AGENDA ITEM #5. CITY COUNCIL COMMUNICATION FORM

Transcription

1 AGENDA ITEM #5. CITY COUNCIL COMMUNICATION FORM FROM: THROUGH: Kim Weber, Finance Director Gary Suiter, City Manager DATE: March 13, 2018 ITEM: Fiscal Sustainability Revenue Diversification. X DIRECTION INFORMATION ONLY ORDINANCE MOTION RESOLUTION I. REQUEST/ISSUE & BACKGROUND INFORMATION: On January 16, 2018 staff presented an overview of the taxing structure in our community. This presentation included information about community-wide property taxes as well as sales taxes, lodging taxes, and other taxes. There was information in that presentation about the different taxing entities, the uses of the funds, and the ramifications of the Gallagher Amendment as well as the Urban Renewal Authority. At that time City Council asked for a presentation on revenue diversification and specifically some comparisons to other communities. Staff used information available through the Colorado Association of Ski Towns (CAST) and information from CML along with surveying municipalities via phone calls and searching municipality websites. It is factual information to the best of our knowledge based on the sources used. Staff compiled the information for Attachment 3 that includes all Colorado municipalities population, sales tax rate, use tax rate, property tax rate, and special sales tax rate on marijuana if applicable. From that list we chose 7 communities that were either like us in a service perspective, population perspective, or funding perspective. Staff then called the 7 municipalities to ask a series of questions that we believed to be critical components for City Council. That information is compiled 5.1

2 into Attachment 4. The next step was to research how each of these municipalities funded their services and programs. To do that, staff researched budget books and called Finance Directors to get the most accurate information. With this information gathering, staff put together a presentation that includes a focus group of 7 municipalities and their revenue pies. Each individual municipality has different services, reports services in different Funds, has different funding sources, report allocated overhead differently, and presents their budget books differently. Therefore it is important to note that this information is meant to give you an idea of how other communities operate, but is not audited financial data. II. ALTERNATIVES: There are no alternatives listed at this point because this is meant to be an educational discussion. III. STAFF RECOMMENDATION: Information only. IV. FISCAL IMPACTS: Information only. V. LEGAL ISSUES: With any tax questions there are federal, state, and local legal issues that will need to be discussed in detail. Attachment 2 is a tax policy document written by our City Attorney for reference. VI. CONFLICTS OR ENVIRONMENTAL ISSUES: None noted. VII. CONSISTENCY WITH COUNCIL GOALS AND POLICIES Fiscal Sustainability 5.2

3 ATTACHMENTS: Attachment 1: Revenue Diversification Presentation. Attachment 2: Tax Policy document prepared by the City Attorney. Attachment 3: Colorado municipality tax information. Attachment 4: Community comparisons. 5.3

4 Attachment #1 Fiscal Sustainability Revenue Diversification March 13, 2018 Kim Weber, Finance Director 5.4

5 Revenue Diversification What is the sales tax and property tax rates of all Colorado municipalities? What other similar communities do? Focus group selected: Aspen Breckenridge Durango Glenwood Glenwood Springs Telluride Vail What are the similarities and differences? What are the options for the City of Steamboat Springs? 5.5

6 Sales & Property Tax All Colorado Municipalities City of Steamboat Springs is one of six Colorado municipalities that doesn t have a property tax. Delta Edgewater Lone Tree Montrose Silverthorne Steamboat Springs Only three Colorado municipalities do not have a sales tax Ophir Pagosa Springs Sanford 5.6

7 City of Steamboat Springs Revenue Pie 5.7

8 City of Aspen General Fund Sales Tax = 2.1% School Foundation Sales Tax =.3% 2% Lodging Tax 1.5% Dedicated to marketing.5% Dedicated to transit Property Tax = mills Real Estate Transfer Tax Groceries & Utilities are taxable Contract for Transit with Transit Authority (RFTA) City handles P&R Special District for Fire/EMS Notes: Other revenues include rental income from housing funds and facility rental income that is substantial. Source: City of Aspen 2018 budget book, excluding inter-fund transfers and bond issuance. 5.8

9 Town of Breckenridge General Fund Sales Tax = 1.93% Marketing Sales Tax =.07% Open Space Sales Tax =.5% 3.4% Lodging Tax 1.4% Dedicated to marketing 2% General Fund 5% Marijuana Tax 4% Lift Ticket Tax $10/employee Occupation Tax Property Tax = 5.07 mills Real Estate Transfer Tax Groceries & Utilities are taxable Town manages transit Town manages P&R Special District for Fire/EMS Notes: Other revenues include sales of assets which was higher than previous years. Source: Town of Breckenridge 2018 budget book excluding debt proceeds and internal services fund revenues. 5.9

10 City of Durango (General Fund Only) General Fund Sales Tax = 2% Recreation Sales Tax =.5% Parks & Opens Space Sales Tax =.25% Capital Improvements Sales Tax =.25% 2% Lodging Tax Dedicated to Marketing/Conferences & Transportation Property Tax = mills Groceries & Utilities are taxable City manages transit City manages P&R Special District for Fire/EMS Source: City of Durango s 2018 budget book excluding administration fee and inter-fund transfers. 5.10

11 City of Glenwood Springs (General Fund, Tourism Fund, Bus Tax Fund & Fire/EMS Fund) General Fund Sales Tax = 1.5% A&I Fund = 1% Capital Improvements Sales Tax=.5% Transit Sales Tax =.2% Streets Department Sales Tax =.5% 3% Lodging Tax Dedicated to tourism promotion 5% Marijuana sales tax 5% Excise tax on Marijuana Property Tax = mills Groceries & Utilities are taxable City manages Transit City manages P&R City manages Fire/EMS & receives partial funding from the rural fire protection district. Source: City of Glenwood Springs 2018 budget book excluding allocated overhead and inter-fund transfers. 5.11

12 Town of Silverthorne General Fund Sales Tax = 2% 2% Lodging Tax 1.7% Dedicated to Parks, Open Space & Trails.3% Dedicated to Marketing 5% Marijuana Tax Real Estate Transfer Tax Property Tax = None Groceries & Utilities are taxable City does not manage Transit City manages P&R Special District for Fire/EMS Notes: Charges for Service is primarily from Recreation & Culture. Rec Center and Pavilion rentals. Source: Town of Silverthorne s 2018 budget book excluding inter-fund transfers and debt proceeds. 5.12

13 Town of Telluride General Fund Sales Tax = 4% Affordable Housing =.5% 2% Excise Tax on Lodging & Restaurant Food & Beverage Dedicated to the Airline Guarantee Fund Real Estate Transfer Tax Property Tax = mills Groceries are non-taxable Utilities are taxable Town manages Transit Town manages P&R Special District for Fire/EMS Source: Town of Telluride s 2018 budget book 5.13

14 Town of Vail General Fund Sales Tax = 2% Capital Improvements Sales Tax= 2% 1.4% Lodging Tax Dedicated LMD & Special Events Real Estate Transfer Tax Lift Ticket Tax Property Tax = Groceries & Utilities are non-taxable City manages Transit City manages P&R City manages Fire/EMS Note: Other Revenues includes a transfer from Vail Reinvestment Authority and a large amount from workforce housing sales. Source: Town of Vail s 2018 budget book excluding inter-fund transfers. 5.14

15 Observations Property tax Mills range from less than 1 mill to over 30 mills in Colorado mills in the focus group Sales tax Ranges from 1.5% to 7% in Colorado municipalities 2.4% - 4.5% in focus group Lodging tax All 7 communities have a lodging tax Most dedicate a portion to marketing 5 of the 7 communities in the focus group have a real estate transfer tax 5.15

16 Observations (continued) 5 of the 7 communities tax food for home consumption (groceries) 6 of the 7 communities tax utilities 5 of the 7 communities have separate special districts than handle fire and EMS All 7 of the communities have some level of parks and recreation within their budget 5 of the 7 communities directly manage transit 5.16

17 Taxing Powers & Limitations Home Rule City Power to impose property taxes & excise taxes New taxes or increased tax rates need voter approval Colorado Constitution prohibits Colorado cities from imposing income taxes TABOR prohibits Colorado cities from taxing transfers of real estate unless in place prior to 1992 Fees can be imposed at a rate at or below the cost of the service 5.17

18 City of Steamboat Springs Existing Taxes Sales Tax = 4.5% 4% - General Services (not dedicated).5% - Dedicated to the Education Fund Board Vehicle Use Tax = 4.5% 4% - General Services (not dedicated).5% - Dedicated to the Education Fund Board Building Use Tax = 4.5% 4% - General Services (not dedicated).5% - Dedicated to the Education Fund Board Lodging Tax = 1% Dedicated to the construction & improvement of tourist amenities (1986 ballot) Specifically dedicated to trails, park purchase & improvements on Yampa Street, Howelsen Ice Arena multi-sports facility, and Old Town Hot Springs New Construction Excise Tax = 1.2% Dedicated to capital improvements 5.18

19 What could the City do? General Sale Tax dedicated or not General Property Tax dedicated or not Admissions tax or seat tax Apply to the price of admission to sporting and cultural events Lift ticket tax Occupation tax or head tax Tax on certain businesses such as those that sell alcoholic beverages Tax on employment known as head tax Special sales taxes Lodging, vehicle rentals, fuel, food/beverage, marijuana, etc. 5.19

20 Attachment #2 Tax Policy Background Worksession March 13, 2018 Taxing Power & Limitations The City of Steamboat Springs is a home rule city. Colorado home rule cities have the power to impose two basic kinds of taxes, property taxes and excise taxes. A property tax is an annual tax imposed on the assessed value of property. An excise tax is a tax on an event or activity. For example, sales tax is an excise tax on sales transactions. New taxes or increased tax rates of any kind must be approved by voters. The Colorado Constitution prohibits Colorado cities from imposing income taxes. A 1992 amendment to the Colorado Constitution known as the Taxpayers Bill of Rights ( TABOR ) also prohibits Colorado cities from taxing transfers of real estate. Real estate transfer taxes imposed prior to 1992 are still valid. The City of Steamboat Springs does not impose a real estate transfer tax. Colorado home rule cities also have the power to charge fees for services provided. New or increased fees do not have to be approved by voters. However, fees may only be charged to offset the costs of services provided. Existing Taxes The City of Steamboat Springs funds its general operations primarily with a sales and use tax, a telephone occupation tax, and with various fees. The city also receives a share of state revenues from taxes on cigarettes and marijuana products. These revenues fund general operations such as transit, street maintenance, storm drainage, public safety, community development, and parks and recreation services. Sales in the city are subject to state, city, and county sales tax at a total rate of 8.4%. 4.5% goes to the City of Steamboat Springs, 2.9% to the State of Colorado, and 1% to Routt County. The City pays 0.5% of the 4.5% city sales tax rate to the Education Fund Board for education uses. Consequently, the effective sales tax rate for City operations is 4%. The sales tax rates of other Colorado home rule cities range from 1.5% to 7%. The vast majority of Colorado home rule sales tax rates range from 3% to 4.5%. Three Colorado home rule cities impose no sales tax. The City imposes a use tax at the same rate as the sales tax on construction materials, motor vehicles, and on some factory built housing. The use tax applies to these items when they are purchased outside of the City but used or registered in the City. Revenue from the use tax on motor vehicles goes to the general fund. Revenue from the use tax on building materials goes to the capital improvements program. Sales in the Local Marketing District, which consists of most commercial and lodging property in Steamboat Springs, are subject to an additional 2% tax on short term lodging. The LMD lodging tax is used to fund seat guarantees and related marketing to improve air service. The city imposes two special sales taxes. The first is the one half cent sales tax for educational purposes that the City collects for use by the Education Fund Board. These revenues are administered by the Education Fund Board. This tax and the restriction on its use were approved by the voters in % 5.0% 0.0% 4.5% City of SBS Sales Tax 2.9% Colorado 1.0% Routt County 8.4% Total th Street, P.O. Box , Steamboat Springs, Colorado (fax) steamboatsprings.net 5.20

21 The second is a 1% tax on short term accommodations. The proceeds from this accommodations tax are restricted to construction of amenities and improvements pursuant to the 1986 accommodations tax ballot question. These revenues were initially dedicated to construction of the Haymaker Golf Course. Currently these revenues are dedicated to trails and Yampa Street improvements pursuant to a 2013 election. Excess funds have been allocated to expansion of the Steamboat Springs Health and Recreation Association and the Howelsen Ice Arena. City sales taxes apply to sales of all goods, with certain exceptions required by state law. City sales tax also applies to some services, including short term lodging services. The city s sales tax applies to groceries and utility bills, which are exempt from sales tax in many Colorado communities. The city also imposes a 1.2% excise tax on the value of new construction. This tax is collected during the building permitting process. Revenues from this tax fund the city s capital improvements program. The city imposes fees for the various services it provides. The City Council periodically reviews and modifies city fees to ensure that the city recoups the appropriate level of costs for services. What the City Could Do -- Property Tax The city does not impose a property tax. There are one hundred home rule cities in the State of Colorado. Of those one hundred cities, ninety-four impose both a property tax and a sales tax. The City of Steamboat Springs is one of six home rule cities in Colorado that does not impose a property tax. Property owners in Steamboat Springs pay property taxes imposed by government agencies, including the Steamboat Springs RE-2 School District, Routt County, the East Routt Library District, Colorado Mountain College, the Steamboat Springs Cemetery District, the Yampa Valley Housing Authority, the Upper Yampa Water Conservation District, and the Colorado River Water Conservation Board. The property tax revenues of these agencies are not available for use by the city to fund general city operations. A portion of the property tax revenues of other agencies is diverted to the Steamboat Springs Redevelopment Authority. These property tax revenues are used for improvements in the SSRA plan area. Property Taxes & Uniformity Property taxes must be imposed uniformly upon similar classes of property. This means tax rates and assessment methods must be the same. For example, residential property must be taxed at the same rate regardless of whether it is used as a primary residence, second home, or affordable housing unit. One exception to the uniformity rule is the Gallagher Amendment. The Gallagher Amendment requires total property taxes collected in the state to be divided between residential and commercial property on a 55%/45% basis. Residential property values have increased statewide more than commercial property values since adoption of the Gallagher Amendment. As a result, commercial property is taxed at an effective rate that is approximately four times higher than the effective tax rate on residential property. What the City Could Do -- Other Taxes Other Colorado home rule cities imposes a variety of taxes other than sales or property tax. These include the following: Admissions tax or seat tax. These taxes apply to the price of admission to sporting and cultural events. They can also be applied to the price of ski lift tickets. Occupation tax or head tax. Occupation taxes apply to certain businesses, such as those that sell alcoholic beverages. Occupation taxes may also apply to employment. Occupation taxes on employment are known as head taxes. They may be imposed on the employer, the employee, or both. Special sales taxes, such as lodging, vehicle rentals, fuel, or food/beverage. Updated March 7,

22 Diversity & Stability The city s sales/use tax and the building excise tax are relatively sensitive to general economic conditions. Sales/use tax revenue and building excise tax revenues respond immediately to declines in business and construction activity. Some elements of city sales tax base, such as utilities and groceries, are relatively stable. Property tax revenues are not as sensitive to general economic conditions. Property values are assessed over a two year assessment cycle. Decreases in property values are not fully reflected in the property tax base for two years. Therefore, property tax revenues are relatively stable during economic downturns compared to sales tax revenues. Updated March 7,

23 City of Steamboat Springs Information Gathering (draft) 13-Mar-18 Attachment #3 NAME OF CITY POPULATION SALES TAX USE TAX PROPERTY TAX MARIJUANA TAX ALAMOSA 9, % 2.00% 6.7 ARVADA 115, % 3.46% 4.31% ASPEN 7, O% 2.10% AURORA 357, % 3.75% %-10% AVON 6, % NONE BASALT 3, % NONE BLACK HAWK % 4.00% % BOULDER 107, % 3.86% %-10% BRECKENRIDGE 5, % NONE % BRIGHTON 38, % 3.75% 6.65 BROOMFIELD 64, % 4.15% BURLINGTON 4, % 2.00% 8.6 CANON CITY 16, % 2.00% CARBONDALE 6, % 3.50% % CASTLE ROCK 56, % 4.00% CEDAREDGE 2, % 2.00% 7.98 CENTENNIAL 108, % 2.50% CENTRAL CITY % 4.00% CHERRY HILLS VILLAGE 6, % 3.00% COLORADO SPRINGS 451, % 3.12% COMMERCE CITY 53, % 4.50% % CORTEZ 8, % NONE 1.21 CRAIG 8, % NONE CRESTED BUTTE 1, % 4.50% DACONO 4, % 3.00% DELTA 8, % 3.00% NULL DENVER 683, % 3.65% %-15% DURANGO 18, % 3.00% EDGEWATER 5, % 3.50% NULL ENGLEWOOD 32, % 3.50% EVANS 19, % 3.50% FEDERAL HEIGHTS 12, % 4.00% 0.68 FORT COLLINS 160, % FORT MORGAN 11, % 3.00% FOUNTAIN 28, % 2.00% FRISCO 2, % NONE % FRUITA 12, % 3.00% GLENDALE 5, % 3.75% GLENWOOD SPRINGS 9, % 3.70% GOLDEN 20, % 3.00% GRAND JUNCTION 63, % 2.75% 8 GREELEY 101, % 4.11% GREENWOOD VILLAGE 16, % 3.00% GUNNISON 6, % 4.00% % GYPSUM 6, % 3.00% HAYDEN 1, % 2.00% %-15% HOLYOKE 2, % 1.50% 21.8 HUDSON 1, % 4.00% JOHNSTOWN 14, % 3.00% KIOWA % 1.50%

24 NAME OF CITY POPULATION SALES TAX USE TAX PROPERTY TAX MARIJUANA TAX LA JUNTA 6, % 3.00% LAFAYETTE 27, % 3.50% %-10% LAKEWOOD 153, % 3.00% LAMAR 7, % 3.25% LARKSPUR % NONE 15 LITTLETON 44, % 3.00% LONE TREE 13, % 1.81% LONGMONT 92, % 3.28% LOUISVILLE 20, % 3.50% 6.71 LOVELAND 74, % 3.00% MANITOU SPRINGS 5, % 3.80% %-10% MINTURN 1, % NONE MONTE VISTA 4, % NONE MONTROSE 19, % 3.30% NULL MORRISON % 3.75% MOUNTAIN VIEW % 3.00% % MOUNTAIN VILLAGE 1, % 4.50% MT. CRESTED BUTTE % 3.00% NEW CASTLE 4, % 2.00% NORTHGLENN 39, % 4.00% % OPHIR 191 NONE NONE OURAY % NONE PAGOSA SPRINGS 1,804 NONE NONE PARACHUTE 1, % 3.75% % PARKER 51, % 3.00% PUEBLO 109, % 3.50% %-15% RICO % NONE % RIDGWAY % NONE RIFLE 9, % 4.25% % SANFORD 844 NONE NONE SHERIDAN 8, % 3.50% SILVER PLUME % NONE %-8% SILVERTHORNE 4, % NONE NULL 5% SNOWMASS VILLAGE 2, % NONE STEAMBOAT SPRINGS 12, % 4.50% NULL STERLING 14, % 3.00% TELLURIDE 2, % 4.50% THORNTON 132, % 3.75% TIMNATH 2, % 3.00% TRINIDAD 8, % 4.00% % VAIL 5, % 4.00% WARD % NONE WESTMINSTER 112, % 3.85% 3.65 WHEAT RIDGE 31, % 3.00% 1.83 WINDSOR 23, % 3.95% WINTER PARK % NONE WOODLAND PARK 7, % 1% WRAY 2, % 2.50% YUMA 3, % 3.00%

25 Attachment #4 City of Steamboat Springs Information Gathering for City Council (DRAFT) 13-Mar-18 Steamboat Springs Aspen Breckenridge Durango Glenwood Telluride Vail Silverthorne Total City Sales Tax Rate 4.50% 2.40% 2.50% 3.00% 3.70% 4.50% 4.00% 2.725% General Sales Tax Rate 4.00% 2.10% 1.93% 2.00% 1.50% 4% 2% 2% Earmarked Sales Tax 0.5% - School Fund 0.3% - School Fund 0.5% - Open Space.07% - Marketing.5% - Recreation.25% Parks & Open Space.25% Cap Imp. 1% A&I Fund.5% Cap Imp..5% Streets.2% Transit.5% - Affordable Housing 2% - Capital Imp. Lodging Tax Sales Tax 1.00% 2.00% 3.40% 2.00% 2.50% 2.00% 1.40% 2.00% Dedicated To 1% - Tourist Amenities 1.5% - Marketing.5% - Transit Specialty Taxes None None 1.4% - Marketing 2% - General 5% Marijuana 4% - Lift Ticket $10/employee Occupation Tax Marketing/conferences & transportation None Tourism Promotion Fund 5% Marijuana Sales Tax & 5% Excise Tax on Marijuana Airline Guarantee Fund LMD & Special Events 1.7% Parks, Open Space & Trails.3% Marketing 2% Excise Tax on Lodging & Restaurant Food & Beverage None 5% Marijuana Groceries (Food for home Consumption) Taxable Taxable Taxable Taxable Taxable Non-taxable Non-taxable Taxable Utilities Taxable Taxable Taxable Taxable Taxable Taxable Non-taxable Taxable Property Tax Mills None None Transit Yes Contract Yes Yes Yes Yes Yes No P&R Yes Yes Yes Yes Yes Yes Yes Yes Fire Yes Separate District Separate District Separate District Yes Separate District Yes Separate District 5.25