Blue River tax initiative raises questions and confusion
November 1, 2013
The town of Blue River is one of several Summit County municipalities posing a tax question to its residents on the Nov. 5 ballot.
The initiative’s language sounds simple enough — should the town impose a 2.5 percent sales tax on its residents? — but its financial impact is something of a mystery, as Blue River is not home to any commercial or retail businesses.
However, Blue River officials and ballot language suggest the initiative would generate $47,000 in annual revenue if passed Tuesday by voters.
How does a town generate sales tax revenue when it has no businesses selling goods or providing services?
On Wednesday, Mayor Lindsay Backas said sales taxes are applied to much more than goods purchased at retail stores. For example, Blue River residents are paying a 2.5 percent tax on utilities, including cable service from Comcast and energy from Xcel.
However, because Blue River does not have an ordinance to collect sales tax — and because the town shares its ZIP code with Breckenridge — local officials believe that revenue is being diverted to Blue River’s neighbor to the north, Backas said.
“This isn’t a tax increase and it won’t result in any additional costs for town residents,” Backas said. “We don’t have anything against Breckenridge; we’re just trying to capture those revenues so we can apply them to local services, maintenance and infrastructure.”
However, Kim Dykstra-DiLallo, spokeswoman for Breckenridge, said Breck is not benefiting from sales tax revenue generated in Blue River.
The only instance in which Breckenridge received Blue River tax revenue occurred several years ago when Xcel Energy imposed a franchise fee on Blue River customers and erroneously sent those funds to Breckenridge, she said.
Xcel caught the mistake and issued credits to Blue River customers. Breckenridge also returned the revenue it received to Blue River, she said.
Whether or not sales tax revenue generated in Blue River is going to Breckenridge is irrelevant, said Blue River trustee Rob Theobald. Sales tax is being assessed — but the revenue isn’t staying in town.
“I know this is happening because there is a 2.5 percent city sales tax on my Comcast bill,” he said. “I’ve been trying to rectify this for eight to 10 years because the funds are not staying in the town of Blue River. I know that for sure.”
If companies like Comcast and Xcel are assessing a sales tax to Blue River customers and that money is not staying in town, and is not being diverted up the road to Breckenridge, then where are the funds going?
For now, the answer is unclear. Officials with Comcast said they would look into the issue, but did not have an explanation at press time.
Still, Theobald is hopeful voters will support the tax measure, explaining the issue of capturing lost revenue is a short-term objective. The town would benefit from having sales tax revenue in the future should Blue River residents decide to amend local zoning restrictions that currently prohibit commercial developments in town.
“Blue River residents are paying sales tax everywhere in Summit County, so in a sense this is also about leveling the playing field,” Backas said. “If residents decide in the future that they want a general store or a commercial business, having this tax in place will further benefit our ability to provide services.”
The sales tax also could be applied to short-term accommodation services, Backas added, which would account for some of that $47,000 in estimated revenues. Currently, Blue River generates the majority of its operating revenue from short-term accommodation and property taxes.
“$47,000 doesn’t sound like a lot of money, but it is to us because we operate with such a small budget,” Backas said. “People who live here year-round want and deserve better services, and I think this is an easy solution to pay for those services.”