In response to content elsewhere in this blog, I have received a number of comments and questions from constituents, denoted below in bold face. I am including them here. The light face, italicized remarks are mine. I realize that these remarks are lengthy and sometimes repetitive. However, given the format I think that is preferable to not having enough information. Again, this blog is my own work, and I am the only one responsible for it. No public money or resources have been used to prepare or host it. –John Graham
The status quo to me is inequitable – I was shocked to learn that I am paying more tax for a cup of coffee than for a ticket to ride the Cog Rail.
The argument against raising the Excise Tax applies to goods, services, and experiences where demand is elastic (where there are many alternatives to meet the demand); the consumer can choose. The Cog Railroad is a classic example of inelastic demand, making “No on 2A” a weak argument. There is only one Pikes Peak and only one Cog Railroad to its summit. Demand is more elastic for the other impacted businesses, but only slightly (except perhaps the Iron Springs Chateau).
If we resort to increasing property taxes, that will have a much bigger impact on businesses as well as residents — I would think of this as an option of ‘last resort’. 2A is a much better alternative.
Council considered a scenario that would increase property taxes but determined that it would create too many hardships on too many people. For instance, our anticipated shortfall this year is $3.3 million. This year we collected about $1.1 million in property taxes. To make up the entire decline, property taxes would have to be increased four-fold – three times for the $3.3 million gap, plus the existing $1.1 million already being collected. That’s a quadruple tax, not a triple tax, and it is one that Manitou Springs property owners would have to pay.
Further, commercial property is taxed at a rate four times that of residential property, so our businesses would see a truly horrific increase that would probably make some of them relocate out of town or go out of businesses.
One of the points the ‘No’ crowd has been making is that Manitou gets all of the excise tax (now 5%) but only a portion of the sales tax, which is true. But if their argument is that raising the excise tax will reduce tourism, and tourists already pay 9.03% on goods and services, how will increasing the excise tax to the equivalent of sales tax trigger reduced tourism? I just don’t buy their argument.
To be clear, the City of Manitou Springs gets less than half of the 9.03% sales tax collected in Manitou Springs. The total is split among four jurisdictions:
- The State of Colorado gets 2.9%.
- El Paso County gets 1.23% – 1% to the County’s General Fund and 0.23% for County Law Enforcement
- The Pikes Peak Rural Transportation Authority gets 1%. Manitou gets a share back.
- The remaining 3.9 % goes to Manitou — 3.5% to our General Fund, 0.1% for Open Space, and 0.3% for our MACH tax to support “Arts, Culture, and Heritage.”
The current total sales tax (9.03%) is now 300% higher than when the amusement excise tax was introduced. Sales tax is assessed on all goods and services at almost twice the rate as the current Excise Tax on amusement tickets. Cumulative inflation since that time is about 675%.
There is no sales tax assessed on the tickets or admission charges, only the Excise Tax, correct?
Correct. In many other locales – for example, Texas – an amusement ticket will be subjected to sales tax. A lot of out-of-state tourists come from these locales, which may have caused some confusion. In Manitou Springs, the Excise Tax is, and will remain, the only tax charged on admissions. Whether 2A passes or not, it will remain this way.
I’m really torn on 2A. The City does need money and at least some of that should come from a tax increase. I just don’t like putting so much of the burden on so few businesses or having perhaps the highest ticket/admissions tax around.
I wish a multi‐faceted approach of something like raising the ticket/admissions tax to perhaps 10%, raising the hotel motel to 4%-5%, increasing sales tax to bring it to 10%, and cutting expenses would have been pursued.
Council also considered increasing several taxes each, more modestly. We decided not to take that direction on the grounds that it would confuse the voters, and we would need each tax to pass, something we felt would be unlikely.
Not sure the source of funding for the ‘No’ PAC….mailers are expensive, and they are spamming me to death. Who’s paying for this? How much money is going into the “No” campaign?
The “No on 2A” campaign is, financed primarily by the businesses listed on their mailers. It appears that the opposition is well-funded and highly motivated. Perhaps the most significant contributor is the Cog Railway. Meanwhile, the City cannot and will not spend public money or use public resources to campaign for 2A. What is being done for 2A is being done by private citizens. Although I am an elected official, everything I’ve done for 2A is done on my own time, my own dime.
I know it is hard to pass multiple increases at the same time. However, I think that in our small town, the electorate could have been educated to and supported the “everyone pays a little” approach.
Again, Council did consider this and felt the matter would be too confusing. Given the confusion I am seeing in voters at present, I think this is probably mostly true. Not having a local newspaper is a real problem.
Specific budget reductions should be identified and shared so that the voters know that the City is engaged and has skin in the game if you will.
I think that water faucets that work and toilets that flush will become endangered species over time. Our infrastructure is already old and frequently brittle. We are looking at an estimated 30% cut to the budget, so the reductions will be extensive. Big, expensive, capital projects will be postponed indefinitely. Maybe we will be able to react to emergencies, but only as long as we have some reserves. Since the first of the year, we have reduced staffing levels by one-sixth over our approved quotas.
I’m very concerned that the lion’s share of additional tax paid is just going to go back to the Cog via the agreement.
This is a legitimate concern. The City and the Cog Railway are currently in litigation disputing the “payback” arrangement. We feel the City has a sound argument, but that will not be decided for some time. Meanwhile, we have to deal with getting bills paid in the near term. If we had the luxury to wait, maybe we would. However, requesting voter support now allows the City to have several advantages:
The Excise Tax could be raised – or lowered – subject to not exceeding the 14% ceiling.
Approval would mean that the City has satisfied the TABOR requirements to get voter approval before raising the tax, which means Council could respond quickly to situations rather than wait for a general election, or call a special one (expensive).
I do worry about the reputation of Manitou as being the highest taxed jurisdiction in the state. That’s one of the reasons why I am less supportive of a 14% excise tax rate…. but 9% or 10% seems reasonable to me. Denver has a 10% Excise Tax on amusement tickets (just paid it to go to Meow Wolf).
This is a legitimate concern. One of the provisions in 2A is that City Council could adjust the Excise Tax rate so long as it doesn’t exceed the 14% ceiling. Further, approval of 2A would mean that Manitou Springs has met the state requirement to get authorization from the voters and no further election would be required, subject to the 14% ceiling. City Council understands that a lower tax rate would be more palatable to many, just as we understand the need to continue to deliver essential services. Passage of 2A would give Council the authority to respond quickly, without having the further overhead and delay of seeking a special election or waiting for the next general election.
However, it is interesting that at the Oct. 20 “Meet the Candidates Night” that the spokesman for the “No on 2A” group stated several times that if such an increase occurred here, it would spread to the rest of the state.
It would be interesting to gain some insight about the city leadership’s vision in 1972 (when the Excise Tax was established) — was the intent for the Excise Tax rate to increase similarly to the sales tax rate as it increased?
The Excise Tax was proposed in 1972 by the City Administrator and adopted by City Council and the voters. I don’t think we can have any deep insight into the Council members thinking at the time. It is easy to imagine they were having worries about budget shortfalls then.
Manitou Springs Mayor's Thoughts 