The ballots for the November election have been mailed. During the next few weeks, city residents will decide the fate of two ballot issues which are the subject of much controversy.
Issue 200, an initiated ordinance written, circulated and supported by Douglas Bruce, calls for Colorado Springs Utilities to phase out the “payments in lieu of taxes” that it makes to the city.
These payments, which presently amount to more than $25 million annually, are meant to compensate the city for the tax revenue that a privately owned utility would pay. CSU has made such payments for decades.
There are arguments for ending them, but they are, in our judgment, weak and unconvincing. Particularly during this economic downturn, the impacts upon the city’s ability to deliver services to its residents would be severe and substantial, while the benefits to utility customers would be relatively negligible. We recommend a “no” vote.
The second issue, 2C, is more complex.
If approved, 2C calls for an immediate 5 mill increase in the city mill levy, to be followed by 1 mill increases every year for the next five years.
As this newspaper pointed out last week, such an increase might seem dramatic, because it will increase the city mill levy from its present level of 4.944 mills to 14.944. That seems like a lot — but as a percentage of the total property tax paid by homeowners in Colorado Springs, it’s relatively insignificant. The owner of a home located within School District 11, assessed at $200,000, pays $986.54 in property tax to various taxing entities. If 2C passes, that tax bill will increase by $79.60 during the first year, and $15.92 annually during the next five years, for a total increase of $159.20.
City Council voted to refer this measure to the voters for two reasons.
The most obvious one has to do with the present recession, which has drastically reduced tax revenue. Absent additional revenue sources, the city will have to make draconian budget cuts, which will include cuts to public safety, parks, recreation programs and which might well make our city less safe, less attractive and substantially less desirable to relocating or expanding businesses.
The second reason has to do with the city’s tax structure, which is heavily skewed toward sales and use tax collection. Unlike revenue from property taxes, revenue from these sources fluctuates with the economy, with collections severely reduced in times of recession.
Our analysis indicated that local sales and property tax rates put Colorado Springs in the middle of comparable cities along the Front Range, and that approval of 2C would not affect our relative position.
But while homeowners might find that their taxes are not substantially affected by 2C, owners of commercial property could see things differently. Thanks to the Gallagher amendment to the Colorado Constitution, approved by voters during 1982, 55 percent of property taxes statewide must come from commercial property and 45 percent from residential property.
That might have seemed reasonable 27 years ago, but it now imposes disproportionately high property tax burdens upon commercial property. Such property only accounts for 25 percent of total property value in the state, but must still produce 55 percent of the property tax revenue.
Under Gallagher, the commercial assessment rate (that is, the percentage of a property’s assessed value that is subject to property tax) was fixed at 29 percent, while the residential assessment rate was allowed to float in order to maintain the 55/45 ratio. The result: the residential rate, which was at 21 percent during 1982, has dropped to 7.96 percent.
As a result, commercial property owners pay 3.6 times as much tax as residential homeowners on a structure of equivalent value. Property tax increases can only be absorbed by raising rents, and, as any commercial real estate broker will tell you, this is not a time to be raising rents.
As voters fill out their ballots, they’ll consider other factors as well.
We suspect that the perceived competence — or lack thereof — of city government will be on their minds. While we know from long experience that the vast majority of city employees are competent and professional, and that city services are delivered efficiently and economically by almost any set of metrics, we’re not so sure about the people at the top.
It has been dismaying to chronicle the secrecy, ineptitude and unprofessional conduct of some of the city’s elected and appointed officials throughout the entire U.S. Olympic Committee debacle. Governments are imperfect by nature, but some of the city’s antics during this period have taken imperfection to a level rarely achieved by local elected bodies outside Albany, N.Y., and Sacramento, Calif.
But such antics should not deter voters from carefully examining the facts and deciding accordingly. We believe that the city faces serious dilemmas that are not easily soluble — and we also understand that voters may find any tax increase difficult to support during these straitened times.
Let us hope that whatever choice the voters make, we’ll be able to say, as did the guardian knight in “Indiana Jones and the Last Crusade” — “you have chosen … wisely.”