Our View: Board analysis is spot-on
January 21, 2012
The city's sales tax-dependent revenue structure is a good fit for the community and doesn't need to be drastically altered because of ongoing economic struggles.
That, in essence, was the overriding message given by the volunteer Tax Policy Advisory Board commissioned by the city to examine the effectiveness of Steamboat Springs' revenue sources. It's a message we believe to be true.
The latest incarnation of the Tax Policy Advisory Board gave its final report to the City Council last week. After 12 months of study and analysis, the 12-member group came to essentially the same conclusions reached in a 2005 report by a previous Tax Policy Advisory Board.
Now that we've had two different groups study the issue during two very different economic times in our city and reach the same conclusion, let's accept that our reliance on sales tax revenues to fund city government has been and likely will continue to be the best model for Steamboat Springs. Any aspiring local politician who thinks otherwise ought to spend some time with the latest Tax Policy Advisory Board report before suggesting radical changes to tax structure.
Among the report's notable points:
■ There has been steady, sustained growth in revenues during the three-plus decades that sales taxes have been Steamboat's primary source of funding. The biggest exception was the two-year period from 2009 to 2010, but we're already seeing revenue stabilization as we slowly emerge from the recession.
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■ An estimated 45 percent of sales tax revenues are generated by city residents. Any shift toward a property tax likely would increase the overall tax burden on residents. The Tax Policy Advisory Board also found little evidence that a property tax would shift more of the tax burden to second-home owners as opposed to full-time residents. Further, as a result of the Gallagher Amendment, the tax burden that commercial property owners would face if a property tax was enacted here would be significantly disproportionate to their share of total property value.
■ The city must further analyze all its enterprise funds to look for ways to make them self-sufficient and thus minimize the use of taxpayer dollars to subsidize them.
■ The growth of location-neutral businesses and professionals in Routt County is responsible for $52 million in annual personal income — about the same as the total personal income collected by locals who work in the county's accommodation and food services industry. It is estimated that location-neutral professionals now generate nearly $1.3 million each year in sales tax revenue to the city of Steamboat Springs. Recognizing the importance of location-neutral professionals, the Tax Policy Advisory Board recommends that the city continue to expand the quality of its infrastructure and amenities to attract more businesses that are not tourism-dependent.
■ The city is in a sound financial position with no immediate need for additional revenues or sources of revenues.
■ The loss of use tax revenues, not sales tax revenues, poses the greatest risk to the city's ability to adequately fund capital improvements and core government services.
We commend the 12 volunteers who spent considerable time compiling a thorough, detailed analysis of city revenue sources. And while we're sure not everyone will be pleased with their findings, we believe the evidence speaks for itself. Many in Steamboat have long feared that a sales tax-based structure would cripple the city in the event of a serious economic downturn. Thanks in part to sound fiscal policy from recent City Councils and city leaders, that hasn't been the case. Our sales tax-dependent revenue model remains the right fit for Steamboat Springs.