Council approves first reading of Brown Ranch funding question locking in 9% STR tax rate
The ballot language was being amended on the fly Tuesday and could see more changes ahead of second reading.
If approved, language of a ballot measure Steamboat Springs City Council intends to send to voters this fall would commit 75% of short-term rental revenues to the Yampa Valley Housing Authority to support the build-out of Brown Ranch and lock in the STR tax’s current rate of 9%.
The question — which was approved on first reading Tuesday, but could change by the time it is considered again on Sept. 5 — will also likely include a reference to performance metrics the housing authority needs to meet at Brown Ranch to maintain that funding. These metrics would likely be tied to unit counts delivered by a certain time, though it is still up in the air about how explicitly those metrics will be mentioned in the ballot language.
Also part of the question is the idea that council has approved an annexation agreement by resolution, a step that is currently planned to happen on Sept. 5, though no agreement has been reached at this point. The passage of the first reading was needed Tuesday for council to be able to refer the question the ballot by a Sept. 8 deadline.
The question stems from a request from the housing authority for the city to commit dedicated STR tax revenues to Brown Ranch each year, removing the fear of a future council pulling the funding rug out from under the project.
Council reviewed three versions of the question, one drafted by City Attorney Dan Foote, one by YVHA’s attorney George Eck, and a third council member Heather Sloop had requested that only committed funding for 10 years.
The city’s draft would have capped annual revenues at $10.5 million, even if that is less than 75% of revenues. The housing authority has objected to this, as they feel if they are taking the risk of getting less revenue in bad years, they should benefit in strong ones. That proved to be a compelling argument, and council dropped the cap concept.
YVHA’s draft calls out that the STR Tax — billed to voters last year as “up to 9%” — would be locked in at that rate. Whether or not that is called out in the ballot question, keeping the rate at 9% is expected to be part of the annexation agreement. Some on council felt it needed to be part of the ballot question to make things clear to voters.
“When we voted 9%, we spent a lot of time saying but we have flexibility on this. What we’re doing here, and it’s important for voters to know that, is we’re giving up that option,” Council member Joella West said. “We’re committing to 9% no matter what for the duration of this tax. That’s the major issue that is going to the voters, it’s got to be in this language.”
City Attorney Dan Foote said the 9% could theoretically change in the future, though it would require agreement from both council and the housing authority. Changing that rate would require amending the annexation agreement, Foote said.
Council member Michael Buccino expressed some hesitation about locking in the 9%, as this is just the first year of the tax and the effect it has on the local lodging market is unclear at this point. Buccino had opposed a rate as high as 9% from the start of talks about the tax last year and voted against sending that question to voters. Buccino indicated he would support referring this question, but wanted to share his hesitation.
“I’m willing to forgo this because it allows us to get affordable housing in Steamboat Springs,” Buccino said. “If it means 9% for 20 years so we can have affordable housing and a workforce, then let’s just finish this one off.”
Council member Sloop said she was concerned that if the ballot measure were to pass, the housing authority would become an advocate for more STRs, potentially lobbying council to expand green zones in an effort to earn more STR tax revenue for Brown Ranch.
“The only way to build is to have an STR tax, which means, who becomes the biggest poster child for more STRs,” Sloop said,
The comment was quickly called “backwards” and “far-fetched” by council members McGinlay and Gail Garey. West went a bit further.
“I’ve spent a lot of years worrying about what if the sky falls, but to say that the housing authority would be taken over by aliens and therefore would come in and say we need to take away long-term rentals for our working people in order to provide more money to provide housing for our working people,” West said. “I can’t get there grammatically, I can’t get there conceptually.”
The city’s potential question also had performance metrics of 450 units in 6 years and 1,124 in a decade. If the first metric was missed, the 75% would be reduced at the proportion of units that had been delivered. If the second metric was missed, the funding agreement would end and the city wouldn’t be required to allocate STR taxes anymore.
A majority on council said they felt the specific metrics did not need to be in the actual ballot question, but instead refer to those metrics generally. Foote suggested “contingent upon YVHA’s timely completion of housing units, per the annexation agreement,” saying it would give them the flexibility to iron out those metrics ahead of Sept. 5.
Lastly, council discussed how it would reference the annexation agreement, considering the idea of placing a date in October to have it finalized. Catherine Carson, who worked on the pro-STR Tax campaign last year, cautioned that having any date after September would doom the measure to fail.
“This is going to be a referendum of the Brown Ranch annexation. … They are going to be voting on the entire Brown Ranch annexation,” Carson said, stressing the agreement is needed sooner rather than later. “The campaign has to know and has to have the information to have the information of what this annexation is about.”
Second reading of the ordinance to refer the question to voters will be considered by council on Sept. 5.
Top Photo Caption: Downtown Steamboat Springs. (City of Steamboat Springs/Courtesy)