Avon voters who rejected a construction materials use tax last year are likely to see revised question in November

After Avon voters rejected a 4% use tax on construction materials last fall, the town will likely bring a revised question to voters this November.

Sixty percent of the 1,115 Avon residents — among 2,981 registered voters — who voted in 2023 rejected the use tax ballot question. Avon voters also rejected a construction materials use tax in 2002.

There are a handful of key differences between this year’s version of the ballot question and the one voters saw in 2023

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Why try again so soon?

Avon is an outlier in Eagle County for its lack of a construction materials use tax; Gypsum, Eagle, Minturn, Red Cliff and Vail all have use taxes on construction materials that range from 3% to 4%.

Many other Colorado mountain communities, including Glenwood Springs and Steamboat Springs, also have use taxes.

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At the Avon Town Council meeting on Aug. 13, officials discussed the rationale for bringing the issue back to voters after it was soundly defeated last November.

In July, Avon staff presented recently completed voter polling that showed a majority of voters will support the construction materials use tax — if they receive education on how the tax works and what the funds will be used for. The town has already begun a marketing campaign in favor of the tax.

Another reason for resurfacing the question has to do with higher voter turnout.

“Presidential years, you always have a higher number of voters,” said Amy Phillips, Avon mayor. “Last year, by doing it in an off year, we didn’t have as high a percentage of our population voting. And I also think that with our mix of our community, when we get higher turnouts, it tends to be more of the people that are being affected by the lack of community housing, and that that in itself will probably drive at least 5% of the people that didn’t vote in the past to vote in favor of this.”

Council member R.J. Andrade cited concerns that the use tax ballot measure will fail again this year after it was rejected by voters just last year.

“I think we have to wait,” Andrade said. “I think we’re taking an unnecessary risk by putting it on there right now when it just failed.”

Six of the seven members of the Town Council voted to move the tax toward the November ballot, with Andrade — though in favor of the use tax — objecting on the basis that the town should wait before posing the question to voters again.

“I really hope I’m wrong,” Andrade said.

How a construction materials use tax works

If the use tax passes in Avon, most builders would pay an upfront tax of 4% on half of the estimated cost of their construction project to receive their building permit.

The 50% is calculated under the assumption that the other half of the cost of construction goes to labor.

If a completed project costs less than estimated, the developer can recoup the difference they paid to the town through a petition process. Additionally, those building single-family homes and duplexes will be able to request to pay the use tax at the end of construction rather than the beginning.

The key detail is that the use tax should not increase the cost of a construction project. If Avon’s use tax passes, those who pay the use tax or receive an exemption would no longer have to pay the town’s 4% sales tax, or the sales tax of any other municipality where they might purchase construction materials.

Town officials prefer the construction materials use tax to a sales tax because it is easier to collect. Sales taxes can often be difficult to track, and tax rates can be manipulated by buying materials from locations outside of Avon, while a use tax can be collected with more consistency.

Differences in this year’s use tax

This year, the funds Avon collects from the use tax have been specifically designated to be used for community housing, which assists people of all income levels who live and work primarily in Eagle County in renting or purchasing homes in Avon.

While the last ballot measure had an exemption ceiling of $50,000, meaning projects up to that amount would not have to pay the tax, this year’s proposed exemption ceiling is $125,000. The exemption is designed to protect those doing smaller home improvement projects from paying the tax.

Since 2021, Avon has issued 366 building permits. Of the total building permits issued, 252 permits were filed for construction projects valued under $50,000, an additional 56 permits were filed for projects under $100,000, and another 17 permits were filed for projects under $150,000. If all these projects were exempt from the use tax, the town would lose out on under $200,000 total over three-and-a-half years.

There is also a possibility of building in the ability to increase the exemption in the future to account for the rising cost of construction.

The ability to escalate the exemption amount in the future is something that will be discussed at a future council meeting after town staff does more research into the legality of such a measure, as tax changes are typically required to go to voters.