HomeMy WebLinkAboutagenda.council.worksession.20170821
CITY COUNCIL WORK SESSION
August 21, 2017
5:00 PM, City Council Chambers
MEETING AGENDA
I. Ballot language for the tobacco tax question in November
II. Water storage financing options
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MEMORANDUM
TO: Mayor and City Council
FROM: Sara G. Ott, Assistant City Manager
Don Taylor, Finance Director
Jim True, City Attorney
DATE OF MEMO: August 18th, 2017
MEETING DATE: August 21st, 2017
RE: Local Tobacco Tax Ballot
REQUEST OF COUNCIL: Staff is requesting City Council provide direction regarding the tax
rate and tax structure which would be proposed to voters for a tax on all tobacco products sold in
the City of Aspen.
Staff is also seeking City Council input on potential areas to administer the revenue that would
be generated if a local tobacco tax is approved. This will allow staff to develop the desired
resolution with ballot language for City Council consideration on August 28th at a regular City
Council meeting.
PREVIOUS COUNCIL ACTION: At a work session on August 8th, City Council directed
staff to develop potential ballot language that proposes a tobacco sales tax in the $3.00-$4.00 per
pack range for cigarettes and a tax on all other tobacco products of around 40%. It was also
requested that staff research the pros and cons of applying a percentage based tax to all tobacco
products instead of using a specific dollar amount per pack on cigarettes. Additionally, staff was
also asked to identify proposed uses for the revenue that would be generated from the proposed
tax.
BACKGROUND: In 2014, 602 municipalities exercised local cigarette taxes. Tax rates ranged
from $0.01 - $3.00 per pack1. A sampling of 2015 municipal cigarette tax rate data prepared by
the Campaign for Tobacco-Free Kid is included as an attachment.
City staff have reached out to tobacco retailers in Aspen to gather feedback regarding the idea of
a significant tax on tobacco products and reactions have ranged from mildly supportive to fairly
vigorous opposition from those retailers. The most significant factors for opposition were
concerns from the retailers that they would see a substantial decline in sales revenue, both
1 Source: Orzechowski & Walker, Tax Burden on Tobacco, 2014
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directly from reduced tobacco sales as well as a decline in incidental/additional sales resulting
from clientele entering the businesses primarily to purchase tobacco products who also purchase
items such as food and beverages. Aside from the information that was directly solicited by City
staff from these retailers there has been no additional feedback provided by other members of the
community or retail sector.
DISCUSSION:
There are three samples of ballot language attached for City Council consideration. In each
sample, the tax rates are blank, awaiting Council consideration.
Sample #1: Percentage tax on cigarettes and all other tobacco products.
Example: 40% tax on all tobacco products.
Sample #2: Per pack tax on cigarettes and a percentage tax on all other tobacco products.
Example: $3/pack tax on cigarettes and 40% tax on all other tobacco products.
Sample #3: Per pack tax cigarettes that gradually increases over time to a voter approved
maximum and a percentage tax on all other tobacco products.
Example: request voter approval of a per pack tax up to $4/pack and 40% tax on
all other. In year one, City Council establishes a tax rate of $3 and incrementally
increases the rate over a period of years to $4 through legislative action.
Revenues generated from the municipal tobacco tax could be designated in budgeting priorities
with the purpose of reducing tobacco use by the general population and the reducing the impact
of tobacco use on the environment. Specific programs would benefit from this revenue source
include:
· Funding of wildfire mitigation efforts
· Funding of tobacco use prevention and cessation programing through a grant to other
government or non-profit organizations where the services currently exist
· Funding the Clean Team in the Parks Department for cigarette litter clean up in the
downtown core
· Funding the Human Services Officer position in the Police Department
FINANCIAL/BUDGET IMPACTS:
Finance has prepared the attached model of the likely revenue from a new tax at different tax
rates. The model is based upon average tobacco sales information provided by a small sample of
local retailers and with the assumption that as taxes increase, sales of tobacco products will
decrease.
Administration of the tax collection and audits can be accommodated within existing staffing
levels.
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NEXT STEPS: If City Council directs staff to continue to pursue a local tobacco tax ballot,
staff will bring back a resolution for a proposed ballot measure that is in accordance with the
direction provided at this work session. This resolution would be scheduled for the regular City
Council meeting on August 28th, 2017.
CITY MANAGER COMMENTS:
ATTACHMENTS:
Sample Resolution #1
Sample Resolution #2
Sample Resolution #3
Local Government Cigarette Tax Rates and Fees, Campaign for Tobacco-Free Kids
Revenue Model for Various Tax Rates
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SAMPLE #1
RESOLUTION NO. _____
(Series of 2017)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ASPEN, COLORADO,
SUBMITTING TO THE ELECTORATE OF THE CITY OF ASPEN A CERTAIN
QUESTION SEEKING AUTHORITY TO LEVY A NEW ____% SALES TAX ON THE
SALE OF ALL TOBACCO PRODUCTS.
WHEREAS, Smoking rates in the U.S. have declined substantially since the
Surgeon General’s 1964 report, from 42 percent to now about 18 percent; however, it
remains one of the biggest public health problems in the United States as almost 500,000
Americans still die prematurely each year from diseases related to cigarette smoking. This
makes up 85% of deaths from lung cancer. In Colorado, like most other states, it is the
number one cause of preventable death, and accounts for 5,100 deaths a year; and
WHEREAS, 90% of adult smokers started smoking before the age of 18 and each
day more than 3,000 adolescents in the U.S. try their first cigarette; and
WHEREAS, since 2014, after decades of effective anti-smoking campaigns and
decreasing smoking rates in the U.S., there has been a surprising upturn in youth tobacco
use; and
WHEREAS, over 225 U.S. localities and the states of California and Hawaii have
enacted into law regulations prohibiting the sale of tobacco products to individuals under the
age of 21 and research has shown such regulations are effective in decreasing high school
tobacco use by up to 50%; and
WHEREAS, Research has shown that teens purchase cigarettes from their peers and
that 90% of the “social sources” (friends and family) of tobacco for the 12-18 year olds are
18-21 year olds. It has also been shown that youth typically do not make the effort to travel
to neighboring localities if the age has increased to 21 in their city; and
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SAMPLE #1
WHEREAS, the City Council finds that this ordinance furthers and is necessary for
the promotion of the public health, safety, and welfare.
WHEREAS, funds generated pursuant to a tax on tobacco products applied to the
general fund would be directed by City Council for tobacco and substance use education,
wildfire mitigation efforts, cigarette litter cleanup and/or human services officer(s); and
WHEREAS, pursuant to C.R.S. Section 39-28-112 and Section 39-28.5-109,
municipalities are authorized to impose taxes on cigarettes and tobacco products; and
WHEREAS, Section 12.1 of the City of Aspen Home Rule Charter requires voter
approval to levy and collect taxes.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ASPEN, COLORADO, THAT:
The following question shall be placed on the ballot at the November 7, 2017,
election:
___ % Sales Tax on all Tobacco Products.
SHALL CITY OF ASPEN TAXES BE INCREASED BY AN ESTIMATED $________
FOR THE FIRST FISCAL YEAR (2018) AND BY SUCH AMOUNTS AS MAY BE
GENERATED ANNUALLY THEREAFTER BY THE IMPOSITION OF A NEW
____% SALES TAX ON ALL TOBACCO PRODUCTS, BECOMING EFFECTIVE ON
JANUARY 1, 2018; AND, PROVIDED, FURTHER, THAT THE FULL AMOUNT OF
REVENUES DERIVED FROM THE SALES AND USE TAXES MAY BE RETAINED
AND EXPENDED BY THE CITY NOTWITHSTANDING ANY STATE REVENUE
OR EXPENDITURE LIMITATION, INCLUDING THE LIMITATION CONTAINED
IN ARTICLE X, SECTION 20, OF THE COLORADO CONSTITUTION?
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SAMPLE #1
INTRODUCED, READ AND ADOPTED by the City Council of the City of Aspen
on the day of , 2017.
_________________________
Steve Skadron, Mayor
I, Linda Manning, duly appointed and acting City Clerk do certify that the foregoing
is a true and accurate copy of that resolution adopted by the City Council of the City of
Aspen, Colorado, at a meeting held on the day hereinabove stated.
__________________________
Linda Manning, City Clerk
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SAMPLE #2
RESOLUTION NO. _____
(Series of 2017)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ASPEN, COLORADO,
SUBMITTING TO THE ELECTORATE OF THE CITY OF ASPEN A CERTAIN
QUESTION SEEKING AUTHORITY TO LEVY A NEW ____% SALES TAX ON THE
SALE OF ALL TOBACCO PRODUCTS.
WHEREAS, Smoking rates in the U.S. have declined substantially since the
Surgeon General’s 1964 report, from 42 percent to now about 18 percent; however, it
remains one of the biggest public health problems in the United States as almost 500,000
Americans still die prematurely each year from diseases related to cigarette smoking. This
makes up 85% of deaths from lung cancer. In Colorado, like most other states, it is the
number one cause of preventable death, and accounts for 5,100 deaths a year; and
WHEREAS, 90% of adult smokers started smoking before the age of 18 and each
day more than 3,000 adolescents in the U.S. try their first cigarette; and
WHEREAS, since 2014, after decades of effective anti-smoking campaigns and
decreasing smoking rates in the U.S., there has been a surprising upturn in youth tobacco
use; and
WHEREAS, over 225 U.S. localities and the states of California and Hawaii have
enacted into law regulations prohibiting the sale of tobacco products to individuals under the
age of 21 and research has shown such regulations are effective in decreasing high school
tobacco use by up to 50%; and
WHEREAS, Research has shown that teens purchase cigarettes from their peers and
that 90% of the “social sources” (friends and family) of tobacco for the 12-18 year olds are
18-21 year olds. It has also been shown that youth typically do not make the effort to travel
to neighboring localities if the age has increased to 21 in their city; and
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SAMPLE #2
WHEREAS, the City Council finds that this ordinance furthers and is necessary for
the promotion of the public health, safety, and welfare.
WHEREAS, funds generated pursuant to a tax on tobacco products applied to the
general fund would be directed by City Council for tobacco and substance use education,
wildfire mitigation efforts, cigarette litter cleanup and/or human services officer(s); and
WHEREAS, pursuant to C.R.S. Section 39-28-112 and Section 39-28.5-109,
municipalities are authorized to impose taxes on cigarettes and tobacco products; and
WHEREAS, Section 12.1 of the City of Aspen Home Rule Charter requires voter
approval to levy and collect taxes.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ASPEN, COLORADO, THAT:
The following question shall be placed on the ballot at the November 7, 2017,
election:
Sales Tax on Cigarettes and Tobacco Products.
SHALL CITY OF ASPEN TAXES BE INCREASED BY AN ESTIMATED $________
FOR THE FIRST FISCAL YEAR (2018) AND BY SUCH AMOUNTS AS MAY BE
GENERATED ANNUALLY THEREAFTER BY THE IMPOSITION OF A NEW TAX
OF $____ PER PACK OF CIGARETTES SOLD AND THE IMPOSITION OF A NEW
SALES TAX OF ___% ON THE SALE OF ALL OTHER TOBACCO PRODUCTS,
BECOMING EFFECTIVE ON JANUARY 1, 2018; AND, PROVIDED, FURTHER,
THAT THE FULL AMOUNT OF REVENUES DERIVED FROM THE SALES AND
USE TAXES MAY BE RETAINED AND EXPENDED BY THE CITY
NOTWITHSTANDING ANY STATE REVENUE OR EXPENDITURE LIMITATION,
INCLUDING THE LIMITATION CONTAINED IN ARTICLE X, SECTION 20, OF
THE COLORADO CONSTITUTION?
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SAMPLE #2
INTRODUCED, READ AND ADOPTED by the City Council of the City of Aspen
on the day of , 2017.
________________________
Steve Skadron, Mayor
I, Linda Manning, duly appointed and acting City Clerk do certify that the foregoing
is a true and accurate copy of that resolution adopted by the City Council of the City of
Aspen, Colorado, at a meeting held on the day hereinabove stated.
_________________________
Linda Manning, City Clerk
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SAMPLE #3
RESOLUTION NO. _____
(Series of 2017)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ASPEN, COLORADO,
SUBMITTING TO THE ELECTORATE OF THE CITY OF ASPEN A CERTAIN
QUESTION SEEKING AUTHORITY TO LEVY A NEW ____% SALES TAX ON THE
SALE OF ALL TOBACCO PRODUCTS.
WHEREAS, Smoking rates in the U.S. have declined substantially since the
Surgeon General’s 1964 report, from 42 percent to now about 18 percent; however, it
remains one of the biggest public health problems in the United States as almost 500,000
Americans still die prematurely each year from diseases related to cigarette smoking. This
makes up 85% of deaths from lung cancer. In Colorado, like most other states, it is the
number one cause of preventable death, and accounts for 5,100 deaths a year; and
WHEREAS, 90% of adult smokers started smoking before the age of 18 and each
day more than 3,000 adolescents in the U.S. try their first cigarette; and
WHEREAS, since 2014, after decades of effective anti-smoking campaigns and
decreasing smoking rates in the U.S., there has been a surprising upturn in youth tobacco
use; and
WHEREAS, over 225 U.S. localities and the states of California and Hawaii have
enacted into law regulations prohibiting the sale of tobacco products to individuals under the
age of 21 and research has shown such regulations are effective in decreasing high school
tobacco use by up to 50%; and
WHEREAS, Research has shown that teens purchase cigarettes from their peers and
that 90% of the “social sources” (friends and family) of tobacco for the 12-18 year olds are
18-21 year olds. It has also been shown that youth typically do not make the effort to travel
to neighboring localities if the age has increased to 21 in their city; and
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SAMPLE #3
WHEREAS, the City Council finds that this ordinance furthers and is necessary for
the promotion of the public health, safety, and welfare.
WHEREAS, funds generated pursuant to a tax on tobacco products applied to the
general fund would be directed by City Council for tobacco and substance use education,
wildfire mitigation efforts, cigarette litter cleanup and/or human services officer(s); and
WHEREAS, pursuant to C.R.S. Section 39-28-112 and Section 39-28.5-109,
municipalities are authorized to impose taxes on cigarettes and tobacco products; and
WHEREAS, Section 12.1 of the City of Aspen Home Rule Charter requires voter
approval to levy and collect taxes.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ASPEN, COLORADO, THAT:
The following question shall be placed on the ballot at the November 7, 2017,
election:
Sales Tax on Cigarettes and Tobacco Products.
SHALL CITY OF ASPEN TAXES BE INCREASED BY AN ESTIMATED $________
FOR THE FIRST FISCAL YEAR (2018) AND BY SUCH AMOUNTS AS MAY BE
GENERATED ANNUALLY THEREAFTER BY THE IMPOSITION OF A NEW TAX
WITH A MAXIMUM OF $____ PER PACK OF CIGARETTES SOLD, THE ACTUAL
TAX TO BE SET AT THE DISCRETION OF CITY COUNCIL UP TO THE
MAXIMUM, AND THE IMPOSITION OF A NEW SALES TAX OF ____% ON ALL
OTHER TOBACCO PRODUCTS, BECOMING EFFECTIVE ON JANUARY 1, 2018;
AND, PROVIDED, FURTHER, THAT THE FULL AMOUNT OF REVENUES
DERIVED FROM THE SALES AND USE TAXES MAY BE RETAINED AND
EXPENDED BY THE CITY NOTWITHSTANDING ANY STATE REVENUE OR
EXPENDITURE LIMITATION, INCLUDING THE LIMITATION CONTAINED IN
ARTICLE X, SECTION 20, OF THE COLORADO CONSTITUTION?
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SAMPLE #3
INTRODUCED, READ AND ADOPTED by the City Council of the City of Aspen
on the day of , 2017.
________________________
Steve Skadron, Mayor
I, Linda Manning, duly appointed and acting City Clerk do certify that the foregoing
is a true and accurate copy of that resolution adopted by the City Council of the City of
Aspen, Colorado, at a meeting held on the day hereinabove stated.
_________________________
Linda Manning, City Clerk
JPW- saved: 8/18/2017-568-G:\john\word\resos\ballot07-Nov-TAXES.doc
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1400 I Street NW · Suite 1200 · Washington, DC 20005
Phone (202) 296-5469 · Fax (202) 296-5427 · www.tobaccofreekids.org
Most counties and cities do not have their own cigarette tax rates because they are prohibited by state law,
but there are major exceptions. More than 600 local jurisdictions nationwide have their own cigarette tax
rates or fees, bringing in more than $470 million in annual revenue and working effectively to reduce smoking
rates, especially among youth, and to decrease smoking-caused death, disease, and costs. The following are
some examples of local jurisdictions with cigarette tax rates, listed by highest local tax rate.
City/County (Partial List) Local Cigarette Tax
(Per Pack)
State Cigarette Tax
(Per Pack)
Total State + Local Tax
(Per Pack)
Cook County, Illinois $3.00 $1.98 $4.981
Juneau, Alaska $3.00 $2.00 $5.00
Philadelphia, Pennsylvania $2.00 $2.60 $4.60
Sitka, Alaska $2.462 $2.00 $4.462
Anchorage, Alaska $2.39 $2.00 $4.39
Matanuska-Susitna Borough, Alaska $2.28 $2.00 $4.28
Bethel, Alaska $2.21 $2.00 $4.21
Kotzebue, Alaska $2.20 $2.00 $4.20
Petersburg, Alaska $2.00 $2.00 $4.00
New York City, New York $1.50 $4.35 $5.85
Chicago, Illinois $1.18 $1.98 $6.16
Alexandria, Virginia $1.15 $0.30 $1.45
Barrow, Alaska $1.00 $2.00 $3.00
Aniak, Alaska $1.00 $2.00 $3.00
Fairfax, Virginia $0.85 $0.30 $1.15
Newport News, Virginia $0.85 $0.30 $1.15
Hampton, Virginia $0.85 $0.30 $1.15
Falls Church, Virginia $0.75 $0.30 $1.05
Haymarket, Virginia $0.75 $0.30 $1.05
Leesburg, Virginia $0.75 $0.30 $1.05
Vienna, Virginia $0.75 $0.30 $1.05
Norfolk, Virginia $0.75 $0.30 $1.05
Herndon, Virginia $0.75 $0.30 $1.05
Suffolk, Virginia $0.75 $0.30 $1.05
Virginia Beach, Virginia $0.75 $0.30 $1.05
Purcellville, Virginia $0.65 $0.30 $0.95
Manassas, Virginia $0.65 $0.30 $0.95
Portsmouth, Virginia $0.60 $0.30 $0.90
Dumfries, Virginia $0.55 $0.30 $0.85
Charlottesville, Virginia $0.55 $0.30 $0.85
Middleburg, Virginia $0.55 $0.30 $0.85
Roanoke, Virginia $0.54 $0.30 $0.84
Chesapeake, Virginia $0.50 $0.30 $0.80
Franklin, Virginia $0.50 $0.30 $0.80
Manassas Park, Virginia $0.50 $0.30 $0.80
Evanston, Illinois $0.50 $1.98 $5.48
Salem, Virginia $0.45 $0.30 $0.75
North Pole, Alaska $0.41 $2.00 $2.41
Christiansburg, Virginia $0.40 $0.30 $0.70
Lovettsville, Virginia $0.40 $0.30 $0.70
Mount Jackson, Virginia $0.40 $0.30 $0.70
Cuyahoga County, Ohio $0.345 $1.60 $1.945
San Francisco, California $0.202 $2.87 $3.07
Sources: Orzechowski & Walker, Tax Burden on Tobacco, 2015; media reports; state and local tax officials.
1 In Chicago ($1.18 per pack), Evanston ($0.50), and other cities in Cook County, the total state-local tax is higher.
2 Regulatory fee, not tax, to pay for cigarette litter cleanup. State law prohibits San Francisco from implementing a local cigarette tax.
LOCAL GOVERNMENT CIGARETTE TAX RATES & FEES
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Local Government Cigarette Tax Rates / Page 2
The table does not list all localities with their own cigarette tax or fee. Overall, Alabama (67.5 cents per
pack) has 343 cities and 54 counties with their own cigarette taxes. Not listed in the above table, Cicero,
IL, has its own cigarette tax rate at 16 cents per pack. Missouri (17 cents per pack) has 128 cities and two
counties. Ohio ($1.60 per pack) has one county with its own tax, Cuyahoga County (34.5 cents per pack).
Virginia (30 cents per pack) has 96 cities and two counties with their own cigarette taxes. New York City
is the only locality with its own cigarette tax in New York State. Philadelphia is the only locality with its
own cigarette tax in Pennsylvania. In Alaska, the taxes in Anchorage, Bethel, Sitka, Kotzebue, Petersburg
and Matanuska-Susitna Borough are annually adjusted for inflation; Fairbanks’ cigarette tax is 8 percent
of wholesale price (about 32 cents per pack); North Pole’s cigarette tax is 10 percent of the wholesale
price (about 41 cents per pack); and two additional Alaskan cities, Aniak and St. Mary’s, have their own
cigarette tax.
The combined cigarette tax rates in the table do not include the federal cigarette tax of $1.01 per pack or
any state or local sales taxes that apply to cigarettes.
Nationally, estimated smoking-caused health costs and lost productivity totals $19.16 per pack.
Some states prohibit localities from having their own cigarette tax rates or limit the maximum amounts.
Including all the state tax rates that are in effect as of April 1, 2017 (MN effective 1/1/17; CA effective
4/1/17), the average state cigarette tax rate is $1.69 per pack and the highest state-only rate is New York
($4.35 per pack). Currently, 35 states, DC, Puerto Rico, the Northern Marianas, and Guam have cigarette
tax rates of $1.00 per pack or higher; 17 states, DC, Puerto Rico, and Guam have cigarette tax rates of
$2.00 per pack or higher; eight states, Puerto Rico, and Guam have cigarette tax rates of $3.00 per pack
or higher; and one state (NY) has a cigarette tax rate more than $4.00 per pack.
Campaign for Tobacco-Free Kids, November 17, 2016 / Ann Boonn
More information on cigarette taxes and the many public health and economic benefits from increasing them
is available at http://www.tobaccofreekids.org/facts_issues/fact_sheets/policies/tax/us_state_local/.
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Tobacco Tax Revenue Model
City of Aspen, CO
August 2017
Current
Average Price Per Pack $6 pack $7 pack $8 pack $9 pack $10 pack
Price Increase - Dollars $0 $1 $2 $3 $4
Price Increase - Percentage 0%16.7%33.3%50.0%66.7%
"Normal" Impact on Demand 0%-7.1%-14.2%-21.3%-28.3%(1) 4.25% decline per 10% price increase
Local / Workforce Base 7,750 6,650 5,550 4,460 3,360 (2) assume 2x price elasticity impact
Tourist Base 2,750 2,730 2,690 2,630 2,560 (3) assume 1/10th price elasticity impact
Monthly Cigarette Pack Sales 10,500 9,380 8,240 7,090 5,920
Monthly Revenue Generated N/A $9,380 $16,480 $21,270 $23,680
Months 12 12 12 12
(A) New Revenue to City N/A $112,560 $197,760 $255,240 $284,160
(1) Internet search on price elasticity shows historical average data supporting a range of 3% to 5.5% decline per 10% increase - assumed mid-point
(2) Given a localized increase on cigarettes with the City, it is possible that there will be a greater reaction to consumer sales to locals & commuting workforce
(3) Given the afluent level of tourist and the addictive nature of tobacco, there is no expectation for price to influence this population's purchasing habits
Cigarette Per Pack Cost $6
Monthly Sales Volume 10,500
Months 12
Annual Cigarette Sales at $6/pack $756,000
Cigarette $ as % of Total Tobacco $75%
Estimated Sales of Other Tobacco Products $252,000
Price Increase - Percentage 0%10%20%30%40%
"Normal" Impact on Demand 0%-4.3%-8.5%-12.8%-17.0%(4) 4.25% decline per 10% price increase
Baseline Dollar Sales $252,000 $252,000 $252,000 $252,000 $252,000
Decline in Sales Due to Tax Increase $0 ($21,420)($42,840)($64,260)($85,680)(5) assume 2x price elasticity impact
Revised Sales Before Applying Tax $252,000 $230,580 $209,160 $187,740 $166,320
(B) New Revenue to City N/A $23,060 $41,830 $56,320 $66,530
Total Estimated New City Revenue (A)+(B)$135,620 $239,590 $311,560 $350,690
Less Existing City Share of State Revenue ($75,000)($75,000)($75,000)($75,000)
Additional Revenue to City $60,620 $164,590 $236,560 $275,690
Prepared by City of Aspen Finance Department, August 2017
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MEMORANDUM
TO: Mayor and City Council
FROM: Don Taylor, Director of Finance
DATE OF MEMO: August 18th, 2017
MEETING DATE: August 22nd, 2017
RE: Financing Alternatives for Utility Projects
REQUEST OF COUNCIL: Staff is requesting City Council provide direction regarding
financing of The Woody Creek land acquisition for the proposed reservoir and other potential
utility fund projects.
PREVIOUS COUNCIL ACTION: City Council has been considering alternatives for
providing water storage for the City” water system. In anticipation of a land acquisition, which
has not been approved at this writing, we are presenting some alternatives to financing this
acquisition and potentially some other utility fund projects that are in budget development.
BACKGROUND: The land acquisition was not contemplated in the adopted budget and so no
financing plan had been developed. Staff has been talking about financing alternatives for some
other projects that were to be a part of a future budget proposal. These projects include waterline
portion of the mall renovation project and a major water line project.
The water fund cannot afford to cash fund (pay as you go) these projects and a land
acquisition is just in addition to that. Staff will be proposing a major water rate increase for 2018
to finance this land acquisition and the other projects. Staff has been working on a rate study and
this will be the subject of an upcoming council work session.
The city charter allows for the issuance of utility fund supported general obligation debt
without a vote. This certainly makes sense since there are no tax implications to debt supported
by rate based charges. The charter does require a vote a vote for revenue bonds and other general
governmental general obligation debt. The TABOR State Constitutional amendment does not
require a vote for utility revenue bonds, but does require a vote for general obligation bonds.
Both the TABOR amendment and the City charter contemplated the need to issue utility debt
without a vote in order for utilities to meet their capital maintenance needs. But because of how
are charter is worded we are precluded from issuing utility debt without an election even though
the intent of both charter and TABOR was to allow it.
DISCUSSION: There are three alternatives for financing the cost of the land. These are as
follows:
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o Issue bonds in the approximate amount of $3,000,000. Because of the issues
between our Charter and TABOR these would have to be general obligation bonds
and be approved in a regularly scheduled election. The City could also size the
issue to finance the other capital projects discussed above. We would recommend
this at about $8,000,000 if this was deemed appropriate. There is economic value
in combining these into a single issue but the Council needs to weigh in as to
whether this particular vote needs to be focused about the reservoir. A proposed
resolution approving a ballot question is attached if this is the direction chosen.
o The second option would be to use Certificates of Participation (COPs). As we
have discussed before this is a syndicated lease purchase and is not subject to an
election. This works well for the acquisition of a single asset such as the land, but
gets more difficult if other projects are to be financed. Pipe replacement projects
are not good collateral for COP’s and we would have to seek out substitute
collateral. This is not impossible but you have to find assets that can serve as
substitute as collateral and approximate the same value as what you are seeking to
finance. Once again, the Charter and TABOR both anticipated that Enterprise
fund based financings could be done without an election but for the reasons
described above is not possible in Aspen.
o A third option would be to pay cash for the property and allow non-compliance
with our financial policies as it relates to target reserves. The City could reduce its
transfer for franchise fee by $200,000 – $300,000 from the water fund to the
general fund for a year that would reduce the AMP reserve for the Armory
building and use the next year to work on a general obligation bond package for
the Utility fund. The ending projected fund balance (target reserve) for 2018
would be at 12-14%. The City’s financial policies call for 25%. This would give
staff time to get Council familiar with the other Utility fund projects that are being
proposed and to get the Utility rate increase in place. This is the alternative that
the staff would recommend.
FINANCIAL/BUDGET IMPACTS: The acquisition of the reservoir site and the financing of
water line projects will increase debt service in the water fund and will require rate increases.
This may be as much as 15-20% increase in rates. In the short run the water fund would be out
of compliance with its Financial Policies until the financing could be completed.
NEXT STEPS: Staff will begin working on whichever financing option that the Council gives
direction to pursue.
CITY MANAGER COMMENTS:
ATTACHMENTS:
Resolution setting Ballot Question for authorizing issuance of General Obligation Bonds.
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RESOLUTION NO. _____
(Series of 2017)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ASPEN, COLORADO,
SUBMITTING TO THE ELECTORATE OF THE CITY OF ASPEN A CERTAIN
QUESTION SEEKING AUTHORITY FOR THE ISSUANCE OF GENERAL
OBLIGATION BONDS FOR THE PURPOSE OF THE PURCHASE OF CERTAIN
PROPERTY LOCATED IN THE COUNTY OF PITKIN, COLORADO FOR USE AS
STORAGE OF MUNICIPAL WATER SUPPLIES OR OTHER MUNICIPAL
PURPOSES.
WHEREAS, , and
WHEREAS, , and
WHEREAS, the City of Aspen has identified property located in the County of
Pitkin, State of Colorado and described and known as Pitkin County Parcel Numbers
R003161 and R015286, Raceway Drive, Woody Creek, Colorado, that would be suitable to
provide storage of water to replace potential storage sites located on Castle and Maroon
Creeks and has entered into a contract for the purchase of such property; and
WHEREAS, Article X of the City of Aspen Home Rule Charter and Article X,
Section 20 of the Constitution of the State of Colorado require voter approval to increase
City debt by the issuance of general obligation bonds.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF ASPEN, COLORADO, THAT:
The following question shall be placed on the ballot at the November 7, 2017,
election:
General Obligation Bonds for the Purchase of Property.
SHALL CITY OF ASPEN DEBT BE INCREASED BY UP TO $_________, WITH A
MAXIMUM REPAYMENT COST OF $__________, BY THE ISSUANCE OF
GENERAL OBLIGATION BONDS FOR THE PURPOSE OF PURCHASING
PROPERTY LOCATED IN PITKIN COUNTY, COLORADO TO BE USED FOR THE
STORAGE OF MUNICIPAL WATER SUPPLIES OR OTHER MUNICIPAL
PURPOSES, WHICH DEBT SHALL BE PAYABLE FROM (1) ELECTRIC UTILITY
FEES AND (2) TO THE EXTENT THE CITY COUNCIL DETERMINES THAT THE
REVENUES PROJECTED TO BE AVAILABLE FROM SUCH ELECTRIC UTILITY
FEES WILL BE INSUFFICIENT TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY,
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AND INTEREST ON SUCH DEBT AND TO OTHERWISE COMPLY WITH THE
COVENANTS OF THE ORDINANCE OR OTHER INSTRUMENTS GOVERNING
SUCH DEBT IN ANY YEAR, FROM THE TAXES DESCRIBED BELOW; SHALL
CITY TAXES BE INCREASED BY UP TO $____________ ANNUALLY IN ANY
YEAR BY THE LEVY OF AD VALOREM PROPERTY TAXES, WITHOUT
LIMITATION AS TO RATE OR AMOUNT OR ANY OTHER CONDITION, TO PAY
THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON SUCH DEBT AND
TO OTHERWISE COMPLY WITH THE COVENANTS OF THE ORDINANCE OR
OTHER INSTRUMENTS GOVERNING SUCH DEBT IF AND TO THE EXTENT
THE CITY COUNCIL DETERMINES THAT THE REVENUES PROJECTED TO BE
AVAILABLE FROM SUCH ELECTRIC UTILITY FEES WILL NOT BE
SUFFICIENT THEREFOR; SHALL SUCH DEBT MATURE, BE SUBJECT TO
REDEMPTION, WITH OR WITHOUT PREMIUM, AND BE ISSUED, DATED AND
SOLD AT SUCH TIME OR TIMES, AT SUCH PRICES (AT, ABOVE OR BELOW
PAR) AND IN SUCH MANNER AND WITH SUCH TERMS, NOT INCONSISTENT
HEREWITH, AS THE CITY COUNCIL MAY DETERMINE; AND SHALL THE
CITY BE AUTHORIZED TO COLLECT, RETAIN AND EXPEND ALL OF [THE
REVENUES OF SUCH TAXES, THE PROCEEDS OF SUCH BONDS AND THE
EARNINGS THEREON] IN 2017 AND EACH SUBSEQUENT YEAR,
NOTWITHSTANDING THE LIMITATIONS OF ARTICLE X, SECTION 20 OF THE
COLORADO CONSTITUTION (TABOR), SECTION 29-1-301, COLORADO
REVISED STATUTES, OR ANY OTHER LAW?
INTRODUCED, READ AND ADOPTED by the City Council of the City of Aspen
on the day of , 2017.
_________________________
Steve Skadron, Mayor
I, Linda Manning, duly appointed and acting City Clerk do certify that the foregoing
is a true and accurate copy of that resolution adopted by the City Council of the City of
Aspen, Colorado, at a meeting held on the day hereinabove stated.
__________________________
Linda Manning, City Clerk
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