Loveland - October 21, 2011
Proponents of a property tax increase for Loveland residents and business on this year's ballot known as Referred Issue 3A, have been
using an argument in their campaign that claims raising property taxes will help the local economy. The Thompson School District Mill
Levy Tax Override named Referred Issue 3A, is a ballot measure that proposes an increase in local property taxes over the next 12 years
of $153.6 million on both home owners and taxable commercial properties. The proceeds from the increased taxes will go into the
Thompson School District (RJ-2) general fund to be spent at the school board's discretion.
Some Loveland small business owners have been reluctant to openly oppose Referred Issue 3A given the overwhelming support it has
received from local politicians and school boosters but fear the dramatic increase in their commercial property taxes could cause them to
go under. This is because the annual $12.8 million property tax increase will fall disproportionately onto the smaller and more
independent businesses mostly in older parts of Loveland for two primary reasons.
1. A large swath of the community (Centerra and downtown) are under URA's (Urban Renewal Authority) that means a large portion of
their property taxes (98% approximately for Centerra and much lesser amount for downtown) are refunded to the Urban Renewal
Authority at year's end by the Larimer County Treasurer. Because Referred Issue 3A proposes raising a certain fixed amount of revenue
for the schools ($12.8 million annually) the RJ-2 Board of Education will be authorized to determine a new Mill Levy rate each year
necessary to raise the money authorized. If Centerra, for example, paid property taxes like everyone else the proposed Mill Levy for
2012 (if 3A passes) would be 9.4 Mills instead of the 10.2 Mills currently in the plan. (see more on this in the column to the right of this
story)
2. In Colorado, commercial property owners pay a much higher property tax rate than do owners of residential property. Commercial
property owners pay an assessment rate of 29% of assessed value while residential property owners must pay an assessment rate of
7.96%. Most commercial property owners pass the cost of additional property taxes along to their tenants (mostly small businesses) by
way of triple net leases. Whether a tenant or property owner, small businesses are the ones who will be paying disproportionately more
for Referred Issue 3A if it passes on November 1st.
Locally owned businesses like Mountain Rentals Inc. (ski equipment) on Eisenhower will be taxed by 3A at around $1,200 per year while
one auto parts store that approached us complained they will be paying $3,000 more every year in property taxes if 3A passes. That
business owner wondered whether he could afford the tax this year without having to remove another employee. Especially frustrating
for one business owner was the lack of help on this issue by the Loveland Chamber of Commerce.
In another case, a local architect has kept his company open while not drawing a paycheck for himself in case things turn around and to
keep his employees working. Raising the cost of doing business in Loveland on him now only incentives him to close the company thus
putting a number of people into the unemployment line not to mention the vacant space and lost business for his local vendors. While
most of the discussion regarding 3A has centered on residential property taxes the problems is with commercial properties.
As a comparison, the owner of a commercial property valued at $300,000 pays $6,685 in property taxes each year now while a
homeowner pays $1,834 for residential property also assessed at $300,000. If 3A passes, the commercial property owner will pay an
additional $871 per year for a total property tax bill of $7,556. The homeowner's annual property taxes will increase from $1,834 to
$2,074 if 3A is passed by voters for an annual increase of around $240.
A Case In Point
The property located at 1644 E Eisenhower in Loveland (Jiffy Lube) pays an annual property tax of $14,496. If 3A is approved by the
voters, the annual property tax burden for the commercial property where Jiffy Lube is located will increase to $16,401 and could
increase with time if values decline. This translates into nearly $2,000 per year increase in property taxes for a modestly valued
commercial lot in Loveland with a 25 year-old building on it.
In the under car business, like many service businesses, the profit margins are narrow since most of the money they charge customers
goes towards the "cost of sale." If Jiffy Lube charges $20 for an oil change and the labor, oil and air filter cost the business roughly $15
it leaves only $5 for profit. Of course that $5 than goes to cover overhead like advertising, insurance, risk, rent and other general costs
of doing business. How much profit is left over after paying the overhead costs really depends on how many oil changes are performed
each year. The higher number of sales means the lower per sale cost of overhead as many fixed expenses are amortized over the
number or volume of sales.
Using this one possible example, the owner of Jiffy Lube would need to sell 800 more oil changes in a single year if half of the profit
from each, $2.50, went only to paying the increase in property taxes caused by 3A -- using actual 2010 property assessments. In a
growing economy increasing property taxes is feasible without detrimentally impacting businesses but when sales are down and small
businesses are especially vulnerable the extra $2,000 per year could be a death nil. Trying to make-up for the loss through extra sales
volume is unlikely in the current economy.
Oil industry experts say the average consumer changes their car oil about 2 times per year. Since Loveland's population is not growing
as it was before the 2008 housing market crash, this means Jiffy Lube, similar to many other small business in Loveland, cannot "grow"
into paying higher property taxes as there are a finite number of customers in the community and most of those customers will only
change their car's oil twice a year. Therefore these smaller business have few choices when looking for ways to cut expenses when
costs are increasing in a down economy.
Proponents of a property tax increase for Loveland residents and business on this year's ballot known as Referred Issue 3A, have been
using an argument in their campaign that claims raising property taxes will help the local economy. The Thompson School District Mill
Levy Tax Override named Referred Issue 3A, is a ballot measure that proposes an increase in local property taxes over the next 12 years
of $153.6 million on both home owners and taxable commercial properties. The proceeds from the increased taxes will go into the
Thompson School District (RJ-2) general fund to be spent at the school board's discretion.
Some Loveland small business owners have been reluctant to openly oppose Referred Issue 3A given the overwhelming support it has
received from local politicians and school boosters but fear the dramatic increase in their commercial property taxes could cause them to
go under. This is because the annual $12.8 million property tax increase will fall disproportionately onto the smaller and more
independent businesses mostly in older parts of Loveland for two primary reasons.
1. A large swath of the community (Centerra and downtown) are under URA's (Urban Renewal Authority) that means a large portion of
their property taxes (98% approximately for Centerra and much lesser amount for downtown) are refunded to the Urban Renewal
Authority at year's end by the Larimer County Treasurer. Because Referred Issue 3A proposes raising a certain fixed amount of revenue
for the schools ($12.8 million annually) the RJ-2 Board of Education will be authorized to determine a new Mill Levy rate each year
necessary to raise the money authorized. If Centerra, for example, paid property taxes like everyone else the proposed Mill Levy for
2012 (if 3A passes) would be 9.4 Mills instead of the 10.2 Mills currently in the plan. (see more on this in the column to the right of this
story)
2. In Colorado, commercial property owners pay a much higher property tax rate than do owners of residential property. Commercial
property owners pay an assessment rate of 29% of assessed value while residential property owners must pay an assessment rate of
7.96%. Most commercial property owners pass the cost of additional property taxes along to their tenants (mostly small businesses) by
way of triple net leases. Whether a tenant or property owner, small businesses are the ones who will be paying disproportionately more
for Referred Issue 3A if it passes on November 1st.
Locally owned businesses like Mountain Rentals Inc. (ski equipment) on Eisenhower will be taxed by 3A at around $1,200 per year while
one auto parts store that approached us complained they will be paying $3,000 more every year in property taxes if 3A passes. That
business owner wondered whether he could afford the tax this year without having to remove another employee. Especially frustrating
for one business owner was the lack of help on this issue by the Loveland Chamber of Commerce.
In another case, a local architect has kept his company open while not drawing a paycheck for himself in case things turn around and to
keep his employees working. Raising the cost of doing business in Loveland on him now only incentives him to close the company thus
putting a number of people into the unemployment line not to mention the vacant space and lost business for his local vendors. While
most of the discussion regarding 3A has centered on residential property taxes the problems is with commercial properties.
As a comparison, the owner of a commercial property valued at $300,000 pays $6,685 in property taxes each year now while a
homeowner pays $1,834 for residential property also assessed at $300,000. If 3A passes, the commercial property owner will pay an
additional $871 per year for a total property tax bill of $7,556. The homeowner's annual property taxes will increase from $1,834 to
$2,074 if 3A is passed by voters for an annual increase of around $240.
A Case In Point
The property located at 1644 E Eisenhower in Loveland (Jiffy Lube) pays an annual property tax of $14,496. If 3A is approved by the
voters, the annual property tax burden for the commercial property where Jiffy Lube is located will increase to $16,401 and could
increase with time if values decline. This translates into nearly $2,000 per year increase in property taxes for a modestly valued
commercial lot in Loveland with a 25 year-old building on it.
In the under car business, like many service businesses, the profit margins are narrow since most of the money they charge customers
goes towards the "cost of sale." If Jiffy Lube charges $20 for an oil change and the labor, oil and air filter cost the business roughly $15
it leaves only $5 for profit. Of course that $5 than goes to cover overhead like advertising, insurance, risk, rent and other general costs
of doing business. How much profit is left over after paying the overhead costs really depends on how many oil changes are performed
each year. The higher number of sales means the lower per sale cost of overhead as many fixed expenses are amortized over the
number or volume of sales.
Using this one possible example, the owner of Jiffy Lube would need to sell 800 more oil changes in a single year if half of the profit
from each, $2.50, went only to paying the increase in property taxes caused by 3A -- using actual 2010 property assessments. In a
growing economy increasing property taxes is feasible without detrimentally impacting businesses but when sales are down and small
businesses are especially vulnerable the extra $2,000 per year could be a death nil. Trying to make-up for the loss through extra sales
volume is unlikely in the current economy.
Oil industry experts say the average consumer changes their car oil about 2 times per year. Since Loveland's population is not growing
as it was before the 2008 housing market crash, this means Jiffy Lube, similar to many other small business in Loveland, cannot "grow"
into paying higher property taxes as there are a finite number of customers in the community and most of those customers will only
change their car's oil twice a year. Therefore these smaller business have few choices when looking for ways to cut expenses when
costs are increasing in a down economy.
| Are Jobs At Risk If 3A Passes? Small Business Owners Say 3A Is A Job Killer |
LovelandPolitics.com
| HOW TO CALCULATE YOUR PROPERTY TAXES * per Larimer County Assessor Website Actual Value x Assessment Rate x Mill Levy / 1000 = Property Tax For example: $240,000 Actual Value x 7.96% Assessment Rate = $19,104 Assessed Value $19,104 Assessed Value x 86.49 mills/1000 = $1,652 tax bill You can calculate the impact of 3A by using an excel spreadsheet prepared by Liberty Watch in Loveland Typical Loveland Property Mill Levy (yours can be different depending on whether you are in any water, fire or other districts in addition to these) 32.487 THOMPSON R2-J GEN FUND 22.524 LARIMER COUNTY 9.564 LOVELAND 9.156 THOMPSON R2-J BOND PYMT 1.899 THOMPSON HLTH SVC DST 1 N COLO WATER CONS DIST 0.142 LARIMER CO PEST CTRL DST 76.77 |
|
| * Total for salary and benefits as collected from public records by Liberty Watch. The "community survey" conducted by the Thompson School District regarding 3A mislead voters into believing Cabrera's salary was much lower than it is by providing false information in a survey question. |
| Below is a partial list of school administration personnel who earn large salaries but choose to live outside Loveland. Thompson School District (RJ-2) includes Loveland, Berthoud and parts of Ft. Collins. |
| The Hidden Centerra Tax In Ballot Issue 3A Unlike most Mill Levy increases, 3A will allow for a flexible Mill Levy rate on your property taxes. That is why it is called a Mill Levy override instead of a Mill Levy increase. Instead of voters approving a specific mill levy increase (like 6 mills) they will be voting to authorize the School Board to determine the appropriate level of tax (Mill Levy Override). At the end of each year the Thompson School District will notify the Larimer County Commissioners of what rate they have determined for the following year. The ballot language does place the limit on $12.8 million depending on values. The Larimer County Assessor's office determined the Mill Levy will need to be 9.4 extra mills to raise $12.8 million for RJ-2 using the last available valuations (August 2011). However, you may have noticed Thompson School District calculations appear to require instead a 10.2 Mill Levy to raise $12.8 Million on the same value of properties inside the district. The difference is net or gross. Centerra commercial properties are 7% of the value of all properties within the Thompson School District. Centerra receives 98% of the property taxes they pay back at the end of the year into the Centerra Metro District account due to the Urban Renewal Authority (URA) Tax Increment Financing (TIF). 9.4 Mills generates a gross return of $12.8 million but 10.2 Mills will be charged since 98% of Centerra's commercial property taxes will be returned to Centerra Metro Districts (McWhinney). Thus Centerra's URA raises the Mill Levy from 9.4 to 10.2 on all taxpayers. Also not figured in the above calculation is each business "Personal Property" taxes paid will be taxed by Issue 3A not just real estate. |