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Home My WebLink About7B - Impact of the affordable housing waivers and Development Excise TaxDO NOT REMOVE - PRAB File Mater~al MEMORANDUM ~'~ August 30, 2000 ~ TO Mayor Toor and Members of City Council FROM Ronald A Secrist, City Manager Peter Pollock, Director of Planning Maureen Rait, Assistant Director of Public Works for DIS/FAM Cindy Pieropan, Housing Planner Bill Boyes, Facilities and Asset Management Coordinator Cathie Williamsoq Public Works/DIS Analyst SUBJECT Affordable Housing Waivers and DET QUESTION How will affordable housing waivers affect Development Excise Tax (DET) revenues and what will be the impact on infrastructure improvements that aze funded by the DET~ RESPONSE Staff is preparing a discussion with Council that will establish a definition for permanently affordable umts that are "automatically" eligible for the DET waiver Staff anticipates that tlus definition will likely be the same as that defined for inclusionary zoning (units averaging at the HCTD low-income limit or a lower income threshold) However, Council will determine whether ..M, all permanently affordable units should be exempt from DET or a more narrow defimtion of ,,,, eligibilrty for permanent affordability is most appropriate Thus a range is provided for the impact of the DET wazver, the lower end of the range utilizes a narrow definition of permanent affordability eligibility while the higher end of the range assumes all permanently affordable units produced through inclusionary zoning are eligible for the DET waiver The current estimate of total number of units left to be built within the limits of the City of Boulder is approximately 3,600 residential units If this total is assumed for construction over a twenty year period with no taxes waived, the total amount of DET revenue projected is approximately $16 million The estimate for the number of permanently affordable housing units for wtuch fees w~ll be "automatically" waived is based on the range of definitions discussed above and assumes anywhere from 410 to 750 of the 3,600 unit total would be eligible for the automatic waiver The total amount of revenues not received due to automatic waivers within this range is estimated to be between $1 5 and $2 7 million Given the assumptions outlined here, the average annual waiver amount is between $75,000 and $130,000 It is important to note that these DET revenue estunates are for residential units alone There is also a commercial component of the DET, which is collected to address growth related impacts to police, fire, human services, municipal space, and transportation (does not collect a ta~c earmarked for libranes nor for pazks and recreation) This component of the DET is projected to collect as much as an additional $24 million over the next twenty yeazs ..... ... The development excise tax was deternvned by estimating capital improvement needs created for municipal space, parks and transportation by new growth and assigning costs to those projects °~'" The affordable housing wavier currently under consideration would decrease excise t~ revenues over the next twenty years In the short-term, projects currently envisioned in the proposed 2001-2006 Capital Improvements Program would have to be defened or rescoped to fit wit}un new revenue levels Specifically, the Violet Avenue (Broadway to U S 3~ improvement project would have to be deferred and not completed unti12007 The Public Safety projects in the FAM CIP could be delayed by as much as one to two yeazs, and the design and development of Sinton Pazk and the Elks site may be delayed In the long-term, a reduction in excise ta~ces without replacement funding (subsidy from another source) will resuk in a reduction in the level of services provided and projects accomplished xc Chns Dropmski, Duector of Pazks and Recreation John Pollak, Assistant Director of Housing and Housing Services for Housing Susan Purdy, Director of FIousing and Human Services Ken Ramsey, Superintendent of Pazks Steve Russo, Pazks and RecreaUon Analyst Mike Sweeney, Assistant Director of Public Works for Transportation ,.... TEXT AND FEATURES OF BRUCE'S TAX CUT AMENDMENT 21 ON NOVEMBEA 7 BALLOT El~ITT1RE SEXT "Be it Enacted by the People of the State of Colorado: Article X, section 20, The Taxpayers Bill ot Rights, is amended to add: (8)(d) Tax cuts. A S25 tax eut, increased 525 yearly (to 550, 575._), shalt lower each tax m sach taz b~ll for eaeh 2001 and later district: utiliry customer and oceupaUOn tax and franchise charge; vehlcfe saies, use, and ownership tax; yearly income tax; property tax; income and property tax equal to yearty revenue from sales and use taxes an food and drink other than tobaeco and akohol; and mcome tax equal to yearly revenue fram astate taxes. (8)(d) tax cuts and state replacement of lopl revenue shali not lowa sUte ar locat excess revenue, the sUte may Iimd Iocai acts increasing replacement costs, Joint mcome tax rMUms equal two tax biils, and attomey fees and casis to enforce (8)(d) shall alwavs be paid to successful plaintiffs only." PHRASE BY PHRASE ANALYSIS TEXT ANALYSIS "A 525 tax cut, increased O Tax cuts increase each year m perpetudy by 525 regardtess of economic gmwth or recesswn (.e , 525 the $25 yeady (to $50, $75...), shali lower each tax in first year, $50 the second. increasmg to 575, 5100, 5125, 5150 5175, 5200, 5225, 5250 )(For purposes of W~s analysis, utdity charge cvts covered by ihe measure are included vnthin the tertn "tan pA,~ each tax bili far each 2001 and later district: O Separate tax cuts appiy for each I~sted tax. ut~lity customer and O Separete tax cuts apparenUy apply for each state and local govemmental enhty which unposes the tax. (An occupaLOn tax artd altemaWe interpretahon apphes the tax cut to each sepa2te levy by each enUty 2ther than a smgle cut Eor each franchise charge; vehicle ennty, i.e., count~es typ~cafly lisi separate le~es For general operahons, soc~al sernces, roads and bndges, etc ) ~ ~ sales, use, and ownefsh~p tax; yearly O Tax cuts apparently apply to each bdl whether monthty, annually, or otherwiu. (M aIt¢myWe mterpretabon income tax; property tax; apphes the tax cut annually, regardtess of the frequency of bilhng ) If the fax cuts apply monthly }or those "u41ity fncome and property tax customer and occupaGan tax and tranchise charge" items that are bdled monthly, the firsi year cut could equal equal to yearly revenue up to 525 X 12 or 5300 "' trom sales and use taxes on food and drink other O'U61it~J' is undefined so the scope of these cuis is unclear "' than tobacco and O A taxpayer who owns mulUple propewes is enntled to a property tax cut for each property alcohol; and income Wx equal to yeariy revenue O Taxes and services for those lacal govemments which have relatively low tax rates or valuahons may be from estate taxes." severely cut within one or lwo years. O Payment of outstanding bonds may be adversely aflected or operat~ons of the issumg govemment reduced to enable payment of the bonds Future bond issues may be infeas~ble or more drfFic~lt as reduced revenues dnve up interest rates that govemments have to pay ,a~... O WhOe the eBecWe date of ihe vanous cuts is not spec~fied, it appears that the property and income tax cuts '~' wouid apply to taxes ovnng in 2001 but not payable unu12002 and that the other cuLS would he effechve in 2001 "' ~~ _ ANALYSIS "(8)(d) tax cuts and state O The Wc cuts and shte replacement, if any, of lacal revenues do not constitute a revenue refund for purpases replacement of local of inee~ng TABOR refund requiremenis ConsequenUy, for the purpose of compiy~ng wtlh TABOR, the tax cuts revenue shall not lower do not quahfy as a retund of arry pnor year excess TABOFi revenues. Moreover, th~s prrnns~on can be mterpreted state or local exeess ~ reqwre each year Ne state and those local govemments which have not "de Bruced' ihe~rTA80R revenue revenue, the state may limits to track and assume that they are actualty recerving the revenues lost from the vancus yx cuts even though limit local ac2s ~ey wdl neither be recarved nor avadable for expenditure "' increasmg replacement O Under e~ther interpretat~on, govemments which have not "de Bruced" theu TABOR revenue hmits wdl costs, ... apparently be required to not only refund "excess" TABOR revenues but also Iose thase revenues which are reduced by the vanous tax cuts O The state may, but does not appear to be reqwred to, replace revenues which the inihatrve causes Iocal govemments to lose (Whiie the tlrafter oi the proposal has stated that ttie state must replace lost Iocal revenues, language m earlier drafts which required the state to do so was omitted from the te# of th~s measure ) Moreover, there are additional legal and prachcal grounds which indicate that state replacement revenue is neither required nor feas~6le "' O If replacement revenue is discretionary with the state, it is hkely that the demands on ihe state to conunue to ~ fund iLs own govemment programs and the Schaol Fnance Act uvdl render it unable to provide replacement { revenues to non-school (ocal govemments ~ O If ihe state replaces any revenues lasi by local govemments, the state replacement revenue wauld count ; against its TABOR spendmg limd rather than agamst its surplus revenues, meaning that ewstrng state programs , would have to Ce reduced cortespondmgly If the state did replace revenue lost by any local govemments, lacal ~ control of govemment operauans could be weakened ( O The state is speahcaliy authonzed to hmd Ne authonty of local govemments and Neir taxpayers to take acUOn 1 which might increase state replacement costs. This language appears to apply only if the state'bacMlls" lost ' '~` lopl revenues so as to prevent lowl govemments from making the backtili more expensrve to the state O The measure is siient as to the auffionry of local voters to "de Bruce" the tax cuts mandated by the measure °' ~• . attomey fees and O This provides an incenhve for individuals to sue a govemment but prowdes no finanaal pmtecLon for the cosis to enforce (8)(d) shall alwa b 9ovemment and its taxpaying chzens who must pay the plamGfPs and govemmenPs legal cosis regardless af the 9o~emmenPs ood faith inter retations vs e paid to g p 3UCCessful plaintiffs ~~ly " O If li6gahon is deemed fnvolous, there is no conesponding provision for the govemment and ds taepayers to recover its 6hgallon costs fmm the mdmdual who brought ihe fnwlous smt ^ n,e... ..--- ~~ -•--• - ... Breakout of Bruce's Tax Cut Amendment 21 on November 7 Baliot First Year Govemment ~ced Tax Cut' Le in Comment tlon tax or franchise $25 per Cit~es & rowns Tax cuts apparently apply to each uphty bdl. However, an ~grye for telecommunicaGOns, monthly bili altematrve interpretation would apply the cuts annually "" a ~~dy, and natural gas ' rather than to each utdiry hdl Utdit~' is not defined. ~Q5 Therefore, for example, it is unclear whether the cuts would ~ apply to some services, such as cable N and celtular t phone services "' If the occupat~on tax or franchise charge ~ that typically is surcharged onto cusiomer bdls is sub~ect to = the reduction, the tax or charge vnll be ehminated immediately for most customers. However, to the eMent that the legal inc~dence of the tax or charge is on the utddy rather than on the customer and is cronstrued to apply to the uttliry ~= rather than to ds customers, the revenue impact wouid he much ~ess '° Although not hsted here, the arts could be ~ interpreted to apply to E-917 service charges imposed by count~es and municipalit~es. These charges appear on ~ customer telecommunicat~on bdls and finance E-911 services throuahout the state "' ~ Sales & use tax on uUliry S25 per State Tax cuu apparenUy apply to each utiUty biil for each taxing Wstomer bdls (i.e., monthly bill enUt7/s tax. However, an altemat~ve urterpretanon would ~ pelecommunica-tions, electnaty " appfy the cuts annually rather than to each uUhty bdl."' and natural gas utddies) $25 per CounLes Utiht~J' is not defined Therefore, for example, it is unclear _ monthly bdl whether the cut would apply to some services, such as _ .. cable N and celiular phone sernces "' . S25 per Ciues 8 towns monthly bill S25 per Regional d~sinds monthty bdl Sales 8 use tax on motor 525 State Tax cuts apparently apply for each tawng enht7ls tax when a'-^• vehicles $ps Count~es new or used vehicle is purchased or leased. S25 CiUes & towns S25 Fi ional d~stncts Speafic ownership tax S25 State Tax cuts apply annually Proceeds are distnbuted to counUes, aties and towns, school distncts, and special distncts in proportion to their respecuve mill lewes, so apparentfy the ~evenue loss to Iocal govemments wouid be shared in the same ro ortion •'• Income tax S25 (X2 ~f State Tax cuts apply annually oint retum) Property tax S25 Counues Tax cuts apply annually for each taxing en6tys tax. M $25 Cities S towns aitematrve interpretat~on applies them to separately Iisted SZS School distncts ~ewes of individual Ixai tauing en6ties rather than one cut "' per entity. $25 Spec~al distnc4s Income tax equal to sales 8 525 (XL rf State Tax cuts apply annually and apply to food and drink use taxes an food 8 dnnk ~oint retum) purchased in restauranis. It is not ent~rely clear how these onll be computed, but it appears that the income taxpayer Hnil get his or her share of the enUre revenue proceeds from the sales tax on food up to the amount of the annuaf tax cut rather than s~mply up to the amount that the taxpayer actuall paid in sales taxes on food."' Property tax equal to sales & 525 Count~es Tax cuts apply annually to each taxing entitys tax and apply use taxes on food & dnnk to food and dnnk purchased hoth for home consumption and in restauranis It is not entirely clear how these wiil be computed, but it appears that the property taxoayer w61 get S25 Cihes 8 towns his or her share of the enhre revenue proceeds from the sales tax on food up to the amount oi the annual tax cut rather than simply up to the amount that the taxpayer actuall paid in sales taxes on food "' Income tax equal to yearfy 525 (x2 if State Tax cuts apply annually 2venue from esiate taxes ~oint retum) ~ ~F Tax cut amounts mcrease for each tax bdl annually by S25 (i e. 525, 550, 575, 5100, $125, 5150, 5175, 5200, 5225, 5250 ) Some utilities may have bimonthly or quarteAy billing cycfes, in which case the tax cut would apparently apply to each biihng cycle rather - than monthly '.» These items diustrate some of the ambigudies and diffenng interpretahons wh~ch may reqwre lit~gatron to resolve «~