Littleton eyes sales-tax request to address capital projects

Road construction, infrastructure funding in dire need, officials say

Posted

Littleton voters could be asked to decide on a sales tax increase next year, part of efforts to address what city officials call a crisis in the city's capital projects fund.

The capital projects fund is the portion of the city budget that pays for road projects, vehicle fleets including police cars, street maintenance, construction and upgrades to city-owned buildings and other infrastructure costs.

The fund has three primary sources of revenue: building use taxes largely imposed on construction projects, gasoline taxes, and an annual transfer from the city's general fund arranged after the city disbanded its fire department in 2018. City fees account for a small minority of the fund.

The fund has been a headache for city officials for years, as it has failed to meet a growing list of infrastructure needs — particularly related to big-ticket road projects needed to address traffic congestion.

Now, city finance director Tiffany Hooten told city council at an Aug. 18 study session, the fund stands to take further hits, as the novel coronavirus pandemic has slowed revenue collection.

Gasoline taxes are down significantly as fewer people are driving this year, Hooten said. Use taxes — which tend to fluctuate widely from year to year anyway — are down as well.

Meanwhile, the city's infrastructure needs are only growing — partly as the result of the last recession over a decade ago.

“We deferred a lot of maintenance back then,” Hooten told council. “We're not making any headway in infrastructure improvements.”

Under current conditions, projections show the fund dwindling from an end-of-the-year available balance of more than $2 million this year to below $10,000 by 2023. City officials have identified needs of up to $20 million per year, Hooten said.

“The capital projects fund is in a crisis,” City Manager Mark Relph told council. “I'm not overstating it. It's a crisis.”

Relph said current projections will leave the city unable to pay matching funds required to obtain federal money necessary to build huge infrastructure projects, such as building a flyover ramp to replace the chronically congested intersection of Mineral Avenue and Santa Fe Drive. The project could clock in at $100 million total, according to projections, with Littleton on the hook for 20%.

The fund is in dire need of diversified, dedicated revenue streams, Relph told council.

Raising the city's sales tax rate could generate millions of dollars a year in revenue, Hooten said.

Littleton's current sales tax rate is 3%. By comparison, Englewood's sales tax rate is 3.5% and Denver's is 4.31%.

Raising Littleton's rate from 3% to 3.25% could generate another $3 million annually, according to city data, while raising it to 4% could generate more than $12 million annually.

Any tax increase would have to be approved by voters, as required by Colorado's Taxpayer's Bill of Rights law, or TABOR. A sales-tax ballot measure likely wouldn't go before voters until 2021, Relph said.

If the city pursued a sales tax increase, it may end up coupled with a bond issue, Relph said, in order to raise enough up-front cash to pay for larger projects. The bond would likely sunset after 15 or 20 years, he said.

Mayor Jerry Valdes was the only member of council who said he was not in favor of asking voters for a sales tax increase.

The city could also ask voters to approve a lodging tax, Hooten said, which could generate $425,000 annually.

Littleton currently does not impose city taxes on lodging, though Hooten acknowledged this could be a tough time to impose one, considering Littleton's hotels have seen vacancy rates of around 90% during the pandemic.

The city could see a bump in tax revenue if voters approve a citizen initiative to allow recreational marijuana sales, Hooten said. Advocates for the measure estimate the city could see $1.5 million in annual tax revenue.

Councilmembers flatly rejected a proposal to impose a grocery tax, which estimates say could raise $425,000 per year. Littleton once had a grocery tax, but it was repealed by citizen initiative in 2002.

Other proposals drew little council support, including imposing fees on residents for street maintenance and street lighting.

Councilmembers were more receptive to the idea of charging fees to obtain and renew business licenses, which could raise $150,000 annually. The city currently provides businesses licenses at no charge, an aberration in the Denver metro area.

“I don't like to be an outlier,” Mayor Pro Tem Scott Melin said. “Let's not shortchange ourselves.”

Comments

Our Papers

Ad blocker detected

We have noticed you are using an ad blocking plugin in your browser.

The revenue we receive from our advertisers helps make this site possible. We request you whitelist our site.