Avon voters could see two tax questions on November ballot

With a strict timeline up to the Nov. 8, 2022 election, the Avon Town Council is pushing forward with the possibility of bringing two tax questions before voters.

At its May 10 meeting, council members discussed whether the town wanted to move forward with further research — including first, voter polling — on both a construction materials use tax as well as a marijuana tax.

While the idea of moving forward with voter polling was not unanimously supported by council members, the majority felt that taking the pulse of the community on both would be important before deciding whether or not to take the questions to the ballot.

Construction materials use tax

The council first floated the idea of a 4% construction materials use tax last year as a way to create a community housing fund. However, the use tax was ultimately sidelined in favor of a short-term rental tax, which voters approved in the November 2021 election.

At the time, council benched the construction materials use tax because members were concerned about its chance of success.

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The construction material use tax, as proposed, would allow the town to collect a tax at the time a building permit is issued. The town would use a predetermined formula to calculate the construction value, and therefore the tax. Other municipalities that have such a tax calculate the use tax based off of 50% of the construction value. Once the use tax was collected, a build would be exempt from paying further sales taxes on materials related to the permit.

Currently, for new development, the town imposes a sales tax on building materials, which the town collects after the purchase, often from projects’ general contractor and sub-contractors. However, Scott Wright, the town’s finance director, said that this current process was a “tremendous amount of work” both for town accounting and on the part of contractors and sub-contractors.

Avon is the only municipality in Eagle County without such a use tax: Eagle, Minturn and Vail all have a 4% use tax and Gypsum and Red Cliff both have a 3% use tax.

According to Wright, switching to this model would create less administrative burden on the town, and make it less confusing for all involved, with advantages all around, he said.

This is something that swayed the support of Mayor Sarah Smith Hymes in particular.

“I support moving forward with it, largely because every other jurisdiction in the county has one, and this is what builders are used to,” she said.

Since coming before council last August, two main changes have been made to the tax proposal. The first is that the funds would no longer be earmarked for community housing as was the original plan. This is because the passed short-term rental tax now fulfills that need. The second is that in order to limit the impact on local residents, staff recommends allowing an exception for projects requiring a building permit of less than $50,000.

On Tuesday night, the majority of council members expressed support for pursuing polling and continuing to consider putting the tax to voters this fall.

“I think polling is valuable,” said Council member Lindsay Hardy. “I’d like to see a poll — I know it’s a waste of money and I hate spending money, sometimes — but I think it’s valuable to hear more from the community members.”

Council member Amy Phillips said she was in support of proceeding because “it’s incredibly important that we do a lot of community outreach.”

Council member Scott Prince held the dissenting voice on Tuesday on the matter.

“I am not in favor of putting this forward. I was opposed last year, and I continue to remain so; regarding polling, I do not support polling as I don’t see a necessary expense and that’s not related to my view on this particular tax,” Prince said.

Marijuana Tax

Last fall, Avon restarted the conversation on whether or not the town wants to allow retail marijuana businesses in town, following a moratorium it passed in 2014. As part of allowing these businesses, the town also has the ability to create a local marijuana tax, pending voter approval.

“Council has the ability to allow cannabis sales by ordinance, without a vote. But the tax increase portion is a TABOR issue, and of course would have to go to the voters,” said Planning Director Matt Pielsticker.

The state of Colorado has three taxes for retail marijuana: a 2.9% state sales tax, a 15% recreational marijuana retail sales tax, and a 15% excise tax. In addition to these taxes, local municipalities are also able to impose and collect their own sales and/or excise taxes on retail marijuana.

According to a staff report, the most common tax rate for local municipalities is 5%.

“Assuming one to two retail locations in Avon, staff estimates $250,000 to $500,000 in sales tax contributions based on a 5% Marijuana and 4% retail sales tax rate respectively,” the report reads.

The town would have the ability to earmark these funds (or not) for specific purpose(s). On Tuesday, council expressed majority support for earmarking the funds for primarily housing, although there was some support for behavioral health as well.

Pielsticker also added that the town could ask voters about the use and the tax at the same time — something he said most communities couple together. This notion was, however, met with some apprehension, with most council members supporting simply asking for the tax to be approved first.

“I’m in favor of the polling for the tax. I do like your idea of the polling for the tax, consideration of the tax for the ballot as differentiated from allowing use. My trouble with allowing use is that half the town has yet to be developed,” said Council member Tamra Underwood. “My feeling at this point — and I probably don’t have to lay my cards on the table this early — but my feeling is that it should not be allowed use in town at this point in time.”

While council members on Tuesday expressed varying degrees of support for allowing retail marijuana in town, the consensus was that polling could help council determine not only where to allocate funds, but take an overall temperature on support of the tax.

“I think this is a huge opportunity, and I think if we don’t start to get the ball rolling, for the future councils, to make that decision, I think we’re missing out,” said Council member Chico Thuon.

Thuon also referenced the fact that in 2012, 75% of Avon voters approved Amendment 64, which legalized marijuana in the state. Although he was ultimately in the minority among the council on whether or not to pay for voter polling on the marijuana tax, with this 75% approval in Avon, Prince felt that there was no need to spend money on polling.

“I actually don’t think we need polling for this item. I think it just goes straight to the ballot. (Thuon) said it passed 75% before, why spend the money on the polling when my guess is it’s going to pass? I don’t see the need to poll,” Prince said. “I’m going to defer to the community for this.”

Prince also added that while he didn’t support polling, he did want to hear from the local business community, especially those most likely to be in close proximity should retail marijuana be allowed.

There was one thing council members unanimously agreed on: If the town does lift its moratorium on retail marijuana, it should start by issuing a limited number of licenses — most supported one or two — for retail marijuana businesses.

With majority consensus to pursue polling on both taxes, the town is expected to poll voters on proposed ballot language — including the proposed allocation of funds for either — in the coming months.

“I think polling helps us get information to make our policy decisions. So if we’re going to poll — we have to do the use tax poll, and I would want to add marijuana to it,” Smith Hymes said.

Avon has until the end of August to make a determination on whether it wants to put either tax in front of voters on Nov. 8.