Our View: Attempting to solve the tax question
June 19, 2011
Steamboat Springs — The second incarnation of the Tax Policy Advisory Board has been meeting since late last year to consider whether to recommend a change in Steamboat Springs' tax structure. The easiest course of action would be to recommend no change at all — that the city simply continue to rely on sales, building use and accommodation taxes to fund city government. And perhaps that's ultimately the best decision.
Regardless of the outcome, we appreciate the time and thought being dedicated to the issue by the volunteer group. We wrote in October that the Steamboat Springs City Council ought to be wary of assembling another Tax Policy Advisory Board, particularly if there's no public appetite for a potential change in our tax structure — such as a property tax to replace some portion of the city's existing sales tax. Keep in mind that any changes to our taxes would have to be put to a vote of residents.
We've previously cautioned the Yampa Valley Housing Authority and the Steamboat Springs School Board against moving forward with tax questions given the state of the economy and the dire financial straits experienced by many in our community.
Of course, it's the economy that led to the current analysis being conducted by the Tax Policy Advisory Board. The previous board, established in 2004, recommended to the city in 2005 that no significant change to our sales-tax-dependent revenue structure was needed. A key reason for that conclusion was that the state's Taxpayer's Bill of Rights and Gallagher Amendment work in such a way that a disproportionate burden of property taxes is placed on commercial properties — i.e., local businesses.
TABOR and the Gallagher Amendment haven't changed. But unlike 2005, our business community is under significantly more stress.
But there is something particularly alluring about a city property tax, and it's why the tax structure conversation continues to resurface. Second-home owners pay very little toward city services even though their properties make up about 48 percent of all Steamboat residential units, according to a 2008 study. Second homes also accounted for 62 percent of all residential assessed value at that time.
Tax Policy Advisory Board member Paul Hughes, the former city manager, cited those figures as reason for swapping a 4 percent city tax on food and utilities for a property tax that would generate a corresponding amount of revenue. Hughes said the plan, which is supported by at least a few other members of the group, seeks to be revenue-neutral, meaning the city wouldn't collect more tax revenues than it currently does.
Additionally, the proposal offers a 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 nonexempt real property. Its supporters say that will lessen the burden on full-time residents and commercial property owners while still ensuring that second-home owners foot more of the city tax bill. The group also is contemplating whether the plan, if supported by council and sent to the voters, should have a five-year sunset and then return to voters for an extension.
Tax Policy Advisory Board members, not surprisingly, are split on the proposal. The group soon will make its recommendation to the City Council, and it could suggest at least two very different plans. Whether one is the proposal presented by Hughes last week remains to be seen. And while we're anxious to see the report, we're also skeptical that there's any real motivation for change in our community.