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Town manager David Mitchem presented an ordinance to town council earlier this month that was designed to change the incentives Pagosa Springs gives to businesses for economic development, closing a loophole that allows tax rebates for any business that opens within town limits, even if it simply moves to town from Archuleta County.
“In 2009, in the face of a national economic downturn,” Mitchem began, “council approved a whole portfolio of incentives to encourage development in our community. A number of those — impact fee reductions and building and planning fee reductions, for example — have gone back to normal. What remains is a tax increment financing mechanism. For businesses that are willing to invest in our community, the town will rebate a portion of the growth in their sales tax.
“We’ve had a case where a couple of businesses have moved from the county into the town, and we are delighted to have them move into town, but because of the wording in the incentive, they are entitled to a sales tax rebate. It really wasn’t the original intent to give rebates to businesses that simply move from the county to the town; the intent was to grow business and to attract new businesses to the community.”
Mitchem presented to town council a minor refinement to the tax rebate incentives that specified only new or expanding businesses would qualify, not businesses that simply move locations. The new ordinance contained a definition of “new” business.
“New businesses include: a new start-up; new to Archuleta County/Town of Pagosa Springs; new services/goods provided to the community; total change of service/goods; and/or a change in type of use of the property. A new business results in new employment, typically increasing from no employees to a number of workers required to fulfill the business function. A name change or ownership change does not fit the definition of a new business.”
Mitchem assured the council that the two businesses that have already applied for tax rebates will get them, because as the code stands now they do qualify, but Mitchem felt that the code needed to be changed so that if this same situation arises in the future, the town would not be obligated to give tax rebates to businesses that simply relocate to town.
However, while council member Don Volger made a motion to accept the changes and no one on the council spoke out in opposition to Mitchem’s proposal, the motion died for lack of a second, leaving the town’s economic incentives package as is.
Giving tax rebates doesn’t seem to have hurt the town’s bottom line, as a recent report indicates revenues are up.
“March Sales Tax revenue received in May 2013 totaled $532,220.84,” according to LeeAnn Foutz from the Archuleta County Finance Department. “This is an increase of $46,410.95 or 9.55% over March 2012.”
In fact, the first three months of 2013 have all significantly outperformed 2012, with January showing a growth of 8.5 percent and February showing a growth of 14.28 percent. So far this year the county has collected $1,470,569 in sales tax compared to $1,329,201 for the first three months of 2012, an increase of $141,368 or 10.6 percent. Also, the first three months of this year have even outperformed 2008, before the economic downturn hit, when the cumulative revenue collection totaled $1,463,711.
Retail trade, the largest sector of Archuleta County’s economy, generated $231,684 worth of sales tax revenue in March, an increase of $14,519 or 6.7 percent compared to March of 2012. Accommodations and food services, Archuleta County’s second largest industry, brought in $99,838, an increase of $5,482 or 5.8 percent compared to March of 2012.
Utility companies collected $64,983 in sales tax revenue in March, an increase of $18,749 or 40.6 percent compared to March of 2012; the real estate business earned $30,046 in March, an increase of $2,258 or 8.1 percent compared to March of 2012; and the construction industry collected $8,591, an increase of $1,389 or 19.3 percent compared to March of 2012. An increase in these three sectors could indicate a rebound in the local housing market.
Mining showed a sharp decline over the year while the information industry and educational services had moderate declines. All other sectors showed slight increases.