Council continues work on detailing proposed housing tax

Potential grants, appeals process and where the money goes

[ By Mark Reaman ]

Details of how to administer and implement the proposed Crested Butte tax increases earmarked for affordable housing continue to be discussed by council. While backing off an idea to allow for exemptions to the empty house tax portion of the equation because of inadequate income or length of ownership, councilmembers do seem in favor of setting up a grant program to help homeowners in need of financial assistance to pay the tax.

Voters will consider two tax measures this fall geared toward affordable housing. The first would raise the current short-term rental (STR) excise tax from 5 percent to 7.5 percent. A second measure would increase town sales tax .5 percent on pretty much everything except groceries purchased in Crested Butte. That is tied to a new tax that implements a $2,500 annual fee on houses and some vacant residential property located in Crested Butte that do not lease to long-term renters at least six consecutive months a year. Council must pass an ordinance detailing the tax because specifics cannot fit on the upcoming ballot.

So council members are taking time this fall to debate how best to define and use the tax. They have agreed on several potential exemptions based on hardships like a death or illness of the property owner, renovation of a home that prevents it being rented for 180 consecutive days, court proceedings that prohibit its renting, a restrictive covenant requiring a unit on the property to be long-term rented, or if an owner chooses to donate the $2,500 plus a 1.5 percent fee to a charitable organization that must then contribute that revenue to the town’s affordable housing fund.

Town finance director Rob Zillioux went over the proposed taxes and the importance of the having the “nuts and bolts” ordinance in place before the November election.

Keeping the tax money inside town boundaries?
Referencing several email concerns from second homeowners, councilmember Mallika Magner asked if the money raised by the tax could be spent outside town boundaries. Town manager Dara MacDonald answered that yes it could.

“I always thought the town could help with housing projects near Crested Butte like the Corner at Brush Creek or something in Mt. Crested Butte,” said mayor Jim Schmidt. “I don’t recall ever discussing spending money on a project in Gunnison however.”

Councilmember Chris Haver pointed out that Gunnison had contributed to the Anthracite Place housing project in Crested Butte and that probably helped with grant and partnership financing. “I understand the concern about using this tax money outside of town,” he said. “We’ve all gotten a lot of emails on the issue. I feel the direction should be focused primarily on town projects or on programs like the InDeed program that would purchase deed restrictions on existing homes in town. But that would be discussed through the public budget process every year before the council so the public would have a say in it. I hope that controls the spending in an appropriate manner.”

Appeal issue?
Council also debated whether Zillioux should be the first point of appeal for the empty house tax. Schmidt said that many of the second homeowners impacted by the tax felt Zillioux was a biased champion of the idea from the start and Schmidt said Zillioux’s advocacy for the tax months ago showed a “disdain” for some second homeowners. Schmidt commented he was “really bothered” by the suggested chain of appeal and said he preferred the appeal process not include Zillioux and perhaps come to the council instead.

Zillioux responded that he took offense at the accusation and asked Schmidt to explain when he had been disdainful. “That’s disrespectful, Jim,” he said.

Schmidt replied that Zillioux had several times insinuated second homeowners were mainly rich hedge funders.

Town attorney John Sullivan said the town’s appeal process had always gone to the town finance director when it came to tax issues.
“I’ll push back on the idea that Rob showed disdain for the second homeowners,” countered councilmember Jasmine Whelan. “I didn’t see that in the presentations. I’ve seen him as a consensus builder. He’s not a bad person.”

“I agree he’s not a bad person,” said Schmidt. “But I didn’t like his presentations on the issue and many people were offended by it. I felt he was making a stump speech as opposed to putting out facts.”

MacDonald said it was the role of the staff to administer any tax.

Councilmember Ian Billick asked if another staff member could handle the appeals and Sullivan indicated they could.
“No matter who is appealing, they have to follow the procedures we lay out,” said Haver.

“I take Jasmine’s position,” said councilmember Mona Merrill. “We need this money to do right things. The reality is that it is $2,500 not $7,000. We’ve come so far listening to the second homeowners. We are crazy to not realize things are changing. This sort of tax is normal in other places. It is lawful to tax second homeowners more. We need a lot of money in the big picture.”

“That’s not the issue. We’ve all come to the agreement we need the tax money,” said Magner.

“If another staff member can review an appeal, the council can step back and consider that,” suggested Billick. “We aren’t passing this tonight so let’s come back and think about it. I definitely feel an appeal should not come to the council.”

Council was generally lukewarm on the idea of allowing homeowners to pass the annual tax through a non-profit group like the Community Foundation or Valley Housing Fund. No one understood the potential benefit, but most felt if it made some people happy and it didn’t impact revenue collection and future bonding potential, they could live with it.

MacDonald said she did not expect many people would utilize that conduit to pay the annual fee that would go up each year based on inflation.

Grant program instead old-timer exemption
As for the length of ownership or income exemptions, staff indicated that would be very difficult to manage. Instead, they proposed the idea of setting up a grant process for those who might have a problem paying the tax. Schmidt had repeatedly said there were some second homes owned by families in Crested Butte that had passed the home down through generations. He did not want to financially pinch the old mining families who used the houses but didn’t have a lot of income.

Town community development director Troy Russ said the town could budget $10,000 to $15,000 each year for such cases. He suggested that the Valley Housing Fund or another third-party entity like the Housing Authority could interview and process the grants. The money could be budgeted every year as long as it was needed.

“I’m a big fan of this idea,” said councilmember Jason MacMillan who originally suggested such a program. The rest of the council agreed with that conclusion.

The council will continue to iron details of the upcoming tax issue with the hope of passing an implementation ordinance in November.