Candidate Q&A: Reader Submitted Questions (Round 1)
Andrew Sawusch • February 7, 2020
3 questions asked by Erie residents on various topics: Service-oriented and non-taxable businesses, how to pay for the health and safety of residents when funding isn't available, how I envision Erie in two to five years
Thank you to all of those who submitted questions on the topics that you wanted me to answer! Round 2 of "Candidate Q&A: Reader Submitted Questions" is scheduled for the week of February 24th through the 28th. So if you have a question that you would like to ask,
feel free to submit it here!
Previous, current, and prospective business owners: don't forget to tell me about the issues, concerns, and barriers to entry that you have experienced by completing the survey available here (the survey closes on Monday, February 17th).
Erie Residents: Please help me to understand how you feel about the topic of "Home Rule" by completing the survey available here(the survey closes on Thursday, February 13th).
Q1.) It seems that you are pushing for sales tax driven businesses. What about Erie businesses that want to expand within Erie that don’t generate sales tax? I’ve been met with much push-back and over the top fees that it has driven my search outside of the town.
In regards to my article from last week: yes, you could say that it was generally focused on “retail sales tax” driven businesses. However, that is not to say that service oriented businesses are not important – they are in fact just as important to the community as “products and goods oriented” businesses.
It is true that “products and goods oriented” businesses do have the largest impact on the Town’s finances, since “service oriented” businesses do not pay retail sales taxes. However, both share the same challenges, issues, and barriers to entry – there are very few already-built retail and office spaces within Town to open a business, while there is a lot of vacant land available to build a new establishment. This is largely due to the large up-front costs the Town charges for infrastructure and other fees, as well as due to the reluctance that developers have had to enter the Town.
When you look at the Erie Economic Development Council’s interactive map of available spaces, there are a total of 50 “available spaces” (49 spaces listed, plus one not listed on Cheeseman Street). However, when you look closer, most of these are vacant land spaces, spaces currently in-progress of being built, or spaces which will be built in the future:
- Retail Spaces: 3 already built, 2 currently being built
- Office Spaces: 4 already built, 0 being built
- Industrial Spaces: 4 already built, 1 being built
- Special Spaces: 1 already built, 0 being built
- Currently Spaces that are Vacant Land: 35
In terms of the spaces that are currently available for lease for retail or office sites, the average cost per SqFt is $25.75 base, an average $12.35 triple-net (NNN), for a gross average total per SqFt of $38.11. This means that for a 1,000 SqFt space, tenants would have a cost of $3,175.83 per month just for the space alone. In comparison to the City of Lafayette which has many more sites available, the average cost per SqFt is $15.08 base, $7.76 NNN, and $22.84 gross ($1,903.33 monthly for a 1000 SqFt space).
While it is great that the Town is doing more to have commercial development occurring within the Town, they must also address the costs that are incurred by business owners and tenants after they sign a lease. If the costs remain too high, then small businesses will be unable to meet their expense obligations, and will not remain in the Town for too long since they could go out of business. The Economic Development Team must look at the total breadth of all items regarding business development, not just having them come to the Town, but also so that they can remain here. Retail sales tax revenues will increase for the Town, as they have already been doing so. But we must be able to maintain the growth, instead of having it all come at once ad then seeing tenants leave soon after due to the hardships that they face.
So, the issues aren’t exclusive to “products and goods oriented” businesses, but they are also issues shared with “service oriented” businesses too.
Q2.) Health and safety has to be paid for. If our town can’t handle financial aspects, how can health and safety be paid for?
Overseeing the public’s health and safety are the primary functions of a government. The Town’s health and safety activities are encompassed within the Town’s “General Fund”. The revenue sources that contribute to the “General Fund” are:
- Taxes (70.1% of 2020 Budget): Retail sales, vehicle sales, property, use, intergovernmental, and other
- Recreation fees (7.6%): Rec Center Passes, kids and adult league fees, and others
- Landfill fees (8.3%): Disposal of waste from development activities, and others
- Permits and related fees (9.2%): Building permits, inspection fees, liquor licenses, and others
- Other sources (4.8%): Oil and gas royalties, sales of assets, donations and sponsorships, and others
Expenses for the General Fund include:
- Personnel (47% of 2020 budget): Wages for Town staff, public safety officers, recreation instructors, and others
- -Operational activities (28.6%): Public safety, public works, parks and operations, and others
- Capital expenditures (19.6%): Maintenance to Town owned roads, buildings, vehicles, equipment, property, and others
- Debt services (4.9%): Payments towards principal, interest, and other servicing of outstanding debt
- Additional appropriations: Partially funding the accounts of other Town activities (Erie Urban Renewal Authority, the Trails and Natural Areas Fund, and others) with the assumption that these other accounts will eventually repay the General Fund
The specific activities that relate to the Town’s health and safety – including road snow removal and pothole repair, salaries for police officers, bridge maintenance, code enforcement, drug task force programs, municipal court activities, referees and lifeguards for recreational activities, community park maintenance, building inspectors, Town legislation, and all others – are solely included in this General Fund.
So, hypothetically, what would the Town of Erie do if they were running a deficit, meaning they did not have the cash flow to pay for items, and what would they do if this was a substantial deficit or for a prolonged period of time? As well, how would the Town fund all of the necessary improvements and maintenance related items needed, in addition to the health and safety requirements?
Health and safety activities would first and foremost be funded before any other Town activities. First, the Town would dip into their “reserves” up until the point in which the Town is legally obligated to maintain in the reserve fund (25% of the current year’s budgeted operating expenditures, plus an additional reserve of $7.5 million to provide a funding source for one-time or capital expenditures or for services in the event of severe economic conditions). If the Town expended their additional reserves, then they would be allowed to dip into these additional reserves, which are for situations just like this hypothetical inability to pay.
In conjunction, it would also require that the budget be reworked, moving funds from specific activities to instead fund the health and safety activities. The Town would then enact a “spending freeze” in order to maintain a lean budget, only issuing expenditures for essential services. To fund the essential services, the Town would impose budget cuts, reducing non-essential activities. This would mean that timelines for planned projects in the pipeline would be pushed out until the following year, recreational activities would be cut, and Town staff would experience layoffs and/or furloughs government-wide.
The Town would also begin to issue debt in the way of General Obligation bonds to pay for the most important capital expenditure projects that are of a “critical” nature. This would result in the Town raising their debt service expenditures, and it would take many years (possibly even decades) to fully repay the bonds. Then, since these bonded debts have been issued, it would entitle the Town to raise property taxes across the board in order to pay for the Town’s activities and these debts. The specific bond that the Town issues, the “Erie Unlimited General Obligation Bond”, is an unlimited bond, meaning the Town retains the right, if required, to potentially raise taxes to 100% of the taxable assessed value.
However, because Erie is a statutory municipality and not a home-rule municipality, they would be restricted by the "Annual Levy Law" (Section 29-1-301, et seq., C.R.S.). This law states that statutory municipalities are restricted in how much they can additionally levy on property taxes, and that it prohibits “the levying of a greater amount of revenue than was levied in the preceding year plus five and one-half percent”. So, the Town would only be able to raise the taxes incrementally each year, increasing them by 5.5% versus the previous year.
It is important to keep in mind that this is all separate from “Enterprise” related activities (water, sewer, storm-drainage). In terms of the Town paying for their improvements, and how they have done so in the past and are still currently doing so, are through “Special Assessments” effecting very specific subdivisions (ie. Metro District taxes), increasing the service charges that you pay with your water bill, as well as by issuing both water bonds and sewer bonds to pay for improvements.
Needless to say, there are many ways that the Town can pay for all of the other activities Town-wide, since their primary focus would still remain on residents’ health and safety first and foremost. However, there must be a focus on increasing the retail sales tax revenues in order to remove any chance that the above noted actions do not happen.
Q3.) How do you envision Erie in the next two to five years?
Ever since I moved to Erie, I have believed that the Town has the potential to become the "Centennial/Highlands Ranch" of North Denver. Not only does it have the potential to be an absolutely wonderful place to live and raise your family, but it also has the potential to be a place that is sought after for others to want to live. One that has great schools, amazing amenities, and great employment opportunities as businesses too wish to seek entering the community.
The next five years will be crucial for the Town of Erie, with the next 2 years being the most critical. If our current trajectory holds and we maintain an average growth rate as we have the past 5 years, we will be pushing almost 35,000 residents by 2022, and we will be well over 40,000 residents by the end of 2025. With the still increasing number of residential developments being constructed, in addition to the planned multi-family developments at both Nine-Mile and Town Center, it seems highly likely that we will eclipse these totals by the end of those years. Based on these projections, this would quickly make the Town the 3rd largest municipality in Boulder County, and the 6th largest municipality in Weld County. This of course means that I also see Erie becoming a home rule municipality, if not by the end of this year, within two years.
I also see a lot of commercial development coming to the Town. With the projects finally beginning at Nine Mile and Erie Commons, in addition to the continued development occurring along CO-7 near Vista Ridge, it gives me great home of a promising future for Erie. However, just because there is development occurring doesn’t guarantee that there will be a constant increase in retail sales tax revenue. As I had noted in the first question, the lease rates are substantially higher than surrounding municipalities. This is because the developers are incurring the up-front costs to build these locations, which are then passed onto the new renter, as well because of the high payments made through utilities and taxes.
Also, due to this ever-increasing and rapidly growing number of residential and commercial developments, it means that the Town will experience additional infrastructure strains beyond the levels that we are currently seeing. Every major road that has not already been widened will need to be, including Arapahoe, CO-7, Erie Pkwy, and County Line. The population increase alone noted above will result in an increase of at least 25% in terms of the number of drivers on the road. This will also mean at least a 25% increase in capacity usage for water, sewer, storm drainage, electricity, trash, recycling, and the list goes on.
Without questions, I see some hard-times coming for Erie if these issues are not addressed immediately and the proper planning necessary is not taken now. This also means working with the tri-counties, our neighboring municipalities, and state officials to prepare for the growth that is still yet to come, in addition to what we have already experienced.
Thank you for taking the time to read this article! If you like the topics and stances that I have been discussing, please be sure to support my campaign for trustee by getting involved in a few different ways (click here to see the ways to contribute)!
Previous, current, and prospective business owners: don't forget to complete the survey available here(the survey closes on Monday, February 17th).
Erie Residents: Please help me to understand how you feel about the topic of "Home Rule" by completing the survey here(the survey closes on Thursday, February 13th).
Topic for Next Week: Home Rule
*Just a side note to all of the items that I discuss: I am a solutions driven problem solver by nature. I wonder how things work, why they work the way they do, and how to make them better. This means seeking different, outside-the-box methods to figure out solutions to various issues. Accordingly, I am always open to learning new ideas, different ways of doing things, as well as constantly learning from others' experiences to make better decisions. When I see an issue, I view it in a holistic fashion, and then dive into specific areas to remove deficiencies and create efficiencies. If you, who are reading this, have some thoughts or ideas about any of the subjects I discuss, I would be more than happy to speak with you to hear your opinions. Please reach out to me here through my website. Listening, hearing, and understanding different perspectives is the only way that we can all grow and create positive change - by learning from others, and delivering ideas that push the needle to become Forward Thinking.
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