If approved, the measure guarantees 75% of Short-Term Rental tax revenue to Brown Ranch for at least six years. If certain unit delivery metrics are met, funding could extend through 2042.
Perhaps the biggest question in front of Steamboat Springs voters is ballot measure 2I, which would allocate funding from the city’s short-term rental tax to the Yampa Valley Housing Authority to use for development at Brown Ranch.
If approved, YVHA would be allocated 75% of annual STR tax revenues for at least the next six years. After six years, there are two sets of performance metrics that could reduce the percentage of STR tax allocation or eliminate the allocation entirely. These performance metrics are not spelled out in the ballot question, rather they are included in Section 9 of the Brown Ranch Annexation Agreement Council approved in September.
If approved, here is how STR tax money would be distributed to YVHA for Brown Ranch, per Section 9 of the annexation agreement:
The first six years, 2024-2029: YVHA gets 75% of annual tax revenues, whatever those revenues are. With a $14 million per year projection, that amounts to $10.5 million per year.
The second six years, 2030-2035: If YVHA delivers 420 units in six years (by October 2029), the allocation automatically remains at 75% of annual STR revenues. If YVHA misses that metric, the allocation could be reduced by a factor proportional to the number of units delivered.
For example, if YVHA delivers 210 units in six years (half of the goal), the allocation would be reduced by half, to 37.5% of annual STR tax revenue. If YVHA exceeds the 420-unit metric, nothing changes and YVHA would still be allocated 75% of annual STR revenues.
The final years, 2036-2042: By October 2035, YVHA is required to complete construction and obtain certificates of occupancy for 1,100 units at Brown Ranch. If that metric is missed, Council would have the authority to cancel STR funding to YVHA for Brown Ranch altogether.
If the 1,100-unit metric is achieved, the allocation would automatically remain at 75% of annual revenues. If the metric is missed, Council would still have the authority to decide to allocate STR Tax funding to YVHA of Brown Ranch on an annual basis, but there would be no requirement.
As the question says, Ballot Measure 2I does not levy any new taxes. The STR tax was approved last November by a wide 62% to 38% margin of Steamboat voters, and 2I takes the next step to allocate a large portion of that money.
One key detail of the STR tax is that it would lock in the 9% STR tax rate set by council last year. When the STR tax was considered last year, one point made by some on council is that the 9% rate could be reduced in the future. While that could still happen, such a reduction would need to be agreed to by YVHA as well if 2I is approved.
In a discussion about this point before Council, YVHA Executive Director Jason Peasley said they would consider agreeing to reduce the tax rate in the future, adding that it would be a conversation between City Council and YVHA at that time.
If the 2035 metric of 1,100 units is missed, Council would then have full authority to change the 9% tax rate without consulting with YVHA, as there would not longer be a requirement to allocate STR Revenues to Brown Ranch.
Another important point of the ballot question is that it does not have any impact on the city’s general fund. There is no minimum payment to YVHA each year spelled out in the question or the annexation agreement and all allocations of STR taxes to YVHA are subject to appropriation.
This means if the STR tax were to theoretically produce no revenue in a given year, YVHA would receive no allocation. (75% of zero is zero.)
“Per the annexation agreement, there is no financial risk to the city’s general fund,” the city wrote in an explanation of the ballot measure on Monday.
If approved, the money would theoretically flow to the housing authority, but in reality, the first years of funding will simply go from one city account to another. This is because the annexation agreement requires YVHA to pay its share of city infrastructure projects with STR tax revenues before it can be used elsewhere, a concept referred to as the “waterfall.”
That funding will be held by the city to build infrastructure projects like widening U.S. 40, extending the Core Trail west, and building another fire station, among other projects identified in the annexation agreement.
Once YVHA’s share of those projects has been paid to the city, allocated STR revenues could be used for on-site infrastructure and for vertical construction, two pieces that are fully on the housing authority to secure funding to build.
This ballot question hinges on Brown Ranch Annexation, which City Council approved on Oct. 17 without referring it to a public vote. There is an ongoing petition campaign attempting to force the annexation question to a vote. If the petition effort is successful, annexation will be voted on by Steamboat Springs voters sometime early next year.
If ballot measure 2I fails, City Council will still have the authority to allocate STR Tax revenues to YVHA for Brown Ranch, but it would need to be done on an annual basis.
Full Ballot Question:
Without increasing tax rates or imposing any new taxes, shall the City of Steamboat Springs be authorized to allocate 75% of its Short-Term Rental Tax revenues through 2042 to the Yampa Valley Housing Authority (“YVHA”) for affordable and attainable housing at Brown Ranch, including infrastructure, and to agree not to reduce the current 9% tax rate during the term of this commitment, with the commitment being contingent on YVHA’s timely completion of affordable and attainable housing units, all as set forth in Section 9 of the annexation agreement between the City and YVHA, with the City’s commitment regarding Short-Term Rental Tax revenues being treated as a multiple-fiscal year financial obligation within the meaning of Article X, Section 20(4)(B) of the Colorado Constitution?