STEAMBOAT SPRINGS– The Steamboat Springs City Council has asked staff to begin exploring the possibility of asking voters to approve a new sales tax on packaged alcohol, marijuana and tobacco products.

Council members directed city attorney Dan Foote to draft an ordinance that would place the tax on the November ballot. The ordinance is slated for first reading at City Council’s July 17 meeting. Council did not determine at what rate alcohol, marijuana and tobacco would be taxed.

In a presentation to City Council last week, City Finance Director Kim Weber presented four combinations of taxes on packaged alcohol, marijuana, cigarettes and other tobacco for the council to consider.

• A 5-percent tax on packaged alcohol and marijuana, a $3-per-pack tax on cigarettes and a 40-percent tax on other tobacco would generate an estimated $1.9 million.
• A 5-percent tax on each of these four items would net the city an estimated $1.8 million.
• A 1-percent sales tax on alcohol and marijuana, a $3-per-pack tax on cigarettes and a 40-percent tax on other tobacco would generate an estimated $560 thousand.
• A 3-percent sales tax on alcohol and marijuana, a $3-per-pack tax on cigarettes and a 40-percent tax on other tobacco would generate an estimated $1.3 million in revenue.

Revenue predictions were calculated to include a tax on both medical and recreational marijuana. Predictions for revenue associated with a packaged-alcohol tax included sales in convenience, grocery and liquor stores. Tobacco products would include non-cigarette tobacco as well as electronic cigarettes and other nicotine delivery products.

Funding community support

Based on initial council conversation, revenue generated from the tax would likely go to some combination of community support, mental health services, law enforcement, youth services and substance abuse prevention.

Though council wanted to bolster community organizations, several council members were concerned that they did not know organizations’ financial needs.

“If we’re going to go forward and ask for people to pay a little bit more, it has to be clear that it’s for specific things, as we said,” Councilperson Sonja Macys said.

City Manager Gary Suiter suggested council create flexibility into how any funds raised from a new sales tax are allocated.

“You have a six-year CIP (capital improvement projects list) that is underfunded,” Suiter said. “I’ve seen so many times where councils tie their hands and tie the hands of future councils, which we’re dealing with with 2A funds. We’re building all of this stuff and don’t have the money to maintain it. I don’t know how many people said ‘we wish we could allocate that somewhere else and address some of our needs.’”

Rate of taxation

Council appeared to lean toward the lower rate options of 1- or 3-percent sales tax for marijuana and alcohol. Councilpersons Scott Ford, Lisel Petis, Heather Sloop and Robin Crossan said they supported a 3-percent tax on alcohol and marijuana in addition to the tobacco taxes.

Ford said he thought the 3-percent sales tax on alcohol and marijuana, $3-per-pack tax on cigarettes and a 40-percent tax on other tobacco was “fairly low-hanging fruit” for the city. He said that, with the exception of a tax on packaged alcohol, he did not anticipate the majority of voters would be paying the proposed taxes.

“We certainly have marijuana users in town, but the majority of voters are not,” Ford said.

Councilperson Kathi Meyer said she thought voters would be surprised by the inclusion of a tax on packaged alcohol, “because it really hasn’t been discussed, whereas the marijuana was specifically asked for.” She said she would support a 2-percent tax on packaged alcohol and marijuana in addition to the tobacco taxes.

“I think 3 percent is high on packaged alcohol and marijuana, personally,” Macys said. “I think it is higher than needed to fund the types of things that we’re looking at.”

Business perspectives

Kevin Fisher, co-owner of the retail and medical dispensary Rocky Mountain Remedies said the “well is pretty dry” when it comes to further taxation on Steamboat’s marijuana industry.

“Tax rates at the excise and sales level for adult-use marijuana are already so high that there’s a reason why we see a continuing, robust black market in Colorado, and that’s because it continues to be more affordable than regulated centers that have to pay for testing, payroll taxes, unemployment insurance, workman’s comp — all these things that regular businesses have,” he said. “When you continue to levy tax after tax after tax, eventually there’s a breaking point.”

He said the marijuana industry is concerned about its impacts to public health, and members of the industry are already paying taxes that fund research and education. In Routt and Moffat counties, revenue generated by marijuana taxes funds Communities that Care, a program that works to prevent alcohol and substance use, violence and crime in youth.

Golden Anderson, co-owner of Golden Leaf dispensary, said he is looking forward to seeing what the city proposes. He doesn’t want to take a stance on the idea until he knows what the tax would fund.

“I’m waiting on the proposals because they haven’t really stated exactly what they’re going to do with the money, yet and a few things like that,” he added.

Greg Stetman, co-owner of Central Park Liquor, is concerned that a higher sales tax rate will drive customers to other resort towns.

“When they start raising the sales tax and the cost to every consumer that comes to Steamboat, you made us less competitive,” Stetman said. “That’s not their job. Their job is to make us more competitive. … One of the advantages we’ve had over a place like Vail or Aspen or Breckenridge, we’re cheaper. Guess what? We’re getting more expensive all the time.”

Several communities have instituted similar taxes.

Voters in Aspen recently passed a $3-per-pack tax on cigarettes and a 40-percent tax on other tobacco and nicotine products. Basalt followed suit in April, approving a $2 tax per pack of cigarettes and a 40-percent tax on other products.

Denver has a 0.5-percent sales tax on liquor. Revenues from the tax are being used to pay off bonds on the Denver Convention Center.

Fisher is frustrated by the concept, which he sees as an undue burden on consumers.

“All I can see from where I stand right now is another tax on law-abiding citizens purchasing a substance that was legalized, whether it be alcohol, whether it be cigarettes, whether it be cannabis, and I am not sure why we’re placing an additional burden on those folks,” he said.

To reach Eleanor Hasenbeck, call 970-871-4210, email ehasenbeck@steamboattoday.com or follow her on Twitter, @elHasenbeck.