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Durango considers sales tax measures to fund city hall, police station

One option preserves current tax rate, another proposes slight increase
The former administration building and Big Picture High School building acquired by the city of Durango is in need of significant renovations before it can be realized as a new city hall and police station. Durango City Council is considering two options for a ballot question to reauthorize a 2005 sales tax that would help pay off revenue bonds to fund the projects. (Jerry McBride/Durango Herald file)

The city of Durango has chosen the former Durango School District 9-R administration building at 201 E. 12th St. and the former Big Picture High School next door for the location of a new city hall and police department, respectively.

But renovating the spaces is projected to cost tens of millions of dollars.

City staff members have homed in on two potential ballot measures that would tap voters to extend and potentially increase a half-cent sales tax originally approved in 2005 and enacted the following year. Now, City Council faces a deadline with the La Plata County clerk to make a decision.

After finalizing its property trade with Durango Fire Protection District in November, it did not take long for the city to begin moving into the former Big Picture High School at 215 East 12th St.

Durango’s Community Development and Engineering departments were the first to settle in at Big Picture High School adjacent to the Durango School District administration building in January. But the departments aren’t done moving, given the city’s plan to eventually move Durango Police Department into the former Big Picture High School location.

Likewise, the old building needs major renovations projected to cost about $72 million. But one vital question remains unanswered, which is how renovations will be funded.

On Tuesday, city staff brought two options using revenue bonds and reauthorizing the city’s 2005 sales tax, which expires in 2026, to Durango City Council for consideration. Each option aims to fund about $62 million for renovations in addition to extending the lifespan of the sales tax.

Whatever option, if either, City Council ends up favoring will be posed as questions to voters for approval on the General Election ballot in November.

A 2005 half-cent sales tax is composed of two quarter-cents, one that funds parks operations and another that funds capital improvement projects on Florida Road and the Durango Public Library. City Manager José Madrigal said in February the latter quarter-cent will soon be paid off.

In both options presented to City Council, the quarter-cent dedicated to parks, open space and trails operations, including maintenance and fire mitigation, would be left intact. The quarter-cent for the library and Florida Road would be used to fund renovations at the new planned city hall and police station.

Durango Mayor Melissa Youssef, left, receives the keys to the former Durango School District 9-R administration building from Durango Fire Protection District board president Karen Barger, right, on Nov. 17, 2023. (Matt Hollinshead/Durango Herald file)
Option No. 1

The first option is a reauthorization of the current tax rate for 30 years, meaning it would sunset in 2055 unless voters extended it, said Elliott Fitz, Durango budget manager.

Reauthorizing the 2005 sales tax at its current half-cent rate for 30 years would provide an estimated $2.9 million in revenues annually. Half of those revenues would go to capital improvements, including the new city hall and police station.

Fitz said all figures are estimates at this time.

With an estimated annual bond payment of $3.9 million for the city hall and police station, the city would have to subsidize the project at the cost of about $948,529, equal to about 3% of the city’s annual sales tax revenue and 2% of general fund revenue, annually through most of the renovation project, Fitz said.

He said the city has other general fund revenues such as real estate tax, use tax and fees for service.

“It is significant. But it’s not insurmountable,” he said.

Durango City Council is considering two options for funding a new city hall and police station proposed for 201 East 12th St., the site of the former Durango School District 9-R administration building. (Durango Herald file)
Option No. 2

The second option presented to City Council is a one-eighth cent increase, or an increase of .375 cents, to the 2005 quarter-cent sales tax for facilities improvements for the duration of the renovation project. Fitz said the open space and trails quarter-cent sales tax would again be left untouched.

“If we were to do that, the general fund would not have to have a subsidy to support these bond payments. And we would project $1.6 million annual increase in revenue,” he said.

Fitz said the benefit of the first option is it would simply continue the 2005 half-cent sales tax at its current rate with a 30-year expiration date.

“Currently, the tax has been in place since 2005, so it’s been about 20 years. It would not be a new tax at all to the city of Durango,” he said.

The strength of the second option is it would cover the entire financing payment for the renovation project. But it is a tax increase, he said.

“We’re projecting about $1.6 million in additional revenue to the city. And we don’t take that lightly,” he said. “Thinking about our business partners that we have in the community, it’s a significant decision to make. And again, we are increasing the sunset period from 20 to 30 years.”

The city’s total current sales tax rate is 3.5%. For comparison, the cities of Glenwood Springs and Breckenridge have sales tax rates of 3.7% and 2.5%, respectively, according to a staff presentation in May and another presentation on Tuesday.

The options reviewed Tuesday will be presented to City Council again at its June 18 regular meeting, where councilors will decide which option they favor. On July 4, City Council will vote on whether to place the item on the ballot.

According to an election timeline presented Tuesday, the city has until July 26 to notify the La Plata County clerk and recorder whether it has taken formal action to participate in the 2024 election. The county clerk would prefer a heads up no later than July 15, if possible.

cburney@durangoherald.com

An earlier version of this story erred in saying the city of Durango had already begun moving into the former Durango School District 9-R administration building. The city has moved departments into the former Big Picture High School, but not the admin building.



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