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HomeMy WebLinkAboutcoa.lu.an.Annexation Study.1978RArm, o � A ►� 1 - CITYO-F ASPEN 130 south galena street aspen, colorado, 81611 Date: October 6, 1978 To: Mick Mahoney From: Harold Stalf Re: Annexation The costs of annexation andcomoarison with resulting revenue have been compiled by Sheri Sonfield and myself. This is a first cut, with many assumptions having been made, especially in the cost figures. However, I believe the figures presented, fairly accurately account for the dollars annexation would require. Our first assumption was to only recognize those costs directly caused by annexation. Anticipated growth within City Government without annexation were not addressed. Secondly, the costs displayed for the most part reflect the requests of the department head, tempered to some ex- tent by us. We show that the City can in theory afford annexation by utilizing 6th and 7th penny revenues. Also, it would be necessary to finance the heavy front end capital'acquisi- tion over several years. These options, along with a proposed amusement tax if we annex the base of the ski areas, are shown to give Council the knowledge and flexibility required to make such a c'_e cision. Note: Not include in our report is the $55,000 projected one time costs of title search, surveying, etc. that are needed before annexation would be possible. cc: City Council A CITY GF �SPEN 130 soui<i galena Street aspen, culoradg; 81611 Annexation - 1980 Operating costs a Public Works Personnel -Director $30,000 1/2 Sect'y 5,000 Overhead - Supplies, etc. 5,000 $40,000 Engineering Personnel-Ass't Engineer $20,000 1/2 Secretary 5,000 2 PT Summer 10,000 Overhead - Eqpt, Maint, etc. 5,000 $40,000 Streets Personnel - 5 persons @$14,000ea = $70,000 Materials - Cinders, Sand, 40,000 Overhead - Supplies, Vehi- cle Maint,etc. 15,000 Road Maintenance - 50,000 $175,000 ..No Change Water No Change (until existing water systems are acquired by the City.) Parks No Change (until new parks are acquired or donated to the City.) (trails to be maintained by PitCo.) Recreation No Change $40,000 $40,000 $175,000 a Needed in 1980 with or without annexation. • Annexa'-*on Pg . 2 Transportation No Change (Until assumption of Central Garage or Towing) Inspection Personnel- 1 Health/Bldg Inspector Overhead - Supplies, etc. Police Personnel - 5 patrolmen@14,OOOea. 2 sergeants@17,500ea. Equipment - 3 cars @ 150/month Overhead - Supplies, Training, etc, Uniforms, etc. Municipal Court No Change City Attorne Personnel - Assistant Overhead - Supplies City Clerk Overhead - Voting Machines, Phones, Increased Records City Manager Personnel- Assistant (full time) Finance $17,500 2,500 20,000 $70,000 35,000 5,000 10,000 $120,000 $15,000 5,000 20,000 $20,OOOb $120,000 $20,000 $10,000 $10,000 $15,000 $15,000 Personnel- 1 Clerk $100,000 $10,000 Joint Departments - Change in Share of Cost/ No Change in level of activity due to annexation. Planning Communic. Anim. Cont. Data Proc. Current Budget 50/50 $217,000 $108,500 168,500 84,250 89,000 44,500 97,230 43,615 60/40 $130,200 101,225 53,400 58,340 Difference $21,700 16,975 8,900 14,725 $60,300 Total Operating $510,300 b - Inspection costs covered by Building Dept. revenues $60,300 Annexation Pg.3 Annexation - Capital City Hall - Basement (Police, Council ) Street Dept. - Epuipment (Trucks, Plows, etc.) Cinder Storage Facility Police Dept. - Radios, Lights, Uniforms, etc. Street Liahtina Capital Expenditures - Total $300,000 250,000 20,000 10,000 5,000 $585,000 Financed over 10 years (optional) _ $65,000/year Water Department Food Tax Refund Costs Lost Revenue $132,000 42,000 $174,000/ year Summary Operations $510,300 Capital 65,000 Lost Revenues 174,000 $749,300 Revenues Unrestricted $240,047 Restriced 544,000 Total Revenues $784,047 Total Cost (749,300) $34,647 DifferencE Proposed Amusement Tax would create additional revenue of $840,000.00 ESTIMATE OF REVENUES GENERATED DUE. TO ANNEXATION ** (an age year of operations stated • 1977 dollars) UNRESTRICTED RE HUES Description 1. Property tax (based on assessed valuation per PitCo Assessors office) a) At 1977 mill levy of 2.01 1) Total area except Highlands 2) Highlands only 2. Utility Franchise Taxes (based upon usage estimates by the utility) a) Canyon Cable b) Rocky Mtn Natural Gas c) Mountain Bell d) Holy Cross Elec 3. Revenue Sharing (based on 1977 per capita receipts) 4. Cigarette Tax (based on estimated increase in state sales tax collections within the city) 5. Mise Licenses and Permits a)Liquor occupational taxes and licenses b)Sales tax licenses c)Business licenses (110 est businesses) 6. City's share of county sales tax (based upon agreement with PitCo) 7. Departmental Revenue Increases a)Building dept.. Total unrestricted revenues RESTRICTED REVENUES Description 1. Sixth Penny Sales Tax Park Dedication Fees 2. Seventh Penny Sales Tax 3. Special Grants 4. Highway Construction & Maintenance Funds Est. Amt. $ 37,129 2,552 39,681 2,718 9,836 9,000 18,060 39,614 47,152 41,650 4,000 200 2,750 6,950 42,000 23,000 $240,047 Restriction Est. Amt. Open space, parks & $ 250,000 recreation acq & improvement; historic bldg restoration Transportation & mall 250,000 acq, impro & operations Use as specified in grant award ' Construction & mtnce of highways, roads & streets in the city * Exact amount of federal or state participation is undeterminable due to continuing legislative change. See attached list of grants available, provided by Jennifer Carr. (p. 6) ** See list of assumptions attached (p. 7) a) Highway Users Tax +. $ 18,485 (based upon the Colo Annual Hwy Report and J estimates of mileage �� { and car registrations i in the area) ; b) County Road and Bridge :. 15,424 Fund (based on 1977 County R&B gill levy ti of 1.67) • e) Motor Vehicle Registration `. 7,740 + Fees (based on estimated A number of vehicles registered in the area) E d) Specific Ownership Taxes 20444 (based on 1977 increase in assessed valuation for property tax purposes) - t _ Total restricted revenues $ 544,093 =� PROPOSED REVENUES: ._ Description Est. Amt. 1. Amusement Tax of 7% (based on 77/78 season skier visits at 78/79 rates and estimated pass vs non-passholder skiers) a) Aspen Mtn. ($3.0 mill. Sales) $ 441,000 b) Buttermilk Mtn. ($2.8 mill. Sales) 196,000 c) Highlands ($6.3 mill. Sales) 210,000 $ 847,000 2. Property Tax increase of 7% (based on 1977 mill of 2.01 and :• 1977 PitCo Assessor's valuation) J _.. .a) Total annexation area except i Highlands 2,552 . v b) Highlands annexation 178 $ 2,730 --Total proposed revenues 849, Vrograms In The Case of Annexation The following prNFrams are potential funding sources for various needs which could occur in the event of annexation. I have not gone into a lengthy research effort due to time constrtr-its. It is not possible to put an exact dollar figure on these prog=,::3, as the need and scope has not been defined. LAND ACQUISITION Resource Conservation and Development Loans Community Facilities Loans ' Community Development Block Grant/Discretionary Leases, Permits, and Easements for Public Works Four Corners Regional Commission Development Surplus Land for Community Development Surplus Property Utilization Disposal of Federal Surplus Property DATA AND INF ORL:=01*1 • Information on Agricultural Activities Soil Survey • Snow Survey and 'dater Supply Forecasting Geodetic Surveys _ Mineral Research and Resource Water Resources Investigation Park and Recreation Technical Assistance Park Practice Program _ Prices and Cost of Living Data - Air Pollution Control - Technical Information Drinking Plater Supply - Technical Assistance C0-&2-1UNITY FI_CILITIES Cooperative Extension Service Watershed Conservation • Economic Development - Technical Assistance Outdoor Recreation - Acquisition, Development and Planning HUMAN RESOURCES Child Development - Child Abuse and Neglect Prevention Public Education on Drug Abuse - Technical Assistance Community Relations Service L Law Enforcement Assistance - Technical Assistance �k TRANSPORTATION Development and Promotion of Intermadal Transportation Comprehensive Planning Assistance State and Community Highway Safety , IC 1IOUSIL'G PROGRA;•1S - CONSTRUCTION OR PURCHASE , Mortgage Insurance - COn t•Uction/Rehab Condo Program Mortgage Insurance - Rental Housing Low/Moderate Income Mortgage Insurance for Purchase or Refinancing PUBLIC ROUSING PROGRA.tiiS Lower Income Housing Assistance Program ROUSING - LAND ACOUISITION Rural Housing Site Loans Rural Rental Housing Loans L • pg. 7 ASSUMPTIONS 1. The estimated amounts are based on an average year of operations and are stated in 1977 dollars. These amounts may not include all start-up costs that would be incurred in the first year of annexation. 2. Estimated population in the annexation area is 3,249 and in the City of Aspen is 5990. Both are based on the number of dwelling units times average number of persons per unit. 3. Estimated 1% sales tax collections from the annexation area are $250,000. 4. All roads in*the area are accepted by the city in their present state and maintained in such state by the city, or, in those instances where property owners want improvements, the city will establish an improvement district to fund the expenditure. 5. Additional parks and recreational facilities are provided at a later date. The county continues to provide trail maintenance. 6. County and other property tax levies and assessed valuation remain at approximately the same rate and amount. 7. The total area after annexation would encompass Mtn. Valley to the Airport Business Center ana Highlands. This includes the current City of Aspen water service area plus Highlands. 8. The original building department revenue increase of $15,000 was based upon 1977 county building department revenues of $22,000 for the annexation area only and was reduced for build out limitations on the present zoning of the area. This amount was revised to $23,000. • / �J ANNEXATION FEASIBILITY For Philip S. Mahoney ' and H. J. Stalf By Bob Kranz Admin. Intern • C� This report is a general review of the economic implica- tions of annexation for the City of Aspen. I. Annexation and Increases in Services Annexation will extend the area within which Aspen must provide services. Fortunately, however, most of the services in Pitkin County are provided through the county government or independent districts. This means that such public services as schools, sewer, fire protec- tion, and electricity will be unaffected by annexation. Similarly, certain services, such as dog wardens, communications, data processing and water are already provided by the City to outlying areas and will not need to be newly extended into annexation areas. The services which the City must extend to an annexation area are police protection, road maintenance, building inspection, health department, and general administration. Police protection for a given area can be calculated at about one officer per thousand citizens. Supervision, training, equipment and pay for a single officer runs about $25,000 per year. Annual road main- tenance costs, including snow removal, patching, etc., are estimated at about $7,000 per mile. The remaining costs are difficult to estimate and will vary widely with the condition of the area annexed. 2 II. Annexation and Revenue Aspen receives more than half of its General Fund revenues from its sales tax. Moreover, between 80 and 85 per cent of Aspen's tax base is dependent upon levies, fines and fees which do not vary with the taxpayers' residence. In other words, 80 to 85 per cent of the City's tax base would be unaffected by annexation. Of the remaining 15 to 20 per cent of the City's tax base, only part of it will be positively affected by annexation. ("Positive effect" meaning increased tax revenue with annexation.) The tax sources positively affected include the county road and bridge tax, vehicle taxes, highway users tax, non -business licenses and permits, various franchise taxes, and property taxes. Opposite the additional tax revenues the City will earn with a given annexation, are the revenues lost from reduced water rates and food tax refunds. The rate the City charges for water in the county is approximately twice what it charges to City users. When an area is brought into the city, its residents will be eligible for the lower rates. Similarly, they will be eligible for food tax refunds not extended to county residents. Overall, for a given annexation area, the City will annually lose.between $5 and $10 in lost revenue and extended service area costs, for every $1 it receives in new tax money from the annexed area. The ratio will vary with the condition of the annexed area and such factors as property values, the percentage of people applying for the food tax refund and the amount of public roadway in the area. The philosophy behind Aspen's tax structure revolves around the community's status as a resort town. The large influx of visitors places a heavy burden on Aspen's municipal services and facilities. Aspen's tax structure represents an attempt to place the costs for these services and facilities on the visitors who use them. For this reason, Aspen's property tax is extremely low and 80 to 85 per cent of its tax base is non-resident dependent. Equity The financial problems the City faces in annexa- 3 tion give rise to questions of equity in regards to the City's tax base. Specifically, are the residents of Aspen's outlying areas paying taxes in proportion to the services they receive? Information reviewed for this report suggests that they are not. For example, a resi- dent of the Mt. Valley area pays the same taxes as a resident of Aspen through the 80 to 85 per cent non- resident dependent taxes. Moreover, they pay substantially 4 higher water rates which amount to an additional taxi and they are not eligible for the food tax refund. For this higher level of taxation the Mt. Valley residents receive fewer public services and no political privileges from the City of Aspen.2 Whether the issue is taken as a political matter of equity to citizens of the outlying areas or a prac- tical matter of the economic feasibility of annexation, the City clearly must consider establishing a tax base which is tied to residency. This most probably means raising property taxes. 1Between $200,000 and $300,000 is annually trans- ferred from the Water Department Fund to the City's General Fund. As such, the Water Department operation must be viewed as a tax source. 2As indicated by the negative revenue flow ratio for annexation, property taxes, etc., do not nearly offset the costs of expanded service areas and reduced water rates. I 3. Cost Analysis of Capital Improvements Given the selection of priority annexation units, a cost analysis of the capital improvements needed to bring each area up to City standards should be completed. For example, bridges, roads, street signs, or street lighting may be below City standards. These would have to be improved at the time of annexation. 4. Homeowner Survey The City must next survey the selected areas to determine,first, if the residents are favorably disposed toward annexation, and second, whether or not they are willing to accept an assessment district to bring the area's roads, etc. up to City standards.1 The City could offer to manage the district and defray some of the improvement costs. This could be done by accepting ten per cent of the district's overall assessment or simply having the various City departments complete any improvements which could be done "in house." 1Given the fact that the City presently manages assessment districts for curb and gutter improvements within the City, I see no reason why similar districts could not be created in the annexation areas. The alternative is to raise property taxes sufficiently to cover lost revenues, increased services area costs and capital improvements in the annexation area. 5 III. Moving Toward Annexation What follows is a general outline of the steps the City of Aspen must take as it moves toward annexation. 1. Definition of Possible Annexation Areas In 1972, the Engineering Department completed a detailed study of potential annexation areas. Twenty-six areas were identified as logical annexation units. For each annexation area a schedule was attached showing the additional revenue generated by that annexation. The City's first step toward annexation would be to instruct the Engineering Department to revise and update this report. The new report should also include a schedule of costs for extended service areas and lost revenues, in addition to the schedule of new revenues generated by each annexation unit. Also, this report should be completed with a substantial degree of Planning Department input on the selection of particular annexation units. 2. Selection of Priority Annexation Areas Given the revenue information generated by the Engineering Department report, and local political con- siderations, the City administration must select annexa- tion units upon which it would seem reasonable to proceed. E 11 7 5. Restructuring of the City's Tax Base Simultaneous with steps 3 and 4 above, the City Finance Department should complete a review of the financial ramifications of annexing each of the priori- tised units. Based on this review, the Finance Department should present recommendations for restructuring the City's tax base in such a way as to make the new revenue annually generated by an annexation unit nearly equal to the annual costs of its annexation. Conclusion The Upper Roaring Fork Valley is an area of tremendous growth. The opportunity to maintain Aspen's sovereignty over the Aspen Metropolitan Community will very quickly pass. It is critically important that the city move in the relatively near future to make annexation economically feasible.