Hayden town board will consider use tax
Developers: Charge on building materials won't stymie growth
July 18, 2007
Hayden — Growth in Hayden is creating more costs for the town than revenue, and Town Manager Russ Martin said the town has to find a way to make sure “growth is paying for itself.”
To that end, the Hayden Town Board will consider a 2 percent use tax on building materials at its meeting Thursday. Voters ultimately will decide whether to instate the tax; the board will decide only whether to put the ordinance on the ballot this November.
Martin said the tax is needed to keep up with the increasing demand for town services – such as water lines and police – created by the town’s steady growth and development. Martin said a use tax on building materials is a way to make growth pay for itself because it directly taxes developers and those who are creating the need for more services. The tax also would apply to Hayden residents who build or renovate their homes, but Martin said the use tax on building materialso would be less of a burden to Hayden residents than the tax it would replace, a use tax on automobile purchases.
Martin said that tax generates $25,000 to $30,000 for the town annually, while the tax on building materials would generate $100,000 in a “normal building year.”
A tax committee reviewed the town’s revenue structure and recommended the use tax on building materials, Martin said. The committee’s members are Joyce Cless, Jack Giessinger, Bill Hayden and Mike Luppes.
A use tax was one of the town’s only options to increase revenue, Martin said. Unlike a home-ruled city or town, such as Craig or Steamboat Springs, Hayden is a statutory town limited by state law in the taxes it can collect. For example, while Steamboat can increase its sales tax beyond a state-mandated maximum of 4 percent, Hayden can not.
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A state law preventing property taxes from rising more than 5.5 percent in any given year also limits the town. Martin said the price the town pays for everything from labor to materials is increasing at a higher rate.
“Property taxes are not generating enough revenue to keep up with the ongoing growth of the town,” Martin said. “The cost of just about everything has gone up more than 5.5 percent. A use tax is about the only thing we could do to offset the exploding cost of projects.”
In 2006, the town collected $934,571 in sales tax; $370,000, or 39.5 percent of total sales tax revenue, came from business generated from Yampa Valley Regional Airport. The town collected $307,615 in property taxes.
If more of the development in Hayden was commercial, Martin said the need for the new use tax wouldn’t be as great. But because most of the development in Hayden is residential, it is not generating much additional sales tax for the town. Also, Martin said commercial properties pay a property tax rate about four times higher than residential properties.
Roger Johnson, president of Mount Harris Development and one of the developers of The Villages at Hayden subdivision, said he doesn’t believe the 2 percent use tax will discourage development in Hayden.
“I’m not opposed to a tax on building materials,” Johnson said. “My concern is how tax dollars are spent.”
Johnson said it would be nice to get a specific definition of what the tax dollars will be used for and said he hopes they will be used to fund projects that are “economically productive for the area” and “not too narrow in scope.” In any case, Johnson said the tax makes great business sense for the town.
“The town of Hayden has a relatively limited tax base to work from,” Johnson said.
Jon Peddie, co-developer of the Valley View Business Park, agreed that the tax, if enacted, would not discourage developers.
“Like anything else,” Peddie said, “all cost increases are passed on to consumers.”
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