Idea of property tax increase stymies council

Looking at long-term financial direction for town of CB

By Mark Reaman

The Crested Butte town councilmembers are in the midst of a discussion on how to deal with long-range financial planning and given continuing uncertainty over things like federal grants and tourism visits, they are discussing actions to take to remain in a healthy financial condition. They are looking at a possible increase in property tax for the street and alley fund, a reduction in the current policy to hold 100% of operating costs in its reserves and digging deeper to see if further belt tightening with projects and staff can be instituted.

It was determined that the town saw big bumps in sales tax revenues the last few years given a surge in visits during the pandemic along with some technical tax collection corrections. Those are not anticipated to continue and given a long list of needed and desired projects in the municipality, how to pay for it all is being analyzed. 

A third work session on the topic was held on Monday, June 2 and the council appeared to settle on a general direction while expressing sustained angst over whether to follow a staff recommendation to add three mills to the current eight mills to collect revenue for the street and alley fund. Staff outlined that major expenditures coming up for that fund included the Red Lady (roundabout) intersection construction, vehicle replacements and an anticipated $1.5 million paving project in 2029. The annual funding at eight mills generates about $1.4 million at current property valuations and another $75,000 comes in through parking in lieu fees and highway users’ tax.

“Eight mills is clearly inadequate,” said town manager Dara MacDonald showing a projection of future revenues and expenditures. “Eleven mills gets us to where we think we should be into 2030 with a very small cushion.”

The additional three mills would cost a residential property owner approximately $190 more per million dollars in valuation. For a commercial property, the hit is higher at about an extra $811 per million in valuation annually.

Councilmember Gabi Prochaska noted that as the town gets busier, and more people move to the North Valley, the town roads will see increased usage and their degradation will increase as well.

Mayor Ian Billick said he felt increased usage along with inflation and changing weather with more freeze-thaw cycles due to climate change all will contribute to higher road maintenance costs.

“We are keeping an eye on all those variables,” said public works director Shea Earley. “We need to adjust our capital improvement plans accordingly and maybe have this conversation again. What worked 20 years ago doesn’t work anymore. We have to adapt.”

“It seems 11 mills is barely maintaining,” said Prochaska.

“Generally, I don’t see how we avoid increasing the mill for the streets and alleys fund,” said Billick. “But if we end up increasing taxes, we need to be look at everything and be disciplined in our actions.”

“I know we need to raise the mills, but I would like to consider how to pay for the streets and alleys beyond just through in-town property owners, especially given that increased use coming from outside town,” said Prochaska.

“We have a hole we have to dig ourselves out of,” said councilmember John O’Neal. “Are there ways to decrease costs in streets and alleys? Maybe not. I’m okay with 11 mills as long as we look at ways to reduce costs first. Maybe wait to replace vehicles.”

“I agree. We should look at other places,” said councilmember Anna Fenerty. “I’d like us to think more intently about doing something else if we can.”

“Community is the most important thing in Crested Butte,” said councilmember Mallika Magner. “We need to preserve that. A three-mill increase sounds easy, but most property valuations are going to be two or three million dollars. Looking at the commercial property increase, do we want to keep our businesses here? Let’s look first at how we reduce costs. Three mills might be too tough on our community.”

“I’m hearing we should be more aggressive in looking for additional revenue not simply on the backs of our residents,” said Billick.

“I agree we should look to tighten our belts, and I have a lot of consternation to raise the mills,” said councilmember Kent Cowherd. “Can we do it slowly? Maybe increase the mill levy by one or 1.5 mills next year and see where we are?”

“I’m not a homeowner so don’t pay those property taxes,” said Fenerty. “I see the need. We don’t have adequate funds, but I agree with Mallika. That hit to commercial properties is a lot. It goes against what we’ve been talking about with supporting business.”

“I have a hard time not seeing how to raise the mills at least some,” said Billick. “When I first got on council, we raised water and sewer rates a bunch because previous councils kept the rates flat. I don’t want to keep kicking real public needs down the road. I want to see us funding what we really need to fund. If we can find $800,000 to pull out over the next five years, that’s the equivalent of one mill. And I say this as someone who pays property taxes.”

The mill levy increase discussion will continue as part of the budget discussions this fall. At that time the council will make a decision on how to proceed with the staff recommendation to increase the street and alley mill levy.

Reserves, capital, staffing and beyond the borders

The council as a whole generally appeared comfortable to adjust its current policy of holding 100% of annual operating costs in its reserve funds. Currently that amounts to about $9 million in the general fund and $6 million in the capital fund. Staff recommended keeping reserves at 75% based on an expected sales tax growth of about 1.25% annually. Staff recommended transferring the excess reserves to the town’s capital fund. From there council indicated it wanted to drill down into details of the five-year capital plan to see if reduction in expenditures could be reduced and then some reserves could be shifted to the streets and alleys fund.

MacDonald said current reserves were already being spent down in the capital fund.

“I’m fine with the 75% recommendation,” said O’Neal. “We have big issues to solve and painful decisions to make.”

“Even at 75%, our reserves are better and more conservative than most other communities,” said Cowherd.

“I’m comfortable with 50% but cognizant of the challenges in the next few years so I’m good at 75%,” said Magner.

As far as capital projects, council looked at where to cut without deciding anything. MacDonald said there were sufficient funds for planned upcoming projects but that entailed spending reserves. 

“When I looked at our capital proposals, my eye went to the million dollars for Rainbow Park and Three Ladies Park upgrades,” said Billick. “It seems like a lot given our situation with housing and roads. I love our parks but if I was going to squeeze, I’d squeeze there.”

Prochaska wanted to make sure safety issues were addressed in delaying any upgrades. Fenerty wanted more details for the projects in the queue. Magner questioned spending a half-million dollars on a high-speed electric vehicle charging station for the public works department that could handle large vehicles like electric dump trucks.

“There is a blip with electric for the next three years but that doesn’t mean the long-term future isn’t electric,” said councilmember Beth Goldstone. “We agreed to take advantage of any subsidies we could get for such infrastructure, and we hopefully will get a $150,000 grant for that. For me, the pullback could come with planning for the TP3 lot in the Slate River subdivision and planning for what goes into the current fire station when they move to the new facility. Those seem more wants than needs. My priorities will be climate actions over new amenities.”

“I see pulling back on capital projects as one-offs,” said Prochaska. “It’s like reducing the reserves. You can’t do it over and over.”

Billick said details in a capital asset management plan could shed more light on that aspect of town finances. A first draft is anticipated by late summer.

The council agreed to tighten up staffing. The consensus was to not increase the number of positions currently budgeted for in 2026. “We are in a good, stable place with staffing,” said MacDonald.

The council also wanted to look into the details of town staff receiving below-market rents in town-owned rental units. O’Neal indicated he wanted rents to at a minimum cover maintenance costs.

“When the council is ready to talk about additional revenues, that is probably a conversation worth having in the next year or two but certainly not until after the 2026 budget cycle,” said MacDonald who reminded council that finance director Kathy Ridgway was retiring.

Magner wanted more detail on what town residents pay for amenities used by the general North Valley population and tourists. Billick again pointed out the importance of sales tax in town finances that is generated by residents, regional locals, second homeowners and tourists.

The council’s discussion will continue through, and probably beyond the 2026 budget cycle.