Brian Edney: The beauty of ‘ESTIP’
April 5, 2010
There have been recent discussions in the Summit Daily editorial pages and online article comments regarding Silverthorne’s Enhanced sales Tax Incentive Program, commonly known as ESTIP. As the former chairman of the Silverthorne Economic Development Advisory Committee, I wanted to try and clear up some of the confusion surrounding the program. I’ve frequently read an incorrect description of Silverthorne’s program as a “subsidy,” and this probably stems from the fact that some cities do indeed provide true subsidies to entice new businesses, thus adding to the confusion. However, this is absolutely not the case with Silverthorne’s ESTIP program. Silverthorne’s ESTIP leverages private development dollars to fund public improvements that provide net benefit to the community. There is a long list of public improvements for which ESTIP can be used, including road improvements, sidewalks, intersections and traffic lights, bus stops, and demolition of blighted commercial buildings. I’ve also read that Silverthorne could experience a “net loss” in sales tax when ESTIP is used, which demonstrated a lack of understanding of the formulae used in the ESTIP Agreement. Any displacement of existing sales tax is factored into the ESTIP eligibility formula. ESTIP reimbursement is based solely on net new sales activity.
Any new business, or expanding existing business, which provides new sales tax of at least $25,000 in their first year of operation is eligible for ESTIP consideration. ESTIP requires that a business pay for public infrastructure improvements up-front and then Silverthorne’s ESTIP reimburses, over a specific period of time, a town-negotiated portion of that net new sales tax collected by a business. Let me repeat that sales taxes are reimbursed to a business because the town has required them to build public improvements. This is not a subsidy. In simple terms, ESTIP requires a business to provide an interest-free loan to the town, which allows the town to pay for the public improvements which are the responsibility of the town to construct. Other less-attractive alternatives for funding these public improvements would include the tradeoffs inherent in competing with existing service needs through annual budgeting, implementing a special improvement taxation district, voter approved bond issues or new taxes.
Silverthorne’s Town Code requires that any new commercial developments be required to pay only for their share of traffic improvements needed to maintain existing service levels. That’s all they are required to do by law. They simply have to pay for their share of the additional traffic. They do not have to correct current intersection deficiencies or increase road capacity offsite. What ESTIP provides is an opportunity for the town to create a partnership where the developer will pay for their share of traffic and up-front the funds to construct the entirety of the overall public improvements needed in an area based on the Town traffic studies. ESTIP provides an opportunity to improve town infrastructure, including poorly performing road networks, something which the town’s current budget can’t accommodate without tradeoffs (like increasing taxes, reducing funding for other services, floating a voter approved bond issue, etc). ESTIP provides public improvements which benefit the community through higher levels of traffic capacity and other enhanced infrastructure systems.
In survey after survey, Silverthorne residents consistently note sales tax as their revenue of choice, and they consistently note the addition of new sales taxable businesses as their preferred financial strategy to limit the town’s vulnerability to economic downturns. ESTIP is the financing tool that can take those net new sales tax dollars and fund public improvements with interest free private financing.