Council will look at sales tax increase to fund parks

Marijuana excise tax on the radar as well

The Crested Butte Town Council is leaning toward making another attempt this November to ask voters to approve a .5 percent sales tax increase that would be earmarked for parks maintenance. The same measure failed last fall by just three votes. There is discussion about floating a marijuana excise tax in front of voters as well.

During an April 6 work session, town manager Todd Crossett and town finance director Lois Rozman outlined the reasoning for going for such tax increases even while general fund reserves are healthy. The general fund reserve is at approximately $3 million, or 100 percent of the annual budget.
“Having the reserves has allowed us to leverage money and do projects like the ice rink, the Depot renovation and the upcoming installation of the affordable housing infrastructure in blocks 79 and 80,” Rozman explained. “It is a good tool when applying for grants.”
Councilman Jim Schmidt said he viewed reserves as a buffer during lean economic times. He asked how much the town dipped into the reserves between 2008 and 2010.
“We took between $100,000 and $300,000 out each year,” Rozman said. “It allowed us to maintain services in town and not cut service or staff.
“As ongoing expenses go up, we rely on sales tax revenues,” Rozman continued, “so it is an unknown. We have just added two new positions this year that add to ongoing expense.”
“Look at communities that lost sales tax revenues after they experienced a flood or a fire,” added Crossett. “It’s not beyond imagination that such a scenario could happen here.”
“For smaller towns, we are the envy,” said Rozman. “Other small towns are working to get to 77 percent or 100 percent of reserves. We are over that. Our philosophy has been to have big reserves to even out cash flows and take care of emergencies.”
“That policy allows you to be comfortable with a contingency in place and to handle major one-time expenses to reach goals of the town,” said Crossett.
Councilman Skip Berkshire said small resort towns will always be hamstrung by the state’s Gallagher Amendment, which delineates property tax rates between private property such as a house and business property. Business takes a big hit under the amendment and in places where valuations are big because of a resort aspect to the community, business is hit particularly hard.
“We need to look at other sources of revenues,” Berkshire suggested. “Maybe a surcharge on retail marijuana sales is appropriate. It could be time to ask voters to loosen up some of the constraints on some of the town funds.”
“Having those separate funds can impose discipline,” countered mayor Aaron Huckstep. “The town has done very well the last few years with sales tax. Lots of months are setting records. But the good times won’t last forever.”
“The current policy of the town staff is something the community can be proud of,” said Councilperson Glenn Michel.
The rest of the council agreed that the tight fiscal policy should remain in place.
Crossett then explained the town’s financial situation with parks. “We’re a victim of our own success,” he said. “Soccer is exploding, for example. Weddings and events using town facilities are skyrocketing.”
He said the real estate transfer tax (RETT) fluctuates and so is not reliable as a steady income stream. The RETT money is used for capital projects in Crested Butte.
“The challenge is that capital projects and maintenance have been deferred,” Crossett said. “We can’t continue to do that. Taking no action would mean things like the skate park would be closed when their useful life ended and that is getting close. There would be no new facilities and a suspension of the parks-and-rec master plan.”
“Has the staff looked at the impact of the possible annexation and how it would likely front-load the RETT and its impact on the sales tax ballot issue?” asked Councilperson Chris Ladoulis.
“There are still a lot of questions with the annexation,” responded Crossett. “The annexation is not a done deal.”
“Now that we have a year’s worth of data, we should relook at a marijuana excise tax,” suggested Michel.
Rozman said that was a good idea but a turndown should be expected in that sector when Gunnison allows retail marijuana sales.
“And if you do such a tax, there will be other groups looking for a piece of that pie,” predicted Crossett.
While the staff favored returning a sales tax increase to the voters, Crossett admitted there was some downside brought up by local businesses that compete with Internet sales that don’t charge tax.
The Trust for Public Land (TPL) has an office that helps communities research and pass taxes geared toward parks, and Crossett asked the council if it would be worthwhile to reach out to the TPL to get some advice. The council said it was worth pursuing to get more information.
Crossett said the staff recommends reaching out to voters for the same tax question this November. He said using the TPL resource would help. Better organization and a citizen’s committee would also be a plus in the effort, he said.
“Last year half the people voted against it,” pointed out Ladoulis. “Do we have an understanding of the reasons?”
“Anecdotally I don’t think people understood all the impacts. We can ask the TPL to help us survey and dig down for the reasons,” said Crossett.
Councilman Shaun Matusewicz has never been a big proponent of increasing town sales tax. “I felt last year, and still do, the opportunity is there for a marijuana excise tax,” he said. “We are leaving a lot of money on the table. There were $2.3 million in legal marijuana sales in town last year. Crested Butte is one of the only resort communities without a 5 percent excise tax.”
“That would only raise $115,000 and we need closer to $300,000 a year,” pointed out Huckstep.
“It helps,” responded Matusewicz. “It will be more difficult to pass an excise tax in the future. The opportunity is still there while the business is new and fresh.”
The council will consider that tax and gave Crossett the go-ahead to touch base with the TPL to see what sort of help they can provide in passing a sales tax increase next fall.