Council keeps crawling toward sales tax hike

But ultimately the voters have the say

A split Crested Butte Town Council will continue to pursue a potential increase in town sales tax to help fund parks and recreation maintenance. An excise tax on retail marijuana sales will also be looked at to increase revenues for the same purpose. Both measures would have to be approved by voters.

The council has held three work sessions on the topic and has come to the conclusion that something has to be done sooner rather than later to make up for a shortfall in the town capital budget. But at the Monday, April 7 council meeting, some Elk Avenue retailers spoke against the idea. And not every councilmember was enthusiastic about a sales tax increase.
“There’s not an immediate cliff that we’ll go off next year if we don’t fill that gap, right?” asked Councilperson Chris Ladoulis.
“The cliff would be reached in 2017,” responded Lois Rozman, town finance director. “The five-year capital budget goes broke in 2017 if we do the projects in that budget. At the moment we’re dipping into reserves, probably $100,000 per year just to address deferred maintenance.”
Rozman explained to the council that all the town departments “battle” to get money for their maintenance projects and it all comes out of the capital fund that is financed primarily through real estate transfer tax.
The RETT brings in about $450,000 per year to the capital budget, and park maintenance eats up about $370,000 of that.
“The roof repair on this building has been discussed for years and put off until this summer, for example,” Rozman said. “It becomes a discussion over what Band-Aid is no longer holding.”
“And the $100,000 doesn’t really change anything,” said Mayor Aaron Huckstep. “The real problem is costing between $250,000 and $500,000 when you look down the road.”
“There is a certain set of expectations with Parks and Rec by the community,” said Todd Crossett, town manager. “We don’t have a sustainable way to fund those expectations. Or the council can decide to downsize those expectations and direction.”
“The community has stated it wants things, but that is without including the discussion of cost and finances,” said Ladoulis.
“There doesn’t appear to be a tremendous appetite in the community to cut back in parks and rec programs,” said Crossett.
“We’ve contemplated the doomsday scenario where cutting is the direction,” said Parks and Rec director Jake Jones. “A lot of the beloved amenities would go off-line. For example, eliminating flowers on Elk Avenue. That’s an easy $30,000 savings. The tennis courts are 35 years old and need to be replaced. Things just don’t materialize for free.”
“I’ve been in retail in Crested Butte since 1983 and it’s an old paradigm to just raise sales taxes to increase revenues,” said Ethan Hicks of Paradox Footwear. “Three things hurt me in trying to stay competitive: the state, the county and the town. Customers are turning to the Internet, and increasing sales taxes just makes it easier for people to turn to the net for shopping.
“I’d ask you to exempt local retailers from sales tax so I can compete with something like Amazon,” Hicks continued. “I can’t raise my prices any more. Raising sales tax a half percent is the wrong thing to do to retail shops in town. Go through the town budget to make it tighter.”
Hicks asked Huckstep how much he collects for the town with his business. The mayor, a lawyer, said that as a service provider, he does not collect sales tax.
“Perhaps the town should look at doing something different and taxing things that aren’t taxed now, like services,” Hicks suggested.
Hicks said that while the town is surrounded “by the biggest playground in the lower 48, the town continues to fund things like hockey rinks and skateboard parks.”
Ali Fuchs of Big Al’s Bicycles said she too was against raising the sales tax. “It is very difficult to run a retail store in this town,” she said. “Charging five cents on every ten dollars doesn’t sound like a lot but it is at the bottom of the bill. I think it will make it more difficult for retailers. It’s hard to compete with the Internet and we are trying to keep Elk Avenue vibrant.”
“I’m not in favor of going any further with a sales tax increase,’ said Councilperson Shaun Matusewicz. “Look at the inside of the FedEx truck. It is filled with boxes from Amazon and Zappos. We can’t change that but raising a sales tax doesn’t help local business.”
“I’m a proponent of the sales tax increase,” countered Councilperson Jim Schmidt. “I think the town has been pretty tight with its funds and I think we need to take care of the recreational amenities we have in town. I can’t think of when I asked what the sales tax was before buying something in another town. Now, I also think we should look at an excise tax on recreational marijuana sold in Crested Butte. It appears we could raise about $90,000 with a 5 percent excise tax.”
“Because any tax increase would have to go on the ballot, a sales tax initiative is a big tool,” said Ladoulis. “I don’t think we’re at the doomsday scenario yet. My inclination is to take other action now and contemplate a sales tax increase in a few years.”
Councilperson Glenn Michel said the council had spent a lot of time combing through town budgets looking for savings and had agreed that finding a way to solve the capital budget shortfall was going to be a top council priority this year.
“We all have recognized this as a need and it is time to support a solution,” he said.
“I’m lukewarm on the sales tax idea but there are a few options out there,” said Councilperson Roland Mason. “I’d like to look at it in conjunction with other alternatives. It will be a couple of things that bring us out of this.”
“I think sales tax in town is too high now,” added Councilperson David Owen. “I don’t think there will be one silver bullet out there to solve the problem. It will be a number of things. I support the staff really looking at the budget to see what can be done. Having said that, there are only a limited number of tools available, so we should look at everything, including sales tax.”
“Where is all this fat in the town budget?” asked Michel. “It is unfair to the staff to say they have to do better with the budget. We have discussed this issue for years.”
“It does a disservice to the staff,” agreed Huckstep. “I don’t believe cutting the budget is a viable option. This is an issue that isn’t going away. Our citizens enjoy using the town amenities and if you want to keep sweeping the issue under the rug, things will continue to deteriorate and it will change this community. We need to make a hard decision at some point.”
“The town has been very responsible with its budgets for years,” said Schmidt. “The main thing is that whatever we decide won’t be the final decision. That will be up to the voters.”
The council appeared inclined to support a new tax on marijuana sales but wanted at least some of the money to go toward substance abuse education. Michel did not like any tie between marijuana sales and town Parks and Recreation programs. He supported putting all money raised from such a tax into education.
“Some education programs have been failures, like the old DARE program,” said Schmidt. “Another theory is that by giving kids other options they stay away from drugs. Parks and Recreation programs provide such options. I think it is appropriate to split that money.”
“Education is great but we aren’t talking about an education problem. We have a capital budget problem with a shortfall,” said Matusewicz.
“When you start asking the public to approve too many things and you start stacking initiatives, my gut says there’s a lower likelihood for people to say yes,” said Huckstep. “If people approve the excise tax and not a sales tax, we then only have a drop in the bucket that we need to fill. Keep that in mind.”
Gunnison County Substance Abuse Prevention Project executive director Matthew Kuehlhorn said he felt an excise tax on marijuana with the money earmarked for education was a good thing. “I think there is an education problem,” he said. “I love the idea of the council putting together a fund earmarked for education and youth development that is doled out through a granting process.”
At Schmidt’s suggestion, the staff will look into the possibility of imposing an excise tax on liquor sales as well as marijuana sales in town.
The council in general agreed that town fees for recreation programs were in line with other communities and should not be raised. Right now, the town collects about 77 percent of the cost of a program through fees.
“If parks and recreation centers made money, there would be a lot of private parks and private rec centers,” said Jones. “But they are in the public domain for a reason. There will always be some need for some public subsidy.”
The council instructed the staff to continue pursuing the path to putting a sales tax increase on the November ballot. They will hold a public open house on the topic in early May.