EDITORIAL: ‘There is No Plan B’… Part Two
In Part One on Monday, I quoted Archuleta County Commissioner Steve Wadley assuring a joint government meeting that the Board of County Commissioners have “no Plan B” for the County Detention Center project. He also assured us — if “assured” is the right word — that:
1. The BOCC still doesn’t have a dollar amount attached to their proposed Harman Park facility, and
2. The BOCC still doesn’t know what type of tax increase they wish to propose for the $17 million (or $20 million) facility expansion, and
3. The BOCC still doesn’t know exactly how much money they are allowed to borrow, under state statutes.
Actually, I lied about Number 3. Commissioner Wadley said absolutely nothing, at the joint Town-County meeting on June 28, about the debt limit that applies to the County government. We still don’t know whether the County actually understands the law in this regard, or if they are intent on simply ignoring the law, in hopes that no one will sue them to clarify the issue.
The two types of tax increases available to the County are: an increased property tax, and an increased sales tax. These two types of taxes affect residents and visitors in slightly different ways — and also affect the relationship between the Town and County in different ways.
The County can ask voters to approve a property tax increase for County operations, and the vote would not affect the Town government’s revenues, directly. But currently, the County is legally required to share 50 percent of its sales tax collections with the Town of Pagosa Springs. So, if the County wanted to place a sales tax increase on the ballot, they would need to work out an agreement with the Town voters about how to share those increased sales taxes.
It’s widely assumed that sales tax is one of the most “regressive” taxes a government can collect — that a sales tax is hardest on low-income segments of the community, extracting a larger percentage of income from the families who can least afford the tax. To make sales taxes less regressive, many states exempt basic necessities — like food — from the sales tax. Colorado does not exempt food, or any other necessities. Our sales tax is about as regressive as they come.
Federal and state income taxes are generally “progressive” — taking a larger percentage from those with the most disposable income. Colorado counties cannot levy an income tax.
Property taxes lie somewhere in the middle, in terms of being progressive or regressive.
But the main discussion we hear in the halls of local government is not about which tax is most “fair,” but rather, which tax is paid mainly by “non-residents.” That is, paid mostly by second-home owners and tourists, who cannot vote on the measure.
I’ve often heard the claim that “tourists pay the lion’s share of our local sales tax.” Wrong.
Earlier this year, I calculated the amount of sales tax contributed by local residents, versus the amount contributed by tourists, using the numbers published by the Archuleta County finance department. I think the analysis bears repeating.
Below is a chart of sales tax collections included in the County’s Fourth Quarter Financial Report for 2016. The Finance Department has made it easy for us to view, in a graphic manner, the monthly sales tax collections over the past three years. (The graph includes 2016 as both the ‘budgeted amounts’ and the ‘actual amounts.’)
As we can see, the amount of sales tax collected each month produces a graph that looks somewhat like a mild-mannered roller coaster, climbing in March (when the ‘spring break’ skiers show up at Wolf Creek Ski Area) and then dipping to its low point in April (during Mud Season.) The summer tourist season begins in June and rolls through September, and then we see a slight rise in December, when Christmas shopping takes off, accompanied by the holiday ski season at Wolf Creek.
If Pagosa Springs had no tourism economy whatsoever, we would probably expect to see a fairly level line running straight across this chart, with a slight increase in December during the Christmas shopping season.
But obviously, we have a tourism economy.
We can probably safely assume that almost no tourists are visiting during April. (Why would anyone visit Pagosa during Mud Season?) But the County sales tax collections in April 2016 nevertheless totaled around $300,000. So I made the assumption that $300,000 is the approximate amount that our full-time residents paid in sales tax during the worst economic month of the year, when business is at its low point. That estimate is not 100 percent accurate, but perhaps reasonable as a preliminary assumption.
Assuming, then, that local business owners and employees spend slightly more during the months when they actually have some money in their pockets, I’m going to pick $320,000 as the average amount of County sales tax paid monthly by our local, full-time residents during 2016.
Times 12 months, that equals $3.8 million — roughly the amount of sales taxes paid by local residents. During the 2016 fiscal year, the County expected to collect a total of about $4.6 million in sales tax revenue — which tells us that only about 17 percent of the County sales tax is contributed by tourists, and the remaining 83 percent is paid by local residents.
How does that split compare to property taxes? If local residents paid $3.8 million in sales tax to the County government during 2016, how much did local residents pay in County property taxes? According to recent reports from Region 9 Economic Development District, it appears that approximately 60 percent of the properties in Archuleta County are owned by people with mailing addresses in other communities — that is to say, by people who do not live here full-time. The County’s property tax collection for 2016 was about $5.6 million. That could feasibly mean that full-time locals paid only about 40 percent of that amount: $2.2 million.
With those numbers in mind, then, we might listen to Pagosa Springs Mayor Don Volger tell the three County commissioners that they do not have enough time, between now and November, to effectively sell any kind of tax increase to the voters.
Mayor Volger said this in a mild-mannered way, so that no one in the room could presume he was trying to tell the BOCC how to run their own government.
Maybe he was too mild-mannered?