THE BUZZ: Power of the Penny

By on May 24, 2016

Electeds devise a sales tax structure they hope will pay for slide while also funding housing and transportation.

160525Buzz_origJACKSON HOLE, WY – Town and county leaders have placed their bets—the ante: two pennies worth of taxes—and they are all in, all or nothing, with a carefully crafted tax strategy that amounts to a swing for the fences. Tasked with raising capital for community priorities including housing and transportation initiatives, along with mitigating an unstable butte seeping its way toward Broadway, government officials have come up with what they believe is a homerun way to foot the bill.

Electeds’ hopes are riding on a scheme that will touch residents for both causes without raising taxes. The cost will be the demise of a proven revenue-raising tool in SPET (special purpose excise tax) and a forfeiture of approximately $6 million. Voters will decide on a tax for Budge slide in August, and have the option of taxing themselves again in November for housing and transportation solutions.

The plan is complicated but worth understanding. After establishing a Community Priorities Fund (CPF) that includes housing and transportation at its core, elected officials split on just how to tax citizens to build houses and buy buses.

An added general penny of sales tax is more perpetual in nature than a one-time SPET initiative, but the former lacks the accountability and specificity of the latter. General sales tax also flows into town and county coffers as general revenue, which can be used any way government sees fit. Town and county officials have a strong record of spreadsheet integrity that has made sure money earmarked for Cause A actually gets to Cause A, but some worry the “blank check” nature of the tax will allow current or future councilors and commissioners to get jiggy with it.

How SPET works

Before explaining the shifty solution elected officials have come up with, a refresher course in SPET might be beneficial. State statute allows counties to ask voters to tax themselves one or two cents on a dollar for specific projects or undertakings that lie outside the “ordinary operations of a local government.”

Teton is one of the few counties in the state that has used this tax so effectively and so often it has been in effect for decades without ever lapsing. The penny simply rolls over every couple of years when the revenue generated by the tax comes close to satisfying the total amount of current wish list items.

The penny tax generates about $10 to $12 million a year, depending on how much stuff people are buying. Electeds have tried to keep the total amount of SPET ballot items at or under $40 million. As tax collection nears an amount that will satisfy all SPET projects, town and county leaders prepare a new batch of items.

The catch is this: When voters hit the polls to check yes or no on SPET items, they are in effect voting yes to a sales tax increase. Granted, the penny has never gone away in the past three decades, but if all SPET ballot items were shot down, sales tax would drop one cent to five percent in Teton County. It’s a handy arrangement that has been levied on taxpayers—many of whom are unaware or unconcerned about the extra “Lincoln” seized at the cash register.

The plan

Electeds decided to put mitigation of the Budge landslide on the August ballot under SPET. Given the polarizing and contested nature of the disaster, some in the process expected a “gimme” item to be added to SPET to ensure the special excise tax didn’t go away. Remember: if no SPET item receives a green light (at least 50 percent of the vote), a penny of sales tax disappears. In the past, town and county leaders have sometimes opted to add a “slam dunk” initiative to SPET—something like a Pathways project has always been useful—just to guarantee that tax revenue kept pouring in.

In 2008, when electeds wanted money to cover design costs for a bus barn and library expansion, in addition to funds for town sidewalks, they sexed up the ballot with Pathways on Highway 22. The 2012 SPET ballot looked even more foreboding, stacked with big-ticket items including the purchase of a 10-acre plot on North Cache from the Forest Service ($13.5M), which failed, and a capping of the leaching landfill ($14.5M). Once again, it was Pathways to the rescue. Phase II of their Highway 22 project was easily digested by voters with 68 percent of the populous opting to finish the path for a mere $4.3 million.

But last month, electeds left Budge slide hanging. Come August, voters will decide whether they want to tax themselves to fix the mess above Walgreens but, more importantly, they have the opportunity to end the SPET cycle as funds generated by the tax are expected to be completely paid out to the five 2014 SPET items right around the time they head to the polls for the primary.

Bye bye, SPET

With the move, government guaranteed the end of SPET. It will die slowly or it will die quickly, but it will go away. If voters pass Budge for the $6 million price tag, the SPET item will be paid off by February or March of next year, at which time the penny of tax will expire and another $6 million of anticipated SPET revenue that could have been generated through next summer will be lost. If voters don’t pass Budge, the SPET penny terminates immediately.

The move surprised commissioner Smokey Rhea. “At the very beginning, the town and county did talk about something else besides Budge on the ballot,” she acknowledged. “But for whatever reason—I have no idea why—it never got discussed. We know we would stand to lose about six million dollars, so why would we do that?”

Commissioner Paul Vogelheim also wanted to see something else added to SPET. He thought money to Fire/EMS to finish a spruce up of Station 1 in Jackson was needed and would be very palatable to voters.

“The county was in favor of an additional item on SPET—Fire/EMS is one voters have always funded—but the mayor shut the door on that,” Vogelheim said.

With the deadline to finalize a SPET list for an August ballot fast approaching late last month, Mayor Sara Flitner steered her peers toward a Budge-only special excise tax. And she has her reasons.

“I don’t want to lose SPET. I tried to go at the community priorities fund through SPET,” Flitner said. “But I didn’t want to get cute and try to gussy up what is a safety priority with something else. We live in a world where we really have to separate needs from wants. We’ve got to fix Budge. And there is a lot of community feedback about keeping the tax rate the same.”

Flitner and others are concerned about selling the general penny sales tax in November. It will be easier to swallow, some electeds believe, if the expiring penny of SPET simply slides over to general sales tax, which will hit the books in April 2017 if passed this fall. The marketing ploy has made at least one political activist a bit skeptical.

“I’m very concerned our local government is not being straight-forward with us regarding their attempt to kill SPET,” Judd Grossman said. Grossman recently announced his intent to run for town council. “They are trying to sell us this ugly tax [general] under the assumption it will solve our housing and transit problems, and doing away with a successful tool in SPET. This is a cynical plan, a reckless plan. I don’t know what’s in their hearts but that’s the way it looks to me.”

Luxury tax

Councilor Jim Stanford admitted some electeds did not want to talk about going above six cents of sales tax. He and others offered a compromise: a SPET bridge to April 2017 that would keep the tax rate the same until the general penny kicked in.

Commissioner Natalia Macker sees the penny shift as a means of better identifying community needs versus community wants.

“The community has to pay for what it wants. We don’t get things for free, bottom line,” Macker said. “Elected officials are tasked with taking care of our community’s needs. Wants are extra. SPET has been around for my entire life and it is one tool available to us but I don’t think it’s the right tool for housing and transportation. Putting Budge on SPET isn’t about playing some kind of game and letting SPET lapse. SPET has been around for my entire life and there are things I hear about that could also be on the SPET ballot that I want, too. But we have to be disciplined and that’s hard sometimes.”

Town administrator Bob McLaurin dismissed notions that the tax proposals hitting polls in August and November were intentionally designed as a marketing ploy. Rising costs of providing even the most basic of services to a growing community hit with a massive influx of tourists twice a year, combined with sagging state revenues, is prompting a shift in thinking. It takes a full six cents of sales tax to run the town and county. The community can no longer afford the luxury of funding “wants” like Rec Center expansion, hospital additions, and a Wilson beach. They would have to be paid for by a future return of SPET, and an added seventh cent of sales tax.

McLaurin said, “If you want a CWC [Central Wyoming College campus] and a Rec Center, you have to go to seven cents. Services have grown so much that six cents can’t carry the whole burden anymore. We are putting our needs in a sixth cent and putting our wants in a seventh cent.”

Is wildlife a priority anymore?

Representatives from St. John’s Medical Center (hoping for a new Living Center), Central Wyoming College (desiring a Jackson campus), and the Children’s Museum (needed a new space) were understanding about being left off the SPET ballot this go-round. If they or anyone else wishes to resurrect SPET next year they’ll have to do the heavy lifting of selling the public on a sales tax increase.

The Jackson Hole Conservation Alliance had been backing a $10 million SPET initiative for wildlife crossings. Executive director Craig Benjamin said his focus is now on pushing that agenda for inclusion in the CPF.

“It’s disappointing that our local elected representatives chose not to provide Teton County voters with the opportunity to approve capital investments that align with our values through the specific purpose excise tax on the August ballot,” Benjamin said. “Protecting wildlife is our community’s highest value and the core of our shared vision of a better future. Recent public opinion research shows Teton County voters overwhelmingly support investments in protecting wildlife. That’s why our local elected representatives should allocate a small percentage of the community priorities fund to protecting wildlife.”

Commissioner Mark Newcomb has made conservation one of his key issues. He is hopeful his peers will be open to adding that topic to the conversation soon.

“I don’t think that discussion is over yet. I’m hoping to bring that up at our meeting on June 6, and get conservation added to the community priorities fund,” Newcomb said.  PJH

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