On March 4, the Pagosa Springs Town Council discussed the possibility of holding a November election to increase the town’s sales tax in order to create a revenue stream to pay for critical infrastructure repairs and upgrades to its aging wastewater system.
Town Manager David Harris explained discussions about “how do we pay for our sewer system repairs, let alone construction of facilities,” has been ongoing for quite some time.
He added, “We can go after grants, but, ultimately, we need money to take care of this.”
The town previously hired Joey McLiney as its financial advisor to go after $4.8 million worth of revenue bonds to pay for the costs of repairing category 4 and 5 problems with its sewer system, as well as other required costs of maintaining the system.
At the meeting, McLiney explained that, as of Feb. 12, all of the bonds had been sold, and that “all of your [category] 4 and 5 projects should be taken care of” through the financings from the bonds, adding that they could be used as matching funds to pursue grants.
However, the town’s sanitation system faces repair costs beyond the category 4 and 5 problems with the sewer pipes, with Harris saying, “This can be a tough pill to swallow, with one of the challenges” being “that our ratepayers are already heavily burdened with the cost of operating.”
At a previous meeting, McLiney suggested that “continually raising rates to pay for the next $15 million [in repairs and maintenance] is not affordable for anyone.”
With the current system, the town uses a series of lift stations to transport its wastewater about 7 miles to the Vista wastewater treatment plant, owned and operated by the Pagosa Area Water and Sanitation District (PAWSD).
Per the agreement with PAWSD, the town is responsible for 25 percent of any required upgrade costs to the Vista plant.
The plant currently faces a required upgrade to meet state Regulation 85, having to do with phosphorus and nitrogen output, with the town’s cost estimated to be $2.5 million.
Harris explained that PAWSD is planning to start the upgrade project in about a month, with it scheduled to go through August of next year.
“From a cash-flow perspective,” he said, the town is looking at the $2.5 million cost for its portion of the upgrade to be “spread out over two years.”
Harris added that the required Vista plant upgrade is just one example of the mounting costs that the town’s sanitation district, the Pagosa Springs Sanitation General Improvement District (PSSGID), faces in the years ahead.
While the PSSGID has the authority to raise its rates on customers to pay for its infrastructure needs, Harris noted that he wanted the council to consider “some alternatives,” with the town-only sales tax election being one of them.
“We could fund many of these projects” through raising of the town’s sales tax, he told the council, adding that what makes the sales tax funding “so attractive” is that “it will not just be paid by town residents, but also by people who live outside of our town limits,” including tourists.
He added that there’s currently a study underway to determine what the exact mix would be between town residents, county residents and visitors paying the tax.
McLiney added that the current per-month, per-connection rate would have to be raised beyond the current rate if the town does any more repairs beyond the $4.8 million dedicated to fix the category 4 and 5 problems with the sewer pipes.
He added that if the town did “everything that was listed in the engineering report,” it would require a more than a doubling of current user rates, taking them from around $71 per month to around $220 per month.
“It’s not a doubling of the $71. It’s an additional $149,” he said. “And that, to me, is unaffordable.”
He added, “I’m not interested in a rate increase,” instead pointing to a half-cent increase in the town’s sales tax as the solution.
He explained that if the town used a “reasonable 3 percent sales tax growth rate,” it could fund a “$42 million project over a 30-year period,” adding that whatever the rate of increase that the town chooses is less important than the “approach” to getting it passed in an election.
Right now the town has more projects than it can pay for, he stated.
“You have $40 million in proposed sewer projects, and if all of a sudden someone says, ‘Let’s do a treatment facility,’ then you could double that number,” he said, adding that sales tax revenues could be used for projects beyond the sewer system, “including economic development, including streets.”
He said that he thinks there is “plenty of time” for a November election, and that he liked the idea of “just doing a sales tax and paying for things with cash.”
The town could put that “half-cent sales tax into a capital improvement fund and, as things come up, you pay for them,” he said.
Council member Mat deGraaf expressed that he thought it was a 50-50 chance that such a measure would gain the approval of the majority of voters.
Town Clerk April Hessman explained that this would only be voted on by the town’s 1,400 residents, and it would be “a town-only question on the November ballot.”
She added that if the measure were to fail, the town could bring it up again during the 2026 elections.
McLiney noted that it isn’t the message that is hard, it’s getting the message out to voters that is the hard part, with the message being that “we think a half-cent sales tax [raise] would keep us from having to raise our [sewer] rates again.”
He added, “And anybody that spends time in your town will help pay for your sewer system. It’s an attractive message.”
Mayor Shari Pierce added that she thinks this is a “better solution for our town residents,” because “many of them are on fixed incomes and a sewer rate that would be $220 a month just can’t be handled, so I like that we can think about those people.”
Agreeing with Pierce, council member Leonard Martinez stated that he has heard from people who say they can’t afford the current rate of $71 per month.
He added that it could be framed as “a very positive message” to say that the town is trying its best to keep rates down through the sales tax solution, while also adding that he liked that visitors would help pay for it “without it always being on our backs.”
He wondered if a half-cent increase would be enough, with Public Works Director Karl Johnson explaining that it would “put us in a good position.”
Pierce asked if the town could lower its sewer rates if it did the sales tax increase.
McLiney suggested keeping the rates where they are until “you know” that the town can lower them, with Pierce adding that this could be an incentive to go for a larger increase in the sales tax to three-quarters of a cent to get it to pass.
Johnson suggested that if the town chose a higher increase it could potentially allow it to “cap” its sewer rates at a fixed number.
When the discussion turned to how it would all work — if there would be a sunset clause and how much of an increase — the council decided to hash out the finer details at a later time.
derek@pagosasun.com
