Craig — Taxes are not sexy, but they do provide cities with the nuts and bolts needed to function.

Craig voters will have the chance to approve — or kill — a measure that would raise the city sales tax and introduce a use tax in the April election. The decision will have a big impact on the future of Craig city services to the tune of nearly $2.5 million in possible revenue annually.

The proposed 1.25 percent sales tax increase would bring Craig’s city sales tax to 3.5 percent. Meanwhile, the use tax would apply that same 3.5 percent tax rate to vehicles purchased outside of Craig, which are currently not assessed any local tax.

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Craig’s current sales tax is 2.25 percent compared to Steamboat Springs at 4.5 percent, Rifle at 4.25 percent and Hayden at 4 percent. Another equation exists also — two state legislators are proposing a state sales tax increase of .62 percent.

Some have made up their minds already, but others are still asking lots of questions.

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Is the city doing everything it can to save money?

According to city officials, yes.

“We’ve held off on raises — with zero increases in wages for the last four years — we’ve gotten rid of nine positions, and we’ve cut back on expenditures,” said City of Craig Finance Director Bruce Nelson.

A memo to Craig City Council last year reveals that from 2013 to 2016, the city cut or postponed more than $2.7 million in expenses to match decreasing revenues.

The largest cuts have come from slashing those nine positions — including four police officers — and delaying or cutting back capital expenses, namely Parks & Recreation projects and Road & Bridge vehicles.

The net result is that city expenditures for 2017 are projected to be a mere $110,000 more than the city’s expenditures were nearly a decade ago in 2008. If the sales tax increase doesn’t pass, the city will have to cut the budget by $1 million, which would mean eliminating more staff positions and cutting back on services.

Where did all the revenue go?

The reason behind all the budget cuts in the past four years has been a fairly steep decline in revenue since it peaked in 2012. Taking a decades-long view, the recent dip has even left the city’s revenues $2 million below where they were in 2008.

The biggest declines have come from some of the same things affecting the county, school district, and other tax-funded entities: declining mineral leases and severance taxes related to the oil and gas slowdown.

But in the city’s case, local sales tax revenues — the city’s biggest source of revenue — have fallen slightly, too, as Craig’s population has shrunk and businesses have closed.

What is a use tax? Will it mean people have to pay double taxes when they buy vehicles out of town?

No.

First of all, if you don’t plan to ever buy a vehicle outside of Craig, the use tax won’t affect your pocketbook.

For those that do, it essentially plugs a loophole in the system. Currently, vehicles purchased outside of Craig aren’t charged local sales tax at all: not for Craig nor for the city or county in which it was purchased.

“It allows the same treatment by everyone who purchases a vehicle, whether they purchase it in town or out of town,” said City Attorney Sherman Romney in a December City Council meeting.

For example, if a Craig resident buys a vehicle in Glenwood Springs, they currently only pay state sales tax of 2.9 percent.

More than $13.7 million in new and used vehicle were purchased outside the Craig and Moffat County in 2015, compared to just shy of $9 million in sales by local Craig dealers, according to numbers compiled by Nelson and Moffat County Clerk and Recorder Lila Herod.

Applying a local tax to those out-of-town purchases would generate nearly $500,000, according to 2018 projections.

Use taxes are common in other Western Slope communities, including Steamboat Springs, Rifle, Glenwood Springs and Grand Junction.

Why are some of the hotel owners unhappy about the proposed sales tax increase?

Some hotel owners have expressed frustration about potentially seeing another sales tax rate hike on the heels of the new 4 percent Local Marketing District tax that was approved by voters in 2015 and put into effect January 2016.

“I’m in whole-hearted support of the sales tax. I think we need it, I just wish there was a way to exempt the hotel industry from it,” said Randy Looper, owner of Elk Run Inn in Craig. “We’re already at 13.05 percent with (the LMD) increase, which isn’t the highest but pretty darn close to the highest in the state.”

If the sales and use tax measure passes in April, local hotels’ sales tax rates will jump to 14.3 percent.

“For the most part, the tourists just paid it and didn’t care,” Looper said of the current sales tax increase. “With hunters, I heard it nonstop and with the workers coming through now, I’ve heard it nonstop. And I’ve had to lower my rates.”

He added that for someone staying a couple nights, it’s not as noticeable. But for power plant workers, for example, who pay $500 to $600 per week and stay as long as eight weeks, they notice a big difference.

Among its neighbors, Craig’s 13.05 percent rate is currently the highest hotel sales tax rate. Steamboat Springs and Hayden’s rates are both 11.4 percent, Rifle’s rings in at 10.65 percent and Meeker comes in at 8.4 percent.

If the state sales tax of .62 percent passes along with Craig’s proposed sales tax increase, Craig hotels sales tax actually would jump to 14.92 percent.

How do our local tax rates compare to our neighbors?

Hotel rates aside, Craig’s current 2.25 percent city sales tax is by far the lowest among neighboring communities. Compared to Steamboat Springs at 4.5 percent, Rifle at 4.25 percent and Hayden at 4 percent, Craig’s sales tax rate is about half as much.

Meeker’s sales tax rate would be closest, though its 3.6 percent local tax is misleading as Rio Blanco assesses only one local tax, effectively a town and county sales tax wrapped into one.

Proposed jump in state sales tax circulates Colorado General Assembly

Northwest Colorado’s two state legislators — Rep. Diane Mitsch Bush and Sen. Randy Baumgardner — are carpooling on what could be the biggest, most impactful piece of state transportation legislation in years.

Mitsch Bush, a Steamboat Springs Democrat, and Baumgardner, a Republican from Cowdrey, are both sponsors of a bipartisan bill that would seek to increase the state sales tax as part of a plan to raise billions of dollars for state transportation funding.

The bill is being hailed by some as a sort of grand compromise that could help solve the state’s growing transportation funding crisis.

If the legislation advances, voters will have the final say.

If passed, the .62 percent state sales tax increase would generate an estimated $702 million annually in additional transportation funding beginning in 2018.

“It’s (going to support) everything from fixing potholes to dealing with congestion,” Mitsch Bush said.

As part of a compromise, annual vehicle registration fees would be cut by an estimated $75 million.

Factoring in the use of some existing revenues, the proposal would ultimately create a net gain of $677 million in additional transportation revenues annually.

If passed along with Craig’s sales/use tax ballot measure, Craig’s sales tax — along with the state’s 2.9 percent and county sales tax of 2 percent — would be just over 9 percent.

Still want to know more? Check out this introduction to the sales and use tax issue from December.

Reporter Scott Franz contributed to this report.

Contact Lauren Blair at 970-875-1795 or lblair@CraigDailyPress.com or follow her on Twitter @LaurenBNews.