No Sales Tax Increase for Lone Tree!
Vote NO on Question 2E
Voter Information Arguments Against Lone Tree Ballot Question 2E
Citizens of Lone Tree are urged to VOTE NO on QUESTION 2E and reject the sales tax increase. By VOTING NO on 2E, the voters will send a message that they are not an open pocketbook or an open checkbook for excessive increases in local government spending. The proposed increase in the tax rate from 1.8% to 2.8% is excessive, unnecessary and based on false and erroneous assumptions about future revenue. The City is under no financial strain and the existing 1.8% sales tax rate is sufficient to fund local government now and in the future. The Lone Tree politicians based their tax increase proposal on an assumption that shows a hypothetical revenue shortfall of $110 million by 2035. But that assumption is unfair and completely unrealistic because it assumes a 0% growth rate in Lone Tree revenue between now and 2035. Over the past 9 years, City sales tax revenue has growth 3.3% per year. If City revenues grow just 3.3% per year in the future, which is very modest, then the $110 million revenue short fall disappears and becomes a $35 million surplus without any tax increase. The City’s projection assumption is not truthful and should be rejected by VOTING NO on QUESTION 2E. Voters should also be aware that the City has other healthy and growing revenue sources. Intergovernmental Revenue has averaged over $10 million each year for the last 10 years. Douglas County shares its property taxes and sales taxes with Lone Tree for roads.
The City is not losing revenue to online shopping either. Recent City financial reports admit that lost revenue by non-resident online shopping is minimal and has been offset by sales taxes collected from larger businesses in the City. However, Lone Tree residents would pay this additional tax increase on their online purchases. The sales tax revenue lost in 2020 due to the pandemic lockdown is a one-time event. By December 2021, sales tax collections are expected to be back at 2019 (pre-pandemic) levels. All the City’s revenue sources are healthy and growing. So, Question 2E should be rejected by a VOTE of NO on 2E.
The City says the new tax revenue will be used for open space, public safety and road maintenance. But there is no legal restriction for those spending targets. All this new tax revenue goes into a giant money pot called The General Fund which is the source of all of Lone Tree’s spending (except the Arts Center). Saying the money is for roads, public safety and open space is just the sales pitch by the City politicians. Until this tax increase came along, the City has not expressed any concern about spending levels for road, public safety and open space. VOTE NO on Question 2E.
Campaign Finance Complaint Filed Against City of Lone Tree
On October 7th the Mayor and City Council of Lone Tree were notified that the City of Lone of the following:
1: The City’s October 1 newsletter was in violation of the Lone Tree Municipal Code as it was using the newsletter to advocate for the passage of Question 2E.
2: A demand that the City send a follow-up newsletter on Monday, October 11 noting the Against 2E arguments.
3: The letter contained notification that a campaign finance complaint was being filed.
4: The campaign finance complaint was filed October 13th.
Use the link below to read the full letter of notice and demand, as well as to read a copy of the formal complaint.
Letters and Statements Against Sales Tax Increase for the City of Lone Tree
How large is this Lone Tree Sales Tax Increase?
Ballot question 2E would increase the Lone Tree sales tax rate to 2.8% from 1.8%. That’s a 55% increase in the tax rate, which is HUGE. If approved, the additional sales tax in 2022 would be $15.5 million. It is very rare to see a local government ask for such a large tax increase. This tax increase is projected to raise $181 million over the next 10 years, which is far in excess of the City’s needs. Lone Tree voters should Vote NO on Question 2E.
What will the City of Lone Tree do with the additional tax money?
The new sales tax money is all General Fund money and gets co-mingled in the Lone Tree General Fund to support higher and higher government spending. The text of the Ballot Question 2E says the new tax money will be used for maintaining and improving streets, public safety and parks and open space. The common practice in government finance is to segregate tax increases for specific uses in separate government funds. For example, Douglas County Government has a Justice Center Fund, a Road and Bridge Fund, the Road Sales and Use Tax Fund, a Law Enforcement Authority Fund, and the Open Space Fund. Each fund receives the revenues for those specific spending purposes. Ballot Question 2E has none of these special funds to legally restrict the tax revenues to these stated purposes. Lone Tree chose these spending targets of streets, public safety and open space as part of its political sales pitch to voters. The thinking is maybe voters will approve higher taxes if it is linked to popular spending themes. The truth is there is no legal link between the tax increase and these spending targets. This is a massive spending loophole in the City’s ballot question. In addition, the metro districts and parks and recreation districts use their property tax money to pay for streets, roads and parks in the City of Lone Tree. Voters should Vote NO on Ballot Question 2E for this reason alone.
Will Lone Tree have a revenue shortfall if Question 2E is not approved?
No. The City has a projection that shows a cumulative revenue shortfall of $110 million between 2022 and 2035. However, that revenue shortfall assumes that revenue growth, including sales tax growth, will be 0% every year until 2035. The 0% growth rate is completely unrealistic. The City’s 0% growth rate projection is just the politician’s way of scaring voters into approving a sales tax increase. The historical growth rate in sales taxes from 2010 through 2019 is 3.3% PER YEAR! Assuming a 3.3% growth rate until 2035, the City’s projected $110 million revenue short fall completely disappears and instead becomes a $35 million revenue surplus. The City of Lone Tree has no financial or economic justification for a sales tax increase. Question 2E is a local government money grab and voters should Vote NO on 2E.
But a 1.0% tax increase is small, right?
In isolation, 1.0% seems small, but compared to the existing 1.8% tax rate, the increase is HUGE. Every government entity thinks their taxes are small in isolation. But add all the taxes up, and the total tax burden on the taxpaying citizen is huge. Here are all the taxes Lone Tree citizens pay: federal income tax, state income tax, Social Security tax, Medicare tax, capital gains tax, alternative minimum tax, county sales tax, state of Colorado sales tax, city sales tax, RTD sales tax, property tax, road and bridge tax, excise tax, gasoline tax, hotel tax, telecom tax, entertainment admissions tax and orthopedic joint hardware tax. Add it all up, and the typical Lone Tree household pays 30% to 40% of their gross income in taxes. Plus, the government has their hand out for more money with all the “fees” citizens pay. Paying for government is the largest single expenditure in the typical Lone Tree household budget. Vote NO on Question 2E and send the politicians and bureaucrats a message that the taxpayers are not an open wallet and open check book for more and more government spending.
What is the Lone Tree sales tax rate now and is it sufficient?
The existing Lone Tree sales tax rate of 1.8% produces a lot of revenue and is sufficient to fund Lone Tree government operations. This is because Lone Tree has a large retail base including Park Meadows Mall, Sam’s Club, Home Depot, Costco and BestBuy. Here is how much sales tax money Lone Tree collects on a per capita basis (per citizen), compared to other municipalities.
Castle Rock $774
Greenwood Village $2,223
Lone Tree $1,700
Plus, by keeping the Lone Tree rate lower, citizens have a tax incentive to shop and dine in Lone Tree. So a 1.8% sales tax rate in Lone Tree makes sense. The Lone Tree sales tax rate should stay at 1.8% and voters should Vote NO on Question 2E.
Does Lone Tree have other sources of revenue than sales taxes such as property taxes?
Yes! Lone Tree has other significant revenues besides sales tax. The City is involved in tax sharing agreements which it calls Intergovernmental Revenue. This tax sharing can be significant. In 2019, the Intergovernmental Revenue was $25.0 million due to cost reimbursement of $20.8 million, mostly for road construction costs. The City receives property tax and sales tax sharing from Douglas County Government which totaled $4.0 million in 2019 and $3.9 million in 2020. Over the last 10 years, the Lone Tree’s Intergovernmental Revenue averaged $10.4 million PER YEAR. In 2020, the City’s Intergovernmental Revenue was $7.4 million. The City of Lone Tree has no financial or economic justification for Ballot Question 2E, and voters should Vote NO on 2E.
Has the Lone Tree lost revenue due to Covid and online shopping?
The retail and restaurant lockdowns during the Covid pandemic put a dent in 2020 sales tax revenue. The 2020 sales tax collections were $19.7 million, or $5.8 million less than the 2019 sales tax collections of $25.5 million. The City predicted that it needs several years to return to the $25.5 million level. The truth is the City’s sales tax revenue has snapped back smartly in 2021. By December 2021, the City should be at or above $25.5 million which would be back to 2019 sales tax levels. The City’s finance team produces a monthly Treasurer’s Report of tax revenue, other revenue, and spending. In the last seven years of monthly Lone Tree Treasurer’s Reports, the City expressed no concern about lost tax revenue due to online shopping. And Lone Tree now collects city sales tax on online sales. On page 23 of the City’s 2019 financial report, the City makes this statement:
“Sales and use (retail) taxes decreased by $112,521 from 2018 to 2019 largely as a result of a shift in shopping trends from brick and mortar to online. However, some of the larger businesses in the City ended the year with significant increases compared to the prior year, which helped offset the impact.”
So, the City has a very healthy retail and restaurant base, and a healthy sale tax revenue steam. Ballot Question 2E to increase sales taxes is a shameless money grab by the politicians. Ballot Question 2E has no economic justification and voters should Vote NO on 2E.
If the voters approve this tax increase for Lone Tree, will this be the final tax increase government will need?
Definitely not! More tax increases can be expected in the future, especially property taxes. In past years, Colorado homeowners were protected from excessive property taxes by the Gallagher Amendment which capped residential property taxes. But the Gallagher Amendment was repealed by Amendment B in November 2020. With the increases in home values in recent years, and the repeal of Gallagher, Lone Tree homeowners can expect large property tax increases. In addition, any sales tax increase has a rachet effect. Politicians watch tax increase ballot questions very closely. If one municipality approves a sales tax increase, then politicians in nearby municipalities start dreaming about a tax increase for their citizens. All the sales tax rates in the surrounding area are at risk of being ratcheted higher and every politician wants to get in on the action if voters approve just one tax increase, so Vote NO on 2E.
The City of Lone Tree pays for garbage and recycling for the community. Will the City shift the cost of this service to Lone Tree citizens if the tax increase is not approved?
Not likely. The total cost of this service is $550,000 per year. The politicians asking for a tax increase like to scare the voters into thinking popular services will be cut back or eliminated unless the tax increase is approved. This City’s garbage and recycling expense is small enough that it is not at risk. Just political scare tactics. Neither snow plowing at risk. The total annual snow plowing cost is $1.2 million.
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