Guest column: Rifle rec center funding: Better with property tax?
I am writing this column as a citizen of Rifle, and would like to discuss the current proposed financing strategy for the Rifle Community and Recreation Center. Just as a note, I am neither for nor against the proposed center. I would, however, like to be sure that the center will not hurt the operating budget of the city of Rifle. I have had an opportunity to work on multiple bond issue elections, and I am hoping that my experience can shed some light on what areas need to be considered when structuring the financing for the center.
The first thing to consider is funding the repayment of the bonds that finance the construction. My understanding is that a 0.74 percent sales tax increase is currently the proposed funding model. The problem with using a flat percentage sales tax to fund a fixed annual bond repayment is that there is no guarantee the sales tax raised will garner enough dollars to pay back your bonds annually. If there isn’t enough sales tax revenue due to a local dip in sales, then the city’s operating budget will be responsible to pay back the remainder. The citizens group that is supporting this has stated to me that the 0.74 percent sales tax is projected to allow enough of a cushion to fund the repayment, even if sales decrease, although I haven’t seen these numbers.
I would prefer funding the center through a “floating” property tax mill levy. This approach would allow the city to collect a fixed dollar amount annually, and would keep the city’s operating budget safer. I would be in favor of creating a special taxing district, which would allow the community to expand the geographic area of the taxing district beyond the city of Rifle, allowing the property tax mill levy to be spread amongst more property value, thereby lowering the cost to each taxpayer.
The second thing to consider is the amount of interest that will be paid on the bonds. This piece is critical, since interest rates have a huge impact on the cost to the taxpayers. Bond rating agencies will look at the risk of the funding mechanism for the bond repayments. A sales tax structure will be more likely to increase the financial risk to investors, which can significantly increase the cost to taxpayers by increasing the interest paid on the bonds. A bond underwriter would be a great resource to review Rifle’s specific situation with this ballot question.
The final financial consideration is the impact of recurring operating costs to run the community center. I hope additional operating costs for the center would not cut other important programs the city currently funds to support our community. Either way, a solid plan to fund continuing operating costs for the center should be completed with the city’s input.
I appreciate the city’s continued efforts to balance fiscal requirements with community needs. The community center could be an economic benefit to our community, if the funding is structured thoughtfully.
Christy Hamrick lives in Rifle and is a certified public accountant with a master’s in business administration and an emphasis in finance and investments.
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