The Yampa Valley Housing Authority has agreed to pay $1,203 per unit per year to offset additional operating costs for city services.
The Gist: Projected increased costs for city services at the Brown Ranch will be covered by additional sales tax revenues from new residents and a $1,203 per unit, per year operating contribution to the city from YVHA.
The Brown Ranch will lead to additional costs to the city of Steamboat Springs, but it also requires the Yampa Valley Housing Authority to make a $1,203 payment, per year per unit to offset these additional costs.
This payment is referred to in the Brown Ranch Annexation Agreement as an annual operating contribution.
The annexation agreement — which Steamboat Springs Voters will consider on March 26 — includes a section specifically devoted to the ongoing costs of city services, and how they will be paid for as the Brown Ranch Builds out. The section specifically addresses numerous city services like costs for police and fire response, a micro-transit system and street services like snowplowing.
A fiscal analysis agreed upon between the city and housing authority estimated the total cost for these services to be slightly over $2,600 per unit, per year. But Brown Ranch residents — 80% of them estimated to currently live outside of Steamboat Springs — will generate new sales tax revenues as well.
When factoring the estimated $1,414 per unit, per year in new sales tax revenues, the estimated operating gap is $1,203 per unit, per year. YVHA agreed to pay this to the city each year for services, with new buildings starting to pay this fee when they receive a certificate of occupancy from the city.
This payment will be due on Jan. 31 annually and will be adjusted for inflation using the consumer price index for the Denver-Aurora-Lakewood from the U.S. Department of Commerce.
YVHA has named several ways it has to come up with the money for this payment, but the annexation agreement does not restrict how YVHA could come up with the money. The ways presented were a real estate transfer tax of 1% to 2% on properties sold at Brown Ranch and other YVHA developments, a metro district for the Brown Ranch imposing a mill levy or a future increase in the YVHA mill levy.
If YVHA fails to make this payment, the city would have the authority to reduce non-emergency services to the Brown Ranch. This can only happen after giving YVHA 90 days to cure the default and would require city council to pass a resolution at a meeting that includes a public hearing.
The annexation agreement also includes a provision that could reduce the payment if the city finds other ways to fund specific services. For example, if the city were to pass a property tax to pay for Parks and Recreation, the payment amount would be reduced, as Brown Ranch property owners would pay these property taxes too.
“If a new property tax or fee generates to the City an average of $100 per unit within Brown Ranch, the Annual Operating Contribution shall be reduced to $1,103,” the annexation gives as an example.
What does the $1,203 per unit, per year pay for?
The annual operating contribution will close the operating cost gap for six different categories of services at Brown Ranch: general government, streets, transportation, police, fire and parks and recreation.
The cost of general government for the city currently was estimated at $463 per unit, per year. The Brown Ranch estimate uses that same number to estimate costs for new units at Brown Ranch.
The cost for streets service like snowplowing is based upon the total lane miles planned to be at Brown Ranch and then spread across units. This totals $255 per unit, per year.
The transportation cost is dictated by the estimated $400,000 cost of the micro-transit identified in the annexation agreement. This breaks down to $177 per unit, per year.
Police services have the highest portion of operating revenues of $763 per unit, per year for Brown Ranch. This number — while police had lobbied for it to be higher — is based on the estimate that current Steamboat Springs residents pay for police services on a per unit, per year basis.
Fire services are expected to cost $705 per unit, per year for Brown Ranch, a number derived from a city analysis of expected needs for the fire department. Lastly, parks services
In total, these services were estimated to cost $2,618 per unit, per year. That cost is then offset by an estimated $1,414 per unit, per year in new sales taxes. The remaining $1,203 is filled by the annual operating contribution from YVHA.
What do current city residents pay for services?
Current residents of the city of Steamboat Springs do not directly pay for services, as the city is funded largely on sales tax revenues.
The argument used to support sales taxes as a viable funding strategy locally is that around 40% of it is paid by tourists. The part often left unsaid is that locals are paying for 60% of sales tax revenues.
Current Steamboat Springs residents have their services subsidized by tourist tax dollars to the tune of roughly $541 per unit, per year, according to RCLCO’s fiscal analysis.
Residents at the Brown Ranch will not benefit from tourism-spurred tax dollars though, and will actually be the only residents in Steamboat Springs that are paying an additional cost for city services.
If YVHA sets up a metro district, when would that be set up?
One avenue to pay the annual operating contribution is to form a metro district at the Brown Ranch. This would be set up before anyone is living at the Brown Ranch, but would eventually be governed by a board of Brown Ranch residents.
This Metro District would then be allowed to assess a property tax on Brown Ranch units to pay for the annual operating contribution.
It is possible that a future metro district board could vote to not raise the money needed to pay for services. This hypothetical is what led to the city adding a provision allowing the reduction in non-emergency services if payments are not received on time. If a future board voted to not raise the money, they would be doing so knowing the city could cut services.
It is likely the Brown Ranch will also have a homeowner's association, which would likely pay for services not provided by the city like maintenance of smaller parks and plowing snow from parking lots.
Could YVHA increase its mill levy to pay for the annual operating contribution?
One other way that has been mentioned for YVHA to pay for this operating contribution would be by raising its mill levy. Currently, YVHA assesses a 1 mill levy in a district that is roughly the size of the Steamboat Springs Fire Protection District.
An increase in YVHA’s mill levy is not currently being proposed, and, indeed, the annexation agreement does not assess any new taxes.
But YVHA’s 10-year-long mill levy voters approved in 2017 is getting closer to its sunset, meaning voters will likely be asked to extend and potentially increase it in the next few years. During annexation talks in August, YVHA Board Member Kathi Meyer said that ask may come as soon as this fall.
Still, any reauthorization or increase in YVHA's mill levy would need to be approved by voters.
“We may use the real estate transfer assessment and the metro district as a supplement to the YVHA mill levy,” said YVHA Executive Director Jason Peasley in annexation talks in August. “If the voters say ‘we’re done funding the housing authority,’ it may be a situation where we have to put it entirely on the metro district or real estate transfer assessment or other revenues.”