City of Boulder 2D – Changes to Housing Excise Tax

The housing excise tax (HET) is a one-time tax paid on new development. Despite its name, it is not restricted to housing. This proposal would provide for a substantial increase in the excise tax on non-residential developments and eliminate the tax for residential developments. After the initial phase-in of new tax rates, the proposal would allow annual increases beginning in 2015 based on the cost of producing housing. The city council would have the authority to waive or reduce the excise tax when in the public interest.

The intent of the housing excise tax is to promote affordable housing. However, the money is deposited in the general fund and city council is not required to spend the money on affordable housing. According to research done by the League of Women Voters, current rates assist “one to two homeowners or rental households per year. With the proposed changes, the HET would assist an estimated 12 to 20 households.”

Recommendation: against

The housing excise tax is written in terms of dollars per square foot. This dollar figure requires regular adjustment as the value of the dollar changes. The 2009 tax rate is 23 cents per square foot for new and annexing residential units and 49 cents per square foot for new, expanded and annexing nonresidential units. The jump from 49 cents to up to $3 (institutional), $5 (industrial and general non-residential) and $7 (commercial) over approximately 5 years is a drastic increase for businesses.

The goal of increasing affordable housing is laudable, but the projected number of households helped seems small. The current inclusionary zoning requirements seem more effective at least on paper. Developers must provide that 20% of their new housing be permanently affordable or pay into a dedicated Affordable Housing Fund. An argument for eliminating the HET on residential development is that these developers are “taxed twice” to pay for affordable housing.


City of Boulder Ballot Issue 2D (Approved Ballot Language)

CHANGES TO HOUSING EXCISE TAX

SHALL CITY OF BOULDER HOUSING EXCISE TAXES BE INCREASED FOR NEW DEVELOPMENT TO PRODUCE APPROXIMATELY $1,250,000 (IN THE FIRST YEAR) ANNUALLY; AND

PURSUANT TO ORDINANCE NUMBER 7679 AND FUTURE CITY COUNCIL ACTION:

SHALL THE PURPOSE OF THIS MEASURE BE TO SHIFT THE TAX BURDEN FROM NEW RESIDENTIAL DWELLING UNITS TO OTHER CATEGORIES OF NEW DEVELOPMENT; AND

SHALL THE EXISTING HOUSING EXCISE TAX BE ELIMINATED ON RESIDENTIAL DWELLING UNITS; AND

SHALL THE HOUSING EXCISE TAX ON NEW DEVELOPMENT OTHER THAN RESIDENTIAL DWELLING UNITS BE RAISED TO BETWEEN $3.00 AND $7.00 PER SQUARE FOOT BASED UPON THE FOLLOWING LAND USE CLASSIFICATIONS:

• COMMERCIAL USES
• INDUSTRIAL AND GENERAL NON RESIDENTIAL USES
• INSTITUTIONAL USES; AND

SHALL THE CITY COUNCIL BE AUTHORIZED TO PHASE IN THE NEW TAX RATES OVER FIVE YEARS OR MORE AND MAKE THE TAX SUBJECT TO AN ANNUAL INCREASE BEGINNING IN 2015 BASED UPON AN INDEX RELATED TO THE COST OF PRODUCING HOUSING IN THE AREA; AND

SHALL THE CITY COUNCIL BE AUTHORIZED TO REDUCE OR WAIVE ANY PORTION OF THE HOUSING EXCISE TAX WHEN DETERMINED TO BE IN THE PUBLIC INTEREST; AND

SHALL APPROVAL BE GRANTED FOR THE COLLECTION, RETENTION AND EXPENDITURE OF ALL REVENUES RECEIVED FROM SUCH TAX NOTWITHSTANDING ANY STATE REVENUE OR EXPENDITURE LIMITATION?

FOR THE MEASURE ____ AGAINST THE MEASURE ____


Ordinance 7679 submitting Ballot Issue 2D to the voters
http://www.bouldercolorado.gov/files/Elections/2009/Ordinance_7679-CHANGES_TO_HOUSING_EXCISE_TAX_.pdf

Boulder Revised Code, Title 3: Land Use Regulations, Chapter 9-13: Inclusionary Zoning
http://www.colocode.com/boulder2/chapter9-13.htm

Boulder Revised Code, Title 3: Revenue and Taxation, Chapter 3-9: Housing Excise Tax
http://www.colocode.com/boulder2/chapter3-9.htm