies on the left. Vampires on the right. Both the public and private sectors are unwieldy monsters who care for nothing save their own perpetuation. This isn't to say they aren't capable of good, but it is never their intent. And their instinct is to take, take, take, until our economy is a barren wasteland.

That's why we need both, to keep the other in check. If you fail to see that, you get what you deserve.

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